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OH 5-2
Controlling Food Costs in Purchasing
5 OH 5-2
OH 5-3
Learning Objectives
Explain the purchase process and determine who should make purchasing decisions.
Describe the importance of par levels and how to establish them.
Explain different types of purchasing methods and their uses.
Describe the parts of a purchase specification and of a purchase order.
Explain the importance of maintaining an ordering system.
OH 5-4
Who Purchases?
Purchasing agent
Manager
Chef
Head cook
Trusted staff member
The buyer maintains quality standards!
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OH 5-5
Who Purchases? continued
The buyer is responsible for ensuring that quality standards are met during the purchasing and delivery process.
OH 5-6
What to Buy
Avoid buying the “cheapest.”
Use purchase specifications.
Buy at the best cost from sellers who meet or exceed the purchase specifications.
Consider both AP price and EP cost.
OH 5-7
Two Kinds of Costs
As purchased (AP)—the cost of food as delivered to the restaurant
Edible portion (EP)—the cost of food as served to the guest
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OH 5-8
AP vs. EP Form
Items, such as fresh whole fish, will weigh much less in their EP form than in their AP form.
OH 5-9
Calculating EP Cost
Two steps
Step 1 – Calculate product’s yield percentage.
Edible portion (EPQ) weight
÷ As purchased (APQ) weight
= Yield percentage
8.00 ÷ 9.5
=
0.842 or 84.2%
OH 5-10
Calculating EP Cost continued
Step 2 – Calculate EP cost.
Example—the EP cost of one pound of onions
As purchased (AP) Cost
÷ Yield percentage
= Edible portion (EP) cost
$0.39/lb AP ÷ 0.842
=
$0.46/lb EP
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OH 5-11
Product Specifications
If you were the purchasing agent what questions might you have about this recipe?
Lemon Curd Trifle with Fresh Berries Recipe courtesy of Tyler Florence
6 egg yolks
1 cup sugar
4 lemons, zested and juiced
1/2 cup (1 stick) butter, cut in chunks
3 pints berries
2 cups whipped cream
1 prepared lemon pound cake, sliced
1/4 cup lemon or orange liqueur (optional)
Fresh mint leaves
OH 5-12
The Product Specification
Is a control device
Lists the product’s name
Lists its intended use
Identifies the desired brand and grade
Identifies the desired size
Identifies the desired variety
Identifies packing requirements
Details delivery requirements
Explains payment terms
OH 5-13
Example of a Product Specification
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OH 5-14
The Product Specification continued
Specifications should describe exactly what buyers want to buy.
Product substitutions identify what is “acceptable” to send if a vendor is out of or short on the product ordered.
OH 5-15
When to Buy
Purchase perishable items daily or every few days.
Purchase nonperishable items weekly or monthly.
OH 5-16
Determining Product Usage
1. Determine the amount of product that will be used between deliveries.
2. Count what is on hand.
3. Subtract the amount on hand from the amount that will be used.
4. The result is the amount to purchase.
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OH 5-17
Establishing Par Levels
Steps
1. Determine the amount of time between deliveries.
2. Determine the estimated amount used during this period.
3. Add a safety factor (cushion) to cover unexpected
changes in volume or availability
4. Add the estimated amount of product used and the
safety factor together to get the par stock.
5. Set par levels for all ingredients and supplies and adjust
by season.
6. Include the par level numbers on the order guide and
place labels on storeroom shelf
OH 5-18
Example Par Sheet
OH 5-19
Calculating How Much to Buy – Par Stock
Amount to Purchase
Determine your par stock (includes safety factor)
Consider Current Inventory and Usage before Delivery
Par stock - Inventory + Usage before Delivery
= Amount to Purchase
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OH 5-20
Calculating How Much to Buy – Yield %
Need ten pounds of green onions.
Yield percentage of green onions is 84.2%.
How many pounds will you buy?
