WELCOME CHRM 2480 Inventory & Purchasing

Agenda Ground Rules Warm Up Activity Syllabus Review Purchasing Website NRAEF ManageFirst Program Chapter One – Introduction to Inventory & Purchasing

Ground Rules Be on time – start on time All cell phones, pagers and IPods should be turned off during class No Internet use during class, unless part of classroom activity Appreciate other points of view Respect others’ desire to learn End on time

Information Card Please fill out the following information on the index card –Side ONE Name Phone Address –Side TWO Business affiliation & current position Hospitality industry background

Warm Up Activity Break into pairs Interview each other – 2-3 minutes each person –Name, Occupation, Why are you taking Purchasing Class, etc…… Introduce each other to the group

Syllabus Review Course Information Course Assessment Schedule of Assignments –Can Cutting, March 31, 9 am room 108? –Tour of FSA, April 21 st, 9 am? –Physical Inventory, Week of April 6 th OCC-April 6 th, 8:30 am NE Med Center-April 6 th, 1:30 pm Hilton Omaha-April 13 th, 9 am Stokes Restaurants- April 8 th, 6 am

Syllabus Review Projects (Individual & Group) Attendance Sheets Website

NRAEF ManageFirst Program Competency Guide IS REQUIRED FOR THIS COURSE How can this book help me? Institute for the Culinary Arts – Metropolitan Community College  Part of a certificate program  Industry-driven  Resume builder

Institute for the Culinary Arts – Metropolitan Community College Who is the NRAEF?  Educational arm of the National Restaurant Association  Bridge between academia and industry  Work with over 60,000 restaurant, hospitality and foodservice members companies NRAEF ManageFirst Program Competency Guide IS REQUIRED FOR THIS COURSE

 Management-focused  Application-based, not just theory  Professional Profiles give you a “sneak peek” into the field  “Real world” activities help build job skills Competency Guide Content Institute for the Culinary Arts – Metropolitan Community College NRAEF ManageFirst Program Competency Guide IS REQUIRED FOR THIS COURSE

 Validated by over 200 restaurant, foodservice and hospitality organizations  Resume builder  Tangible accomplishment  Can give you a hiring advantage over peers who didn’t use ManageFirst How will this certificate help me? Institute for the Culinary Arts – Metropolitan Community College NRAEF ManageFirst Program Competency Guide IS REQUIRED FOR THIS COURSE

Academic Scholarship for NRAEF ManageFirst Program® Students Application deadline: March 31, 2009 Award amount: $2,500 You can apply online at the above link Scholarships are for Undergraduate students enrolled in accredited culinary schools or ManageFirst Program students

Additional Scholarships Metropolitan Community College Foundation scholarships – due 3/15/09 Academic Dean scholarships –Spring quarter – due 3/13/09 –Summer quarter – due 6/16/09 –Must be pursuing Culinary Arts degree and have a 3.0 GPA Apply online:

Let’s Take a Break Please be back in 10 minutes

Agenda Change in Schedule: –March 24 th will be the Can Cutting –March 31 st Chapter 3 & 4 and Inventory Book Set-up U.S, Foodservices Tour – 9 am Sign-up for Inventory & Group Presentations Tuesday, April 21 st, Tour of U.S Foodservice Chapter One – Introduction to Inventory & Purchasing Chapter Two - The Purchasing Function Work on Group Projects

OH 1-16 Introduction to Inventory and Purchasing Inventory and Purchasing Test Your Knowledge 1 OH 1-16

OH 1-17 Chapter Learning Objectives Define purchasing, procurement, and product selection. Outline the objectives in the purchasing function. Describe the importance of maintaining an operation’s competitive position. List the types of goods and services that might be purchased by a foodservice organization.

OH 1-18 Test Your Knowledge Chapter One – page 2 Competency Guide

OH 1-19 Purchasing vs. Procurement Purchasing – to obtain products and services of a desired quality at a desired price. Procurement – the entire process by which products and services are selected based on quality and cost, to include: what products and services are needed, the quality specifications, when the items will be needed, from which vendors you will purchase, managing the contracts, as well as establishing all the purchasing, receiving storing and issuing policies.

OH 1-20 Franchise vs. Independent Franchise – a business purchased from a company along with the right to use that company’s name, logo and products. Provides for purchasing through franchisor’s central commissary Independent – stand alone operation Cooperative buying or co-op buying occurs when independent operators combine their purchasing power to cooperatively purchase all goods and services as a collective group in order to get lower pricing

OH 1-21 Economies of Scale Franchise owners may purchase either through their commissaries or through a co-op Independent owners may purchase through a co-op or independently Profit is earned after all operating expenses have been paid by either operation

OH 1-22 Goals of the Purchasing Function 1. Maintain adequate supply. 2. Maintain quality standards. 3. Minimize investment. 4. Maintain an operation’s competitive position. 5. Obtain the lowest possible edible portion (EP) or as served (AS) price.

