Storing DHM-

Control 2

OM SINGH
Amrapali Institute of Hotel
Management
DHM- 2
 Storing Control
Unit – 4 Class – DHM- 2nd

Contents:

• Receiving.
• Receiving Control.
• Methods
• Level of Techniques
• Perpetual Inventory
• Monthly Inventory
• Pricing of Commodities
• Comparison of Physical Inventory

Educational Objective Addressed:-

• Storing Control – To make Students understand about Storing control, what is

storing control? Importance of Storing..

• Job Description of Storing personnel, Condition of facilities and equipments,

• Arrangement of food, Location of storage facilities, Security,.

• Types of food service-Direct stores, Perishable and non-perishable.

• Stock records, Bin cards, Bin Cards, Stock Control Issuing Control, Requisition.
Transfer Notes.

• Perpetual Inventory methods, Pricing on Commodities, Monthly inventory

Stock taking.

• Stock taking and comparison of actual physical inventory and book value.

• Stock Levels, Pracical problems, Hygiene and cleanliness of the area.

__________________________________________________________________________________

Pre – Requisite:

• Knowledge of F&B Operations

• Knowledge of Purchasing.Receiving
STORING & ISSUING CONTROL

The main objective of a food store is to ensure that adequate supplies of foods for
the immediate needs of the establishment are vaiable at all times.

The aim of stock control is to minimise the cost of holding these stocks whilst
ensuring that there are enough materials for production to continue and be able
to meet customer demand. Obtaining the correct balance is not easy and the stock
control department will work closely with the purchasing and marketing
departments.

The marketing department should be able to provide sales forecasts for the coming
weeks or months (this can be difficult if demand is seasonal or prone to unexpected
fluctuation) and so allow stock control managers to judge the type, quantity and
timing of stocks needed.

It is the purchasing department’s responsibility to order the correct quantity and

quality of these inputs, at a competitive price and from a reliable supplier who will
deliver on time.

As it is difficult to ensure that a business has exactly the correct amount of stock at
any one time, the majority of firms will hold buffer stock. This is the “safe” amount
of stock that needs to be held to cover unforeseen rises in demand or problems of
reordering supplies

Food items are kept in various types of storage – dry stores, Vegatables stores,
dairy stores and meat boxes and freezers. On receipt the food direct items are
usually transferred direct to the kitchen. The utilization of these items is under the
direct supervision of the executive chef. It is impracticable and unnecessary to keep
extensive stock records for the food direct items.The dry store items are received
and transferred to the storeroom. These items are used in smaller quantities one or
twice a day. The detailed records of non-perishable are kept in the form of stock
cards or bin cards. Stock cards are kept on the loose leaf principles and bin cards
are attached to the respective bins or racks.

In order to deal with different department’s coloured requisitions are often used to
easily identify the department concerned. The requisition is priced by the F&B
Controller to ascertain the periodical total of non-perishable consumed. The detailed
information regarding non-perishables are recorded in the weekly invoice book. It is
totaled weekly and the totals are posted to the appropriate stock cards or bin card.
The sequence of items in the weekly issue book may be in alphabetical order or
under group dealings such as canned fruits, breakfast, cereals and so on.

Storing Practice:-

• Groceries and canned goods are stored in the main storeroom. These
products are stored under main heading and in alphabetical order.

• Perishables are stored in refrigerated units.

• A tag of each piece of meat is filled in the storeroom.

• Only authorized person are permitted in the storeroom.

• Keys are deposited with the security and a register should be maintained for
issuing and depositing of keys.

It is the duty of the F&B Controller:-

- To make studies of the stock to eliminate excess quantities.

- Spot check storage method.

- Temperature, sanitary conditions.

- To assure the product is issued in a “ first in first out “ basis

- To prevent spoilage and pilferage.

The storage of food aims to ensure that an adequate supply of food for the
immediate need of the operation is available at all times. In addition the basic
problem in case of these items is to prevent losses through spoilage, Pilferage.

Spoilage Occurs due to :-

- Long period of storage.

- Poor ventilation

- Incorrect temperature.

- Unsuitable issuing practice.

- Paying no attention to slow moving stocks.

Pilferage can be kept to minimum by keeping the stockroom locked and preventing
entrance to the stores by unauthorized personnel.

At the receiving end all food items are categorized as :-

 - Perishable items, meat, fish, dairy products, fruits and vegetables.

- No – perishable items.

The layout of the stores should be based on the principle that minimizes the
distance walked by the storekeeper and the inventory list should be printed in the
same order in which items have been placed in the stores.. This will facilitate the
quick and efficient stock taking. Items which are issued daily must be located near
to the door and the remainder being arranged in a logical sequence. Alternatively
commodities could be grouped together and each of them arranged into sections.

In general food controller must understand the causes which lead to spoilage and
pilferage and should establish appropriate standards and procedures. These storage
control procedure could be divided into four categories.

• Storage facilities and equipment.

- Temperature and lighting

- Storage containers.

