beverage purchase control
BEVERAGE CONTROLit can be defined as a process used by managers to direct, regulate, and restrain the actions of people so that the established goals of an enterprise may be achieved. The control process was described as having four steps:
establishing standards and standard procedures,
training staff to follow those standards and standard procedures,
monitoring staff performance and comparing it with established standards,
and taking remedial actions as needed.
Purchase controlThe primary purposes of beverage purchasing controls are:
1. To maintain an appropriate supply of ingredients for producing beverage products
2. To ensure that the quality of ingredients purchased is appropriate for their intended use.
3. To ensure that ingredients are purchased at optimum prices As always, the key to successful control is to establish suitable standards and standard procedures.
For beverage purchasing, standards must be developed for:
Establishing standards for beverage purchasing
Quality StandardsAlcoholic beverages purchased for bars may be divided into two classes according to use: call brands and pouring brands. A call brand is one used only if the specific brand is requested by a customer; a pouring brand is one used whenever a customer does not specify a call brand. If a customer simply orders a “scotch and soda,” he or she would be given the pouring brand. In contrast, if a specific brand of scotch is ordered (Dewar’s White Label, for example), the customer is given the call brand specifically requested, assuming it is available. The usual practice is for management to designate one low-to-medium-priced brand in each category of spirits as the pouring brand. The specific brands selected as the pouring brands will vary with the clientele and the price structure.
Once pouring brands have been identified, all other brands become call brands. The selection of pouring brands is an important first step in establishing both quality and cost standards. Before establishing quality standards for alcoholic beverages, one must first weigh a number of considerations, including product cost, customer preferences, and product popularity, among others. Most people will agree on the extremes—that certain 25-year-old scotches are of high quality and that particularly inexpensive gins are of very low quality—but between these extremes there is a vast area for legitimate differences of opinion.
The extent of the need for each of the three different types of alcoholic beverages must be determined before any purchase decisions can be made. Needs differ from place to place, depending on clientele and the inherent differences in the nature of operations. Some neighborhood bars cater to customers whose tastes run primarily to domestic beer, inexpensive wines, and comparatively few whiskies. In contrast, cocktail lounges serving an uppermiddle- income business clientele commonly offer imported beers, a large assortment of spirits, and a few fine wines, whereas some expensive restaurants are widely regarded for their specialized wine lists that include the finest of imported wines.
Purchasing beverages requires the expenditure of cash for merchandise that must be carried as inventory until sold. It is usually undesirable to maintain an inventory of items that move very slowly. Once an operation is open and control procedures are in place, a manager can identify slow-moving items and restrict or eliminate their purchase. However, this is a partial solution at best.
Quantity StandardsBecause beverage products are not highly perishable if stored properly, beverages can be purchased far less frequently than perishable foods. This is not to say that beverages are nonperishable, however. Canned and bottled beers should be used within approximately three months of packaging. Draft beers should be consumed within one month. Some wines have comparatively limited lives, whereas others, those that improve with age, can and should be stored for some period before use. Most spirits can be stored almost indefinitely. Thus, perishability is not a critical factor in establishing quantity standards for beverages. Other factors are far more significant.
The principal factors used to establish quantity standards for beverage purchasing are:
1. Frequency with which management chooses to place orders
2. Storage space available
3. Funds available for inventory purchases
4. Delivery schedules set by purveyors
5. Minimum order requirements set by purveyors
6. Price discounts for volume orders
7. Price specials available
8. Limited availability of some items
Some of these considerations are often more important than others. Most establishments, for example, have limited storage space, and this is clearly a limiting factor in establishing quantity standards. So is the number of times that management will permit orders to be placed. It would be foolish to place orders for any item too frequently, so quantity standards must be such that the number of orders placed over time is kept to a minimum. Availability of funds can be another severely limiting factor: Beverage purchases require relatively large cash outlays, either at the time of delivery or very soon thereafter, depending on local regulations. Thus, if the necessary cash is not normally available for purchasing large quantities, it may be necessary to purchase smaller amounts and place orders more frequently. And although management may choose to order a given item frequently, the purveyor may not be willing to deliver more often than once every other week. In addition, purveyors may establish minimum order quantities for some items. Wines, for example, must often be purchased by the case. It is sometimes possible to obtain discounted prices for alcoholic beverages or to receive merchandise dividends by purchasing quantities somewhat larger than one would normally order. From time to time, some beverage products are available at discounted prices for limited periods, and it is sometimes desirable to increase
a current order beyond the normal order quantity to take advantage of the discount. Sometimes, some beverage products, especially wines, may not be readily available in the market, and it may be necessary to purchase a very large quantity when the item is available if one is to ensure an adequate supply for continuing needs.