EPQ (amount needed)
÷ Yield percentage
= APQ (amount to purchase)
10 ÷ 0.842
=
OH 5-22
Calculating How Much to Buy – Catering
Step 1 – Determine the servings per purchasing unit (SPU).
Purchasing unit
÷ Portion size = Servings per purchasing unit (SPU)
OH 5-23
Catering Purchases, continued
Step 2 – Determine the purchase factor.
Recall the formula for EP percentage.
SPU x EP percentage
= Purchase factor (PF)
Edible portion (EP) weight
÷ As purchased (AP) weight
= EP percentage
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OH 5-24
Catering Purchases, continued
Step 3 – Determine the amount to purchase.
Number of guests to serve
÷ Purchase factor (PF)
= Amount to purchase
OH 5-25
Purchase Methods
Competitive quotes
Standing order
Prime Vendor or One-stop shop
Cost-plus
Sealed bids
Commissary
OH 5-26
Factors Affecting Purchasing
Level of service needs
Quality specification needs
Prime vendor relationship needs
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OH 5-27
Vendor Selection
Choosing a vendor
List potential suppliers
Review suppliers
quality, consistency,
variety, price and
service
Check references
Maintaining + relationships
Sales representative
Honor terms of contract
Pay on time
Alert when problems
occur
OH 5-28
Implementing the Ordering System
The Order Guide
OH 5-29
Record Keeping Basics
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OH 5-30
Purchase Orders
The official written record of the items the buyer
wants to purchase
Example of Sysco Purchase Order
OH 5-31
Purchase Order Information
A unique identification number
The name and address of the restaurant
Date of the order
Signature of the buyer
The supplier’s contact information
Date of delivery
The name, quantity, and delivery unit of each item ordered
Total (extended) cost of the order
OH 5-32
Sample Order Schedule
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OH 5-33
Potential Problems with Purchasing Process
OH 5-34
How Would You Answer the Following Questions?
1. A purchase order is best prepared by the (buyer/ seller) of the items to be purchased.
2. With effective purchasing techniques in place, a restaurant's EP costs can often be lower than its AP costs. (True/False)
3. EP weight divided by AP weight results in
A. AP percentage
B. AP cost
C. EP cost
D. EP percentage
4. A butcher’s test is a test of (yield/quality).
OH 5-35
Chapter 5 Controlling Food Costs in Purchasing
Key Terms:
Acceptable substitutions Substitutions previously agreed upon by both
buyer and vendor.
Blanket purchase order A purchase order that allows the buyer to
purchase a certain amount of goods, usually indicated by a dollar
amount, at the stated terms within a given time period.
Buyer The sole person responsible for purchasing particular goods.
Invoice A receipt for items delivered; it is a legal document that
reinforces the terms of a purchase order.
Nonperishable goods Products that have a relatively long shelf life.
Order guide A form used as a tool for counting and tracking all the
products an operation uses and must reorder.
Par level The amount of stock necessary to get the kitchen through until
the next order is delivered.
Perishable goods Products that have a relatively short shelf life—usually
one to three days.
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OH 5-36
Chapter 5 Controlling Food Costs in Purchasing
Key Terms continued:
Perpetual inventory A theoretical count based on goods received and
issued, which exists on paper only.
Prime vendor A purchasing method that involves purchasing most, if not
all, of an operation’s goods from one supplier; also called the one-stop
shop.
Purchase order (PO) A form issued by a buyer and sent to a vendor that
indicates the items and quantities to be purchased.
Sales representative A supplier’s salesperson who would be assigned to
an operation.
Quotes An offer made by a supplier.
Specification A description of the desired product’s name, intended
use, grade, size, and other product characteristics; it can include
general instructions regarding delivery, payment procedures, and other
pertinent data.
OH 5-37
Chapter 5 Controlling Food Costs in Purchasing
Key Terms continued:
Standing order The replenishment of stock by a vendor made on a
regular basis.
Supplier A company that provides products purchased for use in
restaurant and foodservice operations, also called a vendor.