IJASTE – International Journal of Applied Sciences in Tourism and Events Vol.1 No.1 June 2017

EFFICIENCY IN THE PURCHASE OF FOOD AND BEVERAGES
IN OPERATION OF STAR HOTELS IN BALI

1I Putu Astawa
2I Putu Mertha Astawa

3Ni Putu Wiwiek Ary Susyarini
1,3Tourism Business Management, Politeknik Negeri Bali, 80361 Bali Indonesia

email: putuastawa1@pnb.ac.id
2Managerial Accounting, Politeknik Negeri Bali, 80361 Bali, Indonesia

email: merthabali@pnb.ac.id

ABSTRACT
The research aims to calculate efficiency in the purchase of food and beverages

in star hotels in Bali. Ten five stars hotels receiving award as the best hotel from
Trivadvesor in 2016 are chosen as research sample. Data are collected through
questionnaire given to purchasing department. Data are analyzed using descriptive
statistical analysis and economical order quantity (EOQ) analysis. Research result
indicates that the system and process for the purchase of food & beverage in stars
hotels in Bali covered contract system for purchasing of perishable foods such as
vegetables; daily or monthly system to give freedom to hotels to buy required goods;
standing order was used to order certain types of foods supplied by certain supplier;
and cash purchase was used to buy food or beverages in small amount. The
purchasing process in the hotel uses contract system and the level of efficiency could
be improved using EOQ in purchasing. The purchasing of budgeted food and
beverages will facilitate the purchase operation; however, it will be better if it includes
the existing economic approach calculation in order to increase hotel’s performance.
The use of EOQ method could reduce storage cost at the hotels. In the future, hotels
should put more attention on such cost as storage cost and cost of order.

Keywords: efficiency, purchasing, food and beverages, star hotels.

INTRODUCTION

Efficiency is one of the performance measures to be achieved by a company

since it is related to the cost incurred. In globalization era, all companies want to be

able to greatly reduce cost yet higher value of benefit. Efficiency has measure of

success rated based on the amount of source or cost to achieve goals from activities

conducted. Several things can be done by a company to have cost efficiency,

namely: performing production cost efficiency and determining standard cost.

Through production cost efficiency, cost incurred by the company for production

process should be thoroughly planned and well controlled.

Efficiency as an ability of a business unit to achieve goals and is always

related to organization goals to be achieved by a company (Maulana, 1997). A

mailto:putuastawa1@pnb.ac.id
mailto:merthabali@pnb.ac.id

IJASTE – International Journal of Applied Sciences in Tourism and Events Vol.1 No.1 June 2017

department related to cost efficiency in a hotel is purchasing department. The

department is responsible for gaining information on goods, determining supplier for

procurement of goods and issuing purchasing orders to selected supplier.

Purchasing system is a transaction activity conducted by a company to fulfill the need

for product or raw material from a supplier (Galloway et al, 2000). Galloway et al

(2000) stated that “The role of purchasing function is to make materials and parts of

the right quality, and quantity available for use by operations at the right time and at

the right place.” Purchasing is a department handling purchasing. The department is

one of features of a company especially those companies in accommodation sector.

Result of survey in ten best hotels according to Tripadvesor in the first semester

of 2016 is presented in Table 1.

Table 1.
The average value of the Purchase of Foods and Beverages

Five Star Hotels period of January – June 2016

No Month Average Purchase of Food
(Rp)

Average Purchase of
Beverage (Rp)

1
2
3
4
5
6

January
February
March
April
May
June

315,941,806.00
334,757,397.00
499,225,006.00
589,721,789.64
478,691,070.31
563,705,244.81

67,386,462.00
102,243,427.00
216,269,161.00
143,529,247.00
152,904,078.00
176,192,637.00

Source: Processed data, 2016.

Based on Table 1 it can be explained that the amount of purchase conducted in

one semester of 2016 for food and beverages was fluctuated. In April the purchase

was very high for food and in June for beverages. The condition indicates that the

purchase of food and beverages was differed. It means that the increase in the

purchase of food did not accompany by the increase in the purchase of beverages. It

is an interesting condition since food and beverages usually go along in the

application in a restaurant of a hotel; therefore, it is necessary to observe whether the

hotels have efficiency in purchasing cost. Level of efficiency is also needed to

determine the hotels strategy (Farooq, 2014; Alison et al, 2004; Abel and Alfred,

2010).

