Presentation on Inventory Control

1. Inventory Control

2. In this presentation we will learn following:
• Objectives and Importance of inventory control
• Method of inventory control
• Perpetual Inventory
• Physical Inventory
• Comparison of Physical and Perpetual Inventory
• Pricing of Commodities
• Aims of receiving
• Stock taking
• Purchasing

3. Inventory
• Inventory is process of physical counting of all stock items in storerooms and
departments.
• In case of food stores and housekeeping, it is done once in a month and for
alcoholic beverage once in 24 hours.
Objectives
• Inventory control is known as matching or comparison of physical inventory
with stock register.
• The main objective of inventory/stocktaking is to ascertain actual value of goods
in hand as distinct from book value of stock.

4. Importance of Inventory control
It solves following purpose:
• To check total value of stock in hand accordance with financial policy of
establishment.
• To compare value of goods actually in stores with the book value of stock.
• To list slow-moving items.
• To compare usage with sales to assess food percentage as a deterrent against
loss of pilferage.

5. Types of Inventory Control
There are two methods to control the inventory of stores:
1. Physical inventory system
2. Perpetual inventory system

6. Physical Inventory System
• Counting is done either before opening timings of stores or after closing hours.
• In large organizations, a complete inventory may not be taken at one time.
Instead, inventories can be taken in parts on weekly basis.
• It involves at least two persons, one is from food & beverage control
department and other should be from accounts department.
• One person counts the items arranged systematically in storeroom. The other
person records the data on a physical inventory sheet.
• The expensive items should be physically counted/weighed more frequently.
• Uniform room does not exchanges uniforms during inventory. Staff is informed
in time to make necessary arrangements.

7. Physical Inventory Form
Date…………………….
S. No. Quantity
in hand
Unit size Food Item Description Unit Cost Total inventory
value
1 25 Litre Mustard Oil 10 bottles of 1
litre and 30
bottles of 500 ml
100/Litre 2500
Taken by……………………………….
Inventory…………………………….. Carry forward

8. Perpetual Inventory System
• The process of maintaining a continuous record of all purchases and items
issued is called perpetual inventory system.
• This process provides a continuous record of stock in hand at any given time.
• It requires a dedicated staff to update on regular basis.
• Goods received or issued are immediately recorded on prescribed sheet and
compiled at the end of the day.
• A perpetual inventory record is not sufficient for accurate accounting and
control of food and supplies.
• Therefore, it becomes necessary that a perpetual inventory is tallied with the
physical inventory.

9. Perpetual Inventory Form ( For store room)
Item………………………….
Store unit…………………. Room…………………………
Date Order No Quantity in Quantity out Quantity in hand
Perpetual Inventory Form (For bar
Item Date B/F Quantity in Quantity out C/F Remarks
Taken by……………………………

10. Advantage of perpetual inventory
• It indicates the reordering point.
• It controls the over buying and under buying.
• It provides the constant inventory figure at glance.
• Immediate comparison between actual and book value of items.
• It indicates the slow-moving items.
• It is helpful in maintaining par stock

11. Comparison of Physical and Perpetual Inventory
• A perpetual inventory is maintained on a regular basis by concerned
departments, taking into consideration the receivings, issues and usage.
• On the other hand, physical inventory is recorded on the basis of regular checks
which can be fortnightly, weekly or monthly.
• Comparison between perpetual and physical inventory means perpetual
inventory should be equal to physical inventory.
• If there is a large discrepancy, desired actions are taken and any disciplinary
action if it needs to be taken, should be prompted.

12. PRICING OF ISSUES
In stores, there must be a established system so that the department can be fairly
charged for what it has requisitioned for its use.
Perishables: Perishable commodities directly issued to kitchen and priced against
actual purchase price.
Non-perishables: In this case, one of following several methods may be adopted:
a) Actual Purchase Price: Applied to items in frequent purchase and a small stock
is kept. E.g. items costing Rs. 5/- each is issued at Rs. 5/- each.
b) Simple Average Price: Applied to items having a fluctuating market price. E.g. 10
times are purchased in a week at Rs. 5/- each and a similar 12 items are purchased
in next week at Rs. 4/- each. If any of the 22 items in stock were to issue they
would be at Rs. 4.5/- each.

