METHODS OF PURCHASING

There are nine buying methods that may be used for

purchasing foods. The particular method chosen often

depends on the location of establishment, the type and size of

the business, its purchasing power and the type of food being

purchased.

1. Purchasing by Contract

2. Purchasing by Daily Market Quotations List

3. Purchasing by Weekly/Fortnightly Quotation lists.

4. Purchasing by Cash & Carry

5. Purchasing by Paid Reserve

6. Total Supply

7. Centralized Purchasing

8. Periodical Purchase

9. Standing Order Purchase

Two common types of contract used:

1.The Specific Period Contract.

2.The Quantity Contract.

The Specific Period Contract:

 Aims at determining the source of supply and the price of

goods for a stated period often of three or six months.

 This reduces the time and labour of negotiating and

ordering to a minimum.

 When the prices of items are fixed for a period of time,

items with a fairly stable price such as milk, cream, bread,

etc. can be contracted in this way.

The Quantity Contract:

 Aims at ensuring continuity of supply of a given quantity

of an essential item at an agreed price over a particular

trading period.

 Examples are frozen fish, frozen vegetables etc.

 The advantages of this method are the safeguarding of

continuity of supply, and that a known and stable price

has been agreed upon which accurate pricing of menus

can be made.

 Although large quantities are involved, then caterer

would not be required to take delivery of the total

amount contracted at one time, but depending on the

wording of the contract, would take delivery every week

or two weeks, or any period of time of a proportion of

the contracted quantity.

This method is used when purchasing perishable foods on a

daily basis and when it is possible to have two or more

approved suppliers.

 A senior member of the staff or the chef would take a

quick stocktake of the foods left after each lunch service,

pass this information to the head chef who would

complete the ‘daily market list’, by entering the

quantities of all items he/she requires to be purchased

for the next day’s business in the ‘wanted column’.

 The list would then be processed by a member of staff in

the purchasing office. Every approved supplier would be

phoned and asked to quote a price for each of the items

required. The price quoted would be based on the

quantity of the items required.

 This method is used to purchase grocery items where a

delivery of once a week or fortnightly is adequate.

 This method is similar to that described when purchasing

perishable foods by daily market list.

In this case quotations are sought from various suppliers and

on receipt of quotations these would be entered on to a

Master Quotation List and decision then made about where in

orders for each item are to be placed

It should be noted here that the specifications for items will

usually be just by brand name of the product together with

the size, weight, count e.g. Heinz Tomato Ketchup, Spices like

MDH, catch, BMC etc.

This method is of particular interest to the medium and small

establishments whose orders are often not large enough to

be able to get regular deliveries from wholesalers and food

manufacturers.

Cash and carry food ware houses are situated in all towns and

resemble in layout and operation that of very large food

markets.

Advantages:

1. The warehouses are situated near to most catering

establishments and their hours of business are usually

longer than those of most food wholesalers.

2. Small or large quantities may be purchased at

competitive prices.

3. Customers are able to see what they are buying, as

against buying just from a pricelist or catalogue.

4. Customers may use the warehouse as often as they like

and in doing so keep the level of stocks held low.

Disadvantages:

1. Caterers have to provide their own staff and transport to

collect the items from the warehouse.

2. Caterers have to pay cash for the items they purchase.

 This method is used when it is necessary to ensure the

continuity of supply of an item for the menu which is of

particular importance to a restaurant.

 Caterers are buying in advance a large quantity of a

commodity to cover the needs for several months ahead.

E.g. frozen jumbo size prawns, and frozen fillets of beef.

 This method is relatively new.

 It is a method offered only by a few suppliers who are

able to offer a full supply service of all commodities.

Advantages:

1. Negotiation with one supplier only.

2. Reduced volume of paper work.

3. There will be a fewer deliveries with the result less

wastage of time and less staff required to receive the

items.

The main disadvantage is that of being tied to one major

supplier, whose prices may not be as competitive as when

using several suppliers and whose range of certain

commodities may be limited.

 A chain of hotels may prefer to have a centralisedpurchasing system for non-perishable items.

 All requisitions/requirements for the entire year or for a

specific period are sending to head office.

 The purchase department places order for all the hotels

and dispatch to various hotels.

 The advantage of centralized purchasing is that it

reduces the purchase department’s overheads and due

to large quantity of supply ordered, more competitive

rates can be settled for all commodities.

