CULINARY ECONOMICS - COSTS

BOTTOM LINE MANAGEMENT LEARNING COMPETENCIES :

At the end of this module the trainee should be competent to understand : 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. Revenues gross and net. Effects of reduction in net revenues. Type of Costs. Our efforts. Concept of money. The S.O.S. Principle. The questioning mould. Absolute Terms v/s Percentages. Other expenses. Contribution. Types of expenses. Understanding Food Cost. Objectives of Food Cost Control. Steps of the Control Cycle. Aids to Cost control. Yield Tests. Butcher Yield Tests. Cost Factor. Calculation of Capacity Utilization. Break-even point. Banquet Matrix. Economies of Scale. Profits and Profitability. Maximizing Revenues. Minimizing Expenditures. Profitability. How to improve Profitability.

UNDERSTANDING COSTS
Definition of Costs Let us begin by establishing a simple definition of Costs. Costs can be defined as resources sacrificed or foregone to achieve a specific objective. Cost is generally measured in monetary terms. Cost is the amount of expenditure (actual or notional) incurred on or attributable to a product or services. We shall be talking more about a food product sold or a food service rendered. In terms of food costs, a cost is incurred as soon as a product is produced partially or completely. (Semi prepared food for a la carte menu items or completely for example, a bakery or confectionery or dessert item). A cost is incurred even if the product is spoilt due to non-usage or poor preparation style and finish and thrown away or it is consumed illegally i.e. pilfered. We notice that cost is incurred even when the food product is no longer available for sales, i.e. profitable use. This is due to the highly perishable nature of the product line. Expression of Cost : How is Cost expressed? Cost of a product or a service can be expressed in many ways, for example, value in units of weight. (For example: A portion of a Chicken Steak of 225 grams for Rs. 775), or Value in terms of units of volume. (For example Rs. 15/- for 200 ml. of Cola

Or, any other pre-determined unit. e.g. Rs. 750 per plate. e.g. Rs. 225 per piece. e.g. Rs. 775 per casserole, etc. e.g. Rs. 15 for a Pepsi bottle, etc. e.g. Rs. 65 for a can of non-alcoholic beer, or in case of a beverage as per bottle, can or peg, e.g. Rs. 275/- for a large peg. PROFITS ARE THE KEY PRE-REQUISITE OF ANY BUSINESS. CUISINE AT WELCOMGROUP IS CLIENT ORIENTED AND A PROFIT CENTRE. WE NEED TO BE VERY CAREFUL OF COSTS. When the going is good, i.e. to say that the business is good, it is easy to contain costs in terms of parameters of cost percentages (or in Absolute terms) Food business is revenue-led. When revenues of food are high, all fixed and semi-fixed costs are at lower percentages. Most costs in our business due to the fact of their being based on net revenues and net revenue percentagestend to be of this type. Costs therefore look big when revenues start falling. Just to give an example: SWB salaries, wages, and benefits this is a fixed cost. The SWB for the month of April 2008 for the F&B department was Rs. 2147000. The net revenue for the same month was Rs. 9806000. Therefore the SWB for the same month was = 21.90% The Net Revenue for the month of May 2008 was Rs. 12382000.

Let us examine the effect of this amount of Net Revenue on SWB Percentages. SWB is a Fixed Cost, i.e. Rs. 2147000. Therefore the SWB for the month of May 2008 would be 17.34%. The difference between the SWB percentages of April 2008 and that of May 2008 was = 21.90%-17.34% = 4.56 % So that, we notice, that fall in Revenues (Gross, and subsequently Net) make costs look more. Cost is a generic term. When talking of costs or expressing it, we need to give additional information, e.g. by adding a prefix, e.g. Direct Costs. What should be noted is that cost is always a relative or referential term. So that, it is ascertained with reference to some objects such as product or services. Each prefix to the generic word cost implies certain attributes, which explains its nature and also its limitations. To make our understanding of the previous statement, let us examine a few of the prefixes to the generic word Cost, specially relating to our food and beverage business. We shall understand the prefixes faster through our understanding of the types of costs of our business. What are the different types of costs? The different types of Costs that are important to understand in our Food & Beverage business are : Fixed Costs Variable Costs / Semi Variable Costs Budgeted Costs Standard Costs 4

 Direct Costs & Indirect Costs Actual Costs

FIXED COSTS:
Those costs which remain constant irrespective of the product or service output, within and up to the capacity that has been built up, are known as Fixed Costs, or Period Costs (as these relate to a time period). Examples of Fixed Costs are : management and workers salaries, insurance of building, vehicles, etc. Committed Fixed Costs are costs like depreciation, property taxes, and salaries. Discretionary Fixed Costs are costs like Research and Development, sales promotions, donations and external consultancy. Fixed amounts are set aside for these activities. However, in adverse business scenario, these activities can either be eliminated or reduced in scale of expenditure. These are called Discretionary Fixed Costs. Why are they called discretionary ? Because they are at the discretion of a manager. These are therefore totally dependent on the Human Factor. These costs may or may not have any particular relationship to the product, its volumes or level of activity. Discretionary costs may be totally or partially curtailed in a particular time period, a quarter, a half year or a year. Discretionary costs therefore reflect total discretion of the management, and has no relevance to quantum of profits, other costs of the business and volume of activity. Examples of Discretionary costs are : research and development costs, and sales promotion activities.

VARIABLE COSTS :
Variable costs are those costs that vary directly in proportion to the volume of output. These costs are also called Product Costs. These costs increase or decrease in the same proportion to the output. Some of the F&B Costs are Variable Costs. Costs occur only when preparing a F&B product or rendering a F&B service. Cost per unit of sale (of product or service or combination of both) remains constant whereas total variable costs change with change of output in terms of quantities. Semi-Variable Costs do vary, but not in direct proportion to the output. Up to a certain level costs remain fixed and increase or decrease with a change in the output.

BUDGETED COSTS :
It is an exercise of setting standards of financial performance. For a fresh business enterprise, a Budgeted Cost is fixed up considering the viability of the food & beverage product or service. Budgeted costs are also based on certain factors of demand, and creativity of a product line, etc. For an existing business, budgeted cost is based on observations of the previous year or years (i.e. it is chronologically dependent) and the potential of that particular market. A forever effort of a F&B business enterprise is to reduce costs under an average of working conditions. Taking therefore, a previous years achievements, fresh standards are set for the following financial year, against which performances are desired. 6

Budgeted cost is therefore the cost expected to be incurred in the budgeted period, and are calculated taking into consideration the average working conditions which are likely to prevail during the budget period.

STANDARD COSTS :
Standard cost is a benchmarking device. Standard Cost is a benchmark to measure future activities, and to derive inferences there from. Standard Cost is therefore regulatory in nature. Standard Cost refers to the technique which uses a standard for costs for the purpose of control through analysis of variances. Standard Cost is therefore a predetermined calculation of how much costs should be, under specified working conditions. To build up and arrive at a Standard Cost, an assessment is made of the totality of cost elements and co-related technical specifications, qualifications of materials, labour and other costs against the price or wage rate expected to be applied during the period under review. Once a Standard Cost is fixed, actuals of future performances are measured against these standards. Variances observed during this exercise are analyzed, and reasons established. Subsequent corrective action ensures efficient operations. WHAT IS TO BE DONE ? 1. 2. 3. 4. 5. Set Standards. Examine these standards at periodic intervals. Analyze them. Upgrade them. Or Maintain them. 7

DIRECT COSTS :
Costs that can be directly and completely attributed to a product are called Direct Costs. Direct costs are identified with a product or a cost unit. Direct Material Cost: Those materials (or ingredients) which become an integral part of the finished product and which has specific physical units is known as Direct Material, and the cost of such material are called Direct Material Costs. All Food Costs are Direct Material Costs. Direct Labour Cost: Labour which takes a direct and active part in the production of a particular commodity is called direct Labour. These Direct Labour Costs can be directly and conveniently traced to specific products of F&B department or specific services. All S.W.B. Costs are Direct Labour Costs. Direct Expenses : These are those expenses which can be wholly and directly assigned to a specific product or service.

INDIRECT COSTS:
Those costs that cannot be identified with a particular product or service, but need to be accounted and allocated are called Indirect Costs. Indirect Material: Those materials which are used for the purpose which cannot be conveniently assigned to a specific physical unit of product or service are called indirect material, e.g. cleaning supplies, printing & stationery, etc. The costs of these Indirect Materials are called Indirect Material Costs. Indirect labour : Labour employed for the purpose of carrying out tasks incidental to goods produced or services

provided is indirect labour. Such labour does not alter the condition of the product or service. It cannot be particularly traced to a product or service, e.g. salaries of Sales Manager, Salaries of Stores & Purchase personnel. Such Costs are called Indirect Labour Costs. Indirect Expenses : Indirect expenses are those expenses which cannot be directly, conveniently and wholly allocated to a specific cost unit. Examples of Indirect Expenses are Rent of a building, HLP allocations and insurance charges.

ACTUAL COSTS :
Actual Costs are historical in nature. Substantial time gap exists between the occurrence of a cost of product or service and its reporting. Actual Cost is the cost incurred in procuring a product or service. Examples of Actual Costs are petty conveyance, tenting, brass cleaning, petty jobs, etc. There is no stopping of an actual cost in so far as it has already happened. We have now understood the various types of costs relating to our business of food & beverage. What do we do with this understanding? Our efforts should be to keep variable and semi variable costs down. Why? Because Fixed Costs cannot be easily minimized. The important variable costs in Food & Beverage business are FOOD COSTS and OTHER EXPENSES.

FOOD COSTS AND OTHER EXPENSES

FOOD COSTS:
Costs which are directly attributable to preparation of a particular dish, whether in terms of semi-prepared dishes (as earlier explained), or completely ready-to-serve dishes and costs of certain necessaries of our business, e.g. cost of decorations of a dish, cost of accompaniments, cost of food appointments on the service side table (e.g. cost of proprietary sauces), or those items which enhance the value of the dining experience and are of the nature of food, e.g. saunf, supari, pan, etc. are called FOOD COSTS. We shall discuss food costs in detail a little later. WHAT ARE OTHER EXPENSES ? Those expenses which can be directly and conveniently traced to a final product or service are called Other Expenses. These expenses alter the quality of the product or services rendered in term of its sale ability (read acceptability to a client). These expenses alter the quality of the product or the service and in totality the experience of the Food & Beverage event. The following are currently listed as Other Expenses for food business at Welcomgroup: 1. 2. 3. 4. 5. 6. Uniform. Guest Supplies. House Stationery. Photocopying. Menus. Laundry Cost.

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7. 8. 9.

Cleaning Supplies. Contract Services. Pest Control.

10. Garden supplies. 11. Banquet Service. 12. Replacement Charges Chinaware. 13. Replacement Glassware. 14. Replacement Linen. 15. Replacement Silverware. 16. Replacement Cutlery. 17. Replacement Utensils. 18. Silver Plating. 19. Decorations. 20. Music Entertainment Charges. 21. Travelling Local. 22. Local Conveyance. 23. Spoilage. 24. Freight charges. 25. Cooking Gas. 26. Solid Fuel. 27. Charcoal. 28. Hire Charges. 29. Basic Excise Duty / License Fee. 30. Deepavali / Christmas / New Year Expenses. 31. Turn over tax. (at certain geographical locations) 32. Beverage Department Cost. 33. Others. What to do with this understanding ? How to use it ? We may have to look at service delivery / service designs during hard times and change strategies from tactical to strategic and plan.

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CONCEPT OF MONEY To understand and act on keeping variable and semi- variable costs down the concept of money has to be understood. There are four kinds of monies : 1. Your money to be spent on yourself. 2. Your money to be spent on others. 3. Others money to be spent on yourself, 4. Others money to be spent on others.

and

To achieve the situation of keeping the variable and semi-variable costs down money has to be used efficiently. (From the definition of costs, we have already related money to costs) What is the type of money that has to be controlled ? Others money to be spent on yourself and more importantly others money to be spent on others. So that, especially during hard times one should work Harder, Faster, and Smarter. What to do ? - adopt the famous S.O.S. principle. This is not enumerating the requirements of save our soul but the essence is the same. Most importantly Switch On your mind. The principle is : Save On Something. Switch On Something. Switch Over (to) Something. Switch Off Something. To control costs it is very important for everybody to get into an inquisitive and questioning mould. Ask yourself and others : What ? How ? When ? Where ? Who ? 12

It is a known fact that one gets what one demands. An inquisitive and questioning management style: PRESENT FACTS WHAT ? HOW ? WHEN ? WHERE ? WHO ? WHAT IS DONE NOW ? HOW IS IT DONE ? WHEN IS IT DONE ? WHERE IS IT DONE ? WHO DOES IT ? WHY ? WHAT ? HOW ? WHEN ? WHERE ? WHO ? WHY IS IT DONE ? WHY IN THAT WAY ? WHY AT THAT TIME ? WHY IN THAT PLACE ? WHY THAT PERSON ? CONSIDER ALTERNATIVES WHAT ? HOW ? WHEN ? WHERE ? WHO ? WHAT ELSE COULD BE DONE ? HOW ELSE CAN IT BE DONE ? WHEN ELSE COULD IT BE DONE ? WHERE ELSE CAN IT BE DONE ? WHO ELSE CAN DO IT ? BEST SOLUTION WHAT ? HOW ? WHEN ? WHERE ? WHO ? WHAT SHOULD BE DONE ? HOW SHOULD IT BE DONE ? WHEN SHOULD IT BE DONE ? WHERE SHOULD IT BE DONE ? WHO SHOULD DO IT ?

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Typicality of Food Costs : The food production areas pose the greatest problem in so far as the control of food cost is concerned. It is a physical impossibility to trace each item of food through the receiving, storage, and production areas, and verifying its sale in relation to its purchase. What is being said is that it is an impossible task to relate every commodity to a saleable value in food business. Computers can help us come nearer to the above requirements. However, the mental and physical efforts that would be required to analyze the same and benefit from the analysis would be disproportionate to the benefits received through intelligent interpretation of the same. Do we interpret the above and say that we should not get into detailed examinations? No. That is not the essence of the above. We must as a rule, analyze and interpret our A value products. What are our A value products? These are those food items which are either very expensive e.g. sea food or imported foods, or highly perishable, e.g. butcher items, or those that are easily pilfered (subjective accountability), or of the nature of very high consumption. (e.g. tomatoes, onions, and potatoes) Calculation of Food Cost Percentages : Let us assume some figures and examine them : April 2008 Food Cost Net Revenue Rs.24,36000 Rs. 1,12,60000 May 2008 Rs.31,52870 Rs.1,40,30000

The figures above are representative of Absolute terms. Just from these absolute figures, it is difficult to say whether cost is in order,

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it is on the lower side, or on the higher side in comparison, and in relation and proportion to Net Revenues. However, if instead of Absolute terms, we convert these figures to percentages, we can quickly see that in relation to Net Revenues, Food Cost is much higher in May 2008, then in April 2008. The basic equation for expressing food cost as a percentage is Food Cost X 100 Food Sales

From the above, Food Cost Percentage is 21.63 % for April 2008, and 22.47% for May 2008. We now understand the reason for emphasis on a percentage figure. Why? Because it is easier to compare a percentage, than to compare absolute figures. This is further as we are very much used to understanding percentages right from our school days. What are the objectives of Food Cost Control ? The main objective of Food Cost Control is to compare the actual Food Cost percentage, for a period, with a potential Food Cost percentage. What are the steps in the Control Cycle ? The control cycle consists of : Setting up of a potential food cost percentage, which is both desirable and attainable. Establishing Standard Recipes and portion sizes. Establishing Yields of various A value commodities, and relating these to the Standard Recipes. Calculate Menu item costs.

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This is for the Food Production control. On the Menu sales front the following are the steps in the Control Cycle : 1. 2. Determine the Selling prices of the menu items. Periodically Evaluate the Actual results obtained.

An effective Control Cycle : An effective Control Cycle consists of : a. b. c. Setting Standards. (Benchmarking) Examining the results achieved against Standards set. Evaluating the achievements against the Standards (Benchmark) and Setting higher Standards (Benchmarks) if the current ones are achieved, or Examining why the set Standards (Benchmarks) could not be achieved, and establish measures to counter the shortfalls.

The following are some Aids to Cost Control : 1. 2. 3. Through personal observations and interview. Through the value of statistics. Through Cost and Operating Reports.

What are Yields and Yield Tests? It is essential in all businesses to understand the saleable values of a product line or product. In other words a raw commodity has to be related to a saleable product. In different businesses yield tests are done to identify different requirements.

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In food production business, yield tests are mostly done to calculate Butcher raw weight yield tests. These can be intelligently analyzed to find Cost per portion, and Cost factors. What is Capacity Utilization and how is it calculated ? Capacity Utilization and calculations thereof are the understanding of yields in the outlet service business. Outlet wise capacity is calculated for a fixed period, for example: A day, A week, A month, or a year. Capacity Utilization is calculated as per the outlet in question. Let us understand capacity utilization for a Lunch and Dinner F & B outlet. What are the Steps for the calculations ? The steps are : Calculate the number of services in the day. Calculate the number of covers available. Calculate the number of days of the period. Calculate the number of covers actually sold.

A typical situation in the outlet business is that for many reasons, we block sections of the business, called zoning. How to calculate the capacity utilization of Banquets ? The parameters here are different. They are : 3 Services per day, and 10 Square feet of space (area) per person.

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Therefore : a. b. c. d. calculate the total area of the Banquet hall. divide by 10. multiply by 3 (For the 3 possible services; breakfast, lunch or dinner, or lunch, snacks and dinner) Divide by 2 (Considering that all three services cannot be sold everyday, and only 1.5 services can be sold. Why ? Because turn-around time is required, and a fatigue factor should not come into our business) Multiply by number of days for the Month.

e.

A typicality of a banquet operation of a five star deluxe property is that there are a number of banquet outlets available to us, in house, and the capacities available in the outdoor banqueting services is enormous. We do not, repeat do not, even begin to utilize these capacities. How to calculate the Capacity Utilization of In-Room Dining Services? The number of room nights sold for the month multiplied by 4 gives the number of available covers for the month. So that, we find linkages with the Front of the House, when calculating the capacity utilization of Room Service. Break Even Point Breakeven point is a financial situation, wherein the net revenues out of a particular number of covers, matches the cost of production of the entire food, of the same period. Breakeven point can also be defined as a minimum sales volume required by a food service unit in order to avoid an operating loss and meet operational expenses.

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Breakeven Point is an immediate indication of fixing a target, and beyond. It is a benchmarking exercise. Any achievement less than the breakeven point in terms of number of covers would give us losses. For buffets the menu product line is different from one day to another. The break-even point would be different each day. Obviously, we can control the break-even point by relating to the understanding and implementation of our questioning mould. Banquet Matrix If we take an example of same banquet menu offered to say 100 pax, and to 500 pax, we notice that even with a reduced A.P.C. the food cost has reduced. So that, we see that Yields get better and better on the volume route and costs reduce progressively. This is the cascading effect of volumes of business vis a vis cost reduction. Benefits of Economies of Scale are normally passed on to the customer. We, therefore see a distinct link between costs, economies of scale, i.e. volume route, capacity utilization and food cost percentages. Profits and Profitability Taking the three factors of business i.e. Profit, Revenue, and Expenditure; Profits can be increased by 1. 2. 3. Maximizing revenues. Minimizing expenditure. or a combination of the above two.

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Maximizing Revenues Everyone is invited to sell everybody has to chip in and make efforts to sell. The efforts to sell are never a full-stop. Maximizing revenue is normally achieved through the following conventional means : a. b. c. Suggestive Selling. Holding of food promotions creation of a happening place Hoardings and Ad Campaigns.

Maximizing revenue is also achieved through a couple of unconventional means : a. b. Repositioning of Food Outlets, and cuisine. This removes the factor of fatigue, and introduction of creativity. Handling of wants of the client why does he come to a five star hotel for food ?

The success of selling lies with the guest leaving with a feeling of having received a full value for his money spent, or better still, more than his expectations. Minimization of Costs The concept of cost minimization essentially revolves around the following two basic factors : a. b. Elimination of Wasteful costs. Obtaining the maximum value of all unavoidable costs at the least expenditure.

To achieve the goal of cost minimization, it is essential to know a. b. c. d. What are Costs ? What are unproductive Costs ? The process of identification of excessive costs. How to take corrective action. 20

A creative effort would be to list out all items of expenditure and work on them. Just 10% reduction of costs under each heading would help. What is profitability ? Profitability is yield in profits or returns on investments. Profitability is therefore a measure of operating efficiency. How to improve profitability ? Examine your area of the business, under the parameters discussed above, understand your business, control variable costs, control your A value products, understand your client, get into the questioning mould and above all adopt the famous S.O.S. principle in times of distress.

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CULINARY ECONOMICS MENU ENGINEERING

Learning competencies
At the end of the module the trainee should be competent to : a) b) c) d) Understand the process of menu engineering. Explain how menu engineering defines the profitability and popularity of menu items. Explain the menu engineering method for pricing food and beverage items. Understanding the process to make Standards into Stars Puzzles into Stars Problems into Stars e) f) Understand the methods of controlling stars to maintain them as stars. Understand the processes of computerised menu engineering, and the benefits of Menu item analysis. Menu mix analysis. Menu engineering summary. Four box analysis. Menu engineering graph.

Menu Engineering
We can calculate the food cost percentage of a menu item and of a selection of the menu or an entire menu. Percentages are figures which we understand at a quick pace. However, in business we cannot bank percentages. It is figures in absolute terms, that we are concerned with more to understand our financial standings. 23

Food cost percentage of a menu item is calculated by dividing food cost by the sale price, multiplied by 100. A worksheet can give us very vital facts to understand our business. If we have the figure of cost (available to us from the standard recipes) for the menu item, and we have the sale figure of the same menu item, we can arrive at the profits made in selling a portion of that menu item. The same is true for weighted figures. What is contribution ? This profit (which is the difference between the sale price and the cost price) is our contribution for that particular menu item. It is called contribution because it gives positive contribution to our bottom line. It serves our purpose to be in the business, only if we are profitable and cost-effective. Remember profits are the key requisites of any business. Note: at this point, it should be clear that we are not, as of now, talking of departmental contributions, which are the figures arrived by duly working out the net revenues of a particular time period, and reducing these in relationship to the costs of SWB, the food costs, and other expenses. The understanding of these terms has already been taken up in the topic on costs. As of now, for the current purposes, we are talking of either the menu item contribution, or the section of the menus contribution, or contribution of the menu in entirety itself. The understanding of contribution is clear. Figures of contributions in absolute terms can be calculated easily from a worksheet. The success or failure of a food and beverage operation is directly linked to the menu. Therefore a menu is the most important tool of the business. How should menus be appraised to determine whether the most profitable menu items are being sold?

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We do this through the process of menu engineering. What is a good menu item? There are two measures of how good a menu item is : its popularity and its profitability. A popular menu item is ordered frequently by guests. A profitable menu item generates a higher contribution margin. Menu items can be evaluated in terms of both their popularity and profitability. A worksheet was created as an example. This worksheet relates to a Coorgi Food Promotion The Spice of Life held at the Dakshin restaurant at Kakatiya, Hyderabad. 16 menu items of the Lunch and Dinner menu were taken up for a two-week study. This forms page 42 of this module. Upon examination we understood the number of portions of any product sold for the entire study period was entered in the column A. These figures received from this column gave us an idea of the acceptability of various dishes vis a vis clients. We understood that there were certain items which were frequently ordered by clients. What did this indicate ? This indicated that these were popular items. We therefore understand that one measure of understanding or appraisal of a menu is the popularity. Once we work out the contributions of the menu items, being the difference of the sale price and the cost price, we can understand which menu items are giving us more contributions and which are giving us less contributions to our bottom lines. What do we understand? We understand that the second measure of understanding or evaluation of a menu is the profitability. Therefore, we understand that menu items can be appraised in terms of both their popularity and profitability.

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To further understand the above, the worksheet was examined further. The following interesting data emerged : 1. 2. Some menu items are popular (high sales) and profitable (high contribution margin). These menu items are called STARS. Some menu items are popular (high sales) but not profitable (low contribution margin). These menu items are called STANDARDS. Some menu items are not popular (low sales) but are profitable (high contribution margin). These menu items are called PUZZLES. Some menu items are neither popular (low sales) nor profitable (low contribution margin). These menu items are called PROBLEMS.

3.

4.

Menu Engineering classifies all menu items in the above manner. Therefore each menu item is either of the following : A Star. A Standard. A Puzzle, or A Problem. In order to classify each menu item into one of the four basic categories, managers must develop a practical way to define and measure the relative profitability and popularity of each menu item. This can be accomplished by using information about standard food cost and frequency of sales from the worksheet. The basis of a menu items profitability is not the level of its food cost, but its contribution margin. It is therefore wrong to assume that the lower a menu items food cost percentage, the more profitable the sale of the item is to the operation. The goal of effective menu planning and evaluation should be to increase the contribution margin of each menu item not decrease its food cost percentage.

