2.2 Purchasing, Receiving & Inventory
Key Takeaways
- A purchase specification is a written description of an item's required quality, grade, size, and packaging so competing vendors quote on identical products and deliveries can be checked against a standard.
- Par level is the amount of an item that should be on hand to cover demand until the next delivery; ordering brings stock back up to par, preventing both stockouts and over-ordering.
- Receiving means matching each delivery to the purchase order and invoice for quantity, price, and quality, and verifying cold TCS foods arrive at 41 degrees F or below before accepting them.
- FIFO (First In, First Out) rotates older stock to the front so it is used before newer stock, minimizing spoilage and the risk of serving expired food.
- Under rising prices, FIFO values ending inventory near current cost and produces a lower cost of goods sold, while LIFO (Last In, First Out) produces a higher cost of goods sold and a lower, older-valued ending inventory.
Specifications and Purchasing Methods
Good purchasing starts with a purchase specification - a written description of an item's required quality, grade, size, and packaging. Specs let competing vendors quote on the same product so bids are comparable, and they give receiving a standard to inspect against.
Common purchasing methods:
- Competitive bid (formal) - multiple approved vendors quote on identical specs; required for many public or large purchases
- Informal (quote) buying - phone or email quotes for smaller orders
- Prime vendor / contract - most volume goes to one vendor at agreed pricing
- Group purchasing organization (GPO) - facilities pool volume for lower prices
Par Levels
A par level is the quantity of an item that should be on hand to cover demand until the next delivery. You order enough to bring stock back up to par. Set par too low and you face stockouts; set it too high and you tie up cash and invite spoilage.
Receiving Checks
Receiving is a control point, not a formality. The receiving clerk must:
- Match the delivery to the purchase order and invoice for quantity, price, and quality
- Check cold TCS foods are 41 degrees F or below and frozen foods are solidly frozen
- Inspect for damage, pests, and broken packaging
- Reject out-of-spec or unsafe items at the dock and note it on the invoice
Storage: Dry and Cold
- Dry storage: 50-70 degrees F, 50-60% humidity, items off the floor (at least 6 inches)
- Cold storage: refrigerators at 41 degrees F or below; store raw poultry on the bottom, ready-to-eat on top, by minimum cook temperature
- Always rotate by FIFO (First In, First Out) - older stock to the front so it is used before newer stock, cutting spoilage and the risk of serving expired food
Inventory Valuation: FIFO vs LIFO
FIFO and LIFO are also inventory valuation methods that change reported food cost when prices move:
| FIFO (First In, First Out) | LIFO (Last In, First Out) | |
|---|---|---|
| Cost flow | Oldest costs leave first | Newest costs leave first |
| In rising prices: COGS | Lower | Higher |
| In rising prices: ending inventory | Valued near current cost | Valued at older, lower cost |
| Foodservice use | Standard (matches physical rotation) | Rarely used for perishables |
FIFO is the foodservice standard because it matches how perishable stock physically rotates.
Perpetual vs Physical Inventory
- Perpetual inventory: a running record updated every time stock moves in or out
- Physical inventory: an actual hand count of what is on the shelf
A physical count verifies and corrects the perpetual record and supplies the ending inventory figure used to calculate monthly food cost.
A dietary manager rotates stock so that older canned goods are pulled to the front and used before newly delivered cases. Which method is being used?
During a period of rising food prices, how does using FIFO rather than LIFO affect the dietary department's financial figures?
A refrigerated delivery of raw chicken arrives at the dock measuring 48 degrees F. What is the correct receiving action?