Final NDFS 445

1. Forecasting:

1. Forecasting:

- Definition: Forecasting is the process of making predictions or estimates about future events based on past and present data.

- Types of forecasting: Qualitative forecasting (subjective judgments), quantitative forecasting (statistical analysis), time-series analysis, causal models, and simulation.

- Proper uses: Qualitative forecasting is useful when historical data is scarce or unreliable, while quantitative methods are suitable when there is ample historical data available.

2. Inventory Management:

- Different methods: FIFO (First-In, First-Out), LIFO (Last-In, First-Out), Just-in-Time (JIT), Economic Order Quantity (EOQ), ABC analysis (categorizing inventory based on value), etc.

- Differences and uses: FIFO ensures older inventory is used first, suitable for perishable goods; LIFO may result in better tax management but can lead to obsolescence; JIT minimizes inventory holding costs; EOQ helps determine optimal order quantity, and ABC analysis prioritizes inventory management based on value.

3. Three Q's of Receiving:

- Quantity: Ensure the quantity received matches the quantity ordered.

- Quality: Check the quality of received items to ensure they meet standards.

- Quotation: Verify that the price charged matches the quoted price.

4. Decentralized vs. Centralized Service:

   - Decentralized: Service is provided at multiple locations, often with decision-making authority dispersed among various units.

   - Centralized: Service is provided from a single location or a central authority, with standardized processes and decision-making.

5. Foodservice System Methods:

   - Conventional: Food is prepared and served on-site.

   - Ready-prepared: Food is prepared in advance, chilled or frozen, then reheated for service.

   - Assembly/serve: Pre-prepared components are assembled upon order.

   - Batch cooking: Cooking food in smaller batches to ensure freshness and reduce waste.

6. Temperatures for Storage Areas:

   - Dry storage: 50°F to 70°F (10°C to 21°C)

   - Refrigerated storage: 32°F to 40°F (0°C to 4°C)

   - Frozen storage: 0°F (-18°C) or below

7. Principles of Time Motion Economy and Work Simplification:

- Time-motion economy aims to streamline work processes to minimize wasted time and effort.

- Work simplification involves breaking down tasks into simple steps and eliminating unnecessary steps to increase efficiency.

8. Steps of the Receiving Process: 

   - Inspection

   - Documentation

   - Acceptance or rejection

   - Storage

Charrette

Collaborative planning for the kitchen with multiple other areas/people

9. Ingredient Room:

   - Usage: Storage and organization of ingredients.

   - Equipment: Shelving, refrigerators, freezers, bins, labeling tools, etc.

10. Factors Affecting Food Distribution:

    - Distance to be covered

    - Transportation infrastructure

    - Packaging requirements

    - Storage facilities

    - Food safety regulations

11. Kitchen Flow:

    - Efficient layout to minimize backtracking.

    - Ideal flow: Receiving/storage -> Preparation -> Cooking -> Service.

12. Service Methods:

    - Table service: Food served at the table.

    - Buffet service: Self-service from a variety of dishes.

    - Cafeteria service: Customers select pre-prepared items from a display.

    - Fast food service: Quick-service with limited menu options.

13. Service Control Methods:

    - Standardized recipes

    - Portion control

    - Quality control checks

14. Types of Authenticity:

• Natural

• exceptional

• Influential

• Orginal

• Referential

15. Cross Training:

    - Training employees in multiple roles or tasks to increase flexibility and efficiency.

16. Kitchen Design:

    - Planning process: Assessing needs, creating a layout, selecting equipment, considering workflow.

    - Elements: Workstations, storage areas, ventilation, safety features.

    - Square footage requirements: Based on the size of the operation and intended capacity.

17. Seven Steps to Solving Service Issues:

    - Listen actively

    - repeat it back to them

    - Apologize sincerely

    - Acknowledges

    - Make it better

    - Explain how it is going to be resolved

    - Says “thank you”

18. Total Customer Service:

    - Providing exceptional service at every touchpoint of the customer experience.

19. Calculations:

    - Cost of Goods Sold (COGS): Opening inventory + Purchases - Closing inventory

    - Average Inventory: (Opening inventory + Closing inventory) / 2

    - Inventory Turnover: COGS / Average Inventory

Ventilation vs. circulation

Circulation: moving air around

Ventilation: opening a window to bring new air in

Negative air pressure + Positive air pressure

P: more air coming in than out

N: more air going out than in

6 steps to obtaining quality customer service

1. Understand customer procedural and personal service expectations

2. Establish a quality service culture

3. Institute clear and concise service-delivery standards

4. Incorporate service standards into organization systems

5. Assess progress and reward successes

6. Continually work on improving quality service

Unstand→establish→make standards→incorperate standards→ access progress → continually improve

Take out service

Purchase at one location and enjoy in another

Delivery service

Transporting prepared food items to the customer

Tray service

-Delivered to guest on a tray

– Most common in healthcare

– Typical system now moving towards on-demand tray service

Production amount

Overproduction

• Unused prepared food, extra labor costs, wasted food

Underproduction

• Unhappy customers who didn’t get what they came for

Non-commercial vs. Commercial forecasting

Commercial:

• Menus generally remain static in the commercial foodservice organizations

Non-Commercial:

• Menu variety changes on a daily basis in the noncommercial foodservice industry

Production (converting ingredients into what we can sell to customers)

Key element of the transformation process

Purpose:

• Preparation of menu items in the needed

  • Quantity

  • Quality

  • Cost

Production Planning

Manager must determine

• Product characteristics

• Production process characteristics

• Define the desired quality level (should hopefully come from specifications)

• Predict quantities needed for demand

• Consider costs of labor, material, facility utilization (prep-time)

What does this process look like in real life?? (forecasting)

Forecasting

Must be flexible!