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Menu Mix / Menu Mix Percentages The worksheet and the associated system guide us to gather information about the sale of each menu item. Popular items are those that customers order more, with a relatively high menu mix percentage. Thus star menu items are those with relatively high contribution margins and high menu mix percentages, while items classified as problems score relatively low on both measures. In performing a menu engineering analysis, it is not enough to consider menu items individually. Each items contribution margin and menu mix percentage will provide measures for the items levels of profitability and popularity. The requirement is to evaluate how high or low these levels are in comparison with all other menu items. What constitutes a high level of profitability or popularity? For example, suppose that sales of a particular menu item represent 10% of total sales. Is this a high menu mix ? Should this item be classified as a popular menu item? The answer depends on the menu mix percentages of all other menu items and on the total number of items on the menu. For instance, if the menu in question contains ten different items, 10% of total sales may be regarded as a high level of popularity, but if there are only four items on the menu, this figure would represent a low level of popularity. By itself, a menu items contribution margin tells us very little about how profitable sales of this item are when compared with other menu items. What is Popularity? The basis for measuring the degree of popularity of each menu item is called the popularity index. This index is based on the

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assumption (which an individual management could change) of expected popularity. For the purpose of analysis, each menu item is assumed to be equally popular. This means that each item is expected to contribute an equal share of total menu sales. Therefore, the expected popularity of each menu item is calculated by simply dividing 100 % (i.e. Total Sales) by the number of items on the menu. For example, if there are 16 items on the menu (for analysis, as we have done in our case study), and each item is assumed to be equally popular, the sales of each item would be expected to represent 6.25 % of total sales (100 % divided by 16 equals 6.25%). On the other hand, if there were ten items on the menu, each item would be expected to represent 10% of total sales (100% divided by 10 equals 10%). Menu engineering assumes that an item is popular if its sales equal 70% of what is expected. Thus the popularity index for items on a given menu is defined as 70 % of the expected popularity of each item on that menu. The popularity index for a specific food and beverage operation can be adjusted to a higher or lower level depending upon the managements emphasis on selling popular and profitable items. For example, a food item on a 16 item menu would be considered popular if its sale represents 4.38 % of total sales (100% / 16 = 6.25 % and 70 % of 6.25 = 4.38%). (More on this can be understood from the continuation of our case study later on). On the other hand, a food item on a ten-item menu would be considered popular if it accounted for only 7 % of total sales (100 % / 10 = 10 % and 70 % of 10 = 7% ). The concept of a popularity index makes it possible to measure the relative degree of popularity of each item on a given menu. With these tools of menu engineering, a menu can be appraised

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for the profitability and popularity of menu items and further classifies them as Stars, Standards, Puzzles, or Problems. The results of this appraisal exercise should be used to improve the menu. What is Profitability? To understand profitability in terms of Menu engineering, we must first understand Average Contribution margin. The average contribution margin is calculated by dividing the total menu contribution margin by the total number of menu items sold during the specified time period in which the data was collected. Average Contribution Margin = Total Contribution Margin Total number of items sold

The Average contribution margin forms the basis for measuring the degree of profitability of each menu item. A high contribution margin for an individual menu item would be one that is equal to or greater than the average contribution margin for all menu items. The concept of the menus average contribution margin provides a precise measure of each menu items profitability, and it is easily calculated. The figures of food cost of each portion of each menu item are available to us from the Standard Recipe cards. The figures of total food costs of all the portions of all the menu items sold can be calculated by summing up. The total menu revenue (sales) can be determined by simply summing the figure for each menu item sale. The total contribution margin for all menu items is calculated by subtracting total menu costs from total menu revenues.

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Those items that are profitable (i.e. those with a high contribution margin) are those whose contribution margin is equal to or greater than the average contribution margin for all menu items. Items with a contribution margin above this amount are, therefore those items the property most wishes to sell. Appraisal of menu items : It is important to understand the appraisal of menu items for the purposes of establishing their Menu item classification. The results of the work sheet of the Coorgi food promotion The Spice of Life have been utilized for developing the Menu Engineering Work Sheet. This forms page 43 of this module. Let us analyze the food promotions cost and sales figures further. Menu Engineering Worksheet All the 16 menu items were listed in Column A. The information about the collected sales of each of the menu item, over the above mentioned two-week period were entered as total sold in column B. By totalling up the number of portions sold as depicted in Column B, we understand that a total number of 3608 portions (Box N) were sold over the two week period (of the 16 menu items selected). The menu mix (percentage of is calculated in column C. Erachi soup were sold out of Therefore the menu mix of sales represented by each menu item) For example 541 portions of Kozhi the total menu sales of 3608 portions. Kozhi Erachi soup would be = 15%

541 x 100 3608

The menu items per portion food cost is recorded in column D.

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This is received from Standard Recipes. Each items selling price is listed in column E. This information is received from the menu. Column F lists the contribution margin (CM) of the menu item. To calculate the contribution margin for the Kozhi Erachi soup for example, subtract its cost (Rs.35) from its selling price (Rs.175), arriving at a figure of Rs.140. The total cost (column G) is calculated by multiplying the number of each item sold (received from column B) by the item food cost (column D). The total cost for Kozhi Erachi soup is therefore 541 x 35 = Rs.18935. Menu revenues (column H) which relates to the per item menu sale price, are calculated by multiplying the number of each item sold by its selling price. Therefore the menu revenue for Kozhi Erachi soup would be 541 x 175 = Rs.94675. The contribution Margin for the total sales of the menu item (column L) is calculated by subtracting the menu costs (Column G) from the menu revenues. In continuation, the menu contribution for Kozhi Erachi soup would be Rs.94675 Rs.18935 = Rs.75740. It is now possible to determine the average contribution margin (the basis for profitability), and the popularity index (the basis for popularity). In our example, the total menu costs (Rs.329680) are recorded at the bottom of Column G (In box I) and is calculated by summing the menu costs for each individual item. Like wise, the total menu revenues are calculated by summing the individual revenue for each item in column H. The total of these Rs.1475175 in our case are noted at the bottom of column H (in box J).

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The next step is to calculate the total contribution margin (Column L) for all menu items by subtracting menu costs (box I) from menu revenues (box J). Because a total of 3608 portions were sold (box N) and because the total menu contributions margin is Rs. 11,45,495.00 (box M), the average contribution margin is = Total contribution Margin M 1145495 = = = Rs. 317.49 Total number of menu items sold N 3608

Those items that are profitable ( i.e. those with a high contribution margin) are those whose contribution margin is equal to or greater than the average contribution margin for all menu items. (Rs. 317.49) Items with a contribution margin above this amount are then, those items the hotel most wishes to sell. Let us now understand the popularity of the menu item. Column(R) in our example indicates the assessment of each items popularity. By comparing each items menu mix percentage (percentage of sales indicated in column C) with the popularity index calculated for this particular menu we can make the judgement. Because there are 16 items, each item has an expected popularity of 100 % / 16 = 6.25 % . Assume that the sales of a popular item should equal 70% of what is expected for it, the popularity index is 70% x 6.25 = 4.375 = 4.38 %. In our example therefore, the popular item are those whose sales represent 4.38% or more of the total sales ( Box Q) For example, because the menu mix percentage ( Column C) for Kozhi Erachi soup is 15% its menu mix category is rated high ( Column R) (in relation to popularity index which in our example is 4.38%) In contrast check out the Menu Mix % category of Kane Rawa Fry. The menu mix % for Kane Rawa Fry is 3.16% which is lower

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than popularity index of 4.38%. Therefore its menu mix category is rated as low (Column R). Given this information, it is possible to classify menu items. Consider the Kozhi Erachi Soup again. We just noted that this is a popular item. Is it also profitable? Its contribution Margin is Rs. 140. This is less than the average contribution margin (Rs. 317.49) and is classified as a relatively low contribution margin Column (P). Kozhi Erachi Soup is popular but unprofitable. Therefore Kozhi Erachi Soup is classified as a Standard (column S). In the same manner we keep plotting the status of a menu item as per principles of menu engineering. How does the knowledge of Menu Engineering help a Chef? Once it is clear how to use the processes of Menu Engineering, it is very easy to formulate systems to apply this knowledge into improving the menu. The benefits of menu engineering can only accrue if information gained from the menu engineering analysis is used to improve the menu. What can a Food and Beverage Manager or a Chef do with this knowledge about the various food item classifications? Making STANDARDS into STARS Standards are those items that are low in contribution margin, but high in popularity. Guests like these items, but unfortunately, Standards do not contribute their fair share of contribution margin. The following are some ways to convert a Standard into a Star : 1. Increase menu sale prices carefully. Perhaps the item is popular because it represents a great value to the guest. If prices are increased, the item may continue to be good value, may remain popular, and may generate a higher contribution 33

margin. This alternative may be most effective when the item is unique to the property and cannot be obtained elsewhere. 2. Check out for demand. If a price increase for the menu item meets with acceptability, it may be useful to complement an increased price with other strategies such as repackaging the item or repositioning it on the menu. These other strategies may be designed to maintain or increase the items popularity while generating a higher contribution margin through the increase in selling prices. Increase prices in small measures. Relocate the item to a lower profile on the menu. Depending upon the menu layout, certain areas of a menu represent a better location than others. A Standard can be relocated to a less desirable area of the menu. Since the item is popular, some guests will search it out. Others will be drawn to higher profile areas of the menu that list more profitable items the hotel wishes to sell. Focus demand to more desirable items. Menu engineering allows the sales of menu items which are high in popularity and high in contribution margin. Combine with lower cost products. The contribution margin of a Standard can be increased if lower cost meal accompaniments are offered with the entre. Perhaps, for example, higher priced vegetables and dessert accompaniments can be replaced with other, less expensive items without reducing the items popularity. If this can be done, the contribution margin will increase. Consider reduction in size of portion. If the portion size is reduced, the product cost will be decreased and the contribution margin will increase. However, this method of making a Standard into a Star is rarely used. A regular customers perception of value may decrease if portion size is reduced.

3.

4.

5.

6.

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Making PUZZLES into STARS : Puzzles are menu items that are high in contribution margin but low in popularity - items the chef desires to sell since their contribution margin is relatively high. The challenge is to find ways to increase the number of guests ordering these items. Some suggested ways : 1. Focus demand to these items. Reposition the subject menu item to more visible areas of the menu, or rename them. Use suggestive selling techniques, develop marketing campaigns, use table tent cards, highlight the menu item on the menu boards at the entrance to the food & beverage outlet. These strategies would improve the popularity of the menu item. Consider a price decrease. Perhaps an item is low in popularity because it does not represent a value to guests. If this is the case, the selling price might be reduced with the contribution margin still remaining higher than average. This could lead to increased popularity, since a reduced selling price would represent a greater value to the guest. Add additional values to the menu item. Offering a larger portion size, adding more expensive meal accompaniments or garnishes, and using higher quality ingredients are among the ways that value can be increased. These techniques may lead to increased popularity and to a contribution margin that is lower, but still higher than the average generated by the menu.

2.

3.

Making PROBLEMS into STARS: Problems are those menu items that are low in contribution margin and low in popularity. These menu items do not contribute their fair share of contribution margin and they are not popular. These menu items should be removed from the menu. However an honest attempt should be made to convert these Problem menu items into Stars. Some suggested ways to make Problems into Stars : Increase the selling price of the menu item. A higher contribution

35

margin would be the result. Use the same tactics to increase its popularity as those used for converting Puzzles into Stars, mentioned above. Maintaining STARS : Stars are menu items that are high in contribution margin and high in popularity. These are those menu items which the chef wishes to sell the most. How to maintain Stars? Some suggested ways : 1. 2. 3. Maintain rigid quality and delivery benchmarks. Do not attempt to alter the quality of the menu item being served. Position the menu item in a highly visible location on the menu. Make sure guests are aware of their availability. Examine if the star is popular because it is a significant value to the clients. Or, perhaps the star is not available in its existing form elsewhere in the same marketplace. These might be two instances in which the price could be increased without a decrease in popularity. Use suggestive selling techniques. Some of the techniques for focusing demand might be useful. Other advantages :

4.

Menu Engineering : 1. 2.

The process and tools of menu engineering can be used to appraise the entire menu. The process and tools of menu engineering can be used to appraise menu revisions.

Menu engineering is therefore the most important methodology in the hands of a chef or a food & beverage manager to understand the business in terms of profitability. For example, if the popularity of an individual menu item remains stable or increases while its contribution margin increases, the revised menu is a good one. With the tools of menu engineering, the worth of a revised menu can be objectively assessed.

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If, for example, a previous menu generated an average contribution of Rs. 325 and a successive menu generates an average contribution margin of Rs. 360, the new menu is better : the average guest leaves more in contribution margin than when the previous menu was in use.

Computer based Menu management

Menu management computer applications help Chefs and Food & Beverage managers. Menu engineering is a menu management application that helps evaluate decisions regarding current and future menu pricing, design, and contents. The following are the important requirements in the business of food & beverage : 1. 2. 3. Chefs and managers must balance the menu pricing structure to arrive at the most profitable price to assign to a menu item. To understand at what price level and sales mix does the business maximise its profits? To know which of the current menu items require 4. 5. repricing, retention, replacement, or repositioning on the menu ?

To understand how should daily specials and new items be priced ? To understand how the success of a menu change be evaluated ?

Let us examine the menu engineering applications in greater detail.

Menu Engineering Analysis :

Correct data has to be entered into the programs database.

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Menu engineering requires that the user input each menu items food cost, selling price, and sales history. This minimal input is sufficient to generate a complete menu engineering analysis. Following this data input and selection of the analysis option, the menu engineering can begin the work. As the analysis progresses, a menu items contribution margin and sales activity will be categorised as relatively high or low. Procedures performed through a computer software are identical to those described for the manual analysis. Eventually, each item will be further classified for both its marketing and pricing success. The menu engineering output is composed of the following reports: 1. 2. 3. 4. 5. Menu item analysis. Menu mix analysis. Menu engineering summary. Four-box analysis. Menu engineering graph.

The example of the Dakshin promotion Coorgi Food The Spice of Life has been taken up further to illustrate computer based menu engineering. Menu Item Analysis: An Understanding of the same shall be clearer from Annexure on page 44. This is an item-by-item listing accompanied by selling price, portion cost, contribution margin, and item count which relates to number of portions sold. The primary purpose of this report is to provide the user with a means by which to verify the data that is to be analysed. This can be helpful when data has been manually entered into the program.

Menu Mix Analysis :

Study the menu mix analysis report on page 45. This report evaluates each items participation in the overall menus

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performance. The percentage of menu mix (% MM) is calculated as each items count divided by the total number of items sold, and multiplied by 100. Each percentage is then ranked as high or low depending upon its comparison with the menu engineering role for menu mix. The % CM share is calculated as each items contribution divided by the total contribution margin of all of the portions sold multiplied by 100. The percentage each item has contributed to the menus total contribution margin is found in the column labelled % CM SHARE. Each items contribution margin is then ranked according to how it compares with the menus weighted average contribution margin (ACM). A menu classification for each item is determined by considering its MM group rank and CM group rank together.

Menu Engineering Summary:

Study the example of Menu Engineering Summary in on page 42. Perhaps the most informative report produced by the Menu Engineering application, this analysis presents important information in capsule form to produce a concise statement of operations. The row labelled PRICE shows total menu revenue, average item selling price, lowest selling price, and highest selling price. The FOOD COST row contains total menu costs, average item food cost, lowest cost item, and highest cost item. The CONTRIBUTION MARGIN row shows total menu CM, average item CM, lowest item CM, and the highest item CM. The DEMAND FACTOR row lists total number of covers, average number of covers, lowest item count, and highest item count. Much of the information in the body of this report is used

39

elsewhere in the overall menu engineering system. For example, the lowest and highest selling prices on the menu are termed price points and can be used to help identify target market success. This helps marketing campaigns as the marketer is clear about the variances of price points and the variances of a menu in terms of lowest cost menu item and highest cost menu item. This report also contains the menus food cost percentage and number of items sold. Please see page 46.

Four-box-Analysis :
A four-box analysis is presented on page 47. This indexes the menu classifications developed in the menu mix analysis report. Menu Engineering supports the decision maker on strategies for each menu items repositioning. It also supports him by informing him of number of menu items found in each category. The example exhibits four Standards, five Stars, three Problems and four Puzzles. Are five Star menu items out of a total of 16 menu items too less for profitable business? Can we reduce the number of problems? Can we eliminate Puzzles or convert them to Stars? This type of evaluation process begins with the four-box matrix and continues through the menu engineering graph.

Menu Engineering Graph :

An understanding of the same shall be clearer from the example on Page 48. The example illustrates a menu engineering graph, a useful means to evaluate decision strategies. Because it indicates each competing

40

menu items position relative to all others, the menu engineering graph is the most powerful report produced by a menu engineering application. The vertical axis of the graph positions menu mix and the horizontal axis positions contribution margin. Each item is then graphed according to its CM and MM co-ordinates. It is especially important to note that not all items in the same classification possess identical characteristics. This technique, therefore, points out that a different menu engineering strategy may be appropriate for items even though they are similarly segmented.

Limitations of Menu Engineering :

These are : 1. 2. Menu engineering does not respond to items ready for sales, or are partially cooked, but not sold. The calculations are limited to the costs mentioned in the Standard Recipe Card. This is sometimes inaccurate and approximate. Menu engineering process does not accurately point to portions of food items lost due to spoilage or unauthorised consumption.

3.

The limitations of Menu Engineering are a few, the advantages many. Through a combination of sheer experience, and study of menu engineering, a Chef or a Food & Beverage manager can keep the menu and menu revisions profitable to the business. Weighted Average: Weighted Average is an average in which each quantity to be averaged is assigned a weight. These weights determine the relative importance of each quantity on the average.

41

Annexure 1

MENU ENGINEERING - STANDARD FOOD COST WORKSHEET NO. OF PORTIONS SOLD

DECEMBER-2007 D T 1 34 21 24 7 12 18 28 12 14 12 8 9 9 9 9 9 7 9 8 7 7 9 8 7 7 9 8 7 6 6 6 7 9 8 7 6 7 7 7 7 7 9 8 7 6 7 8 8 8 8 8 8 8 8 8 GRAND TOTAL 9 7 9 8 7 6 7 8 12 12 14 15 16 17 18 12 12 9 9 9 9 9 9 15 17 21 32 21 21 21 24 25 26 12 8 8 8 8 8 8 13 12 11 10 13 14 9 8 7 11 21 27 13 7 7 7 7 7 7 25 21 29 32 17 18 18 13 34 35 36 19 19 21 16 17 12 18 12 13 17 18 19 34 32 28 18 10 10 10 10 10 10 14 15 13 16 12 12 13 15 16 17 18 21 23 21 32 31 23 17 11 11 11 11 11 11 8 6 7 8 7 5 9 9 8 9 11 32 21 43 43 21 23 21 21 23 23 23 23 23 23 23 357 147 217 240 372 204 315 200 114 114 114 114 114 114 3608 22 32 21 32 43 12 14 15 16 34 23 23 23 331 24 30 43 45 54 63 23 43 54 32 23 35 38 541 175 400 400 400 150 300 300 1200 650 650 400 400 400 400 400 200 2 3 4 5 6 7 8 9 10 11 12 13 D T D T D T D T D T D T D T D T D T D T D T D T D TOTAL SALE TOTAL FOOD TOTAL FOOD T SOLD PRICE SALES COST COST COST % (A) (B) (AXB) (C) (AXC) (C/B) 14 NOS. RS. RS. RS. RS. X 100 94675 132400 142800 58800 32550 72000 111600 244800 204750 130000 45600 45600 45600 45600 45600 22800 1475175 35 75 75 60 25 30 25 500 150 125 80 100 75 75 125 20 18935 24825 26775 8820 5425 7200 9300 102000 47250 25000 9120 11400 8550 8550 14250 2280 329680 20 18.75 18.75 15 16.67 10 8.33 41.67 23 19.23 20 25 18.75 18.75 31.25 10

MENU ITEMS COORGI FOOD PROMOTION THE SPICE OF LIFE

KOZHI ERACHI SOUP

COORG CHILLI PORK

PANDHI BARTHADHU

LIVER BARTHADHU

TARKARI SOUP

42

CHERIYA VADE

KANDERA BONDA

KAL YERA KOZHAMBU

YERA VARTHA CURRY

KARIVAE PALAI YERA

KANE RAWA FRY

ALLEPPEY MEEN CURRY 8

KOZHI VARTHA CURRY

KOZHI FRY

VEINCHINA MAMSAM

DAKSHIN TROLLEY

MENU ENGINEERING WORKSHEET DAKSHIN RESTAURANT COORGI FOOD PROMOTION THE SPICE OF LIFE

ANNEXURE 2 Date: __________________ Meal Period : Lunch/Dinner

(A) Item

(B) Total Sold (MM)

(D) Item Food Cost

(E) Item Sale price

(F) Item CM (E-D)

(G) Menu Costs (D x B)

(H) Menu Revenues (E x B)

(L) Menu CM (HG)

(P) CM Category

(R) MM % Category

(S) Menu Item Classification

43
(N)Total number of portions sold = 3608 nos. (I) Total Menu Costs (Weighted figure) = Rs. 329680 Food Cost Percent = K= I/J x 100 = 329680/ 1475175 = 22.35%

KOZHI ERACHI SOUP COORG CHILLI PORK PANDHI BARTHADHU LIVER BARTHADHU TARKARI SOUP CHERIYA VADE KANDERA BONDA KAL YERA KOZHAMBU YERA VARTHA CURRY KARIVAE PALAI YERA KANE RAWA FRY ALLEPPEY MEEN CURRY KOZHI VARTHA CURRY KOZHI FRY VEINCHINA MAMSAM DAKSHIN TROLLEY
(J) Total Menu Revenues (Weighted figure) = Rs. 1475175 (M) Total Menu CM (Weighted figure) = Rs.1145495

541 331 357 147 217 240 372 204 315 200 114 114 114 114 114 114

(C) Menu Mix % (MM/N 100) 15% 9.17% 9.9% 4.07% 6.01% 6.65% 10.31% 5.65% 8.73% 5.54% 3.16% 3.16% 3.16% 3.16% 3.16% 3.16% 35 75 75 60 25 30 25 500 150 125 80 100 75 75 125 20 175 400 400 400 150 300 300 1200 650 650 400 400 400 400 400 200 140 325 325 340 125 270 275 700 500 525 320 300 325 325 275 180 18935 24825 26775 8820 5425 7200 9300 102000 47250 25000 9120 11400 8550 8550 14250 2280 94675 132400 142800 58800 32550 72000 111600 244800 204750 130000 45600 45600 45600 45600 45600 22800 75740 107575 116025 49980 27125 64800 102300 142800 157500 105000 36480 34200 37050 37050 31350 20520 LOW HIGH HIGH HIGH LOW LOW LOW HIGH HIGH HIGH HIGH LOW HIGH HIGH LOW LOW
Compared against Rs. 317.49

HIGH HIGH HIGH LOW HIGH HIGH HIGH HIGH HIGH HIGH LOW LOW LOW LOW LOW LOW
Compared against 4.38%

STANDARD STAR STAR PUZZLE STANDARD STANDARD STANDARD STAR STAR STAR PUZZLE PROBLEM PUZZLE PUZZLE PROBLEM PROBLEM

Totals

Q = Popularity index (100% / 16 items ) X 70% or, 6.25 X 70 % = 4.38 %

O = Average Contribution Margin M/N 1145495/3608 = Rs. 317.49

Annexure - 3

MENU ITEM
MENU ITEM SALE PRICE 175 400 400 400 150 300 300 1200 650 650 400 400 400 400 400 200 150 125 80 100 75 75 125 20 500 25 30 25 60 75 75 325 325 340 125 270 275 700 500 525 320 300 325 325 275 180 35 140 PORTION FOOD COST PORTION CONRIBUTION MARGIN

ANALYSIS
ITEM SALE COUNT 541 331 357 147 217 240 372 204 315 200 114 114 114 114 114 114

MENU ITEM

KOZHI ERACHI SOUP

COORG CHILLI PORK

PANDHI BARTHADHU

LIVER BARTHADHU

TARKARI SOUP

CHERIYA VADE

44

KANDERA BONDA

KAL YERA KOZHAMBU

YERA VARTHA CURRY

KARIVAE PALAI YERA

KANE RAWA FRY

ALLEPPEY MEEN CURRY

KOZHI VARTHA CURRY

KOZHI FRY

VEINCHINA MAMSAM

DAKSHIN TROLLEY

Annexue - 4 MENU MIX ANALYSIS

POPULARITY ANALYSIS MM COUNT 541 331 357 147 217 240 372 204 315 200 114 114 114 114 114 114 3.16% 3.16% 3.16% 3.16% LOW LOW LOW LOW 3.16% LOW 3.16% LOW 5.54% HIGH 8.73% HIGH 13.75% 9.17% 3.18% 2.99% 3.23% 3.23% 2.73% 1.79% 5.65% HIGH 12.47% 10.31% HIGH 8.93% 6.65% HIGH 5.66% 270 275 700 500 525 320 300 325 325 275 180 6.01% HIGH 2.37% 125 4.07% LOW 4.36% 340 9.9% HIGH 10.13% 325 9.17% HIGH 9.39% 325 15% HIGH 6.61% 140 LOW HIGH HIGH HIGH LOW LOW LOW HIGH HIGH HIGH HIGH LOW HIGH HIGH LOW LOW % MM SHARE GROUP RANK %CM SHARE CONTRIBUTION MARGIN GROUP RANK PROFITABILITY ANALYSIS MENU CLASS STANDARDS STAR STAR PUZZLE STANDARDS STANDARDS STANDARDS STAR STAR STAR PUZZLE PROBLEM PUZZLE PUZZLE PROBLEM PROBLEM

ITEM NAME

KOZHI ERACHI SOUP

COORG CHILLI PORK

PANDHI BARTHADHU

LIVER BARTHADHU

TARKARI SOUP

CHERIYA VADE

45
CONTRIBUTIONS PER PORTION NUMBER OF PORTIONS SOLD % CM SHARE = TOTAL CONTRIBUTION 100

KANDERA BONDA

KAL YERA KOZHAMBU

YERA VARTHA CURRY

KARIVAE PALAI YERA

KANE RAWA FRY

ALLEPPEY MEEN CURRY

KOZHI VARTHA CURRY

KOZHI FRY

VEINCHINA MAMSAM

DAKSHIN TROLLEY

Annexure - 5

MENU ENGINEERING SUMMARY

TOTAL Rs.1475175 TOTAL MENU REVENUES RS.329680 TOTAL MENU COSTS RS. 91.37 AVERAGE ITEM FOOD COST RS. 317.49 AVERAGE ITEM CONTRIBUTION MARGIN 225.5 NOS. AVERAGE NUMBER OF COVERS RS. 20 LOWEST FOOD COST ITEM RS. 125 LOWEST CONTRIBUTION MARGIN 114 NOS. LOWEST NUMBER OF COVERS RS. 408.86 AVERAGE ITEM SELLING PRICE RS. 150 LOWEST SELLING PRICE AVERAGE LOW HIGH RS. 1200 HIGHEST SELLING PRICE RS. 500 HIGHEST FOOD COST ITEM RS. 700 HIGHEST CONTRIBUTION MARGIN 541 NOS. HIGHEST NUMBER OF COVERS

PRICE (MENU REVENUES)

FOOD COST

46
3608 NUMBERS TOTAL NUMBER OF COVERS SOLD 34.57 % 16 NUMBERS

CONTRIBUTION MARGIN

RS. RS.1145495 TOTAL MENU CONTRIBUTION MARGIN

DEMAND FACTOR

FOOD COST PERCENTAGE

NUMBER OF ITEMS

Annexure - 6

MENU ENGINEERING ANALYSIS FOUR BOX ANALYSIS

STANDARDS KOZHI ERACHI SOUP TARKARI SOUP CHERIYA VADE KANDERA BONDA STARS COORG CHILLI PORK PANDHI BARTHADHU KAL YERA KOZHAMBU YERA VARTHA CURRY KARIVAEPALAI YERA

PROBLEMS ALLEPPEY MEEN CURRY VEINCHINA MAMSAM DAKSHIN TROLLEY

PUZZLES LIVER BARTHADHU KANE RAWA FRY KOZHI VARTHA CURRY KOZHI FRY

47

Annexure - 7

48

CULINARY ECONOMICS
MATERIALS MANAGEMENT The Materials Management Concept
The important aspects of the materials management system are materials, time, and space; and the operation of the system aims to overcome the problems of supply, distance and time, in order to obtain product for the minimum cost under the constraint of established standards of production and service. Materials management is to obtain the right quantity of materials, of the right quality, from the right source, at the right time, for the right price. Materials management can further be qualified as the organization, planning, implementation, and control of the procurement and movement process of all material activities needed to ensure the production of the finished product. This means that materials management is directly involved with the activities of many functional areas including purchasing, receiving, storing, issuing, production planning, production and sales (completion of food service)

Materials Management :

Objectives

Primary objectives of Materials management are : Provisioning of materials in specified quantity in a cost-effective manner. Maintenance of supplies in line with the production requirements. Minimizing investments in storages and supply-line. Maintaining high inventory turnover. Maintaining low inventories.

