Know

An Overview of Inventory

Inventory refers to the foods or supplies a facility has in dry or cold storage. Having sufficient inventory on hand to produce weekly menus helps ensure that your center does not run out of an important ingredient or supply needed to serve meals or snacks. But having too much inventory can tie up financial resources, and if it is perishable, can result in a financial loss if the food goes bad before it can be used. For child care centers, the recommended amount of inventory to have on hand is enough for one to two weeks’ worth of meals.

How much inventory should you have on hand? The correct amount is what you will need to produce food for your "customers," with a small cushion for unpredicted usage, substitutions, or other unforeseen events. A par value system is one type of inventory control: it establishes a maximum quantity of inventory to keep on hand. The par value is the amount needed to fulfill menu requirements for one ordering period, plus a small amount for safety stock, or the amount of "buffer" inventory to have on-hand in the event of any unforeseen circumstances that might affect your program.

When placing orders, the amount of product to order is the amount needed to bring inventory back to the maximum or par level. If an item is served more than once between delivery periods, such as a favorite fruit or vegetable, you must also consider how much will be used before the order is received.

Par levels are typically set for items served each day, like milk, ingredients used in multiple recipes, cleaning chemicals, and paper goods. For foods used as entrees, fruits, vegetables, and grain products like bread, it is best to estimate how much you will serve over the course of the week’s menu.

The inventory turnover rate refers to how quickly inventory is used in a specified period of time. To calculate the inventory turnover rate, you must first know the number of days of inventory on hand. You can either calculate this or go by the standards identified at your facility. See the equations below.

If your facility receives weekly deliveries for most products you order, a good target is to have enough inventory on hand for seven to ten days and have a turnover rate of two to three, which means the inventory should be used up two to three times per month. If your deliveries are more frequent, you will need less inventory on hand. Conversely, if your deliveries are less frequent, you will need more inventory available to prevent shortages of food or other supplies. The following document gives a general overview of inventory management that is used in some programs, including general terminology and best practices. Save the PDF file with your records.

• Costs of Goods Sold

Check with your supervisor to determine which inventory management system is in place within your program.  You may also ask your supervisor how they determine when to order new inventory and what systems are in place to lessen the risk of running out of a food or other product before the next delivery.

Record Keeping

Food Production Records

Food production records document the types and amounts of food produced for reimbursable meals. Some states have guidelines that require child-nutrition program participants to keep food production records for the meals they produce. These records must show how the meals served contribute to the required food components each day meals are served and how they contribute to meeting the age-appropriate nutrient standards over the weekly menu. Food production records are produced for every meal served each day and must be kept on hand for three years plus the current year, according to the Administrative Handbook for CACFP Centers. Check the regulations for your state to determine if production records are required at your program.

Food production records, when completed accurately, provide information about which foods and recipes to use and what portions to serve. Staff can also make notes about actual quantities prepared and number of meals served. Thus, they are important tools for planning and controlling food production and can be used to forecast future meal preparation when a similar menu is planned. This, in turn, leads to more accurate meal planning, reducing the chance of over- or under-production and more controlled costs.

Since food production records capture a variety of different information about meal service, different sections are completed by different food service staff members. As a general rule, the person performing certain job duties related to meal preparation would fill out the corresponding sections of the food production record.

Source: National Food Service Management Institute

Annual Inventory

The Code of Federal Regulations (CFR) Part 226 states that sponsoring programs for the Child and Adult Care Food Program (CACFP) must demonstrate fiscal accountability for funds received to implement the CACFP. One such way that this is done is through accurate record keeping, including a summary of inventory. The CACFP requires sponsors to conduct an annual physical inventory as part of the fiscal-management process. An annual inventory is an itemized listing of all unopened food and nonfood supplies that a facility has on hand at the end of the fiscal year. Inventory represents money in the form of previously purchased food and nonfood supplies. The monetary value of inventoried items must be included in the determination of the food and nonfood costs incurred at the end of one fiscal year and the beginning of the next fiscal year. To complete annual inventory requirements, a count of all food and associated nonfood items, such as paper goods, that are physically present in your facility is taken at the end of each fiscal year. These values, in turn, become the starting inventory values for the next fiscal year.

Procurement

BusinessDictionary.com defines procurement as the process of obtaining or buying goods and services that includes preparation and processing of an order as well as the end receipt (delivery) of the product or service and approval of payment. In child care food service, foods and goods can be procured in several ways, but the two most common are from wholesale vendors and from retail establishments (such as grocery stores). Often, both methods are used. Wholesale vendors allow for better price control, bulk ordering capabilities, and routine delivery windows. Buying from retail vendors, like grocery stores, is usually more expensive per unit and requires a food service staff member to leave the premises in order to buy food. But, if a last-minute menu substitution has to take place, retail vendors are a simple and quick solution.