- Shelving

- Cleanliness

• Arrangement of food items.

- Location

- Rotation of stock

- Availability

• Location of storage facilities

• Pest control system

• Security

Bin Card

For each commodity stored a separate bin card is prepared showing the following
information:-

- Description of commodity

- Quantity of goods issued

 - Date

- Balance remaining

- Accounting of goods received

- Minimum stock level.

Issuing

The Issuing Control Point

Issuing is more prevalent in food service operations where more than one outlet
uses a food storage area. Such as in a hotel where the coffee shop, banquets and
the fine dining restaurant all share a central dining room and a storeroom. As it
would be impractical for each of the food and beverage operations to have their
own storeroom. A formal issuing process is needed so each area can be properly
charged for the food items they use. This is crucial so an accurate food cost can be
maintained for each area. As the manager of any of the outlets in an operation you
would want an accurate costing of the food you used and not have it mixed with
the other outlets that you share a storeroom,

In small operations, those with only one food outlet, formal issuing may be
eliminated entirely. In such cases, all purchases are regarded as direct purchases
and charged to the single food outlet.. Supplies are charged directly to the
department or unit in whom they are used. This accounting transfer occurs even
though the products are held in a central storage area. The direct purchase system
eliminates the critical from a cost control standpoint because it is where the food
products change departments. The objective of issuing is to ensure proper
authorization for the transfer of food products to production department(s) of the
operation. The issuing function should be designed to guarantee that only
authorized personnel order and receive products from the facility's storage areas.
A properly designed issuing system also aids in the calculation of the daily food
cost.

Although this system is simple and less time-consuming, it does not provide as
much control as the formal system described in the section below.

Issuing and Personnel

In a formal issuing system the person in charge of the storeroom checks to

determine that each order has been properly authorized, removes product storage
tags, and proceeds to fill the order. The storeroom person then costs out each item
ordered and total the costs. A copy of the completed requisition is sent to the
operation's accounting office along with any storage tags removed from the items.
This system prevents personnel from helping themselves to whatever they want,
whenever they want it.

While putting orders together, the storeroom person should note any items in short
supply and direct this information to the operation's buyer so the items can be
reordered. Careful inspection of written requests for inventory items and accuracy
are important during product issuing. In some establishments, the storeroom
person not only assembles the order for a department, but also delivers it to that
area. Prearranged issuing times for each department can eliminate confusion and
enable the storeroom person to work more efficiently.

Generally, the same kinds of equipment are used during the receiving and issuing
of inventory. Products issued on the basis of weight should be weighed before they
are released to the production department. Calculators are useful to determine the
dollar amount of each department's order and the total of all issues for the day.
Handcarts and dollies are used to transport the products from storage facilities to
production areas.

Requisitions are the backbone of a successful issuing control point. Written and
orders are required from a department before any products are released. The
requisition forms may be sequentially numbered and/or color-coded by department
for control purposes. Putting requisitions in writing provides documentation and,
therefore, greater control. The need for documentation exists whenever a product
is transferred from one area of responsibility to another. In this case, the products
are transferred from storage to production. Usually a supply of products sufficient
for one day or one meal period is issued to each department.

Issues should be properly costed This facilitates the calculation of daily food cost
and reminds employees to think of inventory as money. Requisitions must be
subtracted from perpetual inventory records to maintain accuracy. Daily issues
help establish usage rates and reorder points.

When products are issued, the FIFO [first in - first out] system must be followed.
Proper stock rotation minimizes spoilage, contamination, and loss of product
quality. The order in which products are assembled for issuing is the reverse of the
order in which they are stored. That is, the least perishable items are taken from
storage first and the most perishable products last. This minimizes possible
contamination and maintains product temperature control. The food production
manager (chef or assistant manager) should be notified if perishable products are
nearing the end of their shelf life.

Storeroom facilities should not be left unattended if the issuing control system is to
remain intact. For maximum security, storeroom facilities should be kept locked
with access limited to the storeroom person and the manager. Staff needs to be
organized and request the items they need for the day rather than running in and
out of the storage areas all day. Restricting unauthorized access to storage areas
helps to eliminate losses due to thefts and pilferage.

It is management's responsibility to establish policies and standards for issuing.

Although some operations do not find it necessary to use a formalized issuing
system, managers who view their inventory as a form of money realize the
importance of carefully controlling the issuing function. It is management's job to
follow up on the issuing control point to determine that standards are being
maintained.

Requisition

A requisition is a request for something, especially a formal written request on a pre-printed

form. Items are often requisitioned during times of conflict, or natural disasters, to aid the efforts.

All food stuff is issued against requisition prepared and signed by an authorized
person.. The requisition are pre-numbered and in duplicate. Whenever possible, it
is recommended to print the originals and the duplicate in different colors.

The F&B manager submits to the storekeeper a written list of sub-department

heads who are permitted to make requisition for merchandise from the stores.