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Secondary objectives of Materials management are : Location of new sources of supply and vendor development. Achieving cost efficiencies through standardization, quality and reduction in purchase of scratch foods. Scratch foods are commercially available products that help in constituting a receipe and reduce the time and efforts of production. Synergies of operations through planning and scheduling, storage, upkeep and maintenance of materials and material handling. Development of personnel through developing of the standards and education of those standards.

Profits From Materials Management :

The movement of materials management supports distinct opportunities to improve profits either through reduction of costs or improved productivity. Profits may be obtained through the adoption of a number of methods, for example : Purchasing at comparatively low prices, in exchange for either bulk supplies or security of the contract. Ensuring high quality of raw materials through selection and constant communication with selected suppliers. Ensuring continuity of supply particularly service elements. Through timing deliveries of input materials to occur when required for optimum production and minimizing store inventory levels.

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MATERIALS MANAGEMENT
PURCHASING LEARNING COMPETENCIES
At the end of the module on Purchasing the trainee should be competent to 1. Understand Value. 2. Understand goals of effective Purchasing. 3. Understand activities of Purchasing Cycle. 4. Understand Purchasing Cycle of Perishables. 5. Understand factors when purchasing food products. 6. Understand how to establish purchasing needs. 7. Understand equation between Quality and Value. 8. Understand how to measure Quality. 9. Understand how to develop Purchase Specifications. 10. Understand the Minimum and Maximum Ordering System. 11. Understand the Purchase Order System and its advantages. 12. Understand Controls in Purchasing functions. 13. Understand One Stop shopping systems. 14. Understand Centralized Purchasing, its advantages and disadvantages.

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PURCHASING - DEFINITION
Purchasing can be defined as a function concerned with the search, selection, purchase, receipt of products required for production. As a management function purchasing is also concerned with the generation of requirement of various products and the audit trail associated. Historically purchasing function was a service activity. Managers viewed purchasing as a support function to purchase those products, supplies and services needed for production and service activities. The concerns of management were to control product cost after the item reached the production areas, not necessarily before the production point. For hotel managements the concern is to reduce cost of back-end operations. Purchasing is a vital back-end operation. Efficient purchasing systems are cost effective and can result in increased profit margins and perfect product supply. Role of purchasing system has evolved into sophisticated functioning. Purchasing is continuously becoming more specific. Objectivity and well-defined rules have replaced older systems of subjective nature. The supply markets are becoming dearer and dearer. The continuous additional burden cannot be borne by prospective clients of any hospitality business. The client is becoming increasingly intelligent and selective. He desires value for money. He is intelligently able to compare products / offerings of different outlets, and reach his conclusions of value for money. Obviously, the purchasing systems have evolved to create competitive supply markets to ensure client satisfaction. Focus on a particular product, person or process is the key word of business. Who is the purchasing being done for?

52

Obviously the client, the guest. Therefore it is surely the client who is the focus. Hotel Managements have been responding to the changing needs, desires, and expectations of guests while recognizing the need to consider both cost and quality aspects of purchasing decisions. What has therefore evolved is a price / quality relationship. Excellent hospitality organizations closely monitor the changing needs of their target markets. Keeping a client happy and satisfied is a continuous requirement. Hospitality organizations that are winners continuously meet or exceed guests expectations. As an evolution other aspects of purchasing such as negotiation, creative pricing plans, quality and detailed knowledge about the markets are currently formalized. Purchasing should not be considered a simple matter of ordering needed products.

PURCHASE SYSTEMS
Purchase Systems are quite complex. Effective purchasing ensures economic and operational benefits. The Purchasing System used by any operator has a direct bearing in the value received by a guest. Efficient and cost Effective Purchasing Systems give strengths to value received by the business, which gives strengths to the total dining experience as perceived by guests. What do we infer from this? That price and quality of products purchased by a hospitality business are primary determinants of a positive guest experience. What should the efficient management of any hospitality organization do?

53

It should : define its target markets as accurately and precisely as possible; and select products and services to offer efficiently focusing on the guest. They must weigh the following vis a vis selection of products and services: 1. 2. 3. 4. 5. Will the products / services sell and at what price? Will the products / services be available and at what cost? Will there be continuity in such availability? What would be the bottom line effects of selling these products/services? How to maximize value received by the property, and the value perceived by a Guest in the products/services that we offer for sale?

The list of products and services to be offered to a guest should be completed only after judiciously studying the above.

CONCEPT OF VALUE
Value must be established and monitored based on the expectations of the target markets. The customers perception of value is very important in the evolving market competition scenario. Value can be maximized only if management establishes systems to ensure optimum results. The value received by a customer is a function of quality, service, and price, within the constraints of intended use. This relationship can be expressed as follows : Quality Service Value = Price Let us assume that there is no change in quality or service. Value

54

has an inverse relationship with price. As price increases value decreases. By contrast, value varies directly with changes in Quality and / or Service. If Price remains constant, and quality and service improve, value increases. When we study the module on SUPPLIER SELECTION, we shall notice that Quality / Service / Value and Price have the same connotation to the hospitality unit, when it becomes the Customer to the supplier.

GOALS OF PURCHASING SYSTEM

The concept of value is clear from the previous understanding. The need of an efficient purchase system is to maximize value for its operation and its guests. The following concerns need to be addressed whenever designing and implementing a purchasing system. Product Quantity Price Time Quality Supplier

WHAT SHOULD BE THE AIMS AND OBJECTIVES OF AN EFFICIENT PURCHASE SYSTEM? The aims and objectives should be : To obtain the right product at the right price. To obtain the product of proper quality and purchased in the correct quantity. To obtain the product at the right time from the best supplier. Purchasing Systems should be planned, implemented, and evaluated to help ensure that these goals are met with regularly.

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PURCHASING OBJECTIVES AND PROCEDURES

Purchasing cycle involves a variety of different procedures. Activities must be controlled when designing and managing purchasing tasks. Let us study the Purchasing Cycle. The Purchasing Cycle is repeated every time products are ordered. Purchasing is a series of activities requiring special planning and control procedures that create an audit trail. An Audit Trail is a series of records, documents, and / or reports that trace the flow of resources through any operation. Documents, records and reports should be maintained by the Operations Department to enable constant check-ups for correctness of operation in so far as accounting processes are concerned. Audits normally occur months later than the actual operation has been done. What is the logical flow of work for the above? The purchasing function encompasses a full range of management activities from listing supply needs to controlling inventory. Management of products is required both before and after they have been received by the operations. Why is it a Management activity? All management activities go through a cycle of planning, execution and follow up. Purchasing is therefore a management activity. Linkages of Purchasing and Costs Associated intimately with costs of various nature, are the purchase functions of a hotel or a unit of the Hospitality Industry.

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Let us start with the base line statement: PROFITS ARE THE KEY PRE-REQUISITES OF BUSINESS . Let us discuss now the two basic parameters of a Food and Beverages business. The two most basic parameters of a business are Purchase and Sales. In continuation of the above we understand the important issues of the business as : 1 Proper positioning of a Food & Beverage outlet. Customers should be satisfied and feel an inherent value of money. (Concept development) Proper positioning of the menu. Proper positioning of the price line of the menu. Proper positioning of the standards in line with the menu positioning. Proper positioning of the food standards. Proper positioning of the service standards of the product. Proper linkages of marketing and the menu product line. Proper marketing itself

2 3 4

5 6 7 8 9

In continuation of point no. 5 i.e. Proper positioning of food standards and in line with the menu positioning, we shall have Proper production techniques. Proper yields better saleable value of the raw product. Proper purchasing.

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What does the word proper mean here? Proper means in line with the declared benchmarks of the organization. I shall take this understanding further under the lecture BRAND STRENGTHS. What have we learnt? We have learnt that if Profits are the key requisites of a business than Proper positioning of sales and marketing is essential, and proper purchasing is very essential. We started with these two parameters of a business - Purchase and Sales. Let us forget temporarily, the angle of sales and marketing and concentrate on the topic: PURCHASING SYSTEMS Just now, we discussed yields and increase in saleable values. What are we saying? We are saying that we need to position our purchase activities efficiently. Please note the word efficiently. If any activity has to be efficient, it has to be based on certain well defined principles. So that, we say that purchase is a management activity. How did we start? We started by talking of profits. So that, we shall refine our earlier statement that purchasing is a management activity for maximizing values, for maximizing profits.

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Purchasing activity therefore is not only an activity for maximizing profits, it is also a series of conscious management efforts in an efficient operation leading to customer satisfaction, and of course a continuation in supplies (We take another cue from this) An efficient purchase activity therefore is a cost saving program. Role of the Purchase Department Is the Purchase Department responsible for purchases only? Well, that is its main function. What are the other functions or Roles of a Purchase Department? The Purchase Department is a hub of activity for the purposes of the various departments of the hotel, etc. It controls the ultimate satisfaction of the client, and also the profitability of the hotel. Purchasing is a full range of management activities. Every activity influences the nature and effectiveness of the system by which the hospitality industry purchases the products and services, for ultimate goal of client satisfaction. What are we saying? Purchasing relates to activities that are designed to maximize value to the company and ultimately to the client. Let us examine below the different Roles of the Purchase Department in major organizations of the hospitality industry. 1. Management of the purchase office Maintenance of necessary records - matters such as previous orders, past experiences with suppliers, orders in process -

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all are important requirements of management of the purchase office. 2. Requisitioning of regular supplies. This is acting on the requests of either the stores personnel or those of the consuming departments directly. This involves dealing with suppliers already contracted with for various supplies. 3. 4. Purchasing of all commodities. Ensuring continuity of supplies of all items of all departments. Determining required Product Quality. This is the setting up of desired quality levels of raw products sourced for various departments? How is it done? 6. By keeping the positioning of the organization in view. By keeping the expectations of the ultimate client in view. By keeping economic concerns of the organization in view. Determining Quantity needs. Quantities to be stocked are governed by the Quantum of their usage by the consuming departments, the geographical location of the hospitality unit (the time taken by the supplier to service a Purchase Order), and also by the storage capacities of the organization, either departmentally or in central stores. 7. Selection of Suppliers The most important role of a purchase department is to select suppliers in association with consuming departments. These

5.

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suppliers need to meet the technical specification of raw product line as desired. In our business these are known as Standard Purchase Specifications. Other evaluating features are prices quoted and negotiated, selection of products, and the services offered by these suppliers. We shall examme supplier selection in details later. 8. Negotiating Prices These are the different tactics and strategies used to secure the lowest price without sacrificing product quality or service of the supplier. This involves intelligent interpretation of the supplier market, the supplier, the hotels business requirements and priorities. 9. Cost Effectiveness This is sourcing alternate sources of the same commodity ensuring cost effective supplies, or sourcing a comparable, acceptable commodity reducing cost inwards, (example of a imported good, involving taxes, etc. against a local produce.) 10. Market Research The purchase department is expected to be in continuous touch with the markets, and market conditions, and evaluating new products. The purchase department has to do continuous research into products, markets, price trends, etc. This supports the purchase function of negotiationg prices. 11. Co-ordination with Production Department Purchase department is responsible to co-ordinate with production department to standardize commodities, and therefore reduce stock levels (reduce the values of Inventory levels) 12. Emergency Purchases Purchase department organizes emergency purchases of various natures of all departments.

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13. Co-ordinate Unusual consumptions On a year-round basis consumption of stock items can be monitored. Purchasing is done accordingly. However, unusual consumption patterns of certain stock items occur in our business. Purchase department keeps an eye on unusual consumption of stock items, analyze reasons in association with department heads, and arranges for replenishments. 14. Arranging for payment Purchase department is the co-coordinator between the supplier and the finance department. Agreements are also required to be made by the purchase department with the supplier for the modalities of payment. These are financial agreements and incorporated in the contracts. 15. To expedite or Follow up on Purchases A follow up is essential in day-to-day working conditions of a purchase department. This is to ensure that required products reach the facilities at the right time. Some suppliers being more conscientious need less follow up than others. 16. Maintaining Proper Supplier Relations A professional relationship with various suppliers is essential. Certain legal and ethical elements come in to play in this matter. 17. Receiving Products The process by which products are brought into the operation, involving basic practices designed to check quality, quantity and the price. 18. Storing Products Correct storage is vital to all products. Products after receipt need to - be either sent to the consumer department, especially those of emergency, perishable or highly perishable nature.

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- Be stored in general stores under various categories, e.g. Food Stores, Engineering Stores, Housekeeping Stores, etc. etc. 19. Co-ordination with Controls Purchase department needs to be in continuous touch with the Controls department for various requirements of the Control Systems. 20. Inspection of Goods This is basically a check system, during inventories or at various phases of production. This is done to determine Quality requirements. Items not moving during a particular period are recommended to the consuming departments for their proper and urgent usage. This is specially so for those items which have expiry dates to them. 21. Controlling Inventories Inventories are regularly done in the hospitality industry. This ensures physical product availability in stores against books, and to understand investments on stock-inhand. A continuous effort is made to reduce Inventory levels. These systems also help in maximizing effective and efficient usage of supplies, minimizing losses in quality and reduce opportunity for theft or unaccountable consumptions. 22. Reducing Dead Inventories and Surplus Equipment, Sale of Scrap, Used oil etc. Selling of scraps or even equipment no longer needed by the operating department is another function of the purchase department. Sale of scrap is very often taken as profit of the department. 23. Co-Ordinate with Senior Management Any cost-effectiveness is towards the bottom line of the

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department and that of the unit. For any cost incurred, at least three times that much revenue needs to be earned in order to be cost-effective, and ultimately profitable. To Summarize: Managing resources available or likely to be available is the Prime Managerial Role of the Purchase Department. Good Purchasing management continuously assesses needs, and when successful, satisfies those needs in a manner, which maximizes value for the operation and its clients.

PURCHASING SYSTEMS PREPARING SPECIFICATIONS

STANDARD PURCHASE SPECIFICATIONS We studied earlier that all management functions are guided by principles. Minimum benchmarks have to be set to avoid any arbitrary situation. These benchmarks help us to control. The Quality, The Quantity, and The Service of a product likely to be procured What is a Purchase Specification? In the simpler terms of explanation it is a specification for the purchase of a commodity. This specification would list various values associated with the purchase of that commodity. So that, a purchase specification is a concise description of the quality, size, weight, count, etc, required for a particular commodity. Purchase specifications are related to the establishment. Each establishment devises these specifications to suit

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their needs, their food and beverage product line, the price range, the policies, and the needs of the client. These specifications are laid down by members of the management team; are directions of a central body in a key chain operation or a specific unit. Why Prepare Specifications? How do we measure a suppliers services? We do that by comparing the purchase specifications against performance of a supplier. So that purchase specifications are Benchmarking Exercises. Purchase specifications establish a buying standard of a commodity for an establishment, so that, a standard product is available for the food production and food service department, for ultimate goal of client satisfaction. The purchase specification informs the supplier (or intended supplier in case of a new supplier) the parameters required by the establishment. The supplier quotes his prices and negotiations are done on these prices, keeping these specifications in view. The supplier is therefore informed of precisely what is required. This in turn assists the supplier in being competitive with pricing. The purchase specifications are therefore a means of eliminating possibilities of ambiguity; and introduction of specifics. Purchase specifications benchmarked for an establishments requirements are called Standard Purchase Specifications (SPS).

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Copies of Purchase Specifications are marked to the consuming Department, the Receiving Department, the stores and the accounts department, so that all understand and speak the same language. It gives guidelines to all as to the standards of Food & Beverage to accept. Purchase specifications make all the concerned staff aware of the differences that can occur in the product, for example size, weight, quality, quantity etc. Standard Purchase Specifications and Standardization Use of purchase specifications helps to standardize purchasing, production and service systems. This is good for the hospitality operation, its employees and the guests it serves. Use of a purchase specification provides a standard quality definition for products purchased. It represents the products required for standard recipes and which are perceived to provide optimal value for the clients being served. Use of specifications, then, helps to ensure consistent product quality regardless of the source of purchases. The hotel and the clients desire consistent quality. Properly developed and utilized purchase specifications help to ensure that there are no surprises. Everyone benefits from their use. Specifications: The process of developing purchase specifications often begins with prevailing industry practices. Specifications offer several distinct advantages: In developing purchase specifications, hospitality personnel gain a better understanding of requirements and quality standards.

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 Receiving personnel can check incoming products against the quality requirements noted in the propertys specifications. Specifications may reduce the variety of products purchased and managed. The research involved in developing specifications may suggest additional ways to use the same product in different menu items. Specifications can lower purchase costs, since the operation will not be paying extra for a product of higher quality than needed. Generic purchase specifications enable several suppliers to quote competitive prices, thus increasing the level of competition. Developing Purchase Specifications Let us look at a format for developing purchase specifications. The format below indicates the categories of information often included. Of particular importance are product use and test procedures. A FORMAT OF DEVELOPING PURCHASE SPECIFICATIONS What are the information levels required in a Purchase Specifications? 1. 2. 3. Name of the food & beverage operation : Product Name : Definition of the Product: The terminology used by the consumer department of the establishment should be understood by the suppliers. If required diagrams or samples can be provided to the supplier or intended supplier. Product Used for : (for example olives for garnish, bread for club sandwich, bread for regular sandwich, etc. etc. 67

4.

5.

General Description of the Product : Provide general quality information about the desired product. Detailed description : State here other factors, which would help to clearly identify desired product. Examples of specific factors, which vary by product being described, may include : Geographic Origin Variety Type Style Gradation: e.g. Extra large size potatoes for french fries. 5 in a Kgm. Or 10 - 16 in a Kgm for Prawns without head, etc. Product size, weight, or count: e.g. per Kgm, per litre. Or 15 drumsticks in a Kilogram. Or 8 bananas per Kgm etc. etc. Portion size Brand Name: e.g. Weikfields cornflour, Or Tabasco, Or Lea & Perrins Worcestershire sauce, Or Kissans Tomato Ketchup etc, etc. Density Medium of pack Specific gravity Container size e.g. per case of 24 tins of 400 gms. each e.g. per case of 12 bottle of beer etc. Edible yield, trim Fat content Special Notes: For example cuts of meat, For example fish without head and stomach. 68

6.

7.

8.

Product Test Procedures : Test procedures occur at the time of the receipt of the product, and also at the time the product is prepared / used. For examples, products expected to be delivered refrigerated, can be tested with a thermometer. Products can be weighed or counted physically. Product Test Procedures are very often used for butcher products, frozen products and dairy products. Special instructions and requirements : Any additional information needed to clearly indicate quality expectations can be included here. Examples include labeling and / or packaging requirements and special delivery and service requirements.

9.

Regardless of the product for which quality standards are being developed, several minimum requirements must be addressed in every specification. These requirements dictate that: An accurate quality description of the product should focus on easily observable, testable features. A quality description should be realistic. When specifications allow little or no deviation or allowance for slight differences between desired and acceptable products, the likely result will be higher prices. Overly strict specifications limit the number of suppliers who can provide items and may even make it impossible to purchase necessary items. Descriptions should be clear and simple. Excessive detail is neither practical nor helpful for the majority of purchasers and /or suppliers. Specifications should permit purchase of readily available products in most instances. Costs rise dramatically and minimum purchase volumes are significant when products must be prefabricated for the specific organization.

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 Supply from more than one vendor should be possible. Costs are reduced when several suppliers are able to provide product needs. There should be flexibility for both the buyer and the seller. The key here relates to practicality and reasonableness. Specifications, which are too tight or inflexible, will defeat their intended purpose. Some general information is required for all orders placed with suppliers, but should not be included in purchase specifications. Examples include: general delivery instructions, personnel authorized to purchase/receive products, quantity needed, agreed-upon purchase price, and purchase unit size. The purchasers concern is minimizing the need to modify purchase specifications; quantity and purchase price often change from order to order. Suppliers should understand the intended use of the product. As experts in their own product lines, they may suggest product alternatives, which are more suited to the property. The purchaser should also check the qualifications of eligible suppliers in order to judge their expertise in a given area. When product test procedures are indicated, quality requirements can clearly be verified. Test information makes it possible to identify substandard products. Who Develops Standard Purchase Specifications? Purchase specifications are developed through the efforts of several departments, staff and other individuals. Lets consider three groups in particular: food and beverage personnel; purchasing staff; and suppliers.

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Food and Beverage Personnel The food and beverage department must make the final decisions regarding purchase specifications for the products the department uses. The responsibility of menu planning rests with this department. The expertise of the F&B Management is of great value in measuring the adequacy of specifications, from the perspective of both operations and guest satisfaction. Purchasing Staff The responsibility of the purchasing staff is to obtain information and provide assistance and not to make the final decisions. For example, purchasers question suppliers, study applicable product data, conduct make-or-buy analysis, and research topics suggested by the food and Beverage manager or The Chef. Purchasing staff arrange for sample/trial orders. Through use of tentative specifications, they obtain sample products for analysis and selection by food and beverage personnel. Purchasers can evaluate initial shipments of these samples and check to see that incoming products meet specifications. Purchasers also provide advice about specifications. Their experience in developing specifications, working with eligible suppliers, and evaluating product samples is of invaluable assistance to line managers. Suppliers Suppliers are not directly responsible for developing specifications. They do, however, provide information and assist the hospitality operation in this process. In general, suppliers may: Inform properties about available products. Offer advice on activities and attitudes of other properties toward various products.

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 Counsel buyers regarding new products about to be introduced. Suppliers representatives often learn about new products before operators and purchasers do. Review and critique proposed specifications. Suppliers may evaluate whether a product defined by the specifications is useful. Whenever practical, specifications should apply to products offered from more than one supplier. At this step, let us understand In-use Products, and New Products. Standard Purchase Specifications for In-Use Products When a product is in current use, the food and beverage personnel and purchaser are both familiar with it and are able to judge its suitability. They recognize the required characteristics and are able to identify which product meets minimum quality standards. Let us examine the basic steps required to develop specifications for current products. Developing Standard Purchase Specifications for In-Use Products Step 1- Select a sample judged to be of proper quality. Step 2- Ask the supplier providing the product to describe it (size, grade etc). Step 3- Write a specification using information already discussed. Step 4- Ask other eligible suppliers to criticize the tentative specification: Does it describe the correct quality? Is it available from several sources? Step 5- Modify the written description as necessary Step 6- Use the specification Exercise: To encourage cross section of trainees to develop standard purchase specification.

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Developing Standard Purchase Specifications for a New Product Step 1- Give a verbal description of product need to reputable suppliers of similar or same product line, and stress its use. Step 2- Analyze sample provided by the supplier, or available with user apartment. Step 3- Select product of correct quality. Step 4- Ask supplier providing the product to describe it. Step 5- Write a specification using information described earlier. Step 6- Ask other suppliers to criticize the specification. Step 7- Modify the specification as necessary. After the specification is developed, purchasers should submit copies to eligible suppliers, indicating that price quotations should be based on the quality descriptions defined by the specification. Standard Purchase Specifications for New Products The above outlines the process, which can be used to establish specifications for new products. Many trade references can also provide assistance. Based upon this information, several suppliers should be able to provide samples, which may accommodate the purchasers needs. Standard Purchase Specification for Central Purchase System Centralised Purchasing is here to stay in our industry. By combining orders from many properties, advantage of volume purchase discounts can be availed. Participating purchasers of units agree on minimum quality requirements for items to be purchased. Frequently, developing specifications acceptable to all concerned parties is one of the most time-consuming aspects to implementing a centralized purchasing system.