 Sometimes the suppliers are directed to supply the

requisite quantity to the respective hotels and the hassle

of supplying is also eliminated.

 Foods and beverages are purchased at a lower price

because of volume purchasing.

 It provides a better opportunity to obtain desired quality

because purchaser has a greater choice of markets.

 Goods can be purchased to the purchaser’s exact

specifications.

 Larger inventories can be maintained assuring a more

constant supply to individual units.

 Greater control over dishonesty of individual unit food

purchasers can be maintained.

 Units must accept the standard item in stock and has

little freedom to purchase for own peculiar needs.

 Units cannot take advantage of local “specials” at

reduced prices.

 Menus usually must be more standardized, thus limiting

the individual unit’s manager’s freedom to change a

menu.

Finally, it should be noted that decisions about whether or not

to become involved in centralized purchasing systems are

normally made by top management, not by food controllers.

However, there are times when food controllers may be

called upon for advice and opinions, and they should

understand what is involved in centralized purchasing.

 Aims at purchasing the commodities procured

periodically.

 The procedure adopted for their purchase is usually

quotations, cash and carry or contract purchasing.

 Usually either the non-perishable items are purchased

through periodical purchase system or those items which

may not be required on regular basis.

 In this method buyers commonly make arrangements

with certain purveyors for the delivery of goods without

specific orders.

 This arrangement takes one or two forms.

 One arrangement calls for the delivery of specific no. of

certain items each day; e.g. twelve loaves of bread, one

packet of butter etc. The number will remain constant

unless specifically changed by the buyer.

 The second arrangement usually calls for the

replenishing of stock each day up to a certain

predetermined number. For instance, the steward might

arrange with a diary supplier to leave sufficient

quantities of bulk milk each morning to bring the total

supply up to a predetermined figure, such as twenty

gallons.

 While these arrangements are convenient, they do

present a number of possibilities for both waste &

excessive cost to develop

OUALITY PURCHASING

If a restaurant is to produce products of consistent

quality, it must use raw materials of consistent quality.

 Therefore, it is important that the food controller, in cooperation with other members of the
management

team, draw up list of all food items to be purchased, and

list in appropriate detail those specific and distinctive

characteristics that will best describe quality of each.

 These carefully written descriptions are known as

Standard Purchase Specifications. (SPS)

 A standard purchase specification is a concise description

of the quality, size and weight or count factors required

for a particular item.

 It is something which is particular to an establishment

and which has been determined by its price structure,

and catering policy of a firm.

 Once established, the specification must be strictly

adhered to.

 Any alteration to a particular specification must only take

place with the approval of the management.

 Once this S.P.S. have been written and agreed upon by

the management team, they are often duplicated and

distributed to potential suppliers to ensure that each will

fully understand the exact requirement of the restaurant.

 Table Apple(in Kg):

Bright brick red colour, no bruises, no holes or black spots,

ripe and juicy,5-6 per kg. The diameter of the fruit when cut

transversely should be at least 3.5” (In season from midAugust to January).

 Table Sweet Lime:

Yellow in colour, juicy, thin skinned, 5-7 per kg. Minimum

diameter 3”. (In season from August to Feb).

 Beetroot:

Dark crimson colour, smooth without wrinkles, tender

surface, free of cracks and scars, no stem and leaves attached.

(5-7 per kg)

Advantages of SPS:

 They force the management team to determine exact

requirement in advance for any commodity.

 They are often useful in menu preparation, in that it is

possible to use one cut of meat purchased according to

specifications to prepare several different items on the

menu.

 They eliminate misunderstandings between the supplier

and buyer.

 Circulation of specifications for one commodity to

several suppliers makes co-operative bidding possible.

 They eliminate the need for detailed verbal descriptions

each time a commodity is ordered.

 They facilitate checking food as it is received.

Although specifications are written down at one particular

time, they need not to be considered fixed for all times. If

conditions change, they can be re-written and re-circulated.

 Economic Order Quantity is an important factor in

controlling the inventory.

 It is a quantity of inventory which can reasonably be

ordered economically at a time.

 Also known as Standard Order Quantity, Economic Lot

Size or Economic Ordering Quantity.

In determining this point ordering costs and carrying costs are

taken into consideration.

 Cost of getting an item of inventory and it includes cost

of placing an order.

