Topic B - Procurement, Production, Distribution, Service

Procurement

• first functional subsystem

• function of acquiring material for production (purchase, receive, storage, inventory control

Purchasing department: Profit Center

• assigned to both expense and revenue responsibilities

  • ex. cafeteria

Purchasing department: Cost Center

• manage expenses, but do NOT generate profit

  • ex. patient

Informal, open market

• when a small amount is needed quickly

  • buyer requests quotes on specific items for specific amounts and qualities from one or more sources of supply

  • contact made by phone or with vendor

  • place order after considering price, quality, delivery

Formal, competitive bid buying

• provide written specifications and quantity needs to vendors who then submit a price

  • bids are opened together; place order with lowest bid (price)

Future contracts

• purchase goods at a specific price to be shipped later

Prime vending

• use single vendor for majority of purchases, saves time and money

• most vulnerable to price increases based on vendor costs than market value of goods

Centralized purchasing

• personnel in one office does all purchasing for all units in that organization

• cost-effective and time-saving

Group or co-op purchasing

• involves union of separate units (hospitals)

• Not related to a single management

• for joint purchasing

• economic advantage of large volume discounts

JIT Just-in-time purchasing

• purchase products as needed for production and immediate consumption by customer, without having to store and record it in the inventory

• receiving clerks take items immediately to area in which they will be used

Purchase requisition

• first document used in the purchasing process

• internal form used to request items from the purchasing manager

Purchase order

• completed by the buyer

• written record of items ordered and quantities needed

  • standing orders - eliminate the need to call in daily or weekly orders

  • FOB (free-on-board) - products delivered with all transport charges paid

  • FOB origin - buyer takes ownership at seller’s location

Written specification

• accurate word picture or definition of a product

  • precise statement of quality - brief complete simple

  • include name, form, quantity, quality, size, grade, brand, style, sieve size

  • Types:

    • Technical: indicate quality by objective and impartial test results (graded food items, gauge metals). Can-cutting: open cans for comparison among brands

    • Approved brand specifications: indicate quality by specifying a brand name

    • Performance specifications: indicate quality by functioning characteristics of the product (how many dishes washed I minutes)

Formularies

• descriptions of approved products that an organization (or a department) would like all personnel (who need such a product) to use

• volume discounts can be obtained

• standardizes usage

Vendor performance requirements

• compare price, quality, service

  • evaluate after several orders have been filled

  • value added services (chopped lettuce vs. heads of lettuce, coffee-making equipment with the purchase of coffee products)

Buyer’s code of ethics

• can serve as a legal agent for the organization

  • consider first the interest of your company

  • buy without prejudice, obtain maximum value for each dollar spent

  • denounce bribery, kickbacks; respect your obligations

  • avoid collusion with vendors - decline gifts and favors that could compromise your ability to make objective purchasing decisions

Food broker

does not own products; connects buyers with sellers

Foodservice management software

• Computrition

• CBORD

• Dietary Manager

• ChefMax

EOQ - Economic Order Quantity

• a quantitative approach to ordering staple or regularly stocked items

• attempts to find the quantity that minimizes both purchasing and inventory costs

• determines the order size that is most economical

• total annual cost of restocking an inventory product depends on the number of times it is ordered each year

• to decrease costs, place orders as seldom as possible by ordering larger quantities

• when the cost of placing an order aligns with the cost of holding the items, EOQ is obtained

Time series

• short-term forecasts; assumption that needs follow an identifiable pattern over time

  • moving average

  • exponential smoothing

Moving average (Time series forecasting)

• uniformly weighs past observations (numbers are weighted equally)

• the NEXT forecast is calculated by dropping the first number and adding the next

Exponential smoothing (Time series forecasting)

• uses software

  • gives more recent values more weight

  • does NOT uniformly weigh past observations

• takes into account seasonality of data and adjusts for forecast error

Causal models

• assumption that a relationship exists between the item being forecast and other factors (selling price, number of customers)

  • medium- and long-term forecasts, expensive to develop

  • example - regression analysis forecasting; assumption that relationship between variables will continue over time

Subjective model

used when relevant data are scarce or when relationships between data do not tend to persist over time - must rely on opinions

• Delphi technique - expert opinions; market research, panel consensus

Purchase Order (PO)