To give solution for issues in the ten sample hotels in this study, an appropriate

data and analysis are needed. For this study, data were collected through

IJASTE – International Journal of Applied Sciences in Tourism and Events Vol.1 No.1 June 2017

questionnaires distributed to purchasing department as well as interview on unclear

system and expenses.

Based on initial data presented above, several problems are described as

follow: (a) How is the food and beverages’ purchasing system in star hotels in Bali?

(b) How is the achievement of efficiency level by star hotels in Bali? Based on these

problems, solutions were expected on system to be implemented and efficiency level

achieved during the first semester of the purchase of food and beverages in 2016.

THEORETICAL STUDY

The purchase of goods by a company is based on financial ability of the

company as well as the readiness of existing facilities such as adequate and qualified

warehouse (Suarsana, 2007). According to Suarsana (2007), there are various

purchasing systems generally applied by purchasing department in a hotel. The first

system is contract system. It is a system to purchase groceries, especially certain

perishable foods such as vegetables and fruits as well as seasonal foods, using a

contract agreement. The contract is conducted with one or more partners and it

stresses the quality, quantity and price of the goods. Prior to the issuance of the

contract, purchasing department conducts selection with authorization of related

superior and agreement has been achieved by both sides, hotel and its partner. The

period of contract is varied for perishable food; it can be three or six months. Terms

of payment, however, is monthly (one month credit). If at any point, market price is

increased and one of the suppliers is unable to fulfill the hotel’s order for several days

or week, hotel will look for a substitute for the supplier that is considered as resign

and inconsistent.

The second system is daily and monthly system. In daily and monthly system, a

company or hotel has freedom and discretion to purchase goods from various

suppliers or supermarkets. Through this system, a hotel will need no analysis on the

performance of various suppliers to be selected. They just go to any nearest

supermarkets, shops or traditional markets that give the lowest price and pay in cash

or credit. The procedure, however, is the same, which is by looking for information on

which shops or supermarkets or markets that has good quality yet cheapest price.

Nevertheless, the system has some limitations or risks, such as when there is a

sudden and high fluctuation in price increase, often times supplier or the shop

intentionally do not meet the hotel’s order to avoid loss.

IJASTE – International Journal of Applied Sciences in Tourism and Events Vol.1 No.1 June 2017

Cash purchase of goods (cash and carry) is the third purchasing system. In this

system, purchasing department in a hotel prepare a small amount of cash known as

petty cash. Petty cash is used to buy goods for hotel operation, especially sudden

request of groceries from the kitchen that hard to fulfill by the supplier partner. The

system is used to buy food and beverages in small amount. It is conducted when

warehouse or kitchen is running out groceries for their immediate need. Cash

purchase is also conducted in supermarket or shop near the hotel because the goods

are going to be used immediately.

Standing order is the third system. The system is one of purchasing system

used to order certain type of foods supplied by certain supplier (Abel and Alfred,

2010). The type of food purchased using this system is dairy product such as fresh

milk, pastry product, yoghurt, ice cream as well as eggs and so on. Standing order is

prevailed any time as long as no written or official notice issued regarding the change

in the order from the hotel. The change, in this case, is conducted by Executive Chef

since he/she is the one who understand on what type of foods that will use standing

order system.

According to Susantun (2000) efficiency is a ratio of input to output related to

the achievement of maximum output with a number of input. If the output ratio is high,

the efficiency is high. Economical order quantity is one of ways to calculate efficiency

level (Ria, 2012; Abel dan Alfred, 2010).

RESEARCH METHODS

The research was conducted in ten best star hotels according to Trivadvesor in

2016. Data were collected through a questionnaire consisted of variables of monthly

average expense of purchasing, fixed cost and variable cost in period of January

2016 to June 2016. In addition, interview was conducted to gain information

uncovered in questionnaire response. Data collected were analyzed using descriptive

statistical analysis and EOQ analysis. Research respondents were purchasing

managers.

