Managing Inventory Control and Procurement

Read this chapter. It uses the food service industry as a case study because of the different types of raw material inventory food establishments need to consider. As you read the section on Three Ways to Increase Your Value, can you recommend a fourth or even a fifth to help these businesses?

Managing Inventory Control and Procurement

Chapter Outline:

  • Basic inventory procedures
  • Systems to track and record inventory
  • Receiving inventory and invoices
  • Requisition systems
  • Inventory record keeping
  • Computerized inventory control
  • Pricing and costing for physical inventory
  • Factors affecting inventory levels
  • Inventory turnover
  • Days of inventory on hand
  • Procurement Process
  • Purchasing defined – buying versus ordering
  • Three ways to increase your value (as a buyer/customer)
  • Market sourcing
  • Choosing suppliers
  • Factors that Impact Prices
  • Product Specifications
  • Contract Buying
  • Purchasing Procedures
  • Production Control Chart

Learning Objectives:

Inventory and Inventory Control
  • Describe inventory systems and procedures used in foodservice operations
  • Calculate and explain the importance of inventory valuation
  • Calculate and explain the meaning of inventory turnover ratio
  • List factors in determining amount of inventory to carry
  • List "best practices" related to managing inventory (Eg. Frequency of performing physical inventory, etc.)
  • List critical steps in receiving process
  • Explain relationship between purchasing, food specifications and receiving function
  • Describe how things can go wrong…where money can be lost in the process?
  • Explain purpose and importance of the supplier invoice in the receiving process
Storage and Issuing
  • Define FIFO
  • List best practices for issuing procedures to control costs in a foodservice operation
  • Describe the key "players" in the procurement process
  • Explain how inventory and purchasing functions are related
  • Explain the steps in the purchasing process
  • Describe characteristics of a valued "customer" buyer
  • List factors to consider in choosing suppliers
  • Explain concept of "good service" from a supplier/vendor.
  • List factors impacting food and supply prices
  • Describe importance and key components of product specifications
  • Explain steps in the ordering process.
  • Determine amount to order given inventory (par level and on hand amount)
  • List information typically included on a purchase order
  • Recognize ethical issues related to purchasing

Key Terms:

  • Inventory
  • Receiving
  • Invoice
  • Requisition
  • Perpetual inventory
  • Physical inventory
  • Par stock
  • Inventory price extension
  • Point-of-Sale (POS) system
  • Holding cost
  • Ordering cost
  • Shortage cost
  • Inventory turnover
  • Procurement
  • Purchasing
  • Buying
  • Ordering
  • Cherry-picking
  • Vendor
  • Distributor
  • Broker
  • Manufacturer
  • Specifications
  • Contract Buying
  • Par levels
  • Amount on hand
  • Line item bid award
  • Market basket bid award
  • Purchase order


This chapter has a sort of circular nature to it. It begins by discussing inventory and inventory control, but of course, there is no inventory if the procurement process has not been completed. The product is purchased, ordered, received, and stored, which brings us back to inventory control.

Source: Beth Egan,
Creative Commons License This work is licensed under a Creative Commons Attribution 4.0 License.