Definition: Art & science of estimating events in the future (it is difficult)

Goal: the goal of forecasting is to get the production just right where you do not over or under produce

Subjective:

• Intuition (the art) Gut feeling

Objective

• Mathematical models (the science)

Why is forecasting so Critical?

• Affects:

  • Food production (to much or to little)

  • Customer satisfaction

  • Employee morale

  • Manager confidence

  • Inventory

  • Staffing

  • Financial status

Production Amount

Overproduction:

• Unused prepared food, extra labor costs, wasted food

Underproduction:

• Unhappy customers who didn’t get what they came for

Which is worse??

Both have real consequences (it depends on the situation of where you would rather hedge your bets)

Non-comercial Vs. Comercial Forecasting

Commercial

• Menus generally remain static in the commercial foodservice organizations

Non-Commercial

• Menu variety changes on a daily basis in the noncommercial foodservice industry

Non-commercial forecasting takes more time!!

How do we forecast?

Quantity demand

Historical records:

• Customer counts

• # of items prepared

• # served

• Meal hour

• Special circumstances

This is where forecasting begins

Forecasting models

Criteria: Cost of model, Relevancy of past data, Accuracy of model, Forecasting lead time, Underlying pattern of behavior

Types:

• Time series: Two types of time series models- Moving average and Exponential Smoothing

• Causal

• Subjective

Time seres Basis

Actual occurrences follow an identifiable pattern over time

Most suitable for short term forecasts

Two types:

moving average

Exponential smoothing

Time series: Moving Average

Moving Average:

• Most common and most simple

• How it works

  • Calculate average of the number of portions sold the last 5 times it was offered

  • Drop the first number and add the most recent number of portions sold to the bottom of the list

  • Continue this process for all data

Time series: Exponential Smoothing

Provides the most accurate forecasts for production.

How it works:

• Does not uniformly weigh past observations

• An exponentially decreasing set of weights is used

• Gives more recent values more weight than older values

• Data required

• Weights, alpha judgement factors, last customer demand, last forecast

• No need to store historical data

Causal Forecasting

Not used as often due to being expensive

Don’t worry to much about it (just the basics)

High costs for development

For short-term forecasting, this does not yield better accuracy over time-series

Popular for medium- & long-term forecasts (not common to use in food service since we look at short term and do not plan into the long term)

Relationship exists between the items being forecast and factors besides time

Such as: Patient census, Number of patients on reg & modified diets, Seating capacity, Number of employees, Selling price, Day of the week

Expensive to develop (Usually medium to long term forecasts)

Common Form: Linear regression

Draws on past data to establish a relationship between

• Item being forecast

  • Dependent variable (Y)

• Factors that affect it

  • Independent variable (X)

Regression Analysis

Evaluating trends & sales estimates for forecasts

Example:

• Sales have increased steadily every month for the past year

• Linear analysis monthly sales (y-axis) and time (x-axis) would produce a line that that depicts the upward trend in sales.

• The trend line used to forecast sales in future months.

Subjective Forecasting

(new item so there is no data or relevant data is scarce)

Used when

• Relevant data is scarce

• Little relationship between past and future data

Methods:

• Market research

• Panel consensus

• Visionary forecast

• Historical analogy

ABC method

A small number of products account for the major value of inventory

Those products should be monitored closely

Products divided into categories

Inventory Valuation

Actual Purchase Price:

• Price inventory at exact price of each individual product

Weighted Average:

• Weighted unit cost based on unit price and number of units in each purchase

FIFO:

◦ Closely follows flow of products

Ending inventory is valued at prices of most recent purchases

LIFO:

• nAssumes current purchases are made for meeting demands of production and should be costed out first

• Value of inventory will be lowest with LIFO

Latest Purchase Price:

• Latest purchase price is used to value the inventory

Predominant type of food service is…

Cafeteria style

Why is inventory important (4)

Accurate information of food and supplies in stock
Determine purchasing needs
Provide data for food cost control
Prevent theft and pilferage

Two types of inventory

Physical inventory
Perpetual inventory

Physical inventory

Actual counting of all items in stock in all storage areas

Perpetual inventory

Purchases and issues are continuously recorded for each product in storage making the balance in stock available at all times