• FIRST CONTROL in receiving process

Receiving area

• close to delivery docks with easy access to storage

invoice

• suppliers’ statement of items being shipped, unit price, total expected payment

• compare invoice against purchase order first → then items against invoice

• inspect items, list on receiving report, store promptly

blind check receiving method

• give clerk blind invoice or purchase order listing incoming merchandise but omitting quantities, weights

• receiving clerk inserts these numbers into the order on the basis of a check of the delivery

• forces clerk to make serious check of delivery

• takes longer and costs more labor

• most accurate BUT very time consuming

receiver to write the merchandise description → count the quantities received → list them on a blank form

Daily receiving report

• lists items received, date, number, units, unit price, supplier, PO number

Substitution invoice

• use when order arrives without an invoice

request for credit

• lists discrepancies such as shortages

pilferage

inventory shrinkage caused by employees stealing food

dry storage temperature

• 50-70°^F

dry storage humidity

• measured by hygrometer: 50-60%

fresh fruits and vegetables humidity

• 85-90%

storage time for shelled eggs

• 3-5 weeks

storage time for unshelled (raw egg white/yolks)

• 2-4 days

storage time for fresh poultry, ground meat, fresh fish, shellfish

• 1-2 days

storage time for steaks, chops, roasts

• 3-5 days

Perpetual inventory

• running record of balance on hand

  • updated each time an item is placed in or removed from storage

  • used in large operations that keep large quantities of product in stock

  • generally restricted to dry and frozen storage

**bread, produce, milk are not on inventory and are considered direct issues

Physical inventory

• actual count of all goods on hand at end of accounting period

  • counted as asset on balance sheet

par stock method

• (required amount of products that are kept on hand)

• bring up stock up to par level each time an order is placed regardless of the amount on hand

  • If ___ is 10, and you have 8…. order 2

fixed order quantity inventory system

• determines the order point (when you must reorder the item)

• (average daily use)(lead time) + safety stock

• lead time: number of days from placing order until delivery

• safety stock: small back-up supply to ensure against sudden increases in use

mini-max method

• stock is allowed to deplete to safety level before new order is placed

• establish minimum and maximum amounts to have on hand

  • order goods when minimum is reached and only in the amount needed to reach the maximum level

  • amount of item ordered will be the same each time it is ordered

ABC inventory classification system

• small amounts of product account for major portion of inventory value

• Activity level: the relative importance of each inventory item is measured by how much the total value of purchases is for that item each year

• A items (vital, high value): <20% of the total # of items in stock constitute 75-80% of the total annual value of purchases

  • Tightest control needed for A items (most expensive, often proteins)

• C items (trivial, low value): 50-60% of inventory items comprise only 5-10% of the value

• B items (moderate, medium value): items between A and C ranges

gas-in-liquid dispersion

whipped egg whites (foam)

gas-in-solid dispersion

spongecake (suspension)

liquid-in-liquid dispersion

mayonnaise (emulsion)

solid-in-liquid dispersion

gravy (sol)

liquid-in-solid dispersion

custard (gel)

maillard reaction

• mostly occurs in an alkaline environment

meat analogs

• isolated soy protein, vegetable protein, fat, carbohydrate, vitamins, minerals, flavor, color (less fat than meat, about 50% protein, no saturated fat)

seafood analogs

• soy blended with fish, retains, flavor, does not change greatly when heated thus reducing weight loss and shrinkage; economical

vegetable blends

• Incaparina (maize, sorghum, cottonseed flour), CSM (corn, soy, non-fat dry milk, vitamins, minerals)

molds

• warm (77-86°^F), damp, dark conditions, grows best on acid, neutral, sweet foods

• used in curing cheese, making soy sauce

yeasts

• water, energy, acid medium in oxygen (77-86°^F)

• bread-making

• produces bubbles of gas; destroyed by boiling

bacteria

• need abundant MOISTURE, NEUTRAL foods

• (68-113°^F)

• some >113°^F thermophilic; aerobic or anaerobic

• destroyed by temperatures of pasteurization (145°^F 30 min)

• FATTOM ideal conditions for microorganism growths

FATTOM

• Food

• Acidity

• Time

• Temperature

• Oxygen

• Moisture

Methods of preservation

• chilling

• freezing

• drying

  • dehydration

  • sublimation

• canning

• irradiation

• pascalization

• HPP - high pressure processing

• chemical preservation - BHA, BHT (antioxidants for fatty products)

