IHM232 – TOPIC 5 -

INVENTORY CONTROL
BY DR. ANNA QUEK
Term 3/2019
 LEARNING OUTCOMES
On the successful completion of this lesson, you should be able to:
 Describe the process of inventory control
 Explain the terms bin card, perpetual inventory, physical inventory, shrinkage control, wastage control and
product safety control;
 Describe the 5 areas of inventory control, and the receiving process;
 Describe the process for issuing of goods to other departments;
 Complete a bin card using perpetual inventory method and a departmental requisition request;
 Give examples of causes of inventory shrinkage and prevention measures and causes of wastage;
 Give examples for product safety control;
 Calculate inventory value and use beginning and closing inventory value to calculate food cost;
DEFINITION OF TERMS

 BIN CARD -A DOCUMENT WITH RECORD OF RUNNING BALANCE OF STOCK ON-HAND. in

addition to information about stock received and notes about problems associated with that stock item.
 PERPETUAL INVENTORY SYSTEM - involves the continual updating of  inventory records. updates
include additions to and subtractions from inventory for such activities as received inventory items,
goods sold from stock, returned goods, and items picked from inventory for use in the production
process.
 PHYSICAL INVENTORY – actual physical stock on hand.
 STOCK SHRINKAGE – when stock on hand does not match the stock records on accounts ledger.
 STOCK WASTAGE – stock that has spoilt and discarded or excess use of stock product due to poor
handling such as spillage, burning of food, overcooking etc.
 PRODUCT SAFETY CONTROL – to ensure product is of the highest quality for consumption by
purchasing from reputable suppliers and adhering to correct handling and storage,
5 AREAS OF INVENTORY CONTROL
RECEIVING GOODS FROM SUPPLIERS
EXAMPLE OF A PERPETUAL INVENTORY RECORD
BIN CARD – CANADIAN CLUB WHISKEY
Figure 5.7 Bin Card

Product Name: Canadian Club Bottle Size: 750 ml

Balance Brought Forward: 24 Date: 12/31
Date In Out Total on Hand
1/1 4 28
1/2 6 22
1/3 5 17
1/4 12 29
 CLASS ACTIVITY 1: BIN CARD EXERCISE
CALCULATE THE TOTAL ON HAND
NAME OF OLIVE OIL UNIT SIZE: 5 LITRES
PRODUCT: PAR LEVEL: 10 UNITS
BALANCE
BROUGHT
2 DATE: 30 NOV 2018
FORWARD:
DATE IN OUT TOTAL ON HAND ORDERED
1/12 8 10
2/12 2
3/12 4
4/12
On 3/12, 6 units of olive oil was ordered from Makro and delivered on 4/12.
Complete all the shaded area.
ISSUING GOODS TO OTHER DEPARTMENTS
• PROCESS REQUISITION FROM VARIOUS HOTEL
DEPARTMENTS Such as restaurants, bar, kitchen,
housekeeping, administration etc. ADMINISTRATION ETC.
MAIN • If goods requisitioned are not in stock, then
STORE PURCHASE ORDER IS MADE TO BUY FROM
EXTERNAL SUPPLIERS

• Complete the requisition order

• Update your inventory records
OPERATION
DEPTS. • Despatch goods to relevant departments.
EXAMPLE OF REQUISITION FORM
Figure 5.2 Storeroom Requisition

Unit Name: Scotto's Supper Club Requisition #: 0221

Date: 1/15

Storage Requested Issued Total Cost

Item Unit Amount Amount Unit Cost
Rice 1 lb. 5 lb. 5 lb. $ 0.25/lb. $ 1.25
Broccoli 1 lb. 30 lb. 28.5 lb. $ 0.90/lb. $ 25.65
Rib Roast 1 lb. 100 lb. 103.5 lb. $ 8.40/lb. $869.40

Total $896.30

To: Kitchen X Requisition Approved By: S.A.R.

Bar Requisition Filled By: T.A.P.
CLASS ACTIVITY 2 – REQUISITION REQUEST
CALCULATE THE TOTAL COSTS OF THE REQUISITION
Store Requisition Requisition #: 001
Dept. Name: Leura Restaurant Date: 3 December 2018
ITEM UNIT QTY QTY ISSUED UNIT COST TOTAL COST
REQUESTED
COKE 300ML 24 24 $0.48 $
SPRITE 330ML 48 48 $0.48 $
SODA WATER 330ML 48 48 $0.40 $
LIME JUICE 1 KG 5 5 $2.50 $
FROZEN
STRAWBERRY 1 KG 6 6 $6.80 $
FROZEN
TOTAL $
TO: KITCHEN: _______ Requested by: ______________(Name)
BAR: 󠄁___________ Approved by: _____________(Manager’s
Signature)
FORMULA FOR CALCULATING COGS USING PERPETUAL
INVENTORY METHOD.