RESULT AND DISCUSSION

Food and Beverages Purchasing System

Every hotel has different purchasing system or process based on their financial

ability as well as readiness of existing facilities such as adequate and qualified

IJASTE – International Journal of Applied Sciences in Tourism and Events Vol.1 No.1 June 2017

warehouse. Due to the large amount of foods and beverages needed in their

operation, hotel needs appropriate purchasing system and process for goods

procurement. Therefore, hotels used four purchasing systems to support their food

and beverages’ needs, as follow:

1. Contract system

Contract system is used to purchase certain types of food especially perishable

foods such as vegetables and fruits as well as seasonal foods. The contract is

conducted with one or more partners and it stresses the quality, quantity and price of

the goods. Prior to the issuance of the contract, purchasing department conducts

selection with authorization from related superior and agreement has been achieved

by both sides, hotel and its partner. The period of contract is varied for perishable

food; it can be three or six months. Terms of payment, however, is monthly (one

month credit). If at any point, market price is increased and one of the suppliers is

unable to fulfill the hotel’s order for several days or week, hotel will look for the

substitute of the partner that is considered as resign and inconsistent.

2. Daily and Monthly System

In daily and monthly system, a company or hotel has freedom and discretion to

purchase goods from various suppliers or supermarkets. Through this system, a

hotel will need no analysis on the performance of various suppliers to be selected.

They just go to any nearest supermarkets, shops or traditional markets that give the

lowest price and pay in cash or credit. The procedure, however, is the same, which is

by looking for information on which shops or supermarkets or markets that has good

quality yet cheapest price. Nevertheless, the system has some limitations or risks,

such as when there is a sudden and high fluctuation in price increase, often times

supplier or the shop intentionally do not meet the hotel’s order to avoid loss.

3. Cash and Carry

In this system, purchasing department in a hotel prepare a small amount of

cash known as petty cash. Petty cash is used to buy goods for hotel operation,

especially sudden request of groceries from the kitchen that hard to fulfill by the

supplier partner. The system is used to buy foods and beverages in small amount. It

is conducted when warehouse or kitchen is running out groceries for their immediate

IJASTE – International Journal of Applied Sciences in Tourism and Events Vol.1 No.1 June 2017

need. Cash purchase is also conducted in supermarkets or shops near the hotel

because the goods are going to be used or processed immediately.

4. Standing Order

Standing order is one of purchasing system used to order certain type of foods

supplied by certain supplier (Abel and Alfred, 2010). The type of food is dairy product

such as fresh milk, pastry product, yoghurt, ice cream as well as eggs and so on.

Standing order is prevailed any time as long as no written or official notice issued

regarding the change in the order from the hotel. The change, in this case, is

conducted by Executive Chef since he/she is the one who understand on what type

of foods that will use standing order system.

Efficiency of Purchase of Food & Beverage in Hotel

1. Cost of Order

Cost of order is cost incurred for goods procurement from order until the goods

are arrived. Regarding cost of order, hotel had detail calculation. The cost is

influenced by staffs’ wage, phone and electricity bills, and cost incurred for order

request. Since there was no calculation, authors calculated based on the existing

theory and the components are presented in the Table 2.

Table 2
Average Cost of Goods Order

No. Components of cost of order Cost of Goods Order

1 Wage Rp 2,106

2 Phone bill Rp 750

3 Papers Rp 500

4 Printer ribbons Rp 311

5 Computer Rp 88

6 Printer Rp119

Source: Data of the Hotels (processed data), 2016.

Based on Table 2 it is known that costs in Hotel consisted of wage for order

staffs and cost to order and creating order request. The cost incurred for one order of

good to one distributor was obtained from staff wage of Rp. 2,106. However, the

calculation of cost was mostly from estimation obtained from interview with

purchasing department especially with staff who ordered the goods without detail

calculation for each component. The calculation of cost of order was fixed for each

IJASTE – International Journal of Applied Sciences in Tourism and Events Vol.1 No.1 June 2017

good since it was not affected by the amount of goods or type and quality of goods

ordered but by the number of components influencing order process such as the

number of labors or resources used. Frequency of order was influenced by frequency

of order needed in one period. The higher the frequency of order, the higher the cost

of good order incurred. It is similar to previous research by Tauvicky Andry (2012)

that in order to minimize cost of order per period is by ordering in bulk thus the

frequency of order is smaller; however, it needs to consider other costs incurred such

as storage cost.

2. Cost of Beverages Storage

Cost of storage is cost incurred to store goods. The cost is obtained from the

amount of value contained in goods. The cost consisted of cost of storage facilities

(depreciation of building and tools), cost of building insurance, obsolescence cost,

and other costs influencing the storage of the goods. The calculation of storage cost

is differed to those of cost of goods order. Storage cost will be a variable cost since it

is influenced by the value or the good price. Since there was no data basing the

calculation of storage cost of foods and beverages, the researchers gained the data

merely from in-depth interview with one of informants who served as purchasing

manager. Based on the information and assumption of 40% of the price, following

was the example of the calculation. Tomato Rosso Pizza Dens of 5 kg had high

storage cost of Rp. 52,000 since the unit price of the good was Rp. 130,000.

