Purchase Orders How Much Stuff Should I Buy

Chapter 4Purchase OrdersHow Much Stuff Should I Buy?Yield TestsSales ForecastingOrder SizeAdjustments to Order SizesChapter OutlineLearning Objectives Discuss the consequences of over-and underordering.Calculate acceptable order sizes, EP weight, and edible product yield.Examine and diagnose causes of product loss.Prepare sales forecasts needed to enhance the accuracy of purchasing decisions.IntroductionBuyers must balance carrying or storage costs (inventory on the shelves) and stockout costs (irritated, disappointed customers).Options:Software applicationsConduct yield testsForecast salesDetermine order sizeYield TestsStep One: Buy enough of the product to conduct two or more tests (or get free samples)Yield TestsStep Two: Calculate the item’s as-purchased (AP) weightMeats, fish and poultry may weigh less then when purchased due to moisture lossshrink allowance may be addressed on the specification sheet)Yield Tests Third Step: use the exact service production procedures used in the restaurantCalculate weight of wasteSubtract from AP weightResult will be the edible-portion (EP) weight (also called usable weight or servable weight)Perform test more than once and average resultsYield TestsFive Causes of Product WasteMise en place – unavoidable cutting/trimming lossProduction loss – shrinkage due to cooking; also trimming of fat after cooking, discarding of end cuts, etc.Pilferage – eating and drinking on the job (cont.)Yield TestsFive Causes of Product Waste (cont.)Unanticipated mistakes Style of service – all-you-can-eat items, food bars, free refills on drinks, etc., are hard to averageAnalyze a product’s use over two weeks, divide by number of customers for average portion sizeYield TestsBest Option: conduct yield tests in your own kitchenSecond Best Option: Use the edible yield percentages in The Book of Yields or the Chef’s Book of Formulas, Yields and Sizes Third Best Option: take the word of your purveyorYield TestsA salmon weights 16 lbs (AP) and yields 12 lbs (EP)What is the yield percentage?Yield Tests Answer:EP ÷ AP × 100 = Yield Percentage12 ÷ 16 = .75 × 100 = 75%Yield TestsIf the AP price for an item is $2.07 per pound and the EP cost is $3.51 per servable pound, what is the yield percentage?Yield TestsFirst, calculate the EP weight:X ounces ÷ $2.07 (AP Price) = 16 ounces ÷ 3.51OrX ounces = 16 ounces ÷ 3.51 × 2.07OrX ounces = 9.4 EP ounces (the yield per AP pound)Yield TestsNow calculate the percentage yield:9.4 ounces ÷ 16 ounces × 100 = 59%Answer: Yield percentage is 59%Alternative method for solving:$2.07 (AP price) ÷ $3.07 (EP cost) × 100 = 59%Sales ForecastingFor Regular Sales -- Historical DataTaken from point-of-sale system (POS)Menu Mix Percentage or Popularity Index (calculated by dividing the number of times an item is served in a given time by the total meals served)Sales ForecastingSteak Ranch RestaurantOver the past 12 Wednesdays, 19 percent of the guests ordered prime rib dinners.Next Wednesday, 268 guests are expected.How many prime rib dinners should be prepared? Sales ForecastingAnswer:286 × 19% = 55 prime rib dinnersPlus a few more:MistakesMix of rare, medium and well-done and end-cut servingsMay have extras because of the number of servings in a roast Sales ForecastingFor Catering Sales – determine what you need, inflate it a bit and prepare the purchase orderChallenge #1 – more guests than guaranteedChallenge #2 – all-you-can-eat buffetOrder SizeThere is a simple formula:EP amount needed ÷ edible yield percentage = AP amount to orderOrder SizeBroccoli Example4-ounce servings (EP)75% yield percentage600 guests4 ounces × 600 = 2,4002,400 ÷ .75 = 3,200 ounces (3,200 ÷ 16 = 200)Should order just over 200 pounds (AP) to serve a 4-ounce portion of broccoli florets to 600 guestsOrder SizeAs mentioned before: you should always order a bit more than you needWastePilferageCan’t always order exact amount you need because of packaging, may end up ordering more anywayStockout is not in our vocabularyOrder SizeWine Example5 ounce serving (EP)Waste is 10% of each 750 ml bottleEstimated 100 glasses will sell per dayHow many bottles should you order in one week? Order SizeWine Example – Answer5 servable ounces ÷ .90 = 5.5 ounces (AP)25.4 ounces (AP) ÷ 5.5 ounces (AP) = 4.6 drinks per bottle700 (# of drinks sold per week) ÷ 4.6 = 152.2 bottlesYou will need to order 13 cases or 156 bottles of wine for the weekAdjustments to Order SizeWhen ordering, take into account your existing inventory. Subtract what you have on hand that is usable from the order size for a product