CONTENT OF REQUISITION AND TRANSFER

Requisitions and transfer should contain the following information:

• Date of issue
• Department to receive merchandise
• Item requisitioned by name.
• Number of units.
• Unit size.
• Signature of authorized person requisitioning and receiving the merchandise.

Requisition must be closed by ruling off the unused portion of the sheet
immediately below the last item requisitoned. Any changes on the requisition must
be initiated by the person responsible for the alteration.

(Issue practice and Issue analysis .Page no “173 by Jagmohan Negi)

Transfer

In big hotels where many kitchens may exist it is necessary from time to time to
transfer food items from one kitchen to another. Similarly in chain operations where
one unit may produce some specific items for another units or where one unit in the
organization running short of needed items may be encouraged to secure them
from another unit. To determine accurate food cost it is necessary to maintain
record of the food transferred.. The transfer note is similar in content with the
requisition form. It works like an internal invoice. The department which issue or
sells these items should be credited for those items.

 Under Kitchen Transfer: When ffod items are transferred from one kitchen to
another record must be maintained as regards to the items and amount so
transferred.
 Intra Unit Transfer: - Food and beverage transfer between the bar and the
kitchen in the from of wine and liqueur for preparing dishes and Oranges and
lemon in the bar for garnishing drinks is required ,these kind of transfer fall
in the category of intra unit transfer.
 Inter Unit Transfer: There are many small chain operations who produce
some items and then distribute those items to other units or chain.

Stocktaking of food

The main objectives of taking stock are:

- To determine the value of goods held in stock. This will indicate if too much
or too little food is held in stock and if the total value of stock held is in
accoedance with the financial policy of the establishment. The total value of
food held in stock is also required for the profit and loss account and the
balance sheet by the organization’s account department.

- To compare the value of good actually in the stores of a particular time with
the book value of the stock,which will have been calculated with the simple
formulae of :

Value of opening stock + purchase during the period – requisition made in

the same period = value of closing stock.

- To list slow moving items .This will bring to the attention of the purchasing
officer the head chef etc. those items which are in stock and for which there
has been no demand ,since the last stock take. Usually these items then be
put on to a menu to sell them before they detoriate or return to the
wholesaler and credit obtained.

- To compare the usage of food with food sales to calculate the food
percentage and groos profit.

- As a deternent against lost and pilferage.

 - To determine the rate of stock turnover for different groups of foods. This is
calculated by the formula.

Cost of Food Consumed

------------------------------- = rate of stock turnover in a given

period

Average value of stock at cost price

Stock management

Good stock management by a firm will lower costs, improve efficiency and ensure
production can meet fluctuations in customer demand. It will give the firm a
competitive advantage as more efficient production can feed through to lower prices
and also customers should always be satisfied as products will be available on
demand.

However, poor stock control can lead to problems associated with overstocking or
stock-outs.

If a business holds too much buffer stock (stock held in reserve) or overestimates
the level of demand for its products, then it will overstock. Overstocking increase
costs for businesses as holding stocks are an expense for firms for several reasons.

• Increases warehouse space needed

• Higher insurance costs needed
• Higher security costs needed to prevent theft
• Stocks may be damaged, become obsolete or perish (go out of date)
• Money spent buying the stocks could have been better spent elsewhere

The opposite of an overstock is a stock-out. This occurs when a businesses runs out
of stocks. This can have severe consequences for the business:

Loss of production (with workers still having to be paid but no products being
produced)

Potential loss of sales or missed orders. This can harm the reputation of the
business.

In these circumstances a business may choose to increase the amount of stock they
hold in reserve (buffer stock). There are advantages and disadvantages of increasing
the stock level.

Advantages Disadvantages
Can meet sudden changes in demand Costs of storage – rent and insurance

Less chance of loss of production time Money tied up in stocks not being used
because of stock outs elsewhere in the business
Can take advantage of bulk buying Large stocks subject to deterioration and
economies of scale theft

Stoctktaking is essential in calculating the cost value of the food used and the gross
profit percentage for any period .It provide a usefull check as :-
- Stock that need to be used up quickly.
- Unmarked or unlabelled stock which should be thrown away.
- Food hygiene standards within the stores.
- Prices and the amending of costing recoeds.
- Total stock carried and the amount of capital tied up in the business.

Stock Level
An establishment is required to determine an appropriate stock level so as there is
no running out of cost or of over stocking of an items.The main determinants of
stock level are :-
- Maximum and minimum forecast usage figures based on the volume forecast
and post histories.
- The re-ordering time for the items.
- The economic order quantity.
- The market trends.
- The shelf life of the item.
- Budget available for purchasing.

Frequently Asked Question:

Q.1.Explain Storing Control?

Q.2 .Explain the Storing Practices in the Hotels?
Q.3. Explain the purpose of Bin Card?
Q.4. Explain the purpose of Issuing Control?
Q.5. Explain the Procedure of Stock Management?
References

• Management & Cost Control –by- Jagmohan Negi ( Page no : 136 – 163)

• Supported Notes – Self made notes and material collected from the industry