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A committee approach is frequently used in developing specifications. Wide differences in specifications must generally be minimized in order to take advantage of volume discounts. Supplies/manufacturers help and support central purchase in this matter. Participation in centralized purchasing is not an independent decision. Each unit is obliged to fall in line. It is possible to purchase some items through the Central Purchase system and purchase others on an independent basis, though cost advantages to centralized purchasing are decreased when this mixed approach is used. Standard Purchase Specifications for Specific Products Let us examine some examples : Purchase Specification Factors: Specific Products Meats Inspection (mandatory) Grading (if desired) Descriptions Weight / thickness limitations Fat limitations Aging of product (when needed) State of refrigeration Miscellaneous (packing, etc.) Sea foods Type Market form (fish - whole, eviscerated, etc; shellfish - alive, whole, shucked, etc) Condition (describe flesh, eyes, skin, gills, etc.) Grade (if desired and available) Inspection (if available) 74

 Place of origin (if necessary) State of refrigeration Miscellaneous (count, sizing, packaging) Poultry Kind (chicken, turkey, duck, goose) Grading (if desired) Inspection (mandatory) Style (whole, breasts) Size (weight limitations) State of refrigeration Miscellaneous (packing, etc.) Fresh Fruits and Vegetables Grade (if desired) Variety Size Type of container Weight per container Count per container Growing area Processed Fruits and Vegetables Grade (if desired) Variety Drained weight or count per case Weight per case Packing medium Can/package size Variety and/or style Growing area (only if necessary) Disadvantages of Standard Purchase Specifications Standard Purchase specifications tends to be idealistic in nature. Sometimes menu product range does not require the top most quality e.g. Tomatoes for puree. Whether one purchases large

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tomatoes, which are meant for salad purposes, and are expensive, and makes a puree out of it, or purchases, smaller variety of tomatoes, which is cheaper, and makes a puree out of it, the resultant product is the same. So that, if the Standard Purchase Specification does not specify the size in relation to weight, the supplier can quote for and bring in expensive variety of the product, whereas a lower quality in terms of purchase price can be as effectively utilized. Unless the consuming and the purchase department are careful they can easily over specify and buy goods of too high a standard than is really necessary. The results in supplies quoting higher prices. ENSURING STANDARDISATION IN PURCHASING FUNCTIONS We have learnt that to get a successful operation going, and to ensure guest satisfaction in terms of Value for Money, the Purchase Functions have to be well defined managerial efforts. To ensure meeting the desired goals, the Purchase Manager must obtain the required products of the right quality and in the right quantity and in time. What is this right quality and right quantity? Is it an arbitrary decision on day-to-day basis by the user department and / or the Purchase department? No. Well defined managerial efforts therefore relate to specific quality requirements set forth for every item purchased. In the Food & Beverage business, these are usually dictated by the demands of the clients in a particular geographical location, the positioning of the Food & Beverage outlets, and therefore the menu and its pricing. 76

We have already studied what is right quality, and how to set standards, what are Standard Purchase Specifications; and the various evaluation processes for these. We shall now study what is right quantity. Purchasing the commodities required in the correct quantity can have far reaching effects in terms of product costs, operational profits, shelf life, storage capacity and reordering of supplies. Purchasing the Right Quantity The quantity of items purchased is just as important as proper quality specifications. Problems occur when too much of a product is ordered. Money is unnecessarily tied up in inventory, which may result in cash flow problems. Over purchasing increases storage costs, including interest, insurance, and rented storage space. Products can deteriorate in quality with time and are more likely to be damaged by overcrowding. The chance of theft and pilferage increases when extra quantities are stocked. Purchasing insufficient quantities also has disadvantages. Insufficient quantities may result in Stock-out situations, and may result in Not-available Menu Items. This translates into consumer dissonance. In case of a Stock-out situation, production may have to be rescheduled. Emergency open-market purchases may have to be made. These open-market purchases not being subject to contractual rates - are expensive and time consuming. In certain cases discounts otherwise available for volume purchases can be lost. Purchasing the proper quantity of products depends upon several factors. As sales of menu items increase, additional quantities of required ingredients are needed. Higher product costs caused by changes in market conditions may result in increased selling prices, which, in turn, may lead to decreased sales levels to guests. In this case, the need for continued purchase of the product should be evaluated. 77

How much to order? We come to a pertinent question as a direct corollary of the above that we should have sufficient quantities for immediate needs and enough in stock, (either in the department or in main stores), till the supplies are replenished next time. We shall now speak strictly in F&B related terms. 1. 2. 3. 4. 5. The menu primarily determines what item must be purchased. Current inventory in the storeroom is another factor determining quantities to be ordered. Quantum of pre-preparation of menu item. Co-ordination of efforts between the user and consuming department. Ordering is done through Purchase Indent. Format of the Purchase Indent is on page 168.

What happens when we effect a menu change? Item needed for the earlier menus demands are sometimes unutilized, and remain in the main stores. Sometimes the sales of a particular menu item are lower than expected. What is the result of this exercise? The result is excess stock and less storage space for other needs. An effort should be made therefore to be efficient in menu planning. An effort has to be made to analyze the quantity reserves as well as the current requirements. Effective use of reserve supplies should not be over looked when menus change. Production chefs must inform Unit Financial Controller of possible change of menus and indicate consumption pattern of Stores items. The factors determining required products are therefore: The menu The menu items Recipes Ingredients

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Menus determine the products intended uses and proper functions. Management may also make judgments based on future prices. When prices are expected to change, managers may respond by buying more or less of a product. Maintaining a safety or minimum level of product on hand may require buying a quantity above that actually needed. The purpose of over stocking is to allow for delivery delays, increased popularity (runs) of items, or other unexpected developments. On the other hand, if large amounts of products are already in storage, the quantities purchased can be reduced. Available space may also limit quantities purchased. Very often suppliers would not meet smaller purchase quantities. They may specify minimum purchase value or units. Sometimes buyers may need to purchase less than optimal quantities when standard unit packaging affects quantity decisions. We must also understand the following : All foods deteriorate with passage of time. Some deteriorate more quickly than others. The organization should therefore adopt a system that will ensure that only those quantities are purchased that will be needed immediately or in the immediate future. Purchase quantities need to be fixed for individual product. How much to order depends on the useful life of the commodity. For purchasing purposes foods are divided into two categories: Perishable and Non-Perishable.

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Purchasing cycle - Purchasing Perishable and Non-Perishable foods Products may be purchased for immediate use and for use over an extended time period. Extremely perishable items such as fresh produce, baked goods, and dairy products must be used immediately. Examples of products, which may be stored in inventory for longer periods, include frozen products, canned goods, and groceries. Perishable Foods Perishables have a further classification of highly perishable foods. For perishables and highly perishable food stuffs a daily inventory is taken, quantities required for the next day or immediate future are calculated (some of the perishables are purchased for a two day period also taking into account weekly off days etc.) At this stage, importance is given to consume those quantities that are already on hand. Therefore the purchase requirements for perishables must include determination of the quantities in stock. The next step for these perishable commodities is determination of anticipated total needs, of the business on hand. This is based on historical data, on menus and consumption patterns. The quantity to be ordered is obviously calculated by subtracting the quantity in hand from the total quantities required. Perishable products are normally ordered several times weekly according to the following rule: Purchase Quantity = Quantity Needed - Quantity Available

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The following are the steps of system used for determining quantities of perishable products: 1. 2. 3. 4. 5. Determine normal usage rates. Consider whether additional quantities are needed for banquets. Determine the amount of each item currently in inventory. Deduct that amount from the normal usage rate to calculate the quantity to purchase. Make adjustments as necessary for holidays, special events, or other factors unique to the order period, for example nonsupply days.

Specimen of Perishale Order Sheet - Fruits & Vegetables is on page 166. Specimen of Perishale Order Sheet - Butchery is on page 167. Non-perishable Foods Non-perishable foods do not deteriorate rapidly. However monies are invested in material in stock. As profits are the key requisites of a business, any money tied up in non perishable food stocks is not available to meet other operating expenses of the business. Non-perishables should be purchased in minimum quantities. There are other benefits of effecting minimum stock levels. These are elimination of possibilities of theft. reduction of storage space requirements. reduction in number of staff handling and maintaining stocks.

Therefore food inventories have to be kept under controls of minimum stock levels.

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THE PURCHASING CYCLE

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Minimum / Maximum Ordering System In order to determine the quantity of non-perishable products to purchase, Minimum/ Maximum Ordering system can be used. This system is based on the fact that only a few of all products purchased represent high-cost items or ones with a high frequency of use. 80% of an hotel units purchase price may be spent on only 20% of all the products it buys. The development of a minimum/maximum ordering system should give first priority to these high cost items. Basically, the minimum / maximum inventory system helps managers determine when products must be purchased and how much of each product to order. 1) A minimum level is the safety level that is the number of purchase units that must always remain in inventory. 2) The maximum level is the greatest number of purchase units allowed in storage. 3) The Usage Rate : Purchase units should be ordered at the rate at which they are used by the operation. The usage rate is the number of purchase units used per order period. 4) The Lead Time Quantity : In addition to usage rates, the hotel unit must also determine lead-time quantity for each purchase item. This is the number of purchase units typically withdrawn from inventory between the time the order is placed and when it is delivered. Again, quantities are counted in terms of normal packing size. This lead-time quantity is distinct from the safety (minimum) level of purchase units kept in inventory. The safety level must allow for such things as late deliveries and greater than normal usage. 5) Order Point : The order point is the number of purchase units in stock when an order is placed. The order point is reached when the number of purchase units in inventory equals the lead-time quantity plus the minimum safety level. Additional quantities of a product are ordered when the quantity available reaches the order point. 83

The equation that we arrive at is : Purchase units at order point = Purchase units in lead time + Purchase units in safety level The above equation means that if products are ordered at the order point, the quantity in inventory will be reduced to the safety (minimum) level by the time products are received. When the order arrives, the inventory levels for the product will again be brought back to the maximum level. The maximum number of purchase units allowed to be stored will be the usage rate plus the safety (minimum) level. The minimum/maximum inventory system can help hotel management to attain an important purchasing objective to order the right quantity of required items at all times of the year. The system has several advantages as well as disadvantages. The advantages of using the system outweigh its disadvantages. Let us study both: Advantages Excessive inventory is prevented. This helps in reduction in the quantum of valuable storage space. Possibilities of stock outs are reduced. The system is easy to use. To meaxure actual performance against experted performance is possible throught usage of this system.

Disadvantages : Better computerized software system generates accurate and larger statistics. The processes of calculation of lead time quantites, safety level, and order-point levels incorporate assumptions. Diffculties may arise if these assumptions are wrong. 84

Time is required to develop minimum/maximum inventory levels to manage specific store items. Specific sales promotions by venders make all data invalid.

What is a STOCK OUT? Stock Out is a situation in stores when a product required by the production area is not available due to market conditions and / or due to poor management. UNDERSTANDING MINIMUM / MAXIMUM ORDER SYSTEM Let us take an assumed supply of grain sugar: Purchase unit Usage rate Order Period = = = kgms. 20 kgms. Per day. 30 days. 20 kgms. Per day X 30 days 600 kgms. 7 days. 7 days @ 20 kgms. Per day = 140 kgms. 7 days @ 20 kgms. Per day = 140 kgms. lead time + safety level 140 kgms.+ 140 kgms. = 280 kgms. usage rate + safety level 600 kgms.+ 140 kgms. = 740 kgms.

Monthly usage rate = = Lead Time =

Lead Time usage rate = Safety Level Order Point = = = = =

Maximum level

When ordering at the order point, the quantity to order is monthly usage rate. 85

CONTROLS IN PURCHASING FUNCTIONS

We have so far understood control procedures that apply prior to the actual purchasing task. Before the purchasing process begins, the food and beverage operation should have : specified minimum quality standards, calculated quantities of products to be purchased, determined order points for each purchase item, and, considered eligible suppliers. It is important that control procedures be built into the actual purchasing process as well. For this purpose, we use a purchase order system. With a purchase order system, a purchase order is sent to the supplier who is awarded the order. Copies of the form are retained in the purchasing department, and are also circulated internally among the receiving and accounting departments. The Purchase Order formally identifies the product, quantity, unit cost, and total cost that both the supplier and purchaser have agreed upon. In addition, the Purchase Order may include: Guaranties - of supply, quantity, time, latest software package etc. Warranties - of HACCP certification for example. Payment requirements - bill submission and payments receivable. Inspection rights of the hotel unit for example for HACCP checks. hold harmless provisions - disclaimers for example. and other legal and contractual concerns. 86

A Purchase Order, is the food and beverage operations record of the specifics of all incoming supplies. The property must pay the agreed-upon price for no less than the agreed-upon quality, for the amount ordered. Higher than necessary food and beverage costs are frequently traced to communication and coordination problems among the several departments or personnel involved in purchasing. Properly used, the Purchase Order minimizes these problems. FORMAT OF A PURCHASE ORDER (Please see Annexures on page 162) Let us revisit the basic procedures found in the formal purchase order systems : Quality requirements for products to be purchased are identified in a standard purchase specification. Eligible suppliers are provided with copies of standard purchase specifications and are informed that prices to be quoted should be for products of that quality defined by the specifications. A range of legal / contractual obligations are defined by the hotel. These may be included as part of the purchase order agreement, or they can be sent along with standard purchase specifications and made to apply to all orders placed. Suppliers are asked to respond to requirements of price quotation. When the purchase order is issued, one copy is given to the supplier and additional copies are distributed as necessary to applicable departments within the property. For example: food and beverage, receiving, accounting, and purchasing department. 87

When the purchase order system is combined with formal bidding, a number of other requirements can be established. For example (a) Bids may need to be received back within a specified time period, (b) penalties for failure to deliver the required quantity and quality of products may be imposed, and (c) procedures to formally ask questions about required products may be addressed in a legally binding document. This system of formal bidding is generally used by large operations. Integrity Concerns : In small food and beverage operations, where owners or managers may purchase the products themselves, control procedures are less concerned with theft than with obtaining the best value. In larger operations, where other personnel take on purchasing tasks, security becomes an important concern. The control process must guard against several types of thefts that are possible during the purchasing process. What are the various types of thefts to be guarded against: 1. Kickbacks : In several common types of kickbacks, the buyer works in collusion with someone from the suppliers company. The kickback can be money or gifts. Either way, the hotel is the loser. In one kickback scheme, products are purchased at prices higher than necessary. The two thieves then split the difference between the real and inflated prices. Controls : To best control this type of theft, the owner or manager can routinely review invoices and ask questions, such as : Why are so many products purchased from the same supplier? The selection of the suppliers can be reviewed. Price quotations can be solicited randomly from open market to ensure that prices paid are the best for the required product quality.

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2. In another type of kickback procedure, the invoice is padded by adding items that were not received, or it is increased by adding unreasonable charges for handling or some other service. This scheme works well when the same employee receives as well as purchases or when both the departments employees are involved in this particular type of theft. Controls : Separating the purchasing and receiving functions. In large hotels the purchasing and receiving functions are separate, but are controlled by the Unit Financial Controller. Under this system, products do not come under the control of production staff until the time of issuing. This system helps reduce the possibility that one person, working alone, can implement a kickback scheme. 3. Non-existent Companies : Purchasing personnel can steal by setting up a non-existent company which then submits invoices for products never received. Controls : Through periodically reviewing the selection of suppliers by examining the names of payees on companys cheques. 4. One SupplyTwo invoices : Suppliers may try to send an invoice to the food and beverage operation for processing a second time. Controls : To avoid this type of theft, operations need an internal system to verify which invoices have not been paid and to cancel invoices when they are paid. 5. Delivery Invoice errors : These are intentional arithmetic errors, short weight or counts, wrong quality and cost the hotel money.

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Controls : All arithmetic on invoices and statements should be checked and proper receiving practices should be adopted to catch these mistakes. 6. Credit Memo issues : In such cases the products are delivered by an agent, a delivery man or a truck driver, and those through courier services. When products are not delivered or when deliveries are short of quantities ordered, a request-for-credit memo should be issued to reduce the original delivery invoice by the value of the items not delivered. The supplier should then issue a credit memo to adjust the account. Controls : A request-for-credit memo should be written and attached to the delivery invoice. The manager should also alert the U.F.C. to ensure that the supplier properly processes the credit to the buyers account. This process should not become a practice and incidences of this nature should be few in a financial year. 7. Quality substitutions : Quality substitutions occur when a price is quoted for the proper quality item but a lower quality item is delivered. Brand or label substitutions are also possible if receiving personnel are not familiar with products ordered. Controls : Proper receiving practices can prevent paying more for a lower quality product. Brand or label substitutions are prevented by familiarizing the receiving personnel with products ordered. The supplier must exchange goods rejected with those products of proper and agreed quality. Quality checks by user department ensures receiving goods of right quality.

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8. Purchasers theft: Purchasers might practice a variety of other thefts: Purchasing for their own use, Reciprocal purchasing for their own benefit, Purchasing products wholesale with the intention of reselling them to selected employees or to others. Controls : An effective Purchasing System can reduce these thefts. There is a grey area of purchasing ethics in which purchasing personnel may be offered gifts or free meals, invitations to parties, or other inducements. All of these enticements are, in large part, designed to increase the suppliers business. Buyers must put the property first and make decisions based on what is best for the property rather than for themselves. The following are some techniques to reduce the cost of Purchasing: 1. Negotiate Prices : Many food and beverage managers believe that the price quoted by the supplier is fixed, and that the purchasing involves simply soliciting price quotations and then accepting the lowest price quoted for the specified quality. So that, negotiate prices. 2. Review Quality Standards : Be sure that the proper quality of products are being purchased. If, for example, products of higher quality than necessary are being used, purchase prices can be reduced by using items of the correct quality. 3. Combine Orders : Sometimes purchase costs can be reduced if a larger order is placed with the supplier. The concept of onestop shopping, which involves buying a wide range of products from one supplier, recognizes this principle.

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4. Purchase in langer quantities : If practical, a larger number of units of required products can be purchased. However the following issues have to be weighed : (a) Increased costs incurred in tying up money and inventory space. (b) Enhanced possibilites of theft. (c) potential increase in spoilage. (d) other quality problems. 5. Pay cash : Some suppliers will quote a lower price if products are paid for at the time of delivery. This also includes making payments promised, in time. 6. Change purchase unit size : For example, if powdered masalas are purchased in 100 gms. packing, per kilogram. This would cost more, than if a kgm packing is purchased. This process needs support from the user department. 7. Consider centralised purchasing : Centralized purchasing, in which several properties of a hotel chain combine orders to increase the volume of items order, and benefit from volume purchases, and volume discounts. This is practiced in our company. This is discussed in detail later in this module. 8. Evaluate purchase of convenience foods : Sometimes, employees can prepare products of acceptable quality, if the right ingredients are available, at a lower cost, than that required for purchasing the products in a convenience form, e.g. Rava idli mix. Evaluate such possibilities. 9. Discontinue unnecessary supplier services : Costs incurred by suppliers for such services as storage, handling, delivery, and grace periods for the payment of bills, may all be included in the product purchase cost. Unit should carefully consider exactly what services are desired and ask suppliers if purchase prices will be reduced if other undesired services are discontinued.

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10. Consider promotional discounts: Opportunity buys (for example, items that a supplier plans to discontinue or has overstocked), sometimes arise, and, if the products can be used by the operation, these represent significant savings over regular prices. One Stop Shopping Systems Due to Globalization of products, a new class of supplier has evolved. This is a supplier who can procure anything for the hotel. This means that the supplier has broadened their lines to carry a vast range of products. This is called One-Stop shopping service. This is against the system of suppliers of specific product lines, such as meat, fresh produce, milk products, canned goods and other grocery items. Currently One Stop Shopping system cannot be used extensively. This is an expensive prposition. This supplied does not have a contracted supplier of his own. This supplier buys required products from open markets himself. This process does not allow him Economies of Scale to be passed on to the hotel. This system can be used only for selected specialized requirements. What are the advantages of this One Stop Shopping Service : 1) The system obviously eliminates the potentially time-consuming process of selecting individual suppliers. 2) The system reduces time necessary to negotiate with suppliers, process orders, and receive incoming goods. 3) Dealing with one supplier tends to build the suppliers trust in the operation and provides purchasing leverage for the operation. 4) The system provides for volume efficiencies received by consolidating orders from a single source, resulting in lower prices. 5) The system supports just-in time purchases.

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The disadvantages of this One Stop Shopping Service : a) Higher Prices - Suppliers selling popular products at a competitive price typically sell other items at a higher markup. When all products are purchased from one supplier, prices paid for some items will likely be higher than those available elsewhere. b) Decreased Variety within a product line Suppliers offer relatively few varieties of each item and, in many cases, only one. A supplier also undertakes a special product from a bulk supplier to him or from a manufacturer. This manufacturer may introduce a new version, or an improved product and sell this in the market. However the said one stop shopping service supplier, having already stocked sufficient quantities of the older version, is forced to offload his stocks on to the hotel. c) Lack of special information - One of the important function of a supplier is to keep informing the hotel about new products in the market. With the increased number of product lines there is a decreased likelihood that the supplier is an expert in each of the many items being offered by him. The suppliers own product knowledge may reduced with the increased supply line. The advantages and disadvantages of One Stop Shopping Systems must be weighed to suit needs of operations. An off and on usage of one stop shopping service is ideal. Centralized Purchasing Centralized purchasing refers to purchasing at a central, geographical location, products common to requirements of all units of a chain of hotels. ITC GREEN CENTRE, corporate headquarters building at Gurgaon houses the Central Purchase department for our company. Chain Operation Advantages: The objective of centralized purchasing is to achieve a better, more efficient purchasing system, one, which shall ensure cost effectiveness.

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What is meant by that? Centralized purchasing is one that will generate lower prices for products and services while ensuring that the required quality is received. Combined buying power of Centralized Purchasing supports strict cost consciousness and purchasing a product of standardized quality. Products are evaluated at the place of centralized purchasing, for quality. New products in the market are also examined for various parameters of product change, product replacement, and product upgradation in line with continuous changes and demands of the operators. With the system of the products being evaluated at a centralized point, units of the chain need not spend so much time with sales representatives of various companies for individual evaluation. This helps in allowing individual units of a chain to spend more time in other managerial functions. Centralized purchasing reduces service and delivery requirements and therefore management is easier. Many suppliers find supplying to a central purchase to their advantage as a means of sharing information with a large group of business. In case of Centralized purchasing, instead of an individual supplier, large distributors or even the manufacturers are interested in product supplies, to achieve their markets penetration better, and to seek marketing advantage of this association. The over all effect of centralized purchasing is to consolidate and centralize the purchase system allowing even the smaller units of the chain to gain the competitive edge of volume purchases, otherwise enjoyed by large operation hotels. Why ? Because suppliers reward volume customers. Is the centralized purchasing advantageous in all working conditions? No

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There are certain disadvantages also. These are : The individual food service operator looses some autonomy in determination of quality. In certain product ranges the advantage of local product or local specials is lost, specially at reduced prices. The central purchase can be at times slow. The individual unit purchase managers loose suppliers loyalty. The individual units operators need to set aside their own creativity and competitive urges in so far as a product line is priced and it is mandatory on them to fall in line. The centralized purchasing depends on orders being placed on them by individual units weeks in advance of their actual requirement. Sometimes these are done on monthly basis and sometimes on quarterly basis. For imported goods the orders are placed on central purchase on yearly basis. Individual units are worried about the next supply in case they miss the current ones. The forecasted requirement therefore is wrong sometimes, the activity resulting in over procurements.

Whatever may be the drawbacks, centralized purchasing is a way of management of chain hotels, and is here to stay. The benefits of economies of scale obtained by individual units through the central purchase option are many and great. The Process of Centralized Purchasing: Total requirements of all units of the chain are conveyed to a central office. The quotations from various suppliers are sought for bulk quantities. Suppliers supply to a centralized point.

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To summarise:
The centralized purchase system therefore gives strength to individual units of a chain by : being cost effective. bringing centralized evaluation of product line. bringing standardization of product line - greater choice of markets. bringing reduction in service and delivery requirements. ensuring greater control over dishonesty of individual unit food purchases. allowing crosscheck of quality of commodities by units of a chain as well as the central purchase department.

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CULINARY ECONOMICS
MATERIALS MANAGEMENT RECEIVING
LEARNING COMPETENCIES: At the end of this section the trainee should be competent to : (a) Understand, identify and describe Receiving Controls. (b) Understand the basic steps involved in receiving products and receiving procedures. (c) Understand the system of payment of bills. (d) Understand the Post-Receiving activities.

