Thursday, 4 p.m.
Sue, the kitchen manager at the Wagon Wheel Restaurant, glanced at the clock. Pierson’s Produce would be calling soon for the weekend order. She pulled out a notepad and began to make a quick list. It was going to be a busy weekend—the homecoming game at the college would be bringing in lots of business. She’d better order an extra case of lemons for iced tea and lettuce for salads.
Sue didn’t have time to take inventory, so she tried to picture the storeroom as it looked when she last peeked in. She was sure they had lettuce—or was that cabbage she saw? No, it had to be lettuce. Maybe she’d only order one case for the weekend. They were fine on parsley; no need to order that. But kiwis—that new fruit salad on the menu was popular, so she added kiwis to the list.
Sue was putting the final items on her list when George, the general manager, tapped at her office door. He carried a report in his hand and he didn’t look happy.
“Have you seen this report, Sue?” he asked. “Our food costs are on the high side, and it looks like produce is the culprit. It’s up to 9.5 percent, and it should be down around 7.5 percent. We really need to do something about that.”
“I’ll take care of it,” she said.
Just then the phone rang. It was Alan from Pierson’s Produce, calling for the order.
“Just the man I wanted to talk to,” said Sue. She explained George’s concern about the produce costs and wondered what Alan could do to help. She could hear him tapping away at his computer keyboard.
“Well, you know, it’s the end of the season and prices are higher now, Sue,” he said. “But, looking at your past orders, I see you’ve been paying $22 a case for fancy lemons. If you like, I can get you lemons for … how does $14 a case sound?”
Sue didn’t even stop to ask what she might be getting for that price. Saving $8 a case was just what she wanted to hear. She agreed and ordered three cases of lemons, a case of lettuce—yes, only one, she told him—and two cases of kiwis. She checked the items off her notepad as Alan read back her order. She thanked him and hung up the phone. Then she turned her attention to other matters.
Monday, 4 p.m.
Sue looked up in surprise as George came into her office. He looked even more unhappy than he had last week, if that was possible. He shook a report under her nose.
“I thought you were going to take care of these produce costs,” he said. “These figures are even higher—11 percent! How could that happen?”
Sue looked confused. “I don’t know,” she stammered.
At that moment, Adrian, the chef, who had happened to hear George’s question as he was walking by, stuck his head in the door.
“I know how it happened,” Adrian said. “We ran out of lemons, lettuce, and parsley this past weekend and I had to send my people down to the grocery store to pick up produce—at retail prices! That’s what drove our costs up.”
“But I ordered lemons and lettuce on Thursday afternoon,” Sue replied. She showed him the torn-off page from her notepad. “Didn’t they get delivered?”
Adrian thought back. Yes, three cases of lemons had been received, but they were small and unattractive, obviously not the fancy lemons that the restaurant used to garnish its drinks. “I told the receiving clerk that the produce company must have sent us the wrong lemons and told him to send them back,” Adrian said. “They definitely weren’t the lemons on our specifications.”
Sue groaned. So much for the $8 a case savings on lemons. She guessed she should have told the receiving clerk what to expect.
Adrian continued. “As for the rest of the order, the restaurant got only half the lettuce it needed, and no parsley at all. We had to garnish the Eggs Benedict with scallions until someone could get to the market and buy some parsley.” He laughed. “But boy, do we have kiwis to spare. We already had one case. I don’t know how we’re going to use up two more cases before they go bad.”
George looked at Sue for an explanation. “I’m sure this is an isolated incident,” he began.
Adrian laughed again and said, “It happens more often than you think. Why don’t you ask her about the time we ended up with Florida oranges for our garnishes instead of California oranges?”
Sue glared at Adrian, and George looked at both of them.
“I think it’s time we sat down and reviewed some purchasing procedures around here,” he said.
Issues discussed in the case study:
1. What standard purchasing control practices could Sue have followed that would have prevented the high produce costs?2. What was right or wrong about the chef’s actions to remedy the situation?3. What steps can Sue take to reduce produce costs in the future?
Source: Case Number: 4656CA
The following industry experts helped generate and develop this case: Timothy J. Pugh, East Lansing, Michigan; and Lawrence E. Ross, Professor, Florida Southern College, Lakeland, Florida.