 Includes requisitioning, purchasing, ordering,

transporting, receiving, inspecting.

 Costs incurred for holding a given level of stock.

 Includes costs of storage facilities, property insurance,

and loss of value through physical deterioration, cost of

obsolescence.

 Either of these two costs affects the profits of the firm

adversely and management tries to balance these two

costs.

 The balancing or reconciliation point is known as

Economic order Quantity.

 The widely used formula is

EOQ =√ {2ACp/Ch} Where,

A= Annual quantity to be used in units.

Cp=Cost of placing an Order.

Ch= cost of holding one unit for one year.

Suppose the annual demand for this product is 5000 units.

The ordering cost is Rs. 20 per unit and the holding cost is Rs.

5/unit per annum. The EOQ shall be:

EOQ = √ {2ACp/Ch} =√ {2x5000x20/5} =√ {40000}

EOQ = 200 units

RECEIVING CONTROL
AIMS OF RECEIVING CONTROL

The quantity of goods delivered matches the

quantity which has been ordered.

 The quality of goods delivered is in

accordance with the specification stated

in the purchase order.

 The prices stated on the delivery note are

in accordance with the prices on the

purchase order form.

 When the quantity or quality (or both) of the

food is not in accordance with the purchase

order or an item is omitted from the order

a ‘request for credit note’ is raised by the

receiving clerk.

 An accurate record is made in the

‘goods received book’ recording details

of the delivery.

 Competent receiving clerk.

 Adequate facilities of equipment

for receiving.

 Charts showing specifications for guidance

in receiving.

 Proper receiving routine.

 Periodic checks on receiving methods

and procedures.

 The primary qualification of the receiving

clerk is alertness, sound judgement, the

ability to organize his routine work and

basic knowledge of the food and beverages.

 He should be qualified to inspect food at

least initially, in order to determine that

it generally meets the establishment

specification standards.

 E.g. one grade of tomatoes may be specified

for certain items on menu, another grade

for different item.

 The difference in the price may determine

profit or loss. To the careless receiving

clerk, tomatoes are tomatoes.

The job of the receiving clerk is

very technical.

The duties and responsibilities are as under:

 He is supposed to have a complete

knowledge about each item’s

standard specifications.

 He must ensure that the tinned food supplies

is fresh; the packaging is of right standard

and is not damaged during transportation.

 In case of fresh fruits, vegetables, frozen

food etc, he should ensure that the items

supplied are as per the SPS mentioned in

the purchase order. If desired he can take

the help of the chef in order to check the

quality of the raw material.

 He should weight and count the items

before receiving them.

 The receiving department should be

located in such a position that the goods

may be quickly unloaded,

checked/inspected, received and then

easily distributed to various stores, cellars,

kitchens and other departments.

 The areas provided for receiving

department should be large enough to

handle the large quantity of goods and it

should be easily cleanable and washable.

 It should also be very well lit and as far as

possible it must have natural light

coming during day time.

 This department should have weighing

scales to weight all kinds of goods.

 The ramp should be made so that the goods

can be carried through trolley and if the

store is on different floor level then goods

lift/elevator should be available nearby to

carry the goods.

The equipments required by the receiving

department can be broadly divided into:

 Major Equipments

 Minor Equipments

 The receiving department should be well

equipped with the various equipments so

that the goods can be received efficiently and

both the quantity as well as quality can be

inspected.

 Various Weighing Scales

 Conveyer Belt

 Forklift Truck

 Crane
 Trolleys

 Lift

 No worker can do a thoroughly efficient job

unless he has the proper equipment, since

weight is of prime importance in the receipt

of goods, a suitable set of accurate scales is

a necessity.

 There are recording scales which stamps

the weight of merchandise on the invoices

or receiving tickets.

 Plate form scales built into the floor

are widely used.

 Other weighing scales used for

weighing goods in quintals and smaller

scales to weight goods in kilograms.

 After weighing the goods, the conveyer belt

is used to carry the goods to store or to any

other convenient place.

It is used to lift the unloaded material from

truck to bring it to receiving department for

opening the big packets or to carry to

weighing scales to weight the exact weight

of the goods received.

Small cranes are used to stack the goods

received in racks or specially build plat forms.

Trolleys are used to carry the goods received

to various stores, kitchens and other

departments which had requisite the goods.

To carry the goods to higher floors, the

goods’ lifts are provided.