RECEIVING PROCEDURES
For proper receiving a thorough knowledge is required of - Quality specifications. - Details regarding Price and Quality. Post receiving follow-up procedures are very important to confirm that the right products are being received. Irrespective of the size of the operation, the basic receiving procedures should be followed as products are received. The following are the steps in product receiving : 1. Check incoming products against the Purchase Order : Receiving should not accept : a. Items not ordered. b. Receive partial or no deliveries of required product. c. Receive items of unaccepted quality. The operation does not want to pay a higher-than-agreed price. Checking incoming products against the Purchase Order removes possibilities of error. 99

2. Quality Check - Check incoming products against Standard Purchase Specifications : Checking incoming products against Standard Purchase Specifications requires trained receiving personnel. Our company has Standard Purchase Specifications benchmarked for all products. A representative of the user department is required to check and accept specialized items for example those of ingredients meant for the food production department. The representative recognizes the quality characteristics for every item purchased. Cost of the products to the hotel unit is based on quality agreed upon. Testing procedures at times help arrive at true quality characteristics. Wherever necessary, especially in case of food products, it is necessary to check product temperature, weight, trim, grade and refrigeration stage. For example for receiving meat products/milk. 3. Quantity Check Check incoming products against the delivery invoices: The supplier provides the delivery invoice, which becomes the basis for processing payments. A definite policy must be developed, implemented, and enforced for measuring, weighing, or counting all incoming products to ensure that the proper quantity of product is delivered and billed. After product quality and quantity are verified, the invoice can be signed. An invoice is part of the andit trail. 4. Accept Incoming Products : This is normally done by signing the delivery invoice. At this point, ownership of the products is transferred to the property, and the products become its responsibility. 100

5. Complete receiving documents : This is to make sure that all information is provided. Information from the delivery invoice is abstracted and made into a daily receiving report (called DRR). 6. Move Accepted Products to Storage Immediately : Check to see that products are promptly moved to the proper storage areas. Employee theft is possible particularly in respect of food products at this point. Quality of products needing low temperature storage will deteriorate if they are left at room temperature. Delivery personnel should not be allowed anywhere, except the receiving. Areas suppliers or representatives should not be involved with storage activities. Delivery Timings Receiving involves time-consuming but important tasks. To accommodate the schedules of responsible staff (those from the kitchen for example), delivery times can be limited. Nonacceptance of deliveries is common at certain times. The receiving personnel need cooperation from other departments in the food service establishment or the hotel. They must coordinate purchase requisitions from the departments with the delivery schedules of suppliers. Ideally, receiving should take place during slow periods in the operations daily business cycle. By scheduling deliveries at these times, the receivers undivided attention can be given to the receiving duties. The establishments delivery hours should be posted on the back door as a guide for suppliers. These should also be communicated to the supplier/s for compliance in writing. The receiver should be available during the times when deliveries are expected.

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Youll recall the Purchase Cycle at this point. The Purchase Order, delivery invoice, and daily receiving report must be assembled. The three documents are routed, sometimes through the purchasing department, and eventually reach the accounting department for final processing and payments. In certain operations, the receiving staff is responsible for an initial verification of invoice extensions. Invoice extensions involve checking to ensure that the number of units purchased, when multiplied by the agreed-upon-purchase price, equals the suppliers charge. Even if receiving employees verify charges, the accounting department should check over all arithmetic on invoices as an integral part of the payment process. This then is a dual check. The daily receiving report (DRR) is sent to the user department, before forwarding to the purchase department. This helps to confirm that types and quantities of products received, fit the requirements dictated by levels of product sales. This activity is specially undertaken for Perishable and Highly Perishable products. (Happens as a procedure in our company)

CONTROLS IN THE RECEIVING FUNCTIONS The planning and control that goes into the purchasing process is wasted if no one makes sure that the products delivered meet the operations standard purchase specifications. Specific staff members only signs the invoice. Great care must be taken to ensure an effective receiving process. Receiving is an important part of the product cost control system.

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WHO RECEIVES? : RECEIVING PERSONNEL Effective receiving requires knowledgeable receiving personnel. Staff must be trained to receive properly. They must know product quality standards and be able to recognize them when products are delivered. They must also understand all receiving procedures and know how to complete internal receiving records. Receiving persons should ensure strict hygiene and sanitation standards. This is important to safeguard the interests of health of guests and employees. Maintenance of Personal Hygiene by receiving personnel is of importance. Receiving personnel should be able to use all required equipment, facilities and forms. Because of the volume of written information to be processed, receivers must be literate. Only selected and trained employees should be permitted to receive food and non-food products. Properly trained receivers know what to do when there is a problem with product deliveries. In this respect, the receiving function is just as important as the purchasing function. The receiving area should be near the delivery door. Since proper receiving requires that most items be weighed or counted, accurate scales are necessary along with other equipment such as calculators, marking pens, rulers, files, thermometers, and transportation equipment. Marking and Tagging Marking and Tagging puts invoice information directly on items. For example, marking case goods or bottles of liquor with the delivery date and price makes it easier to judge whether stock rotations is effective. While valuing inventory, cost data can be taken directly from the cases or bottles; this saves the time.

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Recording the unit price on products makes it more likely that the operation staff members will think about them as alternative forms of cash. Therefore, they will be more careful in handling, portioning, and controlling waste. Tagging is often used with meats and seafood and is done when the products are received. Handy tagging machines are available to facilitate the process. The following are the advantages of tagging meat or fish items: In order to complete the tag, the receiving employee has to weigh the product. Calculating food costs is easier since the information about costs on the tag can be entered onto a requisition form when the product is issued. Theft and pilferage may be better controlled since the tag number helps to identify the products that should be in storage. Inventory procedures are simplified since needed information is noted on the tags. The physical inventory process is speedier. Stock rotation can be maintained more easily. This is the goal of the first-in, first-out (FIFO) inventory system. Calculating yields and understanding per portion and per kilogram product cost especially in the case of butcher products is facilitated due to the process of tagging. POST RECEIVING ACTIVITIES Purchasing department staff should compare the purchase order delivery invoice, and other receiving records routed from the

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receiving department with their own copy of the purchasing documents. They should check for the following : Whether any discrepancies exist between qualities, quantities, and prices agreed upon at time of purchase and those actually received. Whether any products are back ordered or out of stock. Whether results of expediting were effective. Whether any problems require invoice adjustments. The role of the purchasing department extends far beyond the actual purchasing of items. Purchasing goals involving price, quality, quantity, supplier, and time are more consistently met by screening source documents as they move throughout the various departments. This provides the necessary audit trail and audit system of checks and balances for accounting. THEFTS WHILE RECEIVING PRODUCTS Examples of supplier theft possibilities when products are received are as follows : The supplier may deliver lesser quality items, for example 10% fat in chicken, instead of 4% fat, and the operation pays the price for the higher quality. Short weight or short-count products may be delivered so the food service operation pays for more products than it receives. Thawed products may be represented as fresh, while the operation pays the higher price for fresh.

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Ice may be ground into ground meat products. Meat may be sold with excess trim. Weight of ice and / or packaging may be included in the product weight on which price is based. Slacked out seafood - frozen fish, thawed and packed in ice - may be sold as fresh. Expensive cuts for example steaks and inexpensive meat may be combined in one container, and when the entire container is weighed, the operation may be billed for more expensive steaks than are actually in the container. One empty liquor bottle may be included in a case of 12 bottles. These are just a few of the many ways that suppliers can steal from the property by overcharging for amount and / or quality. To help guard against theft at receiving, some basic principles should be followed : 1. Have different people receive and purchase. 2. Train the employee to receive properly. Receiving is too important to leave to whoever happens to be handy. 3. To the maximum extent possible, schedule product deliveries at slow times so that receiving personnel, who may have other duties, have time to receive correctly. 4. Have deliveries made to a specified area of the facility, and be sure weighing scales and other equipment are available and are used. Weighing scales and measuring equipment should be checked often for correctness.

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5. After receipt, immediately move products to storage. Chances for employee theft increase the longer products remain unattended. 6. Do not permit salespersons or delivery / route persons access to back of the house production or storage areas. To the maximum extent possible, the receiving area should be close to an outside exit and visible to management personnel. 7. Lock the outside door of the receiving when the area is not in use. Receiving personnel should have delivery persons in sight during their entire visit. POST RECEIVING PROCESS - BILLING The Billing Process is the involvement of the accounts department in the procurement process. The steps are : 1. Receipt of a copy of the purchase order. 2. Receipt of the delivery invoice. 3. Checking of the Invoice Extensions, if any. 4. Delivery Invoice used to establish amounts owed to the supplier. Amounts owed to the supplier serves as basic input for various finance related reports for examplefood cost report. 5. Processing suppliers bills for payment : (i) Supplier sends a statement covering all delivery invoices which have already been received by the accounts dept. through the receiving dept.

(ii) The invoices are retrieved on receipt of the statement. (iii) Invoices received already are matched with invoice number, date, amount owed, and other information noted on the statement.

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(iv) The total of all invoices is verified to confirm that the amount requested on the statement is correct. (v) One payment cheque is made to cover all the invoices. (vi) The invoices are attached to the statement and information about payment date, cheque number, cheque amount are recorded. Rubber stamps are used to quickly and consistently indicate needed information. Alternately processing of suppliers bills for payment can be achieved through inputs of invoice. The basic information recorded on each of the invoice remains same. (i) No statement is sent separately by the supplier. (ii) Invoice extensions are checked. (iii) Assuming a few days to complete the activity of payment the invoices are filed for a future date of the month. e.g. if the payment date is 16th, then allowing say 3 days for the payment process, the invoice is filed for the 13th. This will allow time for that activity and for mailing the suppliers payments. In either case, the statement with attached invoices or invoices alone, should be filed by supplier name after payment. Copies of the purchase order are also filed to make documentation complete. PROCESSING CHEQUES FOR PAYMENTS Ideally all payments except petty cash expenses should be paid in cheque. Funds to pay bills are never taken out from day to day revenues. The rule is to bank revenues first. Payment by cheques and invoice / statement processing should be done by different employees. As a process, ITC limited-Hotels division has two signatories for cheques. The invoice / statement with supporting records purchase order invoice, and receiving reports is given, along with the cheque, to a management official to sign. A specific person or suppliers

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organization should be designated on the cheque, rather than cash or bearer. Top-level management should routinely examine the list of cheques written to keep current with new suppliers and transactions. COMPUTERISED RECEIVING SYSTEMS Computer technology is now helping some food and beverage operations with the receiving task. Fidelio Property Management is one such system. The receipts are organised in such a way that product delivery size, shape, volume, quantity, price etc is mentioned in a coded form, which is computer usage friendly. A scanner is used to read this information, and at the same time, update the perpetual inventory levels and develop daily receiving and other reports desired by the operation. For example, once a receipt of various perishable and non-perishable products are made, and entered, it is very easy to take a print out of a report of say, tinned products received on x day or potatoes received from 1st of the month to 31st of the month. Computerization therefore helps in rapid generation of important control information with minimal chances of error. ITC Maurya has completely computerized materials management system. Traines of Welcomgroup Management Institute must make an affort to study the system and benefit from such learnings.

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CULINARY ECONOMICS
MATERIALS MANAGEMENT SUPPLIER SELECTION LEARNING COMPETENCIES
At the end of this module the trainee should be competent to: a) Understand why it is important to select suppliers correctly, and towards value creation to the hotel unit. b) Enumerate the factors that should be considered when selecting suppliers. c) Understand the qualifications of a good supplier. d) Understand Informal and Formal buying systems. e) Understand the various approaches to suppliers. f) Differentiate the ways of identifying supply sources. g) Create systems for evaluating suppliers of in-use products and those for suppliers of new products.

SUPPLIER SELECTION
The Objectives of an effective Purchasing System have been discussed. Let us examine them again. The Objectives of Effective Purchasing should be Purchasing of the right product, of the right quality and right quantity, at the right time and price from the right supplier. In certain market conditions supplier selection options are limited. There may be only a few possible suppliers for purchases in remote areas. In situations of a sellers market, a product may be available only with a specified distributor or retailer. This often happens in case of branded products, and also in the case of equipment purchase. In a sellers market, the objectives mentioned above, are sacrificed in terms of quantity, time and price.

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In such a sellers market, decision has to be taken whether to buy the product or not. The product can be removed from offer to the hotel clients. Taking off a menu item from the menu offer due to a major ingredient being subject to sellers market, is an example of the same in the food and beverage business. Let us examine cases when management is able to select from a number of suppliers offering products of similar quality. This is called a Buyers market. How is the supplier selection decision made in these buyers markets? Styles of Buying Many elements affect the suppliers selection process. The goals of purchasing from the right supplier should be realized. The purchasing system should be changed from routine order placing to careful considerate buying. All elements that affect supplier selection process should be considered. Let us examine two types of suppliers, having different volumes of business. Supplier A has a relatively small business volume. He may have difficulty in meeting large volume requirements of a large hospitality organization. Supplier B, in total contrast, is a large volume dealer. This type of supplier may have difficulty in meeting small volume requirements of a small sized hospitality organization. Informal Buying Methods : A systematic approach to purchasing system should be made. It is therefore essential that management practices are incorporated into these Purchasing Systems.

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To be cost-effective is the goal of management practices. The modules on Costs and Purchasing System explain this eminently. We have also related right purchases of products towards value creation for a client, and his satisfactory experience. Value to a client can be reduced due to incorrect purchasing. Incorrect purchasing can be in terms of type of product, or in terms of quantities, or in terms of quality of product, or in terms of cost of subject purchase, or in terms of duration of completion of the order. The above can be in part measure or in totality, or in combination of one fault and other. Irrespective of the hotel unit and its volume of business, correct methods should be used to monitor purchasing systems. Let us recall the topic on security concerns in Purchasing. A Purchasing system may purchase regularly from the same supplier. They may therefore build complete trust in the supplier, and may use very informal buying methods. The most important part of a purchase negotiation is Price. The trust between the purchaser and the supplier may be so much that an order is placed without inquiring about the price. Purchase has a cycle of activities. Proper in house written records of products, quantities required, standard purchase specifications and agreed upon price are kept. Sometimes these records are not kept, and a purchasing system depends on the supplier or suppliers representative to do the needful.

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These types of purchasing methods lead to inefficiencies and errors. An individuals memory cannot be trusted. A person who orders may not be the one who receives incoming products. Without an in-house record of purchases, there is no way to confirm that incoming items match those ordered in terms of purchase price, quantity and quality. Total trust, as noticed from above can lead to errors. Parameters of effective purchase systems are not met, and ordering is ambiguous. The above mentioned are examples of Informal Buying Methods. Formal Buying Methods Purchase Order System is a Formal Buying Method. Selection of a supplier by the operation is often a result of the type of purchasing system used. Suppliers should make efforts to understand the systems of the hotel unit and fit into the same. Supply Concepts in Purchasing Systems Products received by a hotel unit are directly related to the purchasing system employed. System gets what it demands. Systems vary as per the nature and volume of the business, and supply concepts reflect a variety of individual approaches. Short - Term vs Long - Range : Suppliers sometimes only store items. When a product is needed by the hotel, the same is delivered to him by the supplier. If orders are not placed on the supplier in time, the hotel unit can get into an emergency situation in so far as that product is concerned. The supplier may be able to rescue the hotel unit. This is a short-term focus. As against this the long-range focus involves data recording and careful handling of the same. This data management could be for

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a whole range of product supply related issues, that is quality, quantity, type, cost per unit and reasons of purchase. The data management can also be for quality of service of the supplier. Usage of this data to advantage by the hotel through formulation of strategies and goals is the long-term focus. Planning becomes detailed and consistent. Quotations received from suppliers are mostly for fixed periods of time. Hotel division- ITC limited has a system of contracting with various suppliers for a year-long contract. Therefore, it is not possible to change suppliers, before the term of supply contracted for has expired. It is totally dependent on managers of hospitality organizations to choose a system based on the short term or one linked to long range commitments, or a combination of both, for different products. Number of Suppliers : Many factors decide the number of suppliers for a product in food business. These facters have been discussed later on in this module. Some food service operations require fewer suppliers than others. By consolidating buying efforts of a particular period, ordering is simplified and the operator has an opportunity for volume discounts. This is specially so for grocery items. Dependency on a single supplier is a risky proposition. Lack of competition allows for indirect increase in costs. Supply shortages, deterioration in quality and increase in price are the burdens of having a single supplier. In certain markets however, a single supplier for a product is beneficial. This is basically because of his risk-taking capacity and efficiencies of delivery. Since the overall goal is Profit - maximizing, value in purchase functions is important and alternate vendors are selected as

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approved suppliers. A good business relationship results from at least two suppliers for most of the products. Non-perishables are best purchased in bulk from one vendor. Orders for perishables are often split among several suppliers, with a primary and secondary supplier for each category. Our company does this practice. Market Information : Some suppliers automatically provide formal, written market information each month. In certain instances, suppliers telephone managers with market updates, as conditions of supply change. Sales representatives are another source of information. However, sales representatives feedback may be purposefully inadequate, in so much as he has to sell a certain numbers of a product, which may get outdated, with technological improvements. Due to a sales representatives requirements to sell fixed numbers of a product, he may not publicize and recommend a new product with technological improvements. This may hamper purchasing decision. Some suppliers provide additional service in the form of computer data. This service allows management to identify where control efforts must be focused. Suppliers furnish price reports on a regular basis. Quality vs. Price : Inadequate knowledge of standard purchase specifications results in poor standards of Purchase Orders. Quality is difficult to control when written standard purchase specifications are lacking. In some other supply systems, quality is defined by managements standards. The increased emphasis on quality helps ensure that the operation is sure to receive the products specified. In addition,

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the cost and quality control systems of the operation are strengthened. This improves customer satisfaction, and is directly responsible towards a brand gaining strength. Intended Use : Due to the mention of purchase specifications, the intended use of the product is accurately defined. Yields of products enhance due to the supplier understanding the intended use. In case of short fall in the quality of the product, subsequent to this, due to reasons beyond control, the supplier may offer additional benefits, discounts, or additional portions / products to meet up with the original quality / yield requirement, and also give substitutions. Values in the purchasing system are increased when managers control. Checks that address quality, service, and price at unit level, have to be built into this purchasing system. On the other hand, value is reduced when the amount of time that management spends controlling the system outweighs the benefits received. Selection of a Supplier How does an institution select a supplier? A supplier is selected through the Purchase Department. 1. A supplier can be one who has supplied earlier to the institution. 2. A new supplier can be selected. Previous Supplier He is one who has supplied same or similar goods to the institution already. There is, therefore an awareness of the quality of goods supplied, the price that he charged, the type of service that the supplier provided. e.g. speed of response, follow up efforts etc.

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New Supplier When selecting a new supplier, caution must be exercised and detailed enquiries made to establish credentials of the intended supplier. Several Enquiries to a new Supplier include : 1. 2. 3. 4. 5. Full details of the firm and the range of items they are selling. Copies of the recent price lists. Details of their trading terms. Details of other customers. Samples of products.

Subsequent to the study of the above, a visit to the premises of a potential supplier is made. - This helps to understand the size of the suppliers organization. - This helps in understanding first hand the range of products the supplier is marketing. - The storage facilities of the supplier. - The processing facilities (if any) - The transport owned by the supplier. - This helps to evaluate the quality of hygiene and sanitation in the systems of the supplier His procurement processes. His storage systems. His supply systems. This involves spending time with a prospective supplier, but worth it to - Develop a healthy and satisfactory business relationship. - To develop a supplier who is willing and financially capable to stock the quality and quantity of products that an institution purchases. - To develop a supplier who is knowledgeable about the commodity he is likely to supply.

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To develop a supplier who is able to offer a satisfactory delivery performance, with an acceptable price range.

Subsequent to the above process, the selected suppliers are considered as approved suppliers and trial orders are given to them to further judge their services. After having purchased from the supplier then performance is periodically evaluated, based on 1. Price Performance 2. Quality Performance 3. Delivery Performance

PRICE PERFORMANCE
Let us examine two types of suppliers : One supplies a product of lower quality at a lower price and the other supplier may supply a product of superior quality at higher rates. Both suppliers are selling their products. It is dependent on the purchaser to choose the quality that he requires. Once a quality standard is set, other parameters of delivery performance are set up, the price line of the different suppliers is examined. The lower the price the better it is.

QUALITY PERFORMANCE
Consistency is the key word. A supplier should be consistent with the quality of each of his supplies. To ensure this consistency, the purchaser, to obtain desired quality, lays down standards. These are called standard Purchase specifications. We have already discussed these in the module on Purchase Systems. Consistency in meeting the standard purchase specifications would give a high quality performance rating.

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DELIVERY PERFORMANCE
A supplier is of no use if he supplies product of good quality against laid down purchase specifications, is price competitive, but does not supply in time. The ability of the supplier to meet agreed delivering times and dates with the purchaser is called delivery performance. Goods should be delivered when required, and also, when staff qualified to check these goods are available. Late deliveries all add to pressures of work at the purchasers receiving and consumption department. The nearer the scheduled delivery date and time, the higher the delivery performance rating. A system of evaluating suppliers performance during a performance period is to give numerical ratings. Price is measured by comparison of prices of each supplier of the same product with the same standard Purchase Specifications in a known trading period. The lower the price, the higher the rating figures. Quality is measured by the ability of the supplier to provide products consistently and matching the required standard Purchase Specifications. The performance is calculated as percentage of the total orders placed on the supplier. Poor quality of supplies, returned, would lower the rating figure. Delivery Performance would be calculated against the percentage of deliveries made on time. The majority of deliveries made on time would give a high rating figure. To summarize: Who is a good supplier? A good supplier is one with whom the organization can have a long-term relationship. The characteristics of a good supplier that we have examined are :

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 The suppliers capability and commitment to perform well. The supplier must be able to consistently provide the proper quality and quantity of products. The supplier must meet requirements of hygiene & sanitation. The suppliers understanding of the organizations market; and one who contributes by positive ideas of how best to meet this markets needs. The supplier must inform the organization about new or improved products, which may be applicable to their operations. The supplier must provide timely information regarding price changes, to ensure price competitiveness. The supplier must have an ongoing interest in improving products and services provided to the purchasing organization. The supplier should follow up on problems, resolve difficulties that arise, and negotiate any concerns of the business of the purchaser. The supplier must be financially capable of growing with the purchasers business. The interests of the purchaser and the supplier are served when a co-operative, working relationship exists.

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CULINARY ECONOMICS
MATERIALS MANAGEMENT STORING AND ISSUING LEARNING COMPETENCIES :
At the end of this module the trainee should be competent to : 1. Understand the objectives of a storage system for food service operations. 2. Understand the definition of a storage area. 3. Understand the types of storages. 4. Understand how to plan storage spaces. 5. Explain how an inventory classification system supports designing cost-effective inventory control procedures. 6. Understand the ABCD inventory classification system. 7. Distinguish between directs and stores in relation to the inventory systems of food and beverage operations. 8. Identify steps that can be taken to ensure security in storage areas. 9. Describe procedures for maintaining product quality during storage. 10. Understand the reasons to design and implement effective inventory record keeping systems. 11. Understand why should inventory turnover rates be monitored? 12. Calculate an inventory turnover rate. 13. Understand physical inventory system and perpetual inventory system. 14. Understand methods used to determine the value of products held in inventory. 15. Identify concerns of a computerized inventory system.

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CONTROLS IN STORING AND ISSUING

The storing and issuing control points play an important role in linking receiving and production. Storing and issuing systems affect product costs and quality. Products in storage represent money in terms of both their initial cost as well as the cost to replace them if they are stolen, spoiled, or damaged because of improper storage practices. There are many reasons why strict and issuing controls are needed in food and beverage operations. Products can be stolen when issued from storage to production areas. Also, mistakes in issuing can result in more products being used in production than necessary. This, in turn, can result in wastage and unnecessarily high costs. Moreover, since systems of assessing daily food and beverage costs are based, in part, on the value of daily issues, it is essential to know exactly how much of each product is issued.

STORING CONTROLS
As soon as received products are moved to and placed in storage areas, their quality and security can be ensured by the control procedures built into the hotels storage system. The principles of effective storage system for both food and beverage products focus on three primarily concerns: 1. Keeping products secure from theft. 2. Retaining product quality. 3. Providing information necessary for the financial accounting system Audit Trail.

STORAGE
Storage involves arranging goods in specified areas within spaces

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earmarked for particular materials, till they are required for use by the production, service or other departments. The planning of storage spaces depends on three basic factors : 1. Nature of foods to be stored. 2. Quantities in which food are stored. 3. Length of time for which they are stored before use. TYPES OF STORAGE Depending on the speed with which foods spoil, they are classified as perishable, semi-perishable and non-perishable, each type requiring different types of storage conditions. These have to be kept in mind at the time of planning storages. There are basically two types of storages, dry and low temperature storage. These are further subdivided according to the temperatures required.

PLANNING STORAGE SPACES :

Planning and set up of storage areas depends on a hotels menu, service excellence of the supplier, and purchase policies. Menu / Product offer The nature, complexity and size of a menu decides the requirements of ingredients. The Chefs should also advise the U.F.C. about the approximate quantities of these ingredients that would be required in a working period. Service excellence of the Supplier Excellence of service of supplier supports a hotel unit in storing less quantities of products required. On the contrary if the services of a supplier are not upto the mark, or if the hotel is located way out of the local market, additional quantities of ingredients would need to be stored. 125

Purchasing policies of the hotel. Dry ingredients can be ordered on a Just in time, weekly, fortnightly or monthly basis.

INVENTORY CONTROL POLICY

There is need for controls in operations, and the need to be costeffective. However, tight controls are not practical for regulating costs of all the food and beverage items. What is to be done? Each property has to understand the costs of its menu item ingredients and decide control measures. Managers and Chefs should control food & beverage menu item ingredients in relation to their costs per portion or in relation to their perishability. This rule also governs theft prone items in relation to their costs. One approach that has been universally accepted and practiced is the ABCD classification for Foods in Inventories. Food products are categorized according to: (i) their perishability. (ii) their cost per serving. Let us examine the categorization : Class A products : High in perishability, High in cost per serving. eg : Fresh shellfish, fresh fish, fresh meats. Class B Products : Low in perishability, High in cost per serving. eg : Frozen seafood, frozen meats, canned seafood, canned meats, frozen vegetables, preserved speciality items, eg : Stuffed Olives (in India), Canned Imported Goods. Class C Products : Comparatively low in perishability, Comparatively low in cost per serving. eg : Fresh poultry, dairy products, fresh produce.

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Class D Products : Low in perishability, Low in cost per serving. eg : Spices and Seasonings, Condiments, Staples.

