Eliminate Poor Receiving Habits

In virtually every industry where significant quantities of goods are purchased on a frequent basis, a formal receiving department is charged with the responsibility of making sure what was ordered was received. Only in the restaurant industry is receiving taken lightly. Of course, every operator I talk to tells me that receiving is an important part of the manager or chef's job description, but in practice, what really happens?

Typically, the goods arrive, someone gets the invoice, does a quick check to see if it's all there (optional), signs the invoice, and off the driver goes. Nine times out of 10, there is no purchase order, no receiving log, and no real effort made to check pricing, quality or what's inside the boxes.

I have seen 50 case grocery orders received in less than a minute! I've also seen situations where the driver takes his own inventory, brings in the goods, puts them away, and then gives the chef or manager the invoice to sign. No employee of the restaurant has even seen the goods.

Let's face it. Food cost originates at the back door and can never be higher than the total purchases. Therefore, the receiving function becomes your first chance to control costs once the goods have been ordered.

Our studies have shown nearly half an operation's variance (difference between actual and ideal food cost) is the result of poor receiving habits. To the average restaurant, this represents a whopping 2% of sales. This money would have been additional profit since all of it would drop directly to the bottom line.

Over the years I must have heard every excuse in the book for the typically poor receiving practices which dominate the industry. Among the most frequent is lack of time to do it right. I would think that if it were possible to save 2% of sales through good receiving practices, the operation with gross sales of $500,000 annually could hire part-time help at $5 per hour to do nothing but receive goods 20 hours a week, and still have $5,000 left over at year end in additional profit.

In most cases, however, it is not necessary to hire someone new. By shifting around the schedules of those employees interested in learning the receiving function to correspond with delivery times, the same end result can be accomplished. The isolation and use of these individuals also fits in nicely with a more formal management program.

In order to implement a good receiving function, you need a few tools. First and foremost, you need good scales. A large number of items are purchased by weight, and the only way to tell if you got what you are being asked to pay for is to weigh the stuff. This can be difficult to do without good scales.

Second, you need to record what was ordered and the price. This can be a standard purchase order document, or simply a piece of paper on which the person placing the order writes down the necessary information.

Finally, you need a document to record what was actually received in UNITS. I call this document a receiving log, and it becomes instrumental in the method of control described by my articles. With these tools in hand you are now ready to proceed.

I recommend the following steps for the receiving process:

1. Do not accept the invoice from the driver

2. Have items removed from the truck and stacked just inside the back door.

3. Count the items in units while checking the quality and record what you see on the receiving log.

4. Accept the invoice from the driver.

5. Reconcile the invoice against the receiving log for quantity. Adjust the invoice if necessary.

6. Reconcile invoice against purchase order for price and adjusted quantity. Adjust invoice if necessary.

7. Sign corrected invoice and dispatch driver.

8. Put the goods away immediately.

Notice that the invoice is not taken from the driver until the goods are counted. There are two reasons for this practice. First, the knowledge of what is supposed to be there could bias the count. Second, this practice prevents reconciliation on an intermittent basis, which could throw off the count.

Also note that the goods are put away immediately after the driver leaves. This keeps stock in its proper place, aids in the rotation process, prevents perishable items from deteriorating, keeps ice solid and gets the goods away from the back door so as to avoid any temptation on the part of employees to make unscheduled transfers (polite term for stealing).

Think of invoices as legal documents. Once signed, you are legally obligated to pay the amount due, regardless of the accuracy of the invoice. It is therefore extremely important to be sure that the invoice is correct and that all adjustments made are clear and obvious before signing it. If it is not possible to modify the invoice due to lack of space or legibility, attach a memo which clearly defines the modification. Be sure to change the total due on the invoice, and indicate on the invoice that a memo is attached which explains the changes.

Here's another startling discovery. The two worst people to use for receiving goods are the chef and the manager! Although the chef or manager may be the most knowledgeable about what was ordered, they are also the two individuals with the least amount of time to devote to the process. There are far too many interruptions for them to do an accurate receiving job.

Since the receiving function is largely clerical in nature, it is a misallocation of human resource to have managers perform clerical functions. Even though a manager can do a clerk's job, the reverse is usually not true. I strongly advise you to consider another employee for the receiving job.

In order for this to work, you may need to schedule receiving hours with your purveyors. And, you will also need to inform the receiving clerk job what was ordered, from whom, at what price and specification. This can be easily accomplished with purchase orders and specification training.

The person ordering the goods should be responsible for the completion of the purchase order. It takes little or no additional time for that person to write down what is being ordered if this is done while the order is being phoned in to the purveyor. Most people are coordinated enough to hold the phone in one hand and write with the other, and if not, they probably shouldn't be placing orders anyway!

The fact is that receiving is vitally important and needs as much attention in the food-service industry and it gets in every other industry. Receiving must be done religiously, consistently and accurately. The end result will be well worth the effort. It is possible to absolutely eliminate the possibility of purveyor theft or invoice errors overnight. The effect of good receiving practices on profitability will be immediately evident.

System Concepts, Inc. is the maker of FOOD-TRAK - Food and Beverage Management Software - http://www.foodtrak.com