Whereas, a unit price of Fresh Milk of Rp. 14,740 would have storage cost of Rp.

5,896. Based on the calculation, it could be explained that the amount of storage cost

was varied for each good. The more expensive the goods, the more expensive the

storage cost, and vice versa. The amount of storage cost was also influenced by the

amount of goods stored. The larger the quantity of goods stored, the more expensive

the storage cost incurred, and vice versa. Storage cost and cost of order was

inversely proportional. This was the reason for considering cost of order and storage

cost in determining the amount of order to achieve efficient and interconnected

amount of order and purchasing frequency. One way to do it was using EOQ

(Economic Order Quantity).

IJASTE – International Journal of Applied Sciences in Tourism and Events Vol.1 No.1 June 2017

3. Comparison of the Amount of Goods Order, Order Frequency and EOQ

The difference in the amount of order for each purchase and order frequency of

stationary using EOQ method and method used by the hotels is described in the

following table.

Table 3
Comparison of Cost of Order Calculation based on EOQ and Hotel

No. Name of Goods

The
Amount of

Order
(EOQ)

The
Amount of

Order
(Hotel)

Frequency
of

Purchase/
Order
(EOQ)

Frequency
of

Purchase/
Order
(Hotel)

1 Coffee Powder in
Plastic Package of
250 Gr

17 Unit 60 Unit 14 Kali

4 Kali

2 Tomato Rosso
Pizza Denso 5 Kg

2 Unit 8 Unit 12 Kali

3 Kali

3 Whole Peeled
Tomatoes
Chopped
Valfrutta

4 unit 12 unit 9 kali 3 Kali

4 Fresh Milk

24 Unit 72 Unit 18 Kali

6 Kali

5 F.F Potatoes 7 Unit 24 Unit 14 Unit 4 Kali

Source: Processed data, 2016.

There were differences in terms of the amount of order between EOQ

calculation method and method used by the hotels. It can be seen in Table 3 that

based on EOQ method the frequency of order or purchase was higher but the

amount of order was smaller and it was vice versa for the calculation of the hotel.

Certain hotels in Bali conducted bulk order and smaller frequency of purchase. It can

be explained that using the calculation method used by the hotels cost of order

incurred was smaller than storage cost since cost of order is a fixed cost therefore

the amount of goods ordered to a distributor will be fixed. Whereas, in calculation

using EOQ method, the cost incurred for storage was smaller since the amount of

storage depended on the cost of the good price; therefore, the smaller the amount of

good ordered the smaller the storage cost incurred. Based on efficiency, EOQ was

more efficient in terms of the amount of order and more economical in terms of

IJASTE – International Journal of Applied Sciences in Tourism and Events Vol.1 No.1 June 2017

storage cost. On the other hand, hotels’ calculation was more efficient in storage

cost. However, considering inventory and procurement costs, EOQ calculation

method was more efficient than those of hotels’ calculation. The purpose of

calculating the amount of order was to maximizing the difference between income

and cost. Thus, the result of EOQ calculation indicated the cost to be incurred for

more efficient goods inventory and procurement.

CONCLUSION

System and process for the purchase of food & beverage in stars hotels in Bali

were: contract system for purchasing of perishable foods such as vegetables; daily or

monthly system to give freedom to hotels to buy required goods; standing order was

used to order certain types of foods supplied by certain supplier; and cash purchase

was used to buy food or beverages in small amount. The purchasing process was

conducted based on flow determined by each company but it did not significantly

deviate from general theory.

Efficiency level for the purchase of food and beverage in star hotels in Bali was

calculated using detailed EOQ (Economic Order Quantity) method started from cost

of order, storage cost, and other costs using the amount of goods ordered in each

order and frequency of goods order during procurement. The result of the calculation

was inversely proportional to goods procurement calculated by the hotels. The

amount of order calculated by EOQ was smaller than those calculated by the hotels.

Calculation using EOQ method would bring efficiency to the costs incurred for goods

inventory and procurement and it is more efficient than calculation using methods

used by the hotels.

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