Facilities purchasing products in volume from vendors must have a written contract with that vendor. The contract must specify the guaranteed pricing and how long it is good for, as well as what financial adjustments will be made in the event of problems with goods or services. Below is an example of a vendor contract template for a child care center. Contracts for initial bids are lengthier and more detailed than renewal contracts for current vendors.

• Sample Vendor Contract Template

Whether you order from a wholesale vendor or a retail vendor, all food and supply orders should be menu-driven. Centers participating in CACFP that contract with vendors must comply with the regulations outlined in the Code of Federal Regulations (7 CFR Part 226). It is a good idea to check with the state agency or local funding authority for CACFP before negotiating a contract with a specific vendor.

Estimating How Much to Buy

The USDA Food and Nutrition Service has several resources dedicated to food purchasing for CACFP. The Food Buying Guide for Child Nutrition Programs is available on the USDA website (https://www.fns.usda.gov/tn/food-buying-guide-for-child-nutrition-programs). Each section of the document can be downloaded separately directly from the website.

When it comes to determining how much food to order, the Food Buying Guide for Child Nutrition Programs suggests some key points to consider. For instance, foods are most often purchased in case lots, which may or may not be exactly the quantity you need for your recipe. Thus, it is recommended to round up when calculating how much food to buy. On the flip side, you should always round down when calculating the creditable component toward meeting a meal-pattern requirement for CACFP.

To calculate how much of a type of food to purchase, consider these questions:

• How many servings will I need?
• Will different serving sizes be used for various age or grade groupings?
• What is my planned serving size for this food?
• In what form will I purchase this food?
• What serving size does the food provide for meal contribution?
• Is the listed serving size the same as my planned serving size?
• How many purchase units of the food will I need to buy?

The Food Buying Guide for Child Nutrition Programs also has an online calculator you can use to estimate how much food to purchase. Like the print copy, it is organized by meal component and contains several categories within each component. The Food Buying Guide Calculator rounds up to the nearest whole purchase unit or next quarter pound with the information it computes.

Working With the Menu

Inventory management begins with the menu. The menu dictates what types and how frequently foods and other items need to be purchased. Cycle menus are an excellent way to manage inventory because they allow for predictability of necessary supplies, which improves forecasting. Forecasting refers to the ability to make an informed prediction when placing orders, based on previous results. Planning menus ahead of time—including using cycle menus—ordering forecasts are more accurate.

Receiving and Storing

When you receive food from a wholesale vendor, have your order summary ready. Check each food that is being delivered against the initial order summary to make sure that everything you ordered is received and that the price is correct. Foods that require time and temperature control for safety are known as TCS foods. TCS foods should be free of off-odors and colors and be delivered at the correct temperature (41° F [5° C ]or colder for refrigerated foods and 0° F or colder for frozen foods). Ensure that frozen foods have not been previously thawed and then refrozen. For dry goods, check cans for the presence of bulges, severe dents, or rusted cans with pitted edges. Reject any food that does not meet these criteria.

The following table contains information about the receiving process for specific food items.

After you have received your food order from the vendor, it will need to be put into storage right away to keep temperatures from crossing into the temperature danger zone (41 F to 135 F). Ideally, you will be able to have your deliveries come at a time when you are not busy serving a meal. (It is also a good practice to have simple-to-prepare menus on delivery days.)

When storing food in the freezer, make sure that air can circulate around the items; do not overstuff the freezer. Defrosting should take place at regular intervals. Store items in such a manner that you can read what each item is. Oldest food should be in the front, with newer foods in the back. This is called first in, first out (FIFO) rotation. FIFO is the recommended rotation method for foodservice.  However, there are sometimes instances when FIFO is not followed, such as when a more-recently-ordered food commodity has a closer use-by date.

Refrigerated foods should be stored in a hierarchical fashion according to cooking temperature, with ready-to-eat (uncooked) foods on the top shelf, foods that get cooked to an internal temperature of 145 F on the next shelf, foods that get cooked to 160 F on the third shelf, and foods that get cooked to 165 F on the bottom shelf. (This is covered in more detail in Lesson Seven.) As with freezer foods, refrigerated foods should be rotated according to FIFO so that the oldest foods get used before newer foods.

Dry storage areas should be maintained at 50–70 F and be well ventilated. Nonperishable food items need to be stored at least 6 inches from the floor and away from chemicals. Foods should be rotated according to FIFO rotation when possible to do so to ensure maximum quality. Use the following mini-poster from the National Food Safety Management Institute, Storeroom Basics, and hang it in your facility’s store room.

• NFSMI “Storeroom Basics” mini-poster

See

Watch this video clip featuring a registered dietitian nutritionist who explains the process of inventory management in child care kitchens. Make notes of anything you learn from this video that you would like more information about in your own facility.

Do

Understanding the process of how to take annual inventory is an important skill for food service workers in child care centers, especially to be in compliance with CACFP regulations. Use the Ohio CACFP Annual Inventory Requirements packet below. Review each page with your supervisor. Ask your supervisor to explain the process for taking annual inventory at your facility.

• Ohio CACFP Annual Inventory Requirements packet