MANAGE STOCK PURCHASES
AND INVENTORY
D1.HML.CL10.09
D2.HGE.CL7.06
D1.HGA.CL6.09
D1.HRM.CL9.12
D2.TGA.CL6.04
D2.TRM.CL9.08
Slide 1
Manage stock purchases and
inventory
This unit comprises six Elements:
1. Identify the need for stock control and
management
2. Develop and operate a purchasing and/or supply
system
3. Develop and implement stock receival
procedures
4. Develop and implement stock storage systems
5. Develop and implement stock issuing systems
6. Develop and implement stock management
systems
2
Element 1: Identify the need for
stock control and management

1.1 Identify the internal requirements for the
stock control and management system

1.2 Describe the stock items to be covered
and controlled by the stock control and
management system

1.3 Identify personnel with stock control and
management duties
Slide 3
Element 1: Identify the need for
stock control and management

1.4 Describe the steps in the stock
control cycle

1.5 Identify and describe the role of
documentation within the stock
control and management process

1.6 Develop product knowledge in
relation to stock items that will be
used
Slide 4
1.1

Identify the internal requirements for the
stock control and management system
What is a Stock Control System?
• How can it assist a business?
Slide 5
1.1
Identify the internal requirements for the
stock control and management system
Stock Control Systems are either computerised
or manual

Computerised
•
Larger properties or organisations with large
stock turnover rates tend to use a
computerised stock control system
•
They may use an ‘off-the-shelf- commercially
available software package or a complete
package called a Property Management
System
•
Even where a computerised/electronic system
is in use, paper-based documents will usually
provide the raw data that is entered into the
system
Slide 6
1.1
Identify the internal requirements for the
stock control and management system
Paper-based systems


Properties that operate a paper-based stock control
system may use the following documents as the
basis for their system:

Purchase orders, Bin cards, Requisition forms
and Internal transfer sheets – covered in detail
in section 1.5

Sales dockets and cash register audit rolls

Cheques – to prove payment for stock received
In addition to these internally-generated
documents, the paper-based system also uses
externally-generated documents such as Delivery
dockets, Invoices, Statements and Credit notes
Slide 7
1.1
Identify the internal requirements for the
stock control and management system

Security systems

Internal controls
Slide 8
1.1
Identify the internal requirements for the
stock control and management system

The ordering process

Physical inventory

Volume and cost

Stock on hand

On hand quantities
Slide 9
1.1
Identify the internal requirements for the
stock control and management system

Periodic System

Perpetual System
Slide 10
1.1
Identify the internal requirements for the
stock control and management system
Stock rotation

In most businesses it is standard practice to
sell the oldest stock first
Stock valuation

For accounting and reporting purposes it is
necessary to value the stock on hand at
times during the course of the year
Terms of trade

Represent the terms of the contract you
enter into when you buy from a supplier
Slide 11
1.2
Describe the stock items to be covered and
controlled by the stock control and
management system
Inventory

Fresh Food

Linen and Uniforms

Frozen Food

Merchandise

Drinks

Fuel

Alcohol

Equipment

Cleaning Agents and
Chemicals

General Stores

Stationery
Slide 12
1.3
Identify personnel with stock control and
management duties
Identified personnel will have stock control as part of their
management duties:

Purchasing Officer or Procurement Officer

Store person

Managers and owners

Department heads
Slide 13
1.4
Describe the steps in the stock
control cycle
The basic stock control concept
Stock control is used by properties for many
reasons which include:

To identify theft

To determine the financial performance of
departments and the venue overall

To limit the amount of money tied up in
stock-on-hand (‘inventory’)

To make sure the property does not run
out of stock

To track the cost price and selling process
of items
Slide 14
1.5
Identify and describe the role of
documentation within the stock control
and management process
Company Documentation

Purchase order

Purchase specification

Requisition form
 Internal stock transfer sheets

Bin Card System
 Issuing new for old

Receiving Reports
Slide 15
1.5
Identify and describe the role of
documentation within the stock control
and management process
External Documentation

Delivery docket

Invoice

Statement

Credit note

Ledgers
Slide 16
1.6
Develop product knowledge in relation
to stock items that will be used
Knowledge about the products and services you offer and
the facilities available is called 'product knowledge’

Internal sources
 Taste products, read recipes, wrapping and
packaging material, talk to experienced staff

External sources
 Product suppliers, the media – trade magazines,
newsletters, brochures, books, internet
 Trade shows, exhibitions, conferences seminars,
food and cooking demonstrations
 Promotional activities, doing a tour or by visiting
growers, suppliers and manufacturers
Slide 17
Element 2: Develop and operate a
purchasing and/or supply system