Standards for PriceAssuming that quality standards have been established and appropriate purchase quantities are known, the next step is to ensure that all beverage purchases are made at the optimum price. Any discussion of price standards is complicated somewhat by laws that vary from state to state. In general, states may be divided into two groups:
1. License states, where beverage wholesalers (and sometimes manufacturers and distributors as well) are permitted to sell alcoholic beverages directly to hotels, restaurants, and similar operations. This often results in competitive pricing of brands in the market.
2. Control states, where the state government actually sells some or all alcoholic beverages through its own network of stores (or those that are franchised by the state), thus exercising complete control over prices. The practices of control
states vary considerably from one to another. Some sell all alcoholic beverages through state outlets; others sell spirits and wines through state outlets, but permit beer to be sold through private beer distributors. In others, beer and wines are sold in private retail outlets, and state outlets sell spirits as well as wine. In control states, by the way, it is typically illegal for hotels and restaurants to purchase alcoholic beverages out of state.
In beverage purchasing, standard procedures are needed:
Establishing Standard Procedures for Beverage Purchasing
1. To determine order quantities
2. To process orders
Determining Order QuantitiesThere are two basic methods for determining order quantities. The first, known as the periodic order method, is based on fixed order dates and variable order quantities; the second, the perpetual order method, uses variable order dates and fixed reorder quantities.
these have been discussed separately in other post
Processing ordersWhenever practical, it is advisable to establish a purchasing routine that requires formal written purchase orders. In most large hotels and many large restaurants, formal purchase requests serve as the basis for ordering. In a large hotel, the purchasing routine may be the following: A wine steward, as the person in charge of maintaining the beverage inventory and stockroom, prepares a purchase request, similar to that illustrated in picture
|purchase request form|
just after the first of the month.
The purchase request is prepared in duplicate, with the original being forwarded to the purchasing agent in the accounting department. In some establishments, the purchasing agent is required to secure the manager’s written approval on the purchase request before placing any order. The order placed is recorded on a form
known as a purchase order, illustrated in picture
Purchase orderThe purchase order is made up in quadruplicate. The four copies are distributed as follows: The original is sent to the firm from which the beverages had been ordered; one copy is sent to the wine steward to confirm that the order has been placed; another copy is sent to the receiving clerk so that he or she knows what deliveries to expect and will be able to verify that the quantities and brands delivered are correct; the final copy is kept by the purchasing agent.
Monitoring Purchasing Performance and Taking Corrective Actionto assume that the employee is performing the job correctly unless something occurs to indicate the contrary. If, for example, the bartender reports that supplies of the gin identified as the pouring brand has completely run out, this can be taken as a clear sign that standard procedures for beverage purchasing are not being followed, at least for pouring gin. Most managers would agree that a better method of monitoring could have prevented this situation.
If the periodic order method has been established as the standard procedure for beverage purchasing, a manager has several means of monitoring employee performance. One possibility is to create a form for the employee to use when taking inventory on the regular day for determining order quantities and placing orders, as described previously. The employee is asked to record the number of bottles on hand for each beverage identified on the form, which is turned in to management. The use of this form can provide some reasonable assurance that the employee had counted units in inventory before determining purchase quantities. This approach can be refined to the development of a worksheet showing, for every
item in inventory, par stock, normal usage, amount on hand, and quantity ordered. After orders are placed, the employee gives this worksheet to the manager, who can quickly evaluate the order quantities. These are but a few of the possibilities for monitoring performance using the periodic order method.
The perpetual order method also provides many possible means for monitoring. The simplest is to consult the perpetual inventory cards to see that orders have been placed for the proper quantities as items reached their reorder points. A check of the perpetual inventory cards at any time during the course of an operating period
will quickly reveal an employee’s adherence to the standard procedures established.
To the extent that employees are not following the standard procedures established for their jobs, action is required to improve performance. The proper action to take will depend on the nature of the problem. The possibilities include explaining one or two small points that the employee may have misunderstood, completely retraining an employee who misunderstood the entire procedure, and laying off or otherwise disciplining an employee who willfully ignored some or all of the standard procedures established for the job. It is the responsibility of a manager to determine the appropriate action to take in a given situation. However, some steps must be taken to improve employee performance, or the job will not be done in a manner consistent with the standards and standard procedures established.