High Perishability Low High Class A - Products High in Perishability High in cost per serving eg: Fresh Shellfish Fresh fish Fresh meats Class B - Products Low in Perishability High in cost per serving eg: Frozen seafood Frozen meats Canned seafood Canned meats Canned Imported goods Frozen vegetables Preserved specialities. Class D - Products Low in perishability Low in cost per serving

Cost per Serving Class C - Products Comparatively low in perishability Comparatively low in cost per serving Eg: Fresh poultry Low Fresh produce Dairy products

Eg: Spices and Seasonings Condiments Staples (Flour, Sugar)

For purpose of inventory, food products are often separated into two categories : directs and stores. Directs are products that are purchased more or less for immediate use. These are perishable products and are purchased several times a week. These products are relatively inexpensive. Some examples are fresh fruits, vegetables, dairy products, etc. These products are called Directs because they are transferred immediately to production areas after receiving. The products can be held in workstation storage areas. The primary concern with Directs is receiving, rather than storage.

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Directs are : (i) not entered into storage records. They are immediately sent from the receiving to the production department. These are item of perishables, highly perishables, milk products, imported goods, or goods meant for special occasions.

(ii) not considered part of the inventory system. (iii) considered part of the food costs of the day on which they are received. Stores are relatively expensive and generally of non-perishable nature. Stores are : (i) purchased less often than Directs. e.g : Once a week, once a month or even once in several months depending upon usage rates, inventory levels and type of products.

(ii) part of the inventory system. (iii) purchased in quantities necessary to rebuild inventory levels. (iv) part of a minimum / maximum purchasing and inventory system. (v) tightly controlled, mostly on count / weight basis. (vi) necessarily part of a well defined issuing system to remove them from inventory. At this point it is very important to understand the Inventory Control Procedures.

INVENTORY CONTROL PROCEDURES

There are several reasons for designing and implementing effective inventory record keeping systems: Financial accounting systems need inventory values to generate monthly statements. The value of products in inventory is considered part of the propertys current assets.

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 Daily control procedures may require knowing the quantity of products currently available. Inventory records help managers determine not only when to order new products, but also how much of each product to order. Security Concerns in Storage Areas : From the understanding of ABCD Inventory Classification and the difference between Direct and Stores, we know what items are to be tightly controlled and what locations are to be considered storage areas. As a direct corollary we must design the security procedures to ensure correctness of usage, and keeping products secure in store till they are sent to the production areas. The following are the security procedures: (i) Limited Access : Allow only authorized personnel in the store rooms. These may include management, and staff of receiving, Stores and Control department. The requirement is to reduce possibilities of employee theft. (ii) Lockable Storage Areas : The Store room, the freezer, and beverage storage areas should be lockable. One section of the storage areas may be used to store expensive items. This section could be a lockable dry storage area or a lockable reach in refrigerator or both. Store room personnel can still access the other sections of the store. Normally there is a locked storage area maintained with in a locked storage area. This could contain liquor or expensive items. Store room Key Control : Keys should be accessed by only staff members. Locks should be changed in case of a loss of keys and when employees leave

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the organization. The custodian of all keys is the U.F.C. Instead of keys, combination locks with changeable combination or plastic card swipe system as used for guest rooms can be used. The purpose of all the above is to prevent thefts of products. Maintaining Quality during Storage : Quality of products in storage can reduce due to improper storage practices. All products spoil. Some spoil very fast, some take more time to spoil. Same is the case with wines and beers. We learnt even that costs are incurred even when products are no longer available for sale. Products that spoil are no longer available for sale. If products are still sold then client value is affected. What is to be done? : Rotate Products : The First in - First out (FIFO) inventory rotation method is a good rule. The products hold in inventory the longest, shall be the first to be issued to production areas. Newly received products should be kept behind or under products already in storage. These should be marked with dates of receipt. At the time of issuing comparison of the dates of receipt is done. Properly Controlled Environments : Maintain proper temperature, humidity control and ventilation. Use accurate thermometers and check them routinely. Desired temperatures of various storage areas have been discussed earlier in this module itself. Do not allow discard of spoiled items without the authorization of the management. The effectiveness of quality control methods can be assessed.

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Sanitation Practices : Set schedules of cleaning procedures. This applies to all types of storages. Equipment of storage, eg : racks, bins, trays should be made of non-porous and easily cleanable material. Shelving units should permit air circulation. Proper Storage : Products should be stored properly. Store products in their original packing, away from the wall, to allow air-circulation. Some items that absorb odours, such as flour should be stored away from products that give off odours such as onions. Opened products should be stored in clean, labeled, dated and covered containers designed for food storage. Let us discuss various processes regarding storeroom, storeroom controls, and inventories.

STORE ROOM REQUISITIONS

The requisition is used to communicate information from the requesting department (for example, the kitchen), to store room personnel. This form identifies the type and quantity of product to be removed from the stores inventory. Based upon this authorized requisition, items are issued from storage to the requesting user department. The term user refers to the line operating department requiring the items to be issued. A tight fisted approach to authorization of consumption is desirable, and this is most effectively done with a STORE ROOM REQUISITION. Specimen of a Store Room Requisition Form (See Annexure on page 163) Inventory Turnover Good food management demands that sufficient supplies of food be available for use when needed. However, excessive amounts on hand leads to : 131

1. Spoilage, because food must be held too long, before being used, 2. Excessive capital tied up in inventory, 3. Higher than necessary labour costs to handle the greater amount of food, 4. Greater than necessary space allocated to storage and, 5. Unwarranted Opportunities for theft. It is impossible to establish a set number of food items that should be in the storeroom or a fixed value in absolute terms for food in inventory. Why? This is because : 1. Larger establishments need greater storage space and more food in storage than smaller ones, and 2. All food service establishments have slow periods of business during the year, when less food than normal is needed on the premises. 3. The number of products in the inventory are dependent on the type and class of business product offer to client. For food and Beverage this is compounded by the requirement of diversity on buffets and the inherent creativity One important function of keeping accurate inventory records is to allow managers to assess how much money is being invested in non-productive inventory. The value of goods in inventory is typically calculated on a monthly basis to provide information for financial accounting systems; for example ICE (Internal Control Efficiency) meetings. Non- productive inventory refers to products in storage that are not issued to production areas during the time period (usually monthly) covered by financial records. In order to determine how much money is tied up in nonproductive inventory, managers measure the inventory turnover rate. The inventory turnover rate shows the number of items in a given period, that inventory is converted or turned into revenue. In financial terms, it measures the rate at which inventory is turned into food or beverage costs required to generate food and beverage income. 132

Management must in some way determine that appropriate but not in excess- levels of food are kept in inventory. One method is to calculate how often the inventory of food on hand has been ordered and used during a period of time. Let us examine two extreme parameters of ordering. If one were to order sufficient food to last one full year, the amount would be excessive and would lead to waste, inefficiency, and greater than necessary costs. On the other extreme, if one were to order enough food to last only one day, stock-outs discussed earlier would result. Savings would surely come in by purchasing in larger varieties. Somewhere in between the two extremes is an idealized amount of food to have on hand for a specific period. This amount will vary from place to place, and will be determined by many factors, including the amount of cash available for such purposes, the space available for storage, and the time necessary to receive food once it is ordered. For most organizations, an amount to last one or two weeks is considered normal. To measure how often food has been ordered and used, calculate the frequency of turnover of the food in the inventory. For example, if an organization orders and uses an inventory two times each month, an inventory turnover of twenty-four times each year would result, and this is in line as mentioned above. All food is not turned over during the prescribed period of time. Perishables will turn over daily, and some non-perishables, for example canned items, will turn over much less frequently. Calculations are typically made when physical inventories are taken once a month. Inventory turnover rates can be determined for food and beverage products in storage.

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The inventory turnover is calculated by dividing the cost of food (or beverages) used by the average food (or beverage) inventory. The average inventory value is determined by adding the value of inventory at the beginning of the month to the value of inventory data the end of that period and then dividing the sum by two. For example, to calculate the inventory turnover rate of food products for a month, assume the following data: Food inventory value at beginning of month Rs. 102000 Food inventory value at end of the month Rs. 114000 Cost of food used Rs. 273000 Average food inventory = Beginning Inventory + Ending Inventory for month 2 Average Inventory For month = 102000 + 114000 2 = 216000 2 = Rs. 108000

Food Inventory Turnover = Cost of food used for month Average food inventory for month = 273000 108000 = 2.53 times.

In this example, the value of inventory is turned into revenue on an average of 2.53 times during the month. This means that 2.53 times the average amount of daily inventory must be purchased sometime during the month to keep the operation supplied. What is the meaning of the above ? If each months results were the same, (hypothetically), the total for the year would be 30.36 (2.53 X 12 months) times each year, or once every 1.71 weeks (52 weeks divided by 30.36). So that Inventory turnover would be once every 1.71 weeks, in line with our understanding 134

The inventory turnover rate is an important tool to use in managing inventory levels. As this rate decreases, more money is being invested in inventory. If too much of the propertys funds are being used to purchase excess products for inventory cash flow problems may result and create other difficulties for the operation. products may spoil or otherwise deteriorate in quality because of excessive inventory levels. On the other hand, as the turnover rate increases, less money is being invested in inventory. As average inventory levels are reduced, however, a point will be reached at which stock-outs begin to occur. Guest dissatisfaction and operating problems can result. This has been explained earlier. Therefore, to properly control the propertys investment in inventory, managers must determine the best turnover rate for their particular operations. This process requires monitoring. If the turnover rate is calculated monthly, the manager can learn of any increases or decreases in inventory turnover and respond accordingly. This method is detecting turnover trends. It may also be a good idea to calculate turnover rates for specific product categories. One would expect highly perishable items (such as fresh meats and seafood, fruits and vegetables) to turn over more rapidly than less perishable items (such as spices staples, and frozen or canned products).

INVENTORY SYSTEMS
Inventory Recording Systems This is necessarily a Store room Accounting and Control System. Food in storage represents a substantial investment to the food and beverage operation, which spends 20% or more of their incomes on food purchases. Inventory control is the management of storage activities by 135

accounting personnel, and not by the user department. Through the separation of duties and responsibilities, the accounting department discourages theft and pilferage by being closely involved with storage activities. There are two basic kinds of record keeping systems for products in storage: physical inventory and perpetual inventory. A physical inventory system involves actual observation and physical counting of stored products on a periodic basis. A perpetual inventory system involves keeping a running balance of the quantity of stored products by recording all newly purchased items as they enter storage areas and all quantities issued from storage to production areas. Physical Inventory System A physical inventory system is used to assess the value of food and beverage products in inventory on a monthly basis. Inventory value is counted as a current asset and inventory values, both at the beginning and end of the financial period, are a factor in assessing food and beverage costs, and calculations of Food Inventory Turnover. The Unit Financial Controller decides the design of the physical inventory system. What products should be considered in making an inventory count? This decision is partially related to the question of which are to be considered storage areas under the control of the inventory system. For example, does inventory include products in brokencase and work station storage areas? What about products in process, such as frozen poultry thawing in the refrigerator? What items are stores and included in inventory, and What items are directed and excluded from inventory?

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How should monetary value be assigned to products in inventory? 1. 2. 3. 4. One method is to calculate the actual cost of stored products at the time the physical inventory is made. Another method is to use the average costs of stored products over several inventory counts. The last-in, firstout (LIFO) inventory valuation and The first-in, firstout (FIFO) inventory valuation.

Under the LIFO system, the costs of the products most recently added to inventory (last in) are the costs assigned when products are issued (first out). This leads to cost of sales figures that more accurately reflect current replacement costs. It also tends to create a smaller total inventory value. That is, since the most recent (and usually most expensive) costs are the first to be issued, the remaining inventory is made up of the earlier (and usually lower) costs. Conversely, under the FIFO system, the oldest (and usually lowest) costs are issued first, leaving the more recent (and usually higher) costs remaining in inventory. This creates a higher total inventory value and a lower cost of sales. How should costs of such items as opened containers of spices in production areas be handled? Often, the cost of such opened, unused items is assumed to average out. In other words, their value is thought to remain approximately the same from month to month. So, once an estimated cost is established, it can be used monthly. What procedures should be used in counting the products in inventory? Persons involved in managing storage areas should not take inventory count alone. Perhaps the food inventory can be taken

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by the Chef, or an officer of the Food & Beverages Control Department, while the Food and beverage manager takes the beverage inventory. In both situations, a representative from the accounting office can assist in conducting the physical inventory. As stored products are observed and counted, a physical inventory form can be used to record inventory information. When reviewing the form, note: 1. Products can be listed in the same order as they are found in the storage area (or on the perpetual inventory form). Listing products in this sequence makes the task of locating items on the form easier when taking the inventory count. It also reduces the likelihood that products will be missed when inventory is taken. 2. The storage unit is the basis on which products are purchased and costs are assessed. 3. The amount in storage is determined by actually counting all items in storage. With one technique, one person counts while a second person records the quantities on the inventory form. In another, two people can make independent counts and compare results before entering information on the inventory form. 4. Purchase price is the cost per storage unit of the product. Price information is easier to record if products are marked with their unit prices before they are stored. 5. Total price is the total cost of the amount of each product in inventory, and is calculated by multiplying the number of stored items by the purchase price per storage unit. 6. The next two columns are used to repeat the above inventory valuation procedures for a second month. 7. The total food and beverage costs calculated by the physical inventory are given to accounting personnel to use in developing financial statements. They can also be used to calculate inventory turnover rates.

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Physical Inventory form A physical inventory indicates only how much of each product is in inventory and the actual value of all stored products. Two serious disadvantages of a physical inventory system are that it does not indicate how much of each product should be available and what the value of products in inventory should be. A perpetual inventory system compensates for these problems. Perpetual Inventory System It is one of the most important accounting control tool. As items enter the storage, the quantity is recorded on the perpetual inventory record, to show an increase in inventory. As items are removed by using the requisition form, the quantity depleted is also recorded. This running balance enables the controller (a member of the accounting department), through physical observation and count, to match how much product is available to how much should be available. Differences between these figures give a measure of the effectiveness of inventory control systems. Specimen of a Perpetual Inventory Form (See Annexures on page 164) Controls of these type assist the purchasing function in the following ways: 1. As theft / pilferage is curtailed, quantities of products required in inventory are reduced, and as a result, the total amounts of money committed to inventory is decreased. At this point of time understanding of the Inventory Turnover is important. 2. Since a Perpetual Inventory system logs item quantity, such records provide the usage rates and other inputs useful in making purchase decisions.

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3. A Perpetual Inventory system reduces stock outs caused by inaccurate record-keeping. Prevention of losses represents : A real saving to the Operation, and also contributes to the maintenance of inventory levels. Perpetual Inventory system of record keeping is not necessary for every item in the store, but should be done for A Value Products at least, i.e. those that represent the largest portion of food costs, either being expensive, or by virtue of their high consumption pattern. Bin Card System A bin card provides further control over the storage of products, specially the expensive ones. A bin card system is useful to control special items. A bin card is a small index card that is affixed to the shelving reserved for these items. The quantity put on or taken off the shelves is noted on the bin card. In this way, a running balance (perpetual inventory) is maintained and managers can quickly verify available amounts by comparing a physical inspection with the quantity indicated on the bin card. Both these totals should, of course, equal the amount noted in perpetual inventory records. Incorporating a bin card system with physical and perpetual inventory procedures provides for a very tight inventory control system. Format of Bin Card - (See Annexure on page 165) A physical count is still necessary with a perpetual inventory system to verify the accuracy of the inventory balances. When using a perpetual inventory system, staff members who maintain the perpetual inventory records should not perform the physical inventory used for verification. 140

When the physical count of a product differs from the quantity indicated on the perpetual record, a control problem may exist, and management must determine the reason for the variance. Perhaps products are not being recorded at the time of receipt or issue, or perhaps theft is occurring. The purpose of control procedures is to indicate when such problems exist. Managements task is to discover why a problem exists and, of course, to correct it. Computerized Inventory Management : ITC Hotel Maurya - The Luxury Collection has inbuilt a computerized inventory management system. All trainees are advised to study the system.

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CULINARY ECONOMICS FOOD PRODUCTION CONTROLS

LEARNING COMPETENCIES :
At the end of the module the trainee should be competent to 1. 2. 3. 4. 5. 6. 7. 8. 9. :

Describe the process of food production planning and its importance. Understand food production quantity requirements for various segments of business. Understand the value of trends to estimate food production requirements. Understand the Weighted Time Series method to forecast food production quantity requirements. Understand Yields, production losses, and Standard Yields. Understand calculation of Yield percentages. Understand the process of using Yield percentages to calculate cost per servable unit. Understand calculation of Standard Portion Cost. Understand process to calculate Standard Food Cost Percentage.

10. Describe the advantages of Standard Portion sizes. 11. Understand how to use Standard Portion sizes. 12. Identify important control procedures for food production areas, including control of quantities of food production. The key requirements of a business are : To offer good value to a client. discussed on page 54. To generate revenues and profits. Value has already been

Profits are the key pre-requisites of a business. Culinary businesses behave in the same way. 143

If the above two key requirements of the business are met, it is good business. Controlled food production in hotel business ensures working towards the goals of cost-effectiveness. ITC Limited, Hotels Division has defined Food production Quality standards. What needs to be established are the Quantity standards of Food Production. The quantities of Food Production vary due to the variation in the size of client foot-falls. Food production is labour-intensive activity. The task of managing and controlling food production are impossible to disconnect from personal supervision, and direct through personal experience. Experience therefore counts a great deal towards establishing quantities of food production.

FOOD PRODUCTION PLANNING

Food production planning is aimed towards : ensuring quality food products. dining experiences that meet or exceed guest expectations.

Food production comprises of the following three control points: preparing. cooking. holding.

In essence, food production planning is simply getting ready for production. Planning ensures that raw products, personnel, quality delivery systems, and equipment are available when ready. Under or over utilization of resources should be avoided. Planning ensures enhanced possibilities of removing serious economic and marketing faults.

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Each hotel unit of ITC LIMITED is unique in terms of culinary product offers. Each food production unit is unique accordingly. In addition, the personal culinary strengths of each of the Executive Chef or Master Chef define the overall trend of client affections, and in essence the quantum of food production. Each hotel unit of ITC LIMITED must develop specific procedures for production planning that are suited to its own unique needs. However, a typical strategy is to first forecast production requirements and then translate these requirements into production plans.

ESTIMATING FOOD PRODUCTION REQUIREMENTS EXPERIENCE OF CHEFS

As mentioned above, the experience of a chef is invaluable in determining quantities of food production. Gut-feeling and intuition add value to the experience-value of a chef.

ESTIMATING FOOD PRODUCTION REQUIREMENTS TRENDS

Trends set in culinary businesses. Market conditions. These trends change due to

Type of clients and their requirements.

Food Festivals and Food Promotions help set trends and increase foot-falls into the business. It is these Food Festivals and Food Promotions which exhibit to clients the unknown talents of the performing chefs. A la Carte culinary businesses are often dependent upon season, weather conditions, national and local events, and sometimes on financial conditions of the market.

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Trends for A la Carte businesses come out clearly when historical data is maintained in the form of Sales Histories. This is made very easy these days through the usage of computers. Sales histories help identify trends of consumption. This helps in identifying quantities of products required for expected production activities for a particular forthcoming period. Client expectations change. So do quality standards. These quality standards in case of food production can be those of the Quality of food, Quality of service, Quality of ancillary experiences.

Therefore Quality is not a fixed standard. It evolves as expectations change. Quality is relative to market perceptions of what is correct and relative to the type of the food service organization. The tools aiding decisions on right Quantity standards of food production are : Experience of the chefs. This could be in terms of estimating which of the menu items would move faster, and which need enhanced quantity levels of production. While A la Carte business can be judged statistically on these issues, for buffet and banquet business, it is, gut feeling and intuition which are aided by pure experience.

Trends of consumption:
Menu Engineering. Menu Engineering has been discussed in details earlier. Menu engineering worksheets especially the Menu item analysis helps in understanding of the consumption pattern of A la Carte menu items. Production quantity levels of the immediate future can be determined accordingly.

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Formulating Production Plans

Production Planning or Volume Forecasting is the forecasting of the volume of sales for an establishment, for a specified time period, for example a day, a week or a month. The aims and objectives of Production Planning are as follows: 1. 2. 3. To facilitate the food cost control for the establishment. To facilitate the purchasing of foodstuffs, particularly perishable items, and ensure that appropriate stock levels are maintained. To reduce the problem of food that is left over and how it is to be re-used, or customer dissatisfaction when insufficient foods are available. To gear up production to required demand by forecasting the number of meals to be served for a given meal period, for example, the number of portions of a menu item to be sold for lunch or dinner for a period of seven days. Production planning is also to forecast the number of menu items that will be taken by a specific number of customers. To enable a comparison to be made between actual and potential volume of sales, and for corrective action to be taken if necessary.

4.

5.

An initial forecast is made either at a set period in advance, for example a month, or when the major food orders are placed. This initial forecast estimates the total number of meals to be sold by the establishment and the estimated total of each menu item. In the case of a large hotel, with a variety of catering outlets, a more detailed forecast would be made for each individual outlet. Factors that need to be taken into account at this stage are the season, and hence the weather forecast for that time of year; past menu items; major events occurring in the area - that are likely to attract a larger than average number to the establishments normal catchment area,

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any sales campaigns in terms of food festivals or food promotions currently being promoted by the hotel, etc. The initial estimate is later adjusted, usually one or two days prior to the day of production, so that a more accurate forecast can be made. On the basis of this updated information, any changes that may need to be made with regard to staff scheduling, food purchasing, and requisitions, etc. should be made as soon as possible. There are a number of aids or management tools that may be employed by an establishment to assist the forecasting and planning of production, and the Standard Cost tools are part of these management tools.

ESTIMATING FOOD PRODUCTION REQUIREMENTS - SALES HISTORIES

Sales Histories can be used to identify trends of consumption. This helps in identifying quantities of products required for expected production activities for a particular forthcoming period. A careful analysis of previous sales can help control production quantities. The most important criteria of production quantity planning is to reduce left overs and wastages. Seasonability of business, weather conditions, special events, community and national events, etc. affect production estimates. These must be taken into consideration in forecasting production requirements during planning. Sales history records can be used to estimate production requirements. Trends can be identified through usage of sales histories and used to predict future sales. Let us take up an example to understand the process of forecasting production requirements :

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PORTIONS OF MAGGIS FARM SOLD IN THE MONTH OF OCTOBER 2008 DATES 1.10.2008 2.10.2008 3.10.2008 4.10.2008 5.10.2008 6.10.2008 7.10.2008 8.10.2008 9.10.2008 10.10.2008 11.10.2008 12.10.2008 13.10.2008 14.10.2008 15.10.2008 16.10.2008 17.10.2008 18.10.2008 19.10.2008 20.10.2008 21.10.2008 22.10.2008 23.10.2008 24.10.2008 DAYS NO. OF TOTAL PORTIONS GUESTS SOLD 20 19 22 23 19 22 22 26 27 16 14 26 24 25 17 18 23 28 26 25 18 28 23 32 168 212 165 132 192 173 WEDNESDAY 184 174 178 182 196 218 169 WEDNESDAY 188 209 218 216 208 201 199 WEDNESDAY 198 164 221

WEDNESDAY 200

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25.10.2008 26.10.2008 27.10.2008 28.10.2008 29.10.2008 30.10.2008 31.10.2008 TOTAL AVERAGE

278 301 308 168 WEDNESDAY 308 311 308 6547 211.19 NO. OF DAYS 31

30 28 27 16 34 32 28 738 31 23.81

Average Guests per day=211 and Average portions per day= 24 On 29.10.2008 out of a total number of 308 guests, 34 guests ordered Maggis Farm. This amounts to 11.038% (34/308 100 = 11.04 %) Once the total number of guests for the next Wednesday (5.11.2008) is estimated, the percentage can be used to estimate the number of portions of each menu item required. For example, assume that a total of 325 guests are estimated for the next Wednesday (5.11.2008). If the chef assumes that the same percentage of guests will order this Entree, the estimated number of Maggis Farm Portions needed for next Wednesday (5.11.2008) can be calculated as follows : Estimated Portions to be sold = Estimated Guests Percent as a Decimal = 325 .1104 = 35.88 = 36 This process is repeated to estimate production requirements for all other menu items, and for all other days in the forecast period.

COMPUTERS USAGE, TIME SERIES, TIMES SERIES FORECASTING AND ANALYSIS

Computers can be very useful in the projection of production requirements. Electronic files can store historic data, and 150

the computer software can be developed to apply these records for future use. Computer systems tend to employ time series analysis.

Time Series Forecasting and Analysis

Time series is a sequence of data points measured typically at successive times, spaced at uniform time intervals. Time series forecasting is the use of a model to forecast future events based on known past events: to forecast future data points before they are measured. Time series analysis accounts for the fact that data points taken over time may have an internal structure such as autocorrelation, trend or seasonal variation that should be accounted for. Time Series Analysis allows for weighting of historic data with respect to its recency. This forecasting method assigns more importance (weight) to recent occurrences or trends. In other words, if we are attempting to forecast how many Maggis Farm meals would be ordered coming Wednesday (5.11.2008), we could base our projections on data from five previous Wednesdays. For purposes of this example, assume weights of 5,4,3,2, and 1 for the prior Wednesdays, with 5 representing the most recent Wednesday (29.10.2008). Last Wednesday (29.10.2008), 34 portions of Maggis Farm were sold, the previous Wednesday (22.10.2008), 28 portions, before that (15.10.2008) 17 portions, before that (8.10.2008) 26 portions, and prior to that (1.10.2008) 20 portions. To project portions of Maggis Farm required for coming Wednesday (5.11.2008) the following steps were taken : Multiply each weeks number of portions sold by its respective weight and total the values :

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34 5 + 28 4 + 17 3 + 26 2 + 20 1 = 170 + 112 + 51 + 52 + 20 = 405 Divide the computed total by the sum of its weights. This will yield the weighted projection : 405 5 + 4 + 3 + 2 + 1 = 405 / 15 = 27

Time series analysis projects that approximately 27 portions will be consumed coming Monday (5.11.2008). To forecast the number of portions likely to be sold for all the menu items of the menu, the same process can be adopted. The computer may develop its forecasted projections based upon stored data, manually inputted data, or data transferred from POS systems. Its output can also be helpful in developing purchase order requirements and labour needs, and for providing additional assistance to management. Computer forecasts are performed quickly and accurately, which increases their value to the operation.