2.1 Identify and differentiate between potential
suppliers

2.2 Select suppliers based on nominated
internal requirements

2.3 Determine purchasing and supply
requirements that will guide demand

2.4 Determine terms of purchase that may
apply to the purchase of stock items

2.5 Implement ordering system using identified
suppliers
Slide 18
2.1
Identify and differentiate between
potential suppliers
Suppliers


Most establishments are free to choose
whatever distributors or suppliers they
want however establishments who are part
of a bigger group are often obliged, or
contractually required, to buy their stock
from designated suppliers with whom
special arrangements have been made by
head office
Suppliers
Suppliers can be divided into
‘wholesalers’ and ‘retailers’ and the
hospitality industry may buy from either or
both
Slide 19
2.2
Select suppliers based on nominated
internal requirements
Purchasing policy and guidelines

The nature, complexity and details contained in
organisational guidelines can be expected to vary
markedly between different establishments to
reflect:
 Individual need
 Differences between properties
Purchasing
Policy
 Types of stock purchased
 Usage rates
 Staffing
 Ordering protocol
Slide 20
2.2
Select suppliers based on nominated
internal requirements
Purchasing policy and guidelines

Preferred suppliers

Range of products

Price

Supplier location

Continuity of supply

Delivery

Willingness to work with you
Slide 21
2.2
Select suppliers based on nominated
internal requirements
Vendor files

Purpose

Creating and maintaining

Contents
Slide 22
2.3
Determine purchasing and supply
requirements that will guide demand
Standard product specification
information that already exists and
which may be provided by suppliers
can include:

Product name

Product category – convenience,
frozen, fresh, refrigerated

Packing format – such as
number of tins per carton;
dimensions of cartons
Quality specifications such as:

•
Colour
•
Count
•
Texture
•
Unit size

Storage requirements
•
Unit cost

Substitute product
•
Shape
•
Weight and yield data
Slide 23
2.3
Determine purchasing and supply
requirements that will guide demand
Establishment of enterprise-wide purchasing (and
receiving) procedures are necessary to:

Enable management to apply influence and
control over ordering and receival activities

Standardise purchasing and receiving activities
in the workplace

Facilitate training of staff in purchasing and
receiving protocols

Optimise procurement of the right items for the
right job at the right time at the right price

Verify goods received are the items ordered
Slide 24
2.3
Determine purchasing and supply
requirements that will guide demand
Establishing economic order quantities

During the purchasing phase, there can be a need
to establish economic order quantities for various
products
How much to order?
 Reordering points
 Stock Levels
 Maximum Stock Level
 Just-in-time
 Safety Stock Level
 Minimum order quantities
Slide 25
2.4
Determine terms of purchase that may
apply to the purchase of stock items
Ensuring compliance with requirements
Need to ensure compliance

All the established purchasing procedures
developed by the establishment must be
complied with or the entire system collapses
and is rendered ineffective

The failure on anyone’s part to follow just one
established procedure, on just one occasion
can totally compromise the integrity of the
entire purchasing – and wider ‘stock control’ –
system

In practice, this means all the protocols and
parameters for the premises must be adhered
to every time, without exception
Slide 26
2.5
Implement ordering system using
identified
Generally establishments will use more than one ordering
system to place orders with suppliers.

Standing orders

Standing requisitions

Purchase orders

Telephone orders

On-line ordering

Face-to-face lodgement
Slide 27
Element 3: Develop and implement
stock receival procedures

3.1 Monitor in-coming deliveries and stock

3.2 Inspect incoming stock

3.3 Return unwanted or damaged stock

3.4 Reject unsuitable stock

3.5 Complete appropriate delivery documentation
Slide 28
3.1 Monitor in-coming deliveries and stock
Checks need to be made to ensure that:

The goods delivered were intended for you and
not some other establishment

All the goods ordered have in fact been delivered

The goods supplied are of the quality/standard
ordered and/or required
Slide 29
3.1 Monitor in-coming deliveries and stock
Once stock has been delivered, it must be checked:

Against the order that was put in

Against the documentation that accompanies the order
These are the first standard checks that must occur
Checking process:

Quantity

Good condition

Correct size

Quality

Correct price
Slide 30
3.2 Inspect incoming stock
Quality Assurance (QA) tests
Where a genuine quality assurance system is in place, QA
‘tests’ can include:

Weighing pre-cut steaks to verify they fall within the
specified range as stated on purchase specifications

Testing fat content (as above)

Physically testing a (new) product

Yield tests

Taste testing

Reconstituting tests

Checking ‘counts’
Slide 31
3.2 Inspect incoming stock
Continued…
Ancillary checks
Your QA may require periodic checks of, for
example:

The temperature of food delivery vehicles

The food handling practices of delivery
drivers

Inspection of delivery vehicles for cleanliness

Laboratory tests for bacterial levels on
nominated (usually ‘high risk’) foods
Slide 32
3.3 Return unwanted or damaged stock
What is involved in this process?