Beginning (Opening) Inventory +

Purchases = Good available in Stock –
Ending (Closing) Inventory = Cost of
Food Consumed – Staff Meals = COGS
USING INVENTORY OPENING AND CLOSING
BALANCE TO CALCULATE FOOD COST
Figure 5.10 Inventory Recap

Unit Name: Scotto's Supper Club Date: January 31

Meat Seafood Dairy Produce Other Total

Beginning $ 26,500 $ 4,600 $ 7,300 $ 2,250 $ 23,000 $ 63,650
Inventory
Purchases 33,800 17,700 4,400 15,550 1,800 73,250
Goods 60,300 22,300 11,700 17,800 24,800 136,900
Available
Ending 28,000 10,900 6,000 4,500 21,000 70,400
Inventory
Cost of Food 32,300 11,400 5,700 13,300 3,800 66,500
Consumed
Employee 900 200 100 250 50 1,500
Meals
Cost of Food 31,400 11,200 5,600 13,050 3,750 65,000
Sold

If Scotto’s Supper Club’s Total Revenue for the month of January is $200,000.00. What is the food
cost percentage for that month? ________%
3. PREVENTING INVENTORY SHRINKAGE

Shrinkage can be caused by a number of factors,

which occur singlely or in combination:
 employee or customer theft,
 misplaced stock,
 inefficient recordkeeping,
 shipping errors or order fill errors.
While paper errors show a trail of inaccurate loss, theft is a true loss
of physical inventory.
To reduce inventory shrinkage you'll need to increase security and
control.
EXAMPLES OF COMMON EMPLOYEE THEFT IN THE BAR
 Bar theft is one of the most frequent types of thefts in the
foodservice industry.
 Order filled but not rung up
 Bringing in extra product
 Over – and under pouring
 Incorrect change making (cashiering)
 Dilution of product
 Product theft
 Product substitution
EXAMPLES OF HOW TO PREVENT EMPLOYEE THEFT?
1. Keepall storage areas locked and secure.
2. Issue food only with proper authorization and management
approval.
3. Maintain an active inventory management with regular stock take
and spot checks.
4. Avoid assigning the same individual for both the preparation of
a product and the collection of money for its sale, the
opportunity for theft is greatly increased.
5. Ensure that all food received is signed for by the appropriate
receiving clerk.
6. Do not allow employees to remove food from the premises
without management’s specific approval.
4. CONTROL PRODUCT OR FOOD WASTAGE

Food losses through simple product waste affects costs and profitability of your
business.
Managing the food production process entails control of the following six areas:
1.Waste – cut or trim too much
2.Overcooking – burnt food, cooked too long resulting in loss of moisture and weight
3.Overserving – inaccurate portion control
4.Not making good use of leftover food such as blanched vegetables, gravy,
tomato sauce etc.
5.Bought the wrong products e.g. buying corn kernel instead of corn on the cob.
6.Incorrect storage e.g. storing open jars of sauces and not storing them in the
refrigerator
 EXAMPLE OF WASTAGE THROUGH PREPARATION SUCH AS
TRIMMING, PEELING AND CUTTING
Butcher's Yield Test Results
Unit Name: LEURA  Date Tested: 14 April 20xx
Yield Test Performed by: AQ  
Item: SIRLOIN  
  Kg  
AP Amount Tested: 20    
Price per kg AP (As Purchased) $6.00    
AP (As Purchased) Price $120.00 AP amount X AP price per kg  
 
Loss Detail Kg % of Orignial Weight
 
AP Weight 20 100.00%  
Fat Loss 3.6 18.00%
Bone Loss 2.4 12.00% loss divided by AP
Cooking Loss 1.12 5.60% Weight X100
Carving Loss 0.8 4.00%
sum of total production
Total Production Loss 7.92 39.60%
loss
AP minus total
EP (Edible Portion) Weight 12.08 60.40%
production loss
Therefore, if 12.08kg (EP) cost $120.00 (AP)  
AP PRICE PAID DIVIDED BY EP WEIGHT
EP (Edible Portion) Cost per Kg: $9.93
 
 5. CONTROL PRODUCT SAFETY
Product safety in food and beverage from control
perspective include:
 Buying from reputable suppliers, to ensure product
quality supplied.
 Proper storage – at correct temperature, prevent
cross contamination.
 Using FIFO system to issue products.