OH 1-23 Purchasing Impacts The availability of items for sale: Too few items means product outages Too many items means spoilage, waste, and theft

OH 1-24 Maintain Adequate Supply Utilize customer count histories. Sources of data include: The point-of-sale (POS) system Guest checks Physical counts Count customers by day part.

OH 1-25 Maintain Adequate Supply continued Monitor popularity index of items sold. The popularity index measures the popularity of a specific menu item in relation to other items in its category. The popularity index also measures the popularity of one menu category relative to other categories.

OH 1-26 Maintain Adequate Supply continued Additional areas of concern include: Vendor delivery schedules Availability of items from vendors External factors that can influence item sales

OH 1-27 Maintain Quality Standards Foodservice managers maintain quality by: Following the operation’s specifications (specs) on each menu item or ingredient purchased Clearly communicating these standards to current and potential vendors

OH 1-28 Maintain Quality Standards continued Customers expect the same quality product each time they visit their favorite foodservice operations.

OH 1-29 Minimize Investment Tying up excessive dollars in inventory can damage a foodservice operation by restricting the amount of cash available for bill payment. Ideal inventory levels are directly related to cash availability and to storage capability.

OH 1-30 Minimize Investment continued In most cases, prices increase rather than decrease. As a result, effective foodservice managers: Minimize investment by purchasing the maximum amount of quality product available at the minimum price possible. Negotiate reduced prices for large quantity purchases.

OH 1-31 Maintain an Operation’s Competitive Advantage Choose vendors who: Deliver frequently Deliver at convenient hours Can deliver in an emergency outage situation Provide flexible payment options Deliver consistent quality

OH 1-32 Obtain the Lowest Possible EP or AS Price EP = Edible portion price AS = As served price EP and AS refer to the price of an item after all trim and waste has been taken into account. Example: peeled, cubed potatoes AP= As purchased price AP refers to the price of an item before any trim or waste are considered. Example: unpeeled, whole potatoes

OH 1-33 Comparison of AP and EP (AS) Methods

OH 1-34 Mismanaging the Purchase Function Leads to product outages Results in lost sales Alienates customers Ties up excessive amounts of cash Increases operating (food and beverage) costs

OH 1-35 What to Buy Food items Alcoholic beverages Nonalcoholic beverages Nonfood items Furniture, fixtures, and equipment (FF&E) Business supplies and services Support services Maintenance services Utilities Foodservice managers buy many items including:

OH 1-36 Buying Food Items Meat Poultry Eggs Processed foods Fish Dairy Produce Dry and canned goods

OH 1-37 Buying Alcoholic Beverages Spirits Beer Wine

OH 1-38 Buying Nonalcoholic Beverages Soda Coffee Tea Juice Bottled water

OH 1-39 Buying Nonfood Items Linens and uniforms China and glassware Bar supplies Paper goods Cleaning supplies Menus and beverage lists Candles Flowers Music and entertainment Kitchen utensils and supplies

OH 1-40 Buying Furniture, Fixtures, and Equipment Tables, chairs, and barstools Lighting fixtures Bars Cooking equipment Refrigeration equipment Plumbing fixtures Heating, ventilation, air conditioning (HVAC) Entertainment pieces

OH 1-41 Buying Business Supplies and Services Office equipment and supplies Cash registers POS systems Computers Credit card processors Financial and legal services Insurance Marketing and advertising

OH 1-42 Buying Support Services Linen and uniform rental Waste removal Flower services Music services Pest control Parking and valet services

OH 1-43 Buying Maintenance Services Cleaning services Plumbing repair HVAC repair Groundskeeping Painting Carpentry Equipment maintenance Equipment repair Equipment replacement

OH 1-44 Buying Utilities Gas Oil heating Electricity Water Sewage services Telephones Internet access

OH 1-45 How Would You Answer the Following Questions? 1. A (popularity/frequency) index can be used to help estimate how many of a specific menu item are likely to be sold. 2. Which of the following is not a goal of the purchasing function: A. Obtain the lowest possible EP price. B. Maintain adequate supply. C. Maximize investment. D. Maintain quality standards 3. A goal of a quality purchasing program is that of maintaining an operation’s __________ advantage. 4. The cost of most AP food products is higher than their AS cost. ( True/False )

OH 1-46 Chapter Learning Objectives— What Did You Learn? Define purchasing, procurement, and product selection. Outline the objectives in the purchasing function. Describe the importance of maintaining an operation’s competitive position. List the types of goods and services that might be purchased by a foodservice organization.

OH 1-47 Next Week Review Your Learning questions from Chapter One Read Chapter One & Two