Before signing for a delivery or taking receipt of
stock, you must inspect the stock

Never accept a delivery without doing a visual
inspection – unless you have signed for it and
added ‘STC’ (subject to check)

The stock should be checked for damage,
quality, use-by dates, breakages and
discrepancies

You should also check to ensure the delivery
does not bring in pests and rodents, such as
cockroaches and mice
Slide 33
3.3 Return unwanted or damaged stock
Continued….
What is involved in this process?

Such recording may involve noting the
issue on the accompanying delivery
documentation or there may be a
designated ‘Goods In register’ that is used
for this purpose

You should then also note the problem on
the supplier’s invoice or delivery docket

In most establishments, this kind of incident
must also be brought to the attention of a
supervisor or a manager, for their follow-up
Slide 34
3.4 Reject unsuitable stock
Rejecting unsuitable stock generally takes place due to
the stock being damaged, quality supplied is substandard, use-by or best before dates are too close to
expiry or have been exceeded or some other discrepancy
that causes it not to meet establishment standards.

This topic has been discussed in 3.3 above
Slide 35
3.5
Complete appropriate delivery
documentation

Signing delivery dockets

Critical factors when recording received goods

Identify and record variations

Recording variations

What is a variation?

Who is the appropriate person?
Slide 36
Element 4: Develop and implement
stock storage systems

4.1 Create appropriate storage conditions
for all stock that needs to be stored

4.2 Store stock according to required
storage conditions

4.3 Enter stock data into the internal stock
system

4.4 Secure stock and protect it from
damage, deterioration and
unauthorised access
Slide 37
4.1
Create appropriate storage conditions
for all stock that needs to be stored
Storage guidelines are designed to:

Prevent stock becoming damaged during storage
– and thus becoming unable to be used, displayed
or sold

Prevent it becoming out-of-date

Protect it against unauthorised use
Slide 38
4.1
Create appropriate storage conditions
for all stock that needs to be stored

Generic storage requirements

Stock rotation

Food-specific storage conditions

Hygiene compliance

Security

Broken cartons
Slide 39
4.2
Store stock according to required
storage conditions
In any organisation, there is limited space in which stock
is often stored. It is important that storage areas are
designed and managed in a way that ensures that:

The greatest volume of stock can be stored

The area is not a health and safety risk

There is plenty of space to move between items

Items are kept in their correct condition

Chance of damage or spoilage is kept to a minimum

Items can easily be identified

Stock takes can take place in an efficient manner

Items can be moved with sufficient space as to reduce
accidents and injury
Slide 40
4.2
Store stock according to required
storage conditions
Storage units
Storage units may include:

Shelves

Bins

Specially provided storage containers

Refrigerators and coolrooms
In addition:

Items may need to be stored in individual
departments/working areas

Food and beverages require special treatment
Slide 41
4.3
Enter stock data into the internal
stock system
From a ‘receiving and storing’ point
of view, this may involve you in:

Creating files for new suppliers

Entering supplier and product
details – such as names and
addresses, prices, minimum
order quantities

Deleting files – relating to
individual suppliers and product
lines

Updating data – entering details
of:
•
Deliveries into the system quantities and dates
•
Stock that has been issued
or transferred to
departments
•
Returns to suppliers
•
Stock that has been
damaged or has to be
discarded
•
Adjusting stock levels given
on the computer on the
basis of physical stocktakes
Slide 42
4.3
Enter stock data into the internal
stock system

In the same way that every stock item has its own line
on a stocktake sheet, so too does the same apply in a
computer-based system

Every size for the one brand will have its own file, every
different quality and/or variety of a product will have its
own file
Slide 43
4.3
Enter stock data into the internal
stock system
In most cases:

On-screen prompts exist to guide
your actions

Data can only be entered into ‘fields’
that are provided for within the
system

Drop down screens provide options
for extra data etc. to be entered

Links and short-cuts exist on-screen
to move between individual files
stock items
Slide 44
4.4
Secure stock and protect it from damage,
deterioration and unauthorised access
Hospitality venues have two things thieves find very attractive – cash
and stock.
Securing stock
The keys to securing stock after it has been delivered
include:

Implementing an access system to storage areas

Securing high-cost items, e.g., fitting liquor cabinets with locks

Ensuring that door seals are intact

Ensuring the issuing of stock is authorised

Move all deliveries promptly from the goods receiving area to the
appropriate storage area