13. c) Weighted Average Price: This is a more accurate method which is sometimes
used, the quantities are taken into account as well as the price, thus giving a more
accurate average price.
E.g. 10 kg at Rs. 15/- = Rs. 150/-
20 kg at Rs. 20/- = Rs. 400/-
Total 30 kg = Rs. 550/-
WAP 550/30 = Rs. 18.3/- Kg
d) Inflated Price: Here the goods are issued at cost plus, say 10 or 15 % to recover
the cost of handling and storage charged.
e) Standard Price: A Standard Price is to decide on for a given period, usually 3-6
months and the positive and negative variances recorded when purchases vary in
price from the standard.

14. Purchase Control
• Purchasing is often described as obtaining right product, in right amount, at
right time, at right price.
• Purchasing is defined as ‘function concerned with search, selection, purchase,
receipt, storage, requisition, issuing and finally production of food as per
catering policy of hotel.
• Entering into contract with suppliers, ensuring that goods delivered are correct
as regards to quality, quantity and price.
• Ensuring that items are transferred direct to the ordering department or are
correctly received and stored.
• Finally a follow – up is made with using department to check that the goods
purchased were as per the requirement.

15. Purchase Control
• Management of hotel decides quality and volume of items to be purchased.
• Volume of item depends on various factors like sale, storage capacity,
availability of funds, future rates, time taken by suppliers, shelf life of items, etc.
• Par stock should be just sufficient keeping in view above mentioned points and
should be neither less nor more.
• If par stock is not sufficient then hotel may not be able to provide all menus and
other room/bathroom supplies, and on contrary, if the stock is more than the
required amount, it will increase the inventory and hence require more liquid
cash/assets.

16. Aims of Receiving (Food)
Receiving of food is considered to be very important and is often staffed with
people having specialized knowledge.
The aims are as follows:
• The quantity of goods received matches quantity ordered.
• The quality of goods is in accordance with required specifications.
• The prices stated on delivery note are as per prices on purchase order form.
• If quantity or quality of goods are not as per purchase order, purchasing
officer should be informed and request for credit memo should be prepared.
• An accurate record is made in the goods received book recording details of
the delivery.

17. Aims of Receiving (Beverages)
The value of beverage purchases and ensuring profits from sales of beverages
are high, it is important that due attention is given to receiving of beverages.
Aims are as follows:
• The quantity beverage received matches with ordered.
• Goods should be checked tallying purchase order and delivery note.
• Crates and cases should be is check for empty, missing or broken bottles.
• When quantity or quality received is not in accordance with purchase
order, receiving clerk prepares a request for a credit note.
• An accurate record is maintained in the goods received book.

18. After Receiving
1. Directs / Perishables: Kitchen:
• Utilized under the supervision of Executive Chef
2. Dry Stores / Non- Perishables: Stores:
• Goods are stored in the appropriate places & bin cards are updated
• Issued to various departments

19. Storing Procedure / Control
• The purpose of efficient storage is to maintain goods safe until issued to
appropriate department.
• No matter how efficient the purchasing procedure maybe, bad storage
procedures would have an adverse effect on the standard of food or drinks.
• Eventually, this would result in organizations failing to achieve their required
cost and profit targets.

20. Stock Records
• All goods received must be recorded in “goods received books”.
• Bin card: It is a record of all receipts and issues of a particular item and is either
attached to particular books or kept in a file.
• Monthly consumption sheet: To find out the total of items used over a period
of time or to compare usage rate the information can be taken from the sheet.
• Stock taking: It may be done monthly or quarterly or yearly to prove the
accuracy of the stock records.
• In order to carry out stock taking it is necessary to suspend all movement of
goods during the count and to assure all goods are checked and recorded.

21. Stock Records – Issuing and Control
Reason for developing an efficient and effective control system are as follows:
• Shortage or poor stock rotation will reduce standards and therefore directly
reduce revenue.
• If supplies are lacking, items may need to be borrowed from other sections.
• Excessive stock may constitute a safety risk and reduce cash flow.
• Monitoring of use and product evaluation is better achieved.
• Budgetary control is facilitated.
• Standardization of quality is facilitated.

22. Store keeper
Storekeeper plays a very important role in control of stock and smooth
functioning of day to day operations.
The storekeeper must have:
• A good technical knowledge of products especially about shelf life of products.
• Ability to deal with suppliers, own staff, and personnel from other departments
as well as the management.
• Ability to count and measure accurately and up-keep of records.
• Knowledge of up-to-date legislation e.g. health and safety legislations.
• Absolute honesty and trustworthiness in all dealings.