Purchasing: Outline l The Players »The market »The government –agencies –laws »The buyer l The Process »Types of purchasing »Methods of purchasing l The Procedure »Steps to take »Records to keep l The Product »Specifications »Determining yield »Make vs. Buy decisions

l is getting the right ____________ l to the right __________ l at the right __________ l in the right __________ l at the best __________ Purchasing

Purchasing: The Players l The market = ______________ (of ownership) »______ = basic source of supply »________ = middlemen »_______ l Marketing involves the product plus labor, packaging, transportation, advertising; overhead… l Every change of ownership increases _________!

Marketing Share

The Food Dollar Retail trade; other energy Finance; insurance packaging transportation processing farm value 18¢ 3.5 ¢ 4.5 ¢ 4¢7¢ 19¢ 34¢ 16¢ Food- service In the U.S. each $1 spent on food in 2008 went to: Source: USDA, ERS, Food Dollar Series Accessed 9/13/11 from

The Food Dollar other fuels; electricity pre-tax profitadvertising transportation packaging farm value 22¢ 4¢ 4.5 ¢? 4¢ 8¢ 39¢ 18¢ labor In the U.S. each $1 spent on food in 2006 went to: Source: USDA, ERS, Price Spreads from Farm to Consumer: Components of the Marketing Bill. Accessed 9/6/09 from ntstable.htm

The Food Dollar other fuels; electricity pre-tax profitadvertisingtransportation packaging farm value 15¢ 3.5 ¢ 4¢ 8.5¢ 38¢ 23¢ labor In the U.S. each $1 spent on food in 1996 went to:

Purchasing: The Players l Value-added factors l Also, supply and demand, competition, government policy, economic trends, weather conditions can affect price

l Government agencies »_____: meat, poultry, eggs, fish »_____: everything else –standards of identity –standards of quality –standards of fill –sanitation/food safety –labeling »National Marine and Fisheries Service »Public Health Service »EPA: pesticides, water safety »U.S. Treasury: alcohol Purchasing: The Players

l Laws »Law of agency: buyer’s authority to act for an organization; liability »Law of warranty: supplier’s guarantee of performance of goods »Law of contract: agreement of terms between two or more parties »Law of Title to Goods: when does the shipment change ownership? (FOB: Free-on- board vs. CIF: cash, insurance, freight) Purchasing: The Players

l The Buyer »Brokers vs. agents »Ethics? »Policies should be established beforehand Purchasing: The Players

l Types of purchasing Single-unit purchasing Warehouse clubs Centralized purchasing Group/cooperative purchasing Purchasing: The Process

l Informal/Open-market vs. Formal Bid –If U.S. gov’t related business, must solicit bids from all qualified vendors l Purchasing arrangements »Cost-plus purchasing »Prime vending »Blanket purchase agreement »Just-in-Time purchasing Purchasing: Methods of purchasing

Purchasing: The Procedure 1. Identify needs  ________ system 2. Determine product ____________  name, grade, unit purchased, container sizes, count per container, form… 3. Determine __________ needed  depends on forecast, portion size, cash available, frequency of delivery, storage space… 4. Research market for availability 5. Negotiate and place an order  consider price, quality, service 6. Receive, pay, store…

Purchasing: The Procedure l Purchasing records: 1.purchase _________  requisition #, date needed, budget account #, quantity needed, item description 2.___________ (PO) 3.___________

Purchasing: The Product l Form l Quality »Grades = comparison to government standards –scoring depends on type of product –is higher (best) grade always the best choice? »Brands »Condition at delivery l _____(V) = Quality (Q) Price (P)

Purchasing: The Product l ______ helps determine form and quantity to buy »AP = »EP = »AS = EP portion ÷ yield % = AP portion AP price ÷ yield % = EP price

Purchasing: The Product l Make vs. Buy decision »quality »equipment (availability, capacity, turnover time) »labor (availability, skill, training needed) »time »inventory (storage space) »cost l _______should be the last decision criteria

l A. List all the ways you can think of in which buying locally is a positive choice. (Think of the whole food system.) l B. Briefly trace the general steps in food procurement, from identifying a need to the final delivery of the product. Practice Questions-- Purchasing