• sugar, salt - make water unattainable for bacteria

Canning: USDA’s FSIS inspects canned product manufacturing

• if pH is LOW (acidic): use boiling water (strawberries, apples, pickles)

• if pH is HIGH (basic): use pressure cooker (carrots, beets, peas)

• Calcium compounds are additives used as humectants: retain moisture, increase firmness, tenderness

**Botulism more readily destroyed by heat in acid

aseptic canning

• food sterilized outside of can, then aseptically placed in sterile cans which are sealed in an aseptic environment

Irradiation

• cold sterilization (temperature of food does not rise much even through large amounts of energy are used)

• marked with radura symbol

  • to prevent off-flavors in meat, irradiate frozen

  • approved by FDA for spices, beef, lamb, pork, poultry, wheat, potatoes

  • kills most harmful bacteria in foods other than milk

chemical preservatives

BHA, BHT - antioxidants for fatty products (preserve butter, meat)

• fat/lipid oxidation prevention

standardized recipes

• produces known quantity of food of desired quality

  • name, ingredients, procedures, pan size, baking time, temp, quantity and number of portions of specific size, standard of quality expected

  • must be tested and adapted for use

Gantt progress chart

• used to schedule and control work

• concerned with TIME of production, not cost

• rows on chart are tasks to be completed

• horizontal bars indicate time period to complete each task

PERT - Program Evaluation and Review Technique, CPM - Critical Path Method

• Network-based project scheduling tools that map tasks, their sequence, and their time requirements to plan and control a project

Ex. planning a new kitchen renovation with many dependent tasks (demolition, plumbing, inspection)

Conventional

All preparation done on premises where meals are served, foods are prepared and served the same day (immediate service)

• Advantages: more adaptable to individual preferences, menu flexibility, low distribution costs, less freezer storage needed

• Disadvantages: uneven stressful workday caused by peak meal period demands, productivity lower as menus differ daily, high labor costs. Need all pre-preparation, cooking and serving equipment, skilled and unskilled labor

• 5 Critical Control Points

Ex. A hospital kitchen that roasts chicken and makes gravy from raw ingredients on-site, then serves that same day

Commissary

Satellite: centralizes procurement and production; food production (kitchen) and service areas (patients) are in separate facilities

• menu items are in bulk or portioned, then frozen, chilled or hot-held; carriers are filled at the commissary and delivered to the service units

• Advantages: uniform quality of products for all units, economics - centralized, large-volume purchasing, no duplicate equipment or personnel

• Disadvantages: delivery adn safety issues; has 9 Critical Control Points

Ex. a school district’s central kitchen that produces meals and trucks them to individual schools for final heating and service

Ready-prepared

(Cook-chill, cook-freeze)

• no produced for immediate service but for inventory and subsequent withdrawal

• foods are prepared on site, then frozen, chilled, for later use

  • requires blast chiller or freezer, adequate storage

• distinct feature: separation between time of preparation and time of service

  • blast chilling: food may be held 1-5 das

  • tumble chilled: 45 days

  • cook freeze: 3-4 months

• bulk food must be brought down to 37 degree F in 90 min or less

• rethermalization:

  • microwaves

  • convection oven

  • integral heat system

  • immersion technique: heat pouches of food in boiling water or steamers

• 8 Critical Control Points

Ex. A hospital that cooks entrees in advance, chills or freezes them (cook-chill or cook-freeze), and rethermalizes them on the tray line days later

Assembly-serve

(total convenience, minimal cooking concept)

• purchase completely prepared individual portions

• 4 Critical Control Points

Ex. A nursing home that buys fully prepared frozen entrees and pre-portioned items then heats and plates them with almost NO food production

scramble system

• hollow square, free-flow

• divides hot food, grill, salad, beverages - so customers can go exactly where they want

  • DECREASES LINES AND WAIT TIME

American

waiter takes order and food is portioned onto plates in kitchen

French

portions brought to table on platter; waiter completes preparation at table (carving, making sauce, flaming)

• most expensive

Russian

prepared and portioned in kitchen

• brought to table on serving platters

• waiter serves individual portions to each guest

Family style

guests serve themselves from platters or bowls

Banquet

preset menu and service for a given number of people