What is just in time purchasing

Purchase products just in time for production and immediate consumption

Not recorded in inventory

Benefits of JIT

No capital tied up
Less inventory to hide problems

What must you have to have JIT

Must have good relationship with vendor

How to calculate food cost

Beginning inventory + purchases = cost of goods available
- ending inventory

= cost of food used

Inventory turnover calculation

Usage or COGS / average inventory

Average inventory =

(Beginning Inventory + Ending Inventory) / 2

ABC method

ABC analysis —>
A is vital or high value items 15-20%of total inventory, but 75-80 % of cost
B is moderate or medium value items
C trivial or low value items 60-65% but cost 5-10% (paper goods)

Minimum/maximum method

Maximum is what you get when you read order, and minimum is when you have an automatic reorder going

Economic order quantity method

Ordering cost decreases as the size of the order increases

Balance of ordering costs and inventory holding cost

Holding cost is something to think about that

Inventory Valuation (5)

Actual purchase price
Weighted average
FIFO
LIFO
Latest Purchase Price

Actual purchase price

Price inventory at exact price of each individual product

Weight average

Weighted unit cost based on unit price and number of units in each purchase

FIFO

Closely follows flow of products
Ending inventory is valued at prices of most recent purchases

LIFO

Assumes current purchases are made for meeting demands of production and should be costed out first
Value of inventory will be lowest with LIFO

Latest Purchase Price

Latest purchase price is used to value the inventory

What part of the process is production

Key element of the transformation process

What is the purpose of production

Preparation of menu items in the needed

-quantity
- quality
-cost

What the manager determine in production planning (5)

Product characteristics
Production process
Characteristics
Define desired quality level
Predict quantities needed for demand
Consider costs of labor, material, facility utilization

4 aspects of forecasting

Art & science of estimating events in the future
Subjective (intuition, the art)
Objective (mathematical models, the science)
Must be flexible

What is forecasting so critical

Affects a lot of

Food production
Customer satisfaction
Employee morale
Manager confidence
Inventory
Staffing
Financial status

Two types of production (2)

Overproduction
Underproduction

Overproduction

Used prepared food, extra labor costs, wasted food

Underproduction

Unhappy customers who didn't get what they came for

Non commercial vs commercial forecasting

Commercial
Menus generally remain static in the commercial food service organizations

Non commercial
Menu variety changes on a daily basis in the non commercial foodservice industry

Why forecasting method takes more time

Non-commercial forecasting takes more time

How do we forecast (3)

Quantity demand
Historical records
This is where forecasting begins

Historical records for forecasting (5)

Customer counts
# of items prepared
# served
Meal hour
Special circumstances

Criteria for forecasting models

-cost of model
-relevancy of past data
-pattern of behavior
-accuracy of model
-lead time
- underlying pattern of behavior

3 types of forecasting models

Time series, casual, subjective

What is time series

Actual occurences follow an identifiable pattern over time
Most suitable for short term forecasts

Two types of time series models

Moving average
Exponential smoothing

Moving average

Most common and most implemented

Calculate average of the number of portions sold the last 5 times it was offered
Drop the first number and add the most recent number of portions sold to the bottom of the list
Continue this process for all data

Exponential smoothing

A weighted-moving-average forecasting technique in which data points are weighted by an exponential function.


Gibes more weight to recent values than older values

Which forecasting gives most accurate forecasts

Exponential smoothing

Three Q's of receiving

Quality
Quantity
Quote (price)

Do you need to store historical data with exponential smoothing

No

Alpha of exponential smoothing in food service

Alpha of .3

Exponential smoothing

New forecast = [judgement factor x last demand] + [1 - judgment factor x last forecast]

The closer the alpha is to 1 the new forecast...

Will include a greater adjustment for any error that occurred in the preceding forecast

When the alpha is close to 0 to the new forecast will not show much adjustment for the error of the preceding forecast

Causal forecast (3)

High costs for development

For short-term forecasting, this does not yield better accuracy over time-series

Popular for medium & long-term forecasts

What is casual forecasting models

Relationship exists between the times being forecast and factors besides time

Factors in casual forecasting models

Patient census
Number of patients on reg & modified diets
Seating capacity
Number of employees
Sellling price
Day of the week

Examples of regssion analysis

Sales increase steadily every month

Y axis monthly sales, x axis upward trend in sales

Is casual forecasting models expensive to develop

Yes, usually medium to long term forecasts

Regression analysis

A method of predicting sales based on finding a relationship between past sales and one or more independent variables, such as population or income

Evaluating trends & sales estimates for forecasts

Subjective forecasting

Used when —> relevant data is scarce, little relationships between past and future data,

Methods of subjective forecasting

Market research
Panel consensus
Visionary forecast
Historical analogy

Who is on the planning team for large equipment

Owner of administrator
Food service director
Foodservice design consultant/architect
Equipment representative
Builder/contractor
Maintenance engineer
Business manager

Equipment decisions are based on (7)

Budget
Type of meal delivery systems
Menu
Average daily census: capacity required
Size of campus/facility/space allotment
Hours of operation
Labor hours available

Equipment maintenance (8)

• Warranty - parts and labor

• On-site vs contract maintenance

• Service department on call 24/7

• Operation and installation manuals

• Special maintenance required?

• Preventive maintenance

• Replacement programs

• Trade-ins/upgrades

What is production scheduling

time sequencing of events required to produce a meal

Two stages of production scheduling

Planning, and action