FOOD PRODUCTION CONTROL

Food and Beverage control begins with the Menu. Menu is a major marketing tool. The menu also dictates what items are to be prepared. Let us focus on basic concerns of the business that are at the core of controlling the production process.

QUALITY REQUIREMENTS
It is important to understand quality requirements. Operating Standards: These come out from the depth of Management Policies. Management Policies are resultant of the efficient handling of Guest expectations.

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Guest expectations give ideas to make Quality requirements of Operating Standards.

Controls during Production

Controls during production are adhering to established operating standards. Control procedures must help the operations ability to meet its required standards. The Standard Cost Tools needed to control Quality are : Standard Purchase Specifications Standard Yields Standard Recipes Standard Portion Sizes, and Standard Portion Costs

These control tools provide procedure for uniformly purchasing, producing and serving products of the required quality. Standard Purchase Specifications incorporate quality requirements. They dictate the minimum quality and other requirements that all products must meet. These are immediate quality links between the chefs requirements and the suppliers abilities. Standard Purchase Specifications have been discussed at length in the chapter on Purchasing. Let us understand the other Cost tools. Yields, Yield Tests and Yield Management

It is very important for a professional chef to understand Yields, and how to conduct Yield Tests and manage Yields to the advantage of the hotel unit. Simply defined Yield is the amount of product that is saleable by weight or volume. This therefore sets the premier understanding of Yields in relation to the raw commodity weight, as purchased.

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The difference of weight between as purchased weight and saleable weight is termed as Production loss. This directly means that yields are dependent upon quality standards of a Purchase specification. For a chain operation the Purchase specifications of each food commodity are set precisely for this reason to get maximum yield, across the chain. Simply illustrated, poor defining of a Standard Purchase Specification would encourage vendors to supply raw commodities with poor yields. Very often in culinary businesses, upon examination of the needs of the businesses, raw commodity is purchased on the basis of fresh set of Standard Purchase Specifications.

What does the above mean?

If for example, a hotel unit has a large amount of boneless chicken preparation, and in relation very limited requirements of the chicken bones; it would be wise to purchase only boneless chicken. The Standard Purchase Specifications of boneless chicken would be very different from that of the Standard Purchase Specifications for chicken required for roasting, or for Tandoori, or for requirements of the European grill. When further Yield Tests are done for boneless chicken received for menu item requirements the percentages would be definitely higher and nearer to 100 %. However, if full chickens are received, and Yield Tests are done on the same to make them boneless, the yields would be much lower and be nearer to 50%. Why? It is because the Standard Purchase Specifications for both cases of raw commodity purchases are different. In addition,

154

different dynamics work when suppliers quote for boneless chicken, as they have an opportunity to sell the chicken bones and other by-products in the market. Standard Yields are arrived at by conducting yield tests. While doing a Yield test, it is advisable to use as large sample as is possible. This ensures accuracy and yields which are nearer to the truth. Once benchmarks for Yields are set for a product for a hotel unit, the next Yield testing should produce results in line with the benchmarks, or higher in Yields. If lower yields are received, then examination is required of the quality of receiving against standard purchase specifications, and that of losses during storage, etc. At times, particular weather and seasonal conditions ensure poorer yields. This is particularly so for seafood. Yield testing should have a larger requirement - that is to understand Standard Yields, which is ideal yield and potential or actual yields. The food production operation is thought to be doing a fine job if the actual yield is equal to the Standard Yield. In case a higher yield is achieved, then the higher value becomes the next benchmark, and all future yields are matched against the fresh benchmark. It is very essential at this point to understand the Bone to Meat ratio. Understanding of the Bone to Meat ratio is an extension of the understanding of Yields. How much saleable meat comes out of a particular raw commodity, through a defined Standard Purchase Specification, in relation to saleable meat that would come out of the same raw commodity, but with a different Standard Purchase Specification? Higher benchmarks of saleable meat in terms of absolute weight would decide qualification of Standard Purchase Specification. This is so for all raw commodities for food production requirements. 155

Let us take up an example of chicken. If the chicken has to be turned into boneless meat for menu item requirement, an instant thought would be to buy bigger and bigger birds. That is not essentially the right act. Why? This is because larger birds would probably present higher ratios of bones in relationship to saleable meat. The quality of meat in larger birds may be tougher, and not in line with the end-product quality requirements. An understanding of Standard Portions shall be clear later. A list of Standard Portions is set up in the meat fabrication department and is available in the kitchens. Relating the cost of a Standard Portion is very easy through further calculations on a declared yield test. This is done through calculation of the as-purchased weight in relation to the saleable weight. Cost per portion of the raw product is used in Standard Recipes, which have already been discussed earlier in this module.

156

An example of Yield testing and the format for the same is produced here :

WELCOMGROUP MANAGEMENT INSTITUTE, GURGAON

Date___________ YIELDS FOR BONELESS CHICKEN WEIGHT RANGE SPECIFICATION NUMBER OF BIRDS TOTAL WEIGHT : 1000 GMS. 1200 GMS. (WITH SKIN, WITH NECK) : 100 NUMBERS. Day ___________

: 115 KGMS.

AVERAGE WEIGHT OF THE BIRD : 1 KGM. 150 GMS. YIELDS (A) BONELESS CHICKEN LEG (B) BONELESS CHICKEN BREAST (C) CHICKEN FILLET (D) TRIMMINGS (FOR MINCE) : : 27 KGMS. 100 GMS. : 14 KGMS. 150 GMS. : 3 KGMS. 950 GMS. : 4 KGMS. 150 GMS.

WASTAGES, BONES/BY PRODUCTS : 65 KGMS. 650 GMS. (WINGS, SKIN, BONES, TAIL) SALEABLE YIELD : 49 KGMS. 350 GMS.

PERCENTAGE OF SALEABLE YIELD : 42.9 % (A) + (B) + (C) + (D) PERCENTAGE OF WASTAGES, BONES / BY PRODUCTS Standard Recipes A client requires good value. He requires a standardized menu item. His positive dining experience is based on a culinary selection with

: 57.1 %

157

which he identifies or has pleasant expectations of. The clients expectations are required to be met and exceeded on each of his visit. In other words a standardized culinary product supports a positive guest experience. The main tool to standardize a culinary product is a Standard Recipe. A Standard Recipe for a culinary product defines what all ingredients would go into a recipe, in which order and in what proportion or weight or measure. Quality ingredients for the Standard Recipe are purchased through defining of standard purchase specifications. The portion of Method in a Standard Recipe defines how the production of the menu item would progress, and how much time would be required for an individual step and for the entire recipe to be completed. The format for a Standard Recipe lists out the equipment used for production and that for service. Therefore properly developed recipes can also help define effective work practices. Standard Recipes are indicators to kitchen stewards to be ready with the production and service equipment within easy reach and in sufficient quantities, especially during the peak periods of business. The effort is to pin down all the factors that would contribute to a positive guest experience. Standard recipes therefore play a very important role in the overall control system of a culinary operation. When standard recipes are developed, and followed, production

158

costs can be calculated. process and decisions.

Standard recipes support menu pricing

Benchmark of service are also developed through the use of standard recipes. These standards are essentially the time that would be required between the ordering and pick up, and the standards of pick up and service generally called Service Guarantees. Service Guarantees are designed to inform the service staff of important parameters of food production and service. This helps in training and removing ambiguity. Besides name of the menu item, a Service Guarantee has sections like description of the dish, outlet name, selling price, method of cooking, major ingredients, service ware, pick up point, pick-up time, portion size, garnish, accompaniments, service style, and whether it is a hot or a cold service. The Standard Recipe format followed by our company is produced below. Columns like sensitivity ensure safety standards and additional information that informs a newly detailed chef on how to proceed. As the ingredients are specified, Standard recipe is an important tool for the Purchase process. Standard recipes are therefore an important Production tool to deliver quality and for cost control measures.

Standard Portion Standard recipes indicate standard portion sizes. A client expects the same portion size for a particular menu item. Standard portion size supports client satisfaction and consistent menu item costs.

159

FORMAT AND EXAMPLE OF STANDARD RECIPE

Name of the dish Tools

No. of portion Sensitivity

: Mulligatawny soup : Sauce pan, ladle, soup strainer Baking Trays, Oven. : 04 : The soup must not boil after tamarind has been added

160
Next review Made by Approved by

Ingredients 1. Garlic 2. Ginger 3. Turmeric powder 4. Chilli powder 5. Coriander powder 6. Cumin powder 7. Bay Leaf 8. Vegetable oil 9. Large onion Chopped 10. Coconut milk 11. Vegetable/chicken stock 12. Lentil (Tur/Masur) 13. Tamarind Concentrate

Wt./Measure 15 cloves 10 gm tsp tsp tsp tsp 2 no 30 ml 1 no. 60 ml 3 litres 100 gm 2 table spoon

Procedure 1. Place ginger, garlic, chilli, coriander and cumin in a food processor and form a paste. 2. Place oil in a saucepan and add bay leaf to it when hot. Add chopped onion stirring over moderate heat until golden, then add the spice puree from the processor and continue to fry and stir till spices are well cooked and mellowed. 3. Pour in washed lentils and stock and simmer till the lentils are cooked and mashed. Add tamarind paste and check seasoning. 4. Strain the prepared soup. On moderate heat add coconut milk to finish.

Garnish: Boiled Rice 100 gms Garam Masala tsp Lemon Wedge 1 no Fried Curry leaves 12 no. Garnish the soup with 2 table spoon of boiled rice, 3 fried curry leaves and serve a wedge of lime with each cup of soup

Date:

MULLIGATAWNY SOUP FOR SERVICE (PICK UP)

: : : SHELF LIFE : Saucepan, laddle, spoon Soup plate with underliner Soup should not be very thick No. of portions : 01 To order

TOOLS PLATE SENSITIVITY

INGREDIENTS : : 02 tsp. 2. 01 portion (200 ml) 1.

WT. / MEASURE

PROCEDURE

161
4 to 5 nos. 1 no.

Mulligatawny soup

Tamarind concentrate

Heat the soup and add the tamarind Concentrate while simmering. Pour the soup in a cup.

(02 tbsp. tamarind pulp, Dissolved in 04 tbsp. boiling water, strain)

GARNISH Garnish with fried curry leaves and lemon slice.

Fried curry leaves : Lemon wedges :

Portion control tools like ladles, scoopers and weighing scales should be available to facilitate dishing out of defined portions. Standard Portion Costs Once standard recipes and portion sizes are established, a standard portion cost can be established. Recipes and portions are pre-costed. A standard portion cost is determined by dividing the total ingredient costs of recipes by the number of portions the standard recipe yields. The prices of ingredients for costing purposes are established from contracted rates of suppliers.

PURPOSE OF PRODUCTION CONTROLS

The purpose of production controls is to ensure quality while complying with cost limitations. Maintaining prescribed standards is easier when general cost control procedures are followed. Let us examine them : 1. 2. Standard cost control tools are support tools. Use them consistently and efficiently. Have a tight-fisted approach towards requisitioning perishables and highly perishable products from suppliers, and requisitioning groceries from the stores. What comes into the production area would either be used or lost due to pilferage and overproduction. Ensure consistent training of standards and standard cost control tools and food production processes. Minimize food waste. What remains in the hands of chefs can be controlled, what gets out cannot be controlled. This is especially so of buffet dish outs and banquet quantities. Use only the right quality ingredients. means controlled consumption. Right quality often

3. 4.

5. 6.

Keep a sharp eye on employee consumption. Keep the staff

162

on their toes especially in case of menu items prepared for the client. Unmonitored consumption increases costs. 7. Require that no item be discarded without prior approval of management. This applies to items spoiled in storage as well as items improperly prepared. Encourage use of Spoilage Reports. This shall help in pin-pointing responsibilities, and put staff under pressure to perform. Use the process of Menu Engineering intelligently. Match issue and production records with sales records to assess the extent to which issued products generate revenue. Seek employee participation in matters to reduce costs and improve processes.

8.

9.

10. Be sure measuring and weighing tools and equipment are always used to prepare food and beverage items. Make sure staff uses portion-control tools scoops, ladles, weighing machines, volume measures, etc. when portioning food items for service. 11. Accurately access leftovers and fine-tune the quantities of menu items to prepare during the next production schedule. 12. Use leftovers creatively when possible in future production. However, remember that quality decreases over time, such as when hot items are held for service, cooled, stored, and then reheated. In addition, there are sanitation concerns that override the cost control considerations. For example, potentially hazardous leftovers can create sanitation problems if improperly handled and re-served. Balance controlling food costs with maintaining established food quality levels.

163

SPICES SPECIFICATIONS
SL. NO. 1. INGREDIENTS / DESCRIPTION Zeera Powder Fine powder free from foreign substances and moisture. Date of packaging and details of contents displayed. Saffron Orange brown stigmas of the plant which are dried, with a pungent aroma and a bitter flavour. Long strands, free from impurities, correct weight. Zeera Whole Even grain size, free from stalks, impurities and moisture. Should not be broken. Chilly Whole Deep red in colour, free from stalks, Impurities and moisture. Even sized and should not have discoloured or damaged members. Bay Leaf Clean smooth dry leaves. Free from deformities. Leaves should not have holes. Mustard Whole Even grain size, dark purple colour, free from moisture and impurities. Black Pepper Whole Even sized unbroken corns, free from impurities, even black colour. Pista Dana Even green colour, free from dark specks or insects. Saunf Ordinary Light green colour, even size, and free from stalks and impurities. Strong aroma. Ajwain Strong flavour, free from dust, impurities, stalks and insects. UNIT KGM

2.

GMS

3.

KGM

4.

KGM

5.

KGM

6.

KGM

7.

KGM

8. 9.

KGM KGM

10.

KGM

171

SL. NO. 11.

INGREDIENTS / DESCRIPTION Dhania Whole Whole, even colour and size grains. Free from stalks and other impurities. Panch Phoran Equal quantities of saunf, zeera, mustard seeds, kalonji and methi. Free from impurities. Methi Seeds Even size, light yellow colour, free from stones and other impurities. Kashmiri Chilly Powder Fine powder, dark and bright red in colour. Pungent flavour and free from moisture. Ordinary Chilli Powder Fine powder, bright red colour, free from impurities and moisture. Haldi Powder Bright yellow colour, strong aroma, fine powder free from moisture. Dhania Powder Fine powder free from foreign substances. date of packaging and details of contents displayed. Black Pepper Powder Coarse powder, dirty black, specky, free from dust impurities and moisture. White Pepper Powder Light colour, pungent flavour, date of packaging and details of contents specified. Mustard Powder Light yellow coarse powder, slightly specked. Pungent flavour. Date of packaging and details of contents specified

UNIT KGM

12.

KGM

13.

KGM

14.

KGM

15.

KGM

16.

KGM

17.

KGM

18.

KGM

19.

KGM

20.

KGM

172

SL. NO. 21.

INGREDIENTS / DESCRIPTION Small Elaichi Smooth and even sized, light green in colour. Strong aroma, free from insects and impurities. Large Elaichi Large size, rough black exterior, even size and free from insects and impurities. Cloves Even size dark colour. The bud should be Intact, strong flavour, free from impurities. Dalchini Dark brown 3 inch long strips, free from sticks and stalks, strong sweet flavour, smooth texture. Javitri Even size unbroken flower, even pink in colour, free from dust and broken pieces. Jaifal Even size full round shape, strong flavour, free from insects and broken pieces

UNIT KGM

22.

KGM

23.

KGM

24.

KGM

25.

KGM

26

KGM

173

VEGETABLE SPECIFICATIONS
SL. NO. 1. INGREDIENTS / DESCRIPTION Aubergine (Brinjal) Round / long, uniform dark purple colour, shiny skin and Green top stem. Firm, free from bruises or wormholes. (200-300) gms each. Aubergine Baby (Brinjal Masala) Even in shape and good green colour. No skin blemishes and no long stems attached. Banana [Green] Even shape with green skin. Not too many black marks on the skin, free from bruising and dirt. Bean Sprouts Trimmed of the roots with no browning on the cut marks. Creamy white with no blemishes or brown spots. Beetroot Dark purple in colour with smooth skin surface and no deep cracks or splits. Top leaves trimmed and roots free from soil. Tender and smooth skin with no bruises. No stem to be attached. Bitter Gourd (Karela) Bright green colour, shiny ridged surface. Firm with minimum seeds. 10-14/Kg. Seeds should not be red. Broccoli Heavy, compact, dark green head with no yellow flowers or purple leaves. Leaves trimmed to the stem. Head to be full and not in small pieces. Brussel Sprouts Bright green, firm head with crisp leaves. More than 1inches diameter, no yellow leaves or wormholes. No black spots. No roots to be attached. UNIT KGM

2.

KGM

3.

KGM

4.

KGM

5.

KGM

6.

KGM

7.

KGM

8.

KGM

174

SL. NO. 9.

INGREDIENTS / DESCRIPTION Cabbage [Red] Heavy head firm and solid, deep purple in colour. No roots attached. Leaves to be without decay, worm holes or blemishes. Cabbage [White] Heavy head for size. Leaves to be without decay, worm holes or blemishes. No roots to be attached. No loose leaves. Firm and solid, light green in colour. 600-800 gms. Capsicum [Coloured] Shiny skinned and firm to the touch. No soft spots and rotting flesh. Good even colour. Fresh. Capsicum [Green] Firm, plump pepper. Flesh should be brightly coloured. Dark green, shiny skin, tender and crisp. No discoloration, bruises or soft patches. 12/Kg. Seeds should be soft and tender. Should yield on gentle pressure. Carrots Smooth skinned, conical surface. Should break with a snap. Colour may vary from red to orange in summer. Core should not be stringy and should not exceed inches in diameter. Firm and brightly coloured usually bought without its top to reduce moisture loss. Soft and sprouting carrots to be avoided. No moist patches. Cauliflower Bright white to creamy white flower. Firm and compact head with outer leaves attached. Freshness of the leaves is an indicator of fresh head. 1pc. / Kg. Stalk to be trimmed from the base. No brown spots and free from worms. Celery Firm, clean, crisp, brittle stalks with bright green leaves and should not be wilted. 650-800 gms. each. Stems should not be hollow or spongy from inside. A fleshy ribbed stalk vegetable colour varies from healthy green to white. Should not have brown patches.

UNIT KGM

10.

KGM

11.

KGM

12.

KGM

13.

KGM

14.

KGM

15.

PC/ KGM

175

SL. NO. 16.

INGREDIENTS / DESCRIPTION Chilli Achaar Even colour and size. Medium green in colour and crisp to break. No soft and rotting spots. Chilli Green Dark green and smooth shiny surface. Seeds to be soft and white. Even long shape. Should snap when bent. Should have a thick skin. Not overripe. Chives Absolutely green, firm and fresh. Free from debris. Cornbaby Even in size. No stem to be present and the corn to be crisp and pleasant to the taste. Should be ready to use. Bamboo Shoot Fresh pale yellow. Approximate size 5 to 6 per piece. Cucumber Shiny and firm, crisp with a waxy appearance. 3-3 inches in diameter. Dark green in colour. Not shriveled and no yellow marks. The seeds should be soft and small. 5 to 6 size. Average (6-8)/Kg. Should not be bitter in taste, withered in appearance. Chilli Red [Large] Shiny skin free from brown spots. Colour deep red, flesh should not be dry, wrinkled, or broken. Should not have mud. Curry Leaves Shiny dark green leaves with no spots of fungus. Flavourful on pressuring with fingers. Characteristic odour when crushed. Dhania-hara (Coriander Leaf) Bright green, fresh white leaves. Standing leaves not wilted. Young plant without flowers with light aromatic smell. Not too much stem attached, free from sand and dirt.

UNIT KGM

17.

KGM

18. 19.

KGM KGM

20.

KGM

21.

KGM

22.

KGM

23.

KGM

24.

KGM

176

SL. NO. 25.

INGREDIENTS / DESCRIPTION Dill Leaves Bright green in colour, separated leaves, not wet. No wilting or rusting. Dry Coconut Dark brown husky covering, heavy for its size. No soft spots on the surface. Weight 500 gms. French Beans Bright green and velvety to touch, snaps with distinctive clean break with strings. Seed to be small and not prominent in pods. Long and crisp. Garlic Peeled Big cloves with no traces of skin. Highly aromatic, Plump firm heads. Should not have a foul smell. Should be free from sprouts and spots. Garlic Whole Clean with external colour. 2 inches diameter. Should not be shriveled or with dried bulbs. Bulbs to be full fleshed with large cloves and not with too much moisture. Tight root average count 16-22 per kg. Heavy for its size, well filled bulbs, interior of good quality. Ginger Highly aromatic and pungent with a thin edible skin, large, fresh, full even pieces, not stringy. No mud on the surface, inside to be moist and with a distinctive smell. Green Peas [Shelled] Fresh juicy crisp tender pods with a good green colour. The pods should be full with peas. Peas to be green in colour with no worms or foul smell. Leeks Bright white colour of stalk, crisp fleshy leaves on the stalk. (3-4) pcs./Kg. Should be straight, firm and intact should have bright green top without any brown patches.

UNIT KGM

26.

PC

27.

KGM

28.

KGM

29.

KGM

30.

KGM

31.

KGM

32.

PC

177

SL. NO. 33.

INGREDIENTS / DESCRIPTION Lettuce Fresh Bright green colour with fresh crisp tender leaves. Excess soil removed if supplied with roots. Leaves to be attached properly to the root and the root should not be rotten. Lettuce Green Bright green colour with fresh crisp tender leaves. Excess soil removed if supplied with roots. Each piece should have 5 fully green leaves. Leaves to be attached properly to the root and the root should not be rotten. Red Lettuce Fresh, crinkled leaves with no rust spots. Stalks cleaned from soil. Leaves to be crisp and not wilting. Leaves to be attached properly to the root and the root should not be rotten. Lime (Nimboo) Bright yellow in colour, firm and heavy for its size. Should be resilient to thumb pressure. 25-30 pcs per kg. No dry skin or spot on the skin.

UNIT KGM

34.

PC

35.

KGM

36.

KGM

37.

Marrow KGM Long and tubular with a full body without any crinkles or bruising. Even colouring. No dirt stains on the marrow and only one-inch of stalk attached. Methi (Fenu Greek) Fresh, crisp and dark green with no brown or wilted leaves. Mint Leaves Large dark green leaves, not scarred and not wilting. Stem to be trimmed off above the roots. Characteristic aromatic smell. Should be crisp. Mocha (Banana Flowers) Bright purple in colour with a full head. Base to be clean cut and not edged. Petals should be firm and show no signs of aging or browning. Should be fresh. KGM

38.

39.

KGM

40.

KGM

178

SL. NO. 41.

INGREDIENTS / DESCRIPTION Mushrooms Button Cap closed at the stem, firm and white not exceeding 2-cm in length. Should not be bruised or moldy. Mushroom Oyster Grayish creamy colour with large stocks of mushroom. Not wet or wilted and a firm texture. Must be fresh looking. Okra (Lady Finger) Bright green in colour. 3 to 4 long, smooth velvety surface, crisp and tender tip. Should not limp or have bristles. Seeds should be bright white and small. Onion Brown Full bodied with firm flesh. No roots attached and not sprouting from the top. Excess flaky skin to be taken off. No dirt attached. Not shriveled. Onion Green Slender stalks with a white base and long bright green stems. No wilting of the leaves, no dirt attached and leaves not to be rusted or rotten. Onion Small Smaller sized onions with a firm body, no stalk and no roots attached. Soil and excess skin to be taken off. 20 pcs/Kg. Papaya Green Firm green papaya of a pale orange-yellowcolour inside. No rust marks and blemishes on the skin. Even sizing of the fruits. Parsley Bunch Bright green, firm, crisp leaves. No blackish or wilted bunches. Tight heads with more leaves than stalk. Parwal Stripy Green and firm to touch. No brown patches present. Not ripe.

UNIT KGM

42.

KGM

43.

KGM

44.

KGM

45.

KGM

46.

KGM

47.

KGM

48.

KGM

49.

KGM

179

SL. NO. 50.

INGREDIENTS / DESCRIPTION Basil Bunch Clean leaves, flavourful on pressuring with fingers. Thin stems. Pumpkin Red Bright orange outer skin, soft orange colour inside. Skin to be smooth and free from any injury or cracks. Heavy for its size. Pumpkin White Creamy green outer skin, Skin to be smooth and firm. Even shaped, free from any cracks or injury. Tender white and firm. Raddish Red Round and red in colour, with a crispy and juicy flesh. Well-formed, smooth, firm, tender and crisp. Should be of medium size, heavy bulb and sharp taste. Crisp texture inside. Raddish White White colour and elongated appearance. With fresh green leaves. Not over ripe or dry. Sharp taste and crisp core. Tip should break when twisted. Skin should be clear. Raw Mango Dull green waxy skin with no blemishes. Even sized fruits, pale inside. Hard to touch. Ridged Gourd Fresh, juicy dark green in colour, should be tender. Should not be fibrous. Saag Lal Purple in colour, young leaves, and thin stems. Should be free from sand. Saag Pui Deep green in colour, crispy, should snap, fresh leaves. Should not be wilted, have no wormholes, blemishes or bruises. Should not have black spots. Should be clean.

