© 2011 John Wiley and Sons, Inc. All Rights Reserved Selection and Procurement for the Hospitality Industry Purchasing ANDREW HALE FEINSTEIN AND JOHN M. STEFANELLI E i g h t h E d i t i o n

© 2011 John Wiley and Sons, Inc. All Rights Reserved CHAPTER Distribution Systems 3

© 2011 John Wiley and Sons, Inc. All Rights Reserved YOU SHOULD BE ABLE TO: Summarize the various distribution systems in the hospitality industry Differentiate sources’, intermediaries’, and retailers’ involvement in the supply chain Distinguish between the economic values added to products and services as they journey through the channel of distribution

© 2011 John Wiley and Sons, Inc. All Rights Reserved DISTRIBUTION SYSTEM There are approximately 945,000 foodservice operations and about 48,062 lodging facilities A typical non-chain hospitality property uses about suppliers; multi-unit uses 6-8.

© 2011 John Wiley and Sons, Inc. All Rights Reserved THE CHANNEL OF DISTRIBUTION

© 2011 John Wiley and Sons, Inc. All Rights Reserved PRIMARY SOURCES Food Growers Farmers and Ranchers Manufacturers Produces an item from raw materials Processors Fabricators Takes multiple ingredients and assembles into new product “Value-Add” or “Convenience” Food

© 2011 John Wiley and Sons, Inc. All Rights Reserved PRIMARY SOURCES (CONT.) Beer, Wine, Distilled Spirits Brewers Fermented beverages made from grains Winemakers Fermented beverages made from grapes Distillers Beverage alcohol that has undergone distillation process

© 2011 John Wiley and Sons, Inc. All Rights Reserved PRIMARY SOURCES (CONT.) Furniture, Fixtures, and Equipment (FFE) Manufacturers

© 2011 John Wiley and Sons, Inc. All Rights Reserved FOOD INTERMEDIARIES Distributor Specialty distributor – one type of product Full-line distributor – food and non-food Broad-line distributor – full-line plus FF&E Brokers Agent to promote a product for a primary source Manufacturer’s Representatives A broker but with added services

© 2011 John Wiley and Sons, Inc. All Rights Reserved FOOD INTERMEDIARIES (CONT.) Manufacturer’s Agents Much like a rep, markets primary source Commissaries Food process center for specific company Wholesale Clubs Cash-and-carry

© 2011 John Wiley and Sons, Inc. All Rights Reserved FOOD INTERMEDIARIES (CONT.) Buying Clubs or Price Clubs Co-operative Buying Joining of independent purchasers to gain buying power

© 2011 John Wiley and Sons, Inc. All Rights Reserved ALCOHOL BEVERAGE INTERMEDIARIES Importer-wholesalers Imports alcoholic beverages into the US Also acts as a distributor Liquor Distributors Wholesalers who operate under laws Alcohol Beverage Commission (ABC) Controls the sale and purchase of alcoholic beverages

© 2011 John Wiley and Sons, Inc. All Rights Reserved FFE INTERMEDIARIES Dealers Buys from Primary Source and Resells Item Catalog House – keeps no inventory Storefront Dealer – minimum inventory Heavy Equipment Dealer – sale and install Full-Service Dealer – sale and service Brokers Promoter

© 2011 John Wiley and Sons, Inc. All Rights Reserved FFE INTERMEDIARIES (CONT.) Designers Hired Consultants to design layout Architects Much like a Designer Construction Contractor Much like a Designer

© 2011 John Wiley and Sons, Inc. All Rights Reserved FFE INTERMEDIARIES (CONT.) Distributors Broadline Distributor – usually not involved in the design but rather the replacement Leasing companies Rent-to-Own or lease of equipment

© 2011 John Wiley and Sons, Inc. All Rights Reserved SERVICES SOURCES Few large national sources exist Most are local, small companies Franchisees of a national firm Examples might include: CPA, Repair Service, Printing/Copier

© 2011 John Wiley and Sons, Inc. All Rights Reserved ECONOMIC VALUES ADDED TO PRODUCTS Time Value Time that a product sits on the shelf adds up Time that a vendor must wait to be paid Form Value Most expensive added value Processing and Packaging of the product

© 2011 John Wiley and Sons, Inc. All Rights Reserved ECONOMIC VALUES ADDED TO PRODUCTS (CONT.) Place Value Cost involved from getting product to you How is product shipped/delivered? Information Value Depends on the purchaser and information desired – manual vs. trainer Supplier Services Value Additional services are offered with product