Secure the delivery area to prevent unauthorised access. Close
and lock doors, and shutters while you are absent from the area

Store food items under appropriate storage conditions
Slide 45
Element 5: Develop and implement
stock issuing systems

5.1 Identify the basis on which stock will be
issued or distributed internally

5.2 Develop documentation to support the
issuing of stock

5.3 Manage stock distribution within the
premises

5.4 Track and record the movement of stock
within the enterprise
Slide 46
5.1
Identify the basis on which stock will
be issued or distributed internally
Internal ordering

The distribution of stock can be seen
as the processing of internal orders

This means that departments within
the organisation put in orders to be
filled. These goods are traditionally
issued from some internal central
store, which is, in turn restocked as
required

Central to supplying stock to
departments is the ‘Requisition’
Slide 47
5.2
Develop documentation to support
the issuing of stock
The Requisition

This is an internally generated
document

A requisition – or requisition form
– is filled in by a department
requesting stock from the central
stores

It may need to be authorised by
a manager before it can be filled
Slide 48
5.3
Manage stock distribution within the
premises

Par Stock

Par Bar

Imprest System
Slide 49
5.4
Track and record the movement of
stock within the enterprise

Inventory tracking guidelines form the basis
of implementation for inventory control

Once these guidelines have been developed
they should be:
 Communicated clearly to staff
 Put in writing
Slide 50
5.4
Track and record the movement of
stock within the enterprise

Inventory tracking can be achieved using a
computerised system or a paper-based system

There is a need to track inventory to ensure:

Excess money is not tied up in stock

You never run out of items/stock you need

Stock is used before it reaches its ‘Use By’ or
‘Best Before’ date

Fast- and slow-moving lines can be identified

The financial performance of
departments/revenue centres and the
establishment can be calculated.
Slide 51
5.4

Track and record the movement of
stock within the enterprise
Inventory sheets – also known as
stock-take sheets or stock sheets
– are part of the overall stock
record system and are used to:
 Monitor stock levels – of the
stock-on-hand
 Track the movement of stock
within the premises and for
actual physical stock-taking
purposes
Slide 52
Element 6: Develop and implement
stock management systems

6.1 Create and implement stock taking systems

6.2 Create and implement stock valuation
systems

6.3 Create and implement stock reporting
systems

6.4 Make recommendations to improve the
operation of the existing stock system
Slide 53
6.1
Create and implement stock taking
systems

Regardless of which inventory tracking – or stock
control – system is used there is always a need to
undertake physical stock-takes as part of the stock
management process

Reasons for stock-takes

Frequency of stock-takes

Stock-take or stock count?

Stock-take options

Stock-takes and training staff
Slide 54
6.1
Create and implement stock taking
systems

Electronic stocktaking

Manual stocktaking

Naming conventions

Marking stock

Outside contractors
Slide 55
6.2
Create and implement stock valuation
systems
Identifying fast and slow-moving items
Ways to determine what is selling fast or slow include:

Talking to others – department heads, staff

Counting and monitoring stock-on-hand – in the
stores and departments

Analysing documentation – requisition forms, bin
cards, stock take sheets
Reporting fast and slow-moving items

Notification may be a simple verbal report or more
formal written on a standard form

You may be required to notify:

Management

Department heads

Accounts department
Slide 56
6.2

Create and implement stock valuation
systems
LIFO
 Last in first out

FIFO
 First in first out

Average cost method
Slide 57
6.3
Create and implement stock reporting
systems
Waste management

In theory a well-developed and properly implemented
stock control system should never result in losses from
redundant, soiled, damaged or obsolete inventory but
regardless of the system there always seems to be
instances where such events occur
Slide 58
6.3
Create and implement stock reporting
systems
Waste management

Common causes of
loss/problems
 Failure to rotate stock as
required
 Lack of scheduled inspections
 Failure by staff to record
spillages or breakages
 Failure by staff to document
and follow-up on items returned
to suppliers for credit
Slide 59
6.4

Make recommendations to improve the
operation of the existing stock system
Because the inventory of any property will never
remain static – in terms of quantity or type/s of
products – there is an on-going need to establish
processes for updating and maintaining the stock
control system that is in place
Slide 60
6.4
Make recommendations to improve the
operation of the existing stock system
Fine tune the system
It may be possible to fine-tune the present
system (rather than replacing it) by:


Providing refresher training to staff in its use
A system which was working perfectly well
can, almost overnight, be compromised and
rendered ineffective if one ‘expert’ staff
member leaves and is replaced by a less
professional person

Modifying small sections of the system which
have been identified as problematic

Allocating more resources to the system

Ensuring existing protocols are, in fact, being
adhered to
Slide 61