UNIT KGM

51.

KGM

52.

KGM

53.

BUNCH

54.

KGM

55.

KGM

56.

KGM

57.

KGM

58.

KGM

180

SL. NO. 59.

INGREDIENTS / DESCRIPTION Saag Sarson Dark green leaves with stems trimmed, leaves should not be small in size, moldy or worm eaten. Snake Beans (Barbatti) Long shaped with no rust or brown marks on the skin. Not rubbery to bend and not showing dullness due to aging. Banana Leaves Should be young shoots. Not torn, no brown patches, clean. Sonja Phali (Drum-sticks) Should not be woody, fleshy with translucent seeds. More than half inch in diameter. Spinach Fresh, dark crisp leaves. Stems should be trimmed, stalks should snap when bent. Should be stored upright. Leaves should not be worm eaten or wilted /damaged. Should not be wilted, damaged or with wormholes. Spring Onions Leaves bright green in colour, unbroken stem up to 7 long. Bulbs to be white not more than 3 cm in diameter. No bruised leaves. Yellow, wilted and damaged leaves to be avoided. Squash Firm skinned either yellow or green in colour. No rust marks or blemishes on the skin and of an even size of the vegetable. Firm to the touch and soft or mushy. Tamarind (Imli) Small dark sets, reddish in colour. Light green, firm crisp skin, small seeds, bright with pulp. Tinda Light green, firm crisp skin, small seeds, and bright white pulp.

UNIT KGM

60.

KGM

61.

PCS.

62.

KGM

63.

KGM

64.

KGM

65.

KGM

66.

KGM

67.

KGM

181

SL. NO. 68.

INGREDIENTS / DESCRIPTION Tomatoes Large Mature but not over ripe or soft. Large size, smooth firm and pulpy 80-100 gms. No black spots. 12 nos./Kg. Uniform shape, colour to be bright red. Should have no bruises or blemishes. Fresh. No leaf or stalk to be attached. Tomatoes Small Mature but not over ripe or soft. Even medium sizes, smooth, firm and pulpy and should not be with dust particles. Uniform shape, colour to be bright red. No leaf or stalk to be attached. 40-50 Gms. each. Tomatoes Regular Even colouring of the skin with no green colouring. Must be moist and red when cut. No stalks or leaf attached. (60-65) Gms. Each. Uniform shape, colour to be bright red. Turnip Creamy white colour with purple blush. Thin Skinned smooth and tender. (10-12)/Kg. No Cuts or bruises Yam (Arbi) Brown outer skin with a firm yellow creamish flesh. Long cylindrical shape, firm with dry outer surface. No wet spots, rotting or dirt attached.

UNIT KGM

69.

KGM

70.

KGM

71.

KGM

72.

KGM

182

FRUITS SPECIFICATIONS
SL. NO. 1. INGREDIENTS / DESCRIPTION Table Apples Bright red colour with fruity aroma, crispy and juicy, having moderate to low acidity, high sweetness, even spherical shape. Firm and resilient to pressure with no defects or decay, internal browning, broken skin or bruises. 5-7/Kg. No stalk or leaf attached. Cooking Apples Light green in colour, strong flavour. Table Oranges Thin loose skinned, heavy for its size, juicy inside. Predominant flavour. Juice Oranges Bright orange colour, heavy for its size, sweet juice, even colour. No dry flesh inside, skin firm with no excessive pith. Average 9 nos./Kg. Skin should be thin. Yellow Bananas Greenish yellow, firm fresh full plump, no dry and black patches, size not less than 7 inches from stem end to tip, should not be overripe and mashed. Green Bananas Rich green in colour. No black marks, ripe. Kinoo Firm texture, strong flavour. Bright orange colour, heavy for its size, sweet juice, even colour. No dry flesh inside, skin firm with no excessive pith. UNIT KGM

2. 3.

KGM KGM

4.

KGM

5.

KGM

6. 7.

KGM KGM

8.

Mango Dusseri KGM Thin bright orange to yellow skin with a smooth surface. Full, firm, resilient to gentle pressure. Pulp should be bright orangish, no stringiness at all. Seed should not be more than 1/4th the size of whole mango. Flavour sweet with typical light flavour.

183

SL. NO. 9.

INGREDIENTS / DESCRIPTION Mango Langra Greenish yellow colour with firm skin, sweet and flavourful smell, flesh bright yellow and juicy. Seed flat and thin, not more than 1/4th of the pulp. No bruises or blemishes minimum fiber in the pulp. Mango Alphonso Bright yellow to orange coloured skin, no blemishes, full, firm resilient to pressure. Flesh to be sweet and plentiful. Average 4/Kg. Papayas (Local) Orangish yellow colour in summer with traces of green acceptable in winter. Tested for ripeness by shaking- if seeds are loose and rattle then papaya is ready. Pressure applied on apex should indent. Average weight 1-1.5/Kg. Fresh, should avoid soft and bruised fruit. Papayas (Banglore) Orangish yellow colour in summer with traces of green acceptable in winter. Tested for ripeness by shaking- if seeds are loose and rattle then papaya is ready. Pressure applied on apex should indent. Average weight 1-1.5/Kg. Fresh, should avoid soft and bruised fruit Disco Papaya Flesh should be bright orangish, seedless or negligible white seeds. Taste sweet and texture not very hard or soft. 4-5 /Kg. Black Grapes Plum red in colour full bunches, skin thin, pulp sweet and juicy, no moulds, wet sticky or decayed grapes. No soft, squashed or overripe grapes. Approximately 400 gms. / bunch. Green Grapes Light green colour, ripe, full bunches each bunch of even conical shape, firmly attached to stems, no loose, squashed, soft or over ripe grapes. Skin should be thin, pulp juicy and sweet. Average weight of each bunch - 400gms.

UNIT KGM

10.

KGM

11.

KGM

12.

KGM

13.

KGM

14.

KGM

15.

KGM

184

SL. NO. 16.

INGREDIENTS / DESCRIPTION Black Grapes Seedless As name suggests no seeds, plum red colour, skin thin, pulp juicy and sweet. No soft, squashed or over ripe grapes. Packed tightly in bunches. No mould formation. Grape Fruit Best quality, juicy. Yellow colour of the skin. Pinkish hue when cut.The flesh may be sweet, sharp tasting and acidic. Should be juicy, neither too big nor too small. Pomellos Light greenish yellow skin, should be heavy for its size, juicy and full flavoured, Should not be too huge or too small in size as they lack sweetness and have acidity and weak flavour. Tapers slightly at the stem. May or may not have seeds. Water Melon The rind is thick and fragile. Dark green colour, plump, heavy for its size, good flavour. No discolouration, browning or dry patches. Fruit should be free from blemishes, broken skin and other defects. Should be deep red in colour when cut. Should be juicy with smooth seeds, should be free from white streaks. Chickoos Dark brown coloured thin skin, firm surface. Pulp dark brown, soft, juicy and sweet. Should not have bruises or soft patches. Should not have wormholes. 8-10/Kg. Peaches Nice, firm, pleasant, small and sweet in taste. Green Coconut Fresh, even size, no black marks and tender skin. Should yield at least 8 full ounce per Coconut.

UNIT KGM

17.

KGM

18.

KGM

19.

KGM

20.

KGM

21.

KGM KGM

23.

185

SL. NO. 24.

INGREDIENTS / DESCRIPTION Guavas Firm, fresh and sweet. The sizes vary from 2.5 cm to 10-cm. Thin pale green skin, which turn light yellow as they ripen. The flesh varies from white through to deep pink or salmon red. Table Sweet Lime Bright greenish yellow colour, thin skin, fruit should be plump, firm and heavy for its size, juicy and having a good flavour. No blemishes, bruises or other defects. Fruit should not be soft or spongy, no sour smell. Average. 5-6/Kg. Juice Sweet Lime Bright greenish yellow colour, thin skin, fruit should be plump, firm and heavy for its size, juicy and having a good flavour. No blemishes, bruises or other defects. Fruits should not be soft or spongy - No Sour smell Average 5-6/Kg Gooseberry Firm sweet and in shell. Pineapple Outer skin thick scaly, orangish green in colour. Ripe ones should show softness around apex when pressure is applied. Flesh of distinct whitish yellow colour, soft, fiberous sweet and juicy. Fruit should be heavy for its size and base should be well trimmed. No rot or mould formation. Baby Pineapple Outer skin orangish green, ripe ones should show softness around apex when pressure is applied. Flesh of distinct whitish yellow colour, soft, sweet and juicy. Fruit should be heavy for its size and base should be well trimmed. No rot or mould formation.

UNIT

KGM

25.

KGM

26.

KGM

27. 28.

KGM KGM

29.

KGM

30.

Pears KGM Green, brown or yellowish in colour, clean and bright. Soft juicy flesh, crisp and with good flavour. Not wrinkled, no scars, damage, insect or worm injury. Supplied with stalks attached. 10-12 /Kg. Creamish flesh.

186

SL. NO. 31. 32.

INGREDIENTS / DESCRIPTION Pomegranate Heavy for its size. Seeds not too large. Pears Hard Green brown colour, clean and bright. Soft Juicy flesh crisp and good flavour. Not wrinkled, no scars, damage, insect or worm injury. Supplied with stalks attached. 10-12/Kg. Large Plums Firm, smooth texture and not sour. Custard Apple Firm sweet center. Heart shaped or oval and can weigh up to 450 gms. Light or tan greenish quilted skin, which develops brown patches when the fruit is ripe. The flesh is with a lot of seeds, sweet sour mellow in taste and custard like. The fruit should be unblemished. Apricot Bright orangish yellow colour, plump and fairly firm, juicy with good flavour and tender flesh, should not be decayed or shriveled, seed should be easily unattached from flesh.

UNIT KGM KGM

33. 34.

KGM KGM

35.

KGM

36.

Strawberries KGM Bright red colour with even shaped fruits and leaves, should be fresh with no blemishes, bruises, soft spots or moulds. Should not be acidic. Should be of even size and colour. Should be very carefully and securely packed. Should be firm and shiny. Marsh-melon Smooth texture, sweet inside and heavy for its size. Star Apple Best quality. Kabuli Anar Deep red flesh and minimum of seeds. When cut juice should come out freely. KGM KGM KGM

37. 38. 39.

187

SL. NO. 40.

INGREDIENTS / DESCRIPTION Mango Chausa Oval shaped, long, sweet, with no fiber. Skin greenish yellow. Flesh to be golden yellow. Seed to be thin. Should not be overripe. Neither hard nor too soft. Should not have wrinkles on the skin, no bruises, blemishes or wormholes. Skin should be smooth and shiny. Should not be dirty. 5 / Kg. Mango Fazli Flesh yellow in colour, skin should be green in colour. Huge for its size. Should be fresh and sweet. Neither hard nor too soft. Should not have wrinkles on the skin, bruises, blemishes or wormholes. Skin should be smooth and shiny. Should not be dirty. 2-3/Kg. Mango Himsagar Yellowish green in colour. No fibre, flesh is deep in colour. Should not have spots, no wormholes. Neither hard nor too soft. Should not have wrinkles on the skin, no bruises, blemishes. Skin should be smooth and shiny. Should not be dirty. Plums Rich colour, smooth, the flesh is juicy, sweet or sour. May vary from red to yellow in colour, soft tip is the best guide. Lychies The skin is brownish with a white translucent, pearly flesh and is refreshingly juicy. The taste varies as the fruit matures. Should not have a bad odour, no insect, Stem should be attached around 3-4 to keep it fresh.

UNIT KGM

41.

KGM

42.

KGM

43.

KGM

44.

KGM

188

MILK AND MILK PRODUCTS SPECIFICATIONS

SL. NO. 1. INGREDIENTS / DESCRIPTION Milk [Skimmed] [Toned] [Whole/Full Cream] Should be fresh, clean, only from dairy cows. Free from objectionable odours or flavors. Sp. gravity of 1.028 at 60 degree F. Should have minimum 4% butter fat content and minimum 6.25% non-fat milk solids. Homogenized and pasteurized. Sealed and dated packets. Possibility of tetra packs will be appreciated. UNIT LT

2.

Single Cream LT Fat content should be above 18%. No fat globules in cream. Not yellow in colour or grainy to touch. Cows cream only, should not be sour. Homogenized and pasteurized. Double Cream LT Fat content should be above 48%. No fat globules in cream. Not yellow in colour or grainy to touch. Cows cream only, should not be sour. Homogenised and pasteurized. Paneer 50% Fat Pure white in colour with a good consistency. The binding should be firm and should not have 20% of water by weight. Should be odourless and have a mild creamy taste. Should be supplied in moist clothes of polythene to prevent drying. Should be free from bacteria. Chenna Soft, pleasant smell. Should be free from bacteria. Khoya Soft and firm with no objectionable odour. Should be free from bacteria. LT

3.

4.

5. 6.

KGM KGM

189

EGG SPECIFICATIONS
SL. NO. 1. INGREDIENTS / DESCRIPTION Eggs The egg should be fresh, clean and washed and with an unbroken shell. The white should firm and gelatinous. Eggs to be of uniform size and weight not less than 55 gms. To be supplied in plastic trays. Each tray holding 30 eggs. When opened yolk should be bright yellow in colour, firm and free of blood spots with a tight white of an egg. Not to float on water turf. Country Eggs The egg should be fresh, clean and washed with an unbroken shell. The white should firm and gelatinous. Eggs to be of uniform size and weight not less than 55 gms. To be supplied in plastic trays. Each tray holding 30 eggs. When opened yolk should be firm and free of blood spots with a tight white of an egg. Not to float on water turf. UNIT NOS

2.

NOS

190

FISH SPECIFICATIONS
SL. NO. 1. INGREDIENTS / DESCRIPTION Calcutta Bekti Fillet (Without Collar Bone) Head, backbone and fins to be removed, Belly should be clean, flesh should be light pink in colour, no bad or foul smell, scales shinny and skin to be firm, without collarbone, weight 1.2-1.7 Kg. Bombay Bekti Fillet Skin to be firm and light pinkish in colour and should be moist. Odour to be fresh and pleasant. Belly should not be torn, swollen or sagging. Eyes to be protruding and no scales falling off. Gills to be bright red, gutted. Weight 1.5-2 kg. Indian Salmon Fillet Skin to be firm and bright pink in colour when gutted. Odour to be fresh and pleasant. Belly should not be torn, swollen or sagging. Eyes to be protruding, wet and transparent. and no scales falling off. Gills to be bright red, gutted. Indian Haddock Fillet Skin to be firm, odour to be fresh and pleasant. Belly should not be torn, swollen or sagging. Eyes to be protruding and no scales falling off. Gills to be bright red, gutted. Weight 4-5 Kg. Prawn Large Firm flesh, shiny and wet surface. Head should be intact. Tail springy when touched. No bad odour. 9-11 pcs/Kg. Prawn Medium Firm flesh, shiny and wet surface. Head should be intact. Tail springy when touched. No bad odour. 16-17 pcs. /Kg. Shrimps Fresh flesh, should be firm, crisp and dry. Should not be limp. Shell should be shiny and peeled. No bad odour. No cracks and hole in shell. UNIT KGM

2.

KGM

3.

KGM

4.

KGM

5.

KGM

6.

KGM

7.

KGM

191

SL. NO. 8.

INGREDIENTS / DESCRIPTION Pomfret Whole Large Eyes should be bulging and shiny. Skin should be shiny and smooth. Gills should be bright and red in colour. Tail should be firm. When cut the flesh should be firm and belly should not be swollen and sagging. Weight 350-400 gms. Pomfret Small Eyes should be bulging and shinny. Skin should be shiny and smooth. Gills should be bright and red in colour. Tail should be firm. When cut the flesh should be firm and belly should not be swollen and sagging. Weight 200-250 gms. Hilsa Whole Skin should be firm. Scales firm, bright and shiny. Eyes should be wet, transparent and protruding. Gills deep red in colour. Tail should be springy. Belly should not be torn, sagging or swollen. Average weight per fish should be 1.2-1.4 Kg. Not frozen should be fresh. Rohu/Katla Whole Skin to be firm. Odour to be pleasant. Belly should not be sagging. Eyes to be protruding and no scales falling off.

UNIT KGM

9.

KGM

10.

KGM

11.

KGM

12.

Cafeteria Fish Cut KGM Rohu/Katla fish. Should be fresh. Weight of whole should be 2.5-3 Kg. The pieces should be neatly cut cut to be ready to fry. 70-80 gms/piece without head. Prawn Small Firm flesh, shiny and wet surface. Head should be intact. Tail springy when touched. No bad odour. 20-22 pieces/Kg. Shell should be firm and not soggy The flesh should be bright off white in colour, the tentacles should be intact if received head on it should have a pleasant smell. Salmon Whole Skin to be firm, odour to be fresh and pleasant. Belly should not be torn, swollen or sagging. Eyes to be protruding and no scales falling off. Gills to be bright red, gutted. Weight 2 2.5 kg. KGM

13.

14.

KGM

192

SL. NO. 15.

INGREDIENTS / DESCRIPTION Prawn Jumbo Firm, flesh shiny and wet surface. Head should be intact. Tail springy when touched. No bad odour. 5-6 pieces/Kg. Shell should be firm and not soggy The flesh should be bright off white in colour, the tentacles should be intact if received head on it should have a pleasant smell. Indian Silver Salmon Skin to be firm, odour to be fresh and pleasant. Belly should not be torn, swollen or sagging. Eyes to be protruding and no scales falling off. Gills to be bright red, gutted. Weight 2 2.5 kg. Crab Should be alive with claws tied. Should be heavy and plump. A sign of plumpness is when the abdomen touches under the shell, is slightly lifted. The shell should not be broken in fragments or pieces. Weight 3-4 pcs/Kg. Mud Crab Should be alive with claws tied. Should be heavy and plump. A sign of plumpness is when the abdomen touches under the shell, is slightly lifted. The shell should not be broken in fragments or pieces. Weight 550-600 gms/Kg. Prawn Headless Large Firm, flesh shiny and wet surface. Tail springy when touched. No bad odour. Wt. 18-22 pieces per Kg. Shell should be firm and not soggy The flesh should be bright off white in colour, the tentacles should be intact. If received head on, it should have a pleasant smell. Prawn Headless Medium Firm, flesh shiny and wet surface. Tail springy when touched. No bad odour. Wt 26-28 pcs. Per Kg. Shell should be firm and not soggy The flesh should be bright off white in colour, the tentacles should be intact. If received head on, it should have a pleasant smell.

UNIT KGM

16.

KGM

17.

KGM

18.

KGM

19.

KGM

20.

KGM

193

SL. NO. 21.

INGREDIENTS / DESCRIPTION Lobster (Fresh) Bought live. Identified by the reflex actions of the eyes, antennae and claws. Should not show any signs of damage from fighting or have any signs of missing pieces. Average 12 in length and approx. 800 to 1100 gms. Lobster (Sand) Weight 3-4pieces per Kg. Shell should be firm and not soggy The flesh should be bright off white in colour, the tentacles should be intact if received head on it. Lobster (Rock) Weight 2 pieces per Kg. Shell should be firm and not soggy The flesh should be bright off white in colour, the tentacles should be intact. If received head on, it should have a pleasant smell. Prawn Jumbo Headless Firm flesh, shiny and wet surface. Head should be intact. Tail springy when touched. No bad odour Same as Jumbo prawns. Weight 7-8 pcs. / Kg. Shell should be firm and not soggy The flesh should be bright off white in colour, the tentacles should be intact if received head on. King Fish Whole Skin should be shiny, odour fresh and pleasant, belly intact. Eyes should be wet and transparent and scales should be firm. Gills to be bright right and tail should be springy. 2 2.5 Kg. Reef Cod Fillet Fresh, odourless, not sticky to the touch. Skinless, belly removed. Only usable meat to be accepted. Weight 2 3 Kg. a fillet.

UNIT KGM

22.

KGM

23.

KGM

24.

KGM

25.

KGM

26.

KGM

194

CHICKEN SPECIFICATIONS
SL. NO. 1. INGREDIENTS / DESCRIPTION Broiler Chicken Dressed weight should be 1.2 Kg. inclusive of the skin and neck. Feet to be cut from the hock joint. Neck to be 1.5 inches long from the carcass. Should be free from deformities, blood clots. Breasts and legs free from cuts, tears and missing skin. Birds to be well developed and even size distribution No broken bones, free from discoloured skin and flesh. Flesh to be plump and fat. Should not be dark yellow and mushy to touch. Tandoori Chicken 600-700 gms. in weight. Without skin. Fresh. No bad odour. Neck to be 3 inches long from the carcass. Should be free from deformities. Breasts and legs free from cuts, tears and missing skin. Birds to be well developed and even size distribution. No broken bones, free from discoloured skin and flesh. Flesh to be plump and fat. Should not be dark yellow and mushy to touch. Capon Dressed weight should be 2.2-3 Kg. inclusive of the skin and neck. Feet to be cut from the hock joint. Neck to be 3 inches long from the carcass. Should be free from deformities. Breasts and legs free from cuts, tears and missing skin. Birds to be well developed and even size distribution. No broken bones, free from discoloured skin and flesh. Flesh to be plump and fat. Not dark yellow and mushy to touch. Chicken Liver Should be deep reddish brown in colour. Should have a shiny surface and free of excessive fat. Should not be slimy to touch and no bad odour. UNIT KGM

2.

NOS

3.

KGM

4.

KGM

195

SL. NO. 5.

INGREDIENTS / DESCRIPTION Boneless Leg And Breast No skin, no cartilage or socket joint. Bright pale pink flesh, no dryness. No signs of injury or blood clots. Excess fat and sinews removed. Fresh and not frozen. Packed in 1Kg. packets sent on ice. Small Chicken 700-800 gms. Rest same as chicken. Chicken Bones Bright and pink, fresh feel. Not slimy or sticky. No smell. CHICKEN WINGS Full wings with blob of bird attached. No Feather stalks. Packed in 1Kg. bags. Chicken Curry Cut Even mix of breast and leg pieces. No excessive neckpieces. No splintered bones, [STAFF] clean even cuts. Fat should not be excessive. No off odour. Fresh and not frozen.

UNIT KGM

6. 7.

KGM KGM

8.

KGM

9.

KGM

196

MUTTON / LAMB SPECIFICATIONS

SL. NO. 1. INGREDIENTS / DESCRIPTION Mutton Curry Cut [For Cafeteria] Free from smell. No bone splinters. 60-70 Gms/ piece. Properly trimmed and no fat/skin present. No excessive shoulder bones or shoulder botis. Should have a uniform mix of leg, shoulder and thigh botis. Should come chilled in clean baskets. Mutton Chops Trimmed and cleaned from the bone. Meat to be smooth and bright red in colour. No blood clot or blue patches Lamb Leg The hind legs separated from the thighbone down. No flaps of fat or tissue attached. No portion of spine or tail attached. Feet off at the ankle. The colour of the meat should be bright and brick red. The meat should not have blue bruises, blemishes or purple blood clots. No rancid / rotting smell in the meat. No slime formation on the meat. Weight 1.8-2.2 Kg. No bad odour. Lamb Liver Dark red colour. Shiny smooth exterior, free from slime, whole piece, free from odour. Lamb Kidney Brown in colour, tender and flavourful, should be plump, firm, should be shiny with no off smell. Lamb Fat Fat from kidney region. Butter texture, smooth white colour. No yellow patches and free from blood, spots and slime. Should not have an unpleasant odour. Lamb Brain Whole brain, plump, pleasant smelling and free from odour, blood and slime, shiny exterior texture. UNIT KGM

2.

KGM

3.

KGM

4.

KGM

5.

KGM

6.

KGM

7.

Nos

197

SL. NO. 8.

INGREDIENTS / DESCRIPTION Khassi Leg Pair Should be with a tail and aitchbone attached. Should have smooth, moist and not excessive covering of fat films. Weight (2.5-3) Kg. per pair. Tail should be attached for identification up to the receiving point. However the weight of the tail should be deducted from the final quantities received. Kidney Fat - Mutton Chunky even pieces of fat. Should be free of any flesh. The fat should be creamy white in colour and smooth in texture. No offensive smell.

UNIT KGM

9.

KGM

198

BEEF AND PORK SPECIFICATIONS

SL. NO. 1. INGREDIENTS / DESCRIPTION Beef Round Cut Shiny surface with brick red colour, trimmed of excessive fat. Meat should be tender with no bad odour. No yellowing of tissues and tendon. Beef Fillet Shiny surface with brick red colour, trimmed of excessive fat especially at the head. Meat should be firm, tender with no bad odour. No yellowing of tissues and tendons. When pressure is applied to the fillet with the finger and the thumb then they should penetrate the surface. Excess waste meat attached should be trimmed. Side strip should not be present. Approx. wt. (1.3-1.8) kgs./fillet. Should be received fresh and frozen. Beef Kidney Fat White and firm. Marbled texture. Membrane easily removed, not slimy. Received fresh. Shin Bone Large center of marrow, bones not to be slimy or dull in colour. No dirt or grains on bones. Ox - Tail Whole length, without skin. Non-slimy. Small blob at the base of tail attached. Ox Tongue Pink purple in colour with coated skin. No Slime or discolouration, no smell. UNIT NOS

2.

KGM

3.

KGM

4.

NOS

5.

NOS

6.

NOS

199

SL. NO. 7.

INGREDIENTS / DESCRIPTION

UNIT

Pork Leg KGM Flesh should be firm and pink and no traces of moisture. Fat marbelling should be firm and even and the trotters should be missing. Should not have a bad odour. Skin to be free of Hair, Unblemished firm and dry to touch. The skin should be creamy in colour and properly cleaned of all dirt and the fat should be evenly distributed and visible.

200