 Racks
 Scientific Equipments

 Filling racks

 Tables & Chairs

 Telephone & Intercom

 Numerous racks are provided to the receiving

department so that the goods received can

be kept till they are shifted to stores.

 This keeps the floor of the receiving

department neat and clean and the

fresh supplies can be properly received.

 To check the fat content in milk, a

lactometer can be used.

 Small pans are provided where the frozen

items like meat, chicken can be dipped by

filling them with water and after bringing it

to room temperature the weight of the frozen

item is taken. Sometimes suppliers inject

water in the wings/breasts of chicken and

freeze them

The filling racks are provided to keep all

the supply orders, purchase orders, goods

received book, credit notes, etc.

To carry out the paper work.

Telephone and intercom are provided so

that there is no communication gap among

various departments and suppliers.

 When goods are delivered they are

usually accompanied by a delivery note

showing details of items supplied.

 The delivery note should be used for

checking purpose against the goods and

any damage or shortage must be noted.

Delivery Note ABC Supplier Ltd. No.

New Delhi

To

Queens Hotel

Please receive

S.No P.order No. Quantity Pack Size Item

Remarks

Received in good order & condition Signature of Receiving clerk

 An invoice is a detailed account of goods

purchased. It is numbered and shows

quantities, prices, packing charges and

details of terms and discounts etc.

 It is sent by the supplier to the customer.

 Invoice received should be check for

prices and calculations.

 It should be passed if correct for entry into

the appropriate columns of GRV & GRB.

Market Price Meat Co. Invoice No.

New Delhi

To

The Grand Restaurant

S.No Quantity Unit Description Unit Price Amount

01. 30 Lbs Broilers 80/Lb 2400

02 03 Lbs Leg of lamb 200/Lb 600

Total 3000

Signature of Supplier………………………………

The return of goods require at least

four steps:-

1. An argument with the delivery man who is

disinclined to take back a delivery because

that means extra work and explanation for

him.

2. The reason for return of the merchandise

must be noted on the invoice.

3. A form requesting a credit memo must be

filled out duplicate and sent to accounts

department for transmittal to the vendor.

4. Last but by no means least, the

department head must be notified so that

plans may be changed and substitutions

made in menu if that should be necessary.

An example of a typical request form for credit form

Hotel ABC

Request for Credit Memorandom

No.______________

To

XYZ Meat Co. Date_____________

Please Issue your Credit Memo for items below:

S.No. Qty. Unit Description Cost (Value)

Unit Price Total

01 12 Kg Frozen Calf liver 150 1800

02 02 Kg Leg of lamb 250 500

Reason : 1. Calf Liver not delivered but invoiced.

2. Leg of lamb not as per specification

F&B Controller Accounts Dept. Van driver Requested by

____________ _____________ __________ ____________

There can be several reasons when a receiving clerk can

ask for a credit note:

 Due to poor quality (not as per specifications)

 Not ordered but delivered

 Ordered but not delivered, still invoiced.

 Suitable receiving records of all

shipments must be maintained.

 The principle media by which such

records are maintained are receiving

sheets, individual tickets, daily receiving

report, goods received book.

Daily merchandise receipts are divided

into two categories:

1. Storeroom purchases that are dispatched

to the storeroom (Non-perishable)

2. Direct purchases that are sent to

kitchen (Perishables)

 The GRVs’ are made separately for both

of the above supplies.

 Four or five copies are made which are

distributed as:-

1. Supplier

2. Stores/kitchen

3. F&B Controller

4. Accounts

5. Book Copy

 These copies are exchanged with one

another at the time of processing of bills.

These GRVs’ are stamped with receiving

stamp

Stamp (Sample)

Received by______________ Date___________

Deptt Head approval ___________________

G.R. Ledger No.______________

Initial_________________

Goods Receipt Voucher

Hotel ABC

GRV No…… Date……………..

Suppliers Name…….. Invoice No………. Date……………

Purchase Order No. …………… Date………….

S.No Description Quantity Rate Value Remarks

Total Value

Entered in Cardex /Bin Cards Signature of receiving clerk

Initials of Storekeeper Date…………. Sig of Accts

 GRVS’ stream line the purchases, bills and

will minimize pilferage as it goes through

03 stages of check i.e. stores/kitchen, F&B

Controller and accounts.

