FOOD AND BEVERAGE CONTROL SYSTEM

CHAPTER 1
OVERVIEW OF OPERATIONS CONTROL

 Maintaining a viable and profitable business is a major concern of every food establishment.

Problems faced by food establishment owners:

 Many food outlets are unable to sustain their business or reap a good return of their
investment.
 There are those who enjoy a good patronage but the profit gained is far below what
is expected by the owner.
 Others simply break-even
 Some experience accumulated deficits and unpaid loans, rentals and deliveries.

 Problems like these indicate that the management team has failed in its controlling function,
particularly in the area of cost and materials management.

OPERATIONS CONTROL SYSTEM

CHAPTER 1: Overview of Operations Control

Designed to help the establishment to:
 Attain profit target;
 Keep costs within the budget yet maintain quality food and service;
 Sustain an efficient flow of production and service;
 Maintain check and balance to prevent anomalies and discrepancies.

Consists of:
 Built-in checks,
 Technological and clerical procedures; and
 Tools in all phases of operations
- for the purpose of regulating cost while sustaining quality of production and service.

To sustain viability and profitability in food business, 2 elements are crucial important:
 Sales
 Cost

 Profit - is the difference between sales and cost

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PROFIT = SALES - COST

 FOOD AND BEVERAGE CONTROL SYSTEM

To maximize the profit, the company should therefore:

1. Take serious efforts to generate revenue that is large enough to recover pre operating
capital, provide for fixed cost and overhead expenses and generate the expected profit.

The break-even point must be determined so that the operator is aware of the critical
volume of sales to sustain its viability. To have allowance to profit, the sales must exceed
the break-even point.

2. Control costs and keep them within the budget ceiling. This requires the
enforcement of a budget control system whereby the management team:

 Decides on the allowance cost percentage for every cost item

(like 38% of sales allocated for food cost, 15 % labor etc.)

 Monitor costs, compare them to the budget and take note of variance;

 Determine and analyze causes and sources of variances

(eg.: excessive consumption)

 Take remedial measures to correct variances, bring back cost to its desired level so
as to prevent deficits and maintain the desired profit margin.

3. Design and consistently administer a system of operations control in all phases of

operations – from menu planning and product design to purchasing, down to delivery of

CHAPTER 1: Overview of Operations Control

food and service.

SCOPE OF OPERATIONS CONTROL

Operations control covers all aspects of operations, including:

 Product development, menu planning and recipe standardization

 Ordering and purchasing
 Warehouse operations
 Receiving of stocks
 Storekeeping
 Stock issuance
 Inventory
 Distribution of processed goods to food outlets (if commissary operated)
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 Production and dispatching of food

 Service and sales
 FOOD AND BEVERAGE CONTROL SYSTEM
BASIC STEPS IN OPERATIONS CONTROL
1. Establish goals or targets as well as standards.

The starting point in operations control is the establishment of sales and profit target. From
the expected sales, the food company shall set up a standard distribution of income,
expressed as cost ratio (i.e., profit – 20% of sales, food cost – 35%, etc.)

Once this standard or budget established, all consuming units are expected to control and
regulate their consumption such that the actual cost shall not exceed the ceiling.

2. Design and enforce control measures, policies and tools to keep costs within the
standards.

Control measures like recipe standardization, regulation and purchases, documentation of

stock movements, reconciliation of cost and inventory balance and other measures are to be
designed as safeguard against wasteful consumption, losses, abuses and anomalies in
transaction.

3. Measure actual performance – compare actual cost vs. Budget

The actual cost of operations shall be measured and compared against the budget. Then
variance report is prepared and discussed with concerned officers. Among many hotels and
food chain, this function is performed by a Cost Control Department.

CHAPTER 1: Overview of Operations Control

4. Analyze Variance

A variance (an actual cost that exceeds budget) can emanate from excessive or wasteful
consumption, losses, pilferages and other factors. Any excess will eat up allocation for profit
or other expenses. The variance should therefore be analyzed and acted upon immediately
before they accumulate and result to deficits. They analysis may be taken by the cost
controller together with the management team.

5. Take corrective action

Once the causes of the variance are identified, remedial measures have to undertaken to
correct the situation. Otherwise, the company cannot sustain a viable and profitable business.
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 FOOD AND BEVERAGE CONTROL SYSTEM
TERMINOLOGIES
 COSTS - The prices paid or the fair value of other considerations given to acquire
resources or services. It is an economic sacrifice measured by monetary value
of an exchange. In short, these are sacrifices made to secure resources.

 EXPENSES – expired, consumed and/or utilized costs.

 CONTROLLING - one of the functions of management which is concerned with the

measurement of current performance vs. Targets and correcting any gap
to be able to move towards predetermined goals.

 COST CONTROL – the process through which actual costs are made to conform to
standard or expected costs so that the expected profit can be attained
without sacrificing the quality of food and service.

 COST REDUCTION – the use of management devices to reduce costs such as the
research for cheaper materials, improved methods of production,
proper scheduling and utilization. Many cost reduction are done in
violation of standards. Cost maybe reduced at the sacrifice of quality
and service.

CHAPTER 1: Overview of Operations Control

Nichole Ann A. Lago
 FOOD AND BEVERAGE CONTROL SYSTEM
FLOW OF OPERATIONS CONTROL

Forecast, budgeting and standards Establishment of sales forecast, budget for each cost item,
setting. desired profit and other performance targets

Distributing reponsibilities and defining Identifying and distributing operational tasks and
accountabilities for results. responsibilities; defining accountabilities for results.

Menu Planning Preparation of menus, standardization of recipes, costing

and pricing; test of quality and yield

Use of purchase specifications; calculation of requirements

Ordering and Purchasing based on accurate allocations and par stock, test or quality
and yield; competitive bidding.

Inspection of stocks against quality standards and purchase

CHAPTER 1: Overview of Operations Control

Receiving of stocks
specifications; use of receiving reports

Classification and labelling of stocks, securing stocks

Storage and Inventory against theft and spoilage; regular inventory, Reconciliation
of actual vs. Expected stock balance

Establishment of par stock requirements as basis for daily

Requisition and Issuance requisition; control of issuances using appropriate forms;
use of FIFO system (first in, first out)

Production and Service Adherence to standard recipe, recycling of leftovers,

adherence to standard serving portions, and use of order
slips.

Audit and Recording of Transactions Audit of sales vs. Issued portions, recording of daily sales,
receipts, invoices, purchases etc
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Monitoring performance vs. Targets, and standards,

Corrective Measures
analyzing variances, taking corrective action