 It ensures proper & cross check on

G.R. Ledger, Bin Cards, & Stock Ledger.

 For large food service establishments, a

receiving sheet is consolidated report of

all the items received during the day.

 It is made in triplicate, one copy retained

by receiving department, one copy to F&B

Controller and one copy to accounts for

verification and purchase invoices.

Hotel ABC

Receiving Clerk’s Daily Report

No._______________

Date_______________

S.No Quantity Unit Description Unit Amount Distribution

Price Direct to Stores Refrigerator

Kitchen

Total Amount

Signature of receiving clerk

 In this ledger all details are noted from

GRV’s to keep a complete record of all the

supplies received.

 Two ledgers are maintained—01 for

perishables and 02 for non-perishables.

Hotel ABC

Goods Receipt Ledger/Book

Date:

S.No Name of the Description Qty. Rate Value GRV No. Remarks

Supplier

A set of standard receiving could include

the following:

 Count each item that can be counted (No.

of cases or No. of individual items)

 Weight each item that is delivered by weight.

 Check the count or weight figures on the

invoice accompanying the delivery. If

purchase orders are used, the invoice

information should also be verified

against that.

 Checking specification—confirm that the

items are of the quality desired. If

specifications were prepared and sent

to supplier, check the quality against

these specifications.

 Check the expiry dates.

 Check the temperature (exceptions)

 Spot check case goods to ensure they are

full and that all items in the case are of the

same quality.

 If goods are supplied without invoice, prepare

a memorandum listing name of supplier.

 If goods are short-listed or if quality is not

acceptable, prepare a form requesting for

Credit Memo listing items returned

And obtaining delivery man’s signature

acknowledging he has taken the items back.

 Store all items in proper storage location as

soon after delivery as possible.

 Send required documents to various

departments for further action.

 Assessing the performance and efficiency of

receiving department, the control office

spot checks should be carried out to ensure

that the receiver is performing all his duties.

 If the items are not received properly, the

supplier may be tempted to deliver the

substandard or short-shipped items. e.g.

 When a delivery man notices that weighing

scales are not used or that quantities are not

counted, he may be tempted to short-ship

deliveries, if he notices that quality is not

checked, he can substitute a lower quality.

Even with all these safeguards in effect,

losses can also occur from employees in and

around receiving and storage areas. Such as:

 The receiver working with delivery man and

approving invoice which do not match with

the details on purchase order i.e.

 Quantity of items received less than invoiced

 Quality of items received not as desired e.g.

◦ Expired/Near expiry items accepted.

Leaking bottles received

◦ Melted Ice-cream received etc.

RECEIVINGOF EXPENSIVE

ITEMS

 In the majority of catering establishments

some items of food such as meat, special

processed meats such as ham, and fish

such as smoked salmon, constitute the

most expensive of the purchased foods.

 Because of this high cost, it is uncommon

for units operating a detailed control system

to set up a form of special control of these

items.

The tag is made of hard paper and has got

two identical parts which is attached by

the string or wire to the food item.

 On receiving the items they are checked

against the purchase specification as to

being acceptable or not.

 If suitable, a tag is made out for each item

received, with the main information being

taken from the invoice or delivery note.

 The weight recorded on the tag is obtained

by actually weighing each item individually.

 The tag is then separated along the

perforation with the control office copies

being sent direct to control with the

invoice or delivery note and the kitchen

copy being attached by the string or wire

to the food item.

 When the item is issued at a later date, to

the kitchen for use, the tag to the item is

removed and sent to control with the date of

issue.

 The control office will usually operate a

reconciliation of meat tags form, recording

the tags received from the receiving

department and from the kitchen.

 Thus the total value of tags of each

expensive item would be known for:

a) Daily purchases

b) Daily issues to the kitchen for

immediate use

c) Balance shown would give the stock value

of those items.

 It aids the control of expensive foods.

 It requires the receiving clerk to weigh and

record each item, and to check against the

specific purchase specification.

 It prevents dispute over the weight when

the meat (fish, poultry) is issued to kitchen.

 Issuing becomes easy.

 It helps in maintaining FIFO

 In order to compel hasty, careless and

indifferent receiving clerks to weight and

count every incoming item, a system known

as ‘Blind Receiving’ may be implemented.

 The clerk has no access to any invoice

or delivery ticket containing the weight

and count of the merchandise ordered.

 The copy of purc