1. The Purchasing Function: An Overview
Chapter 1

2. Objectives Describe commerce Outline the purchasing function
Analyze the optimal goals of selection and procurement
Describe the desired attributes and knowledge required of a buyer

3. Objectives (cont’d.)
Describe a storeroom policies and procedures manual
Differentiate among the various types of sellers and how to best work with them

4. Objectives (cont’d.)
Distinguish among the various purchasing options and contracts available to buyers
Identify the benefits of a healthy buyer–seller relationship

5. Historical Perspectives in Trade
Early humans were hunter-gatherers
Agriculture (seed planting) began later
Trade (commerce) is the voluntary exchange of goods or services
First form of trade was bartering
When currency was invented, selling and buying became separate transactions

6. The Goals of Selection and Procurement
Choosing from available alternatives
A spec and a detailed description of what is needed guides selection
Procurement
Systematic exchange of payment for goods or services between buyer and seller

7. An Optimal Goal Optimal purchasing
Matches the specific characteristics of the product with the specific needs of the business

8. An Optimal Goal (cont’d.)
Considerations that are evaluated
Product attributes
Supplier attributes
Delivery requirements
Sanitation
Dependability

9. The Buyer Line position: e.g., chef
Directly involved in food preparation
1-2 Organizational Chart of a Small Restaurant

10. 1-3 Organizational chart of a larger hotel food service operation

11. Required Attributes and Knowledge
Ethical standards
Honest and fair treatment of all
Conceptual skills
Understands relationships between functions and how actions affect society
Communication skills
Listen to and articulate needs

12. Required Attributes and Knowledge (cont’d.)
Mathematical skills
Computer skills
Market awareness
Understand laws of commerce
Product knowledge
Obtained by exposure to various forms of food products

13. Storeroom Policies and Procedures
Develop a policies and procedures manual
Addresses who does what and when in purchasing
Includes supplier selection criteria
Guidelines on sales calls and accepting gifts from suppliers

14. The Seller
Buyer must establish mutually satisfying relationships with sellers (purveyors)
When sellers are successful:
They can broaden their product line
There are more to choose from, ensuring competitive pricing

15. Selecting Sellers Respect is important Research food service resources
Internet commerce
Local suppliers
National distributors
Broadline distributors have wide product range

16. Selecting Sellers (cont’d.)
Set up an introductory meeting
Prepare a list of questions to ask
Keep the meeting to one hour
Inspect the purveyor’s facilities
Look for sanitary conditions and practices

17. Establishing Purchasing Options and Contracts
Inquire about purchasing options
Formal or informal arrangements
Depends on size and structure of seller’s organization or buyer’s business
Cooperative buying
Group formed to buy directly from source in large quantities

18. Purchasing Service and Maintenance Contracts
Food service operators enter into contracts with outside service vendors
Some examples:
Pest control, waste removal and recycling, cleaning, facility and equipment maintenance, laundry and linen supply, bookkeeping, legal, insurance, utilities, advertising, flowers and plants, and vending machines

19. Informal Buying Practices
Practiced by smaller operations where chef or owner does the buying
Advantages of informal buying
Takes little time away from daily operations
Varying quantity needs can be addressed
Urgent needs may be addressed quickly
Take advantage of price fluctuations

20. Formal Buying Practices
Bid buying
Buyer requests price quotation from sellers
Cost plus fixed fee buying
Agreement with distributor for fixed markup above their costs

21. Formal Buying Practices (cont’d.)
Volume buying and warehousing
Goods are held by supplier and delivered as needed
Prime vendor contracts
Similar to cost plus fixed fee but multiple vendors are used

22. Formal Buying Practices (cont’d.)
Long term contracts
Based on fixed prices; delivered as needed
Hedging (forward buying)
Buying quantities before they are needed to avoid price increases
If price falls, buyer loses

23. The Buying Process Buying occurs after menu planning is completed
Buying consists of three major steps
Identifying the need
Planning for the purchase
Making the purchase

24. Identifying the Need Determine stock levels
Consider shelf life
Minimum quantity known as safety stock
Consider normal usage rates
Determine whether additional quantities are needed for special events

25. Planning for the Purchase
Determine rate at which operation uses the items
Compare quantities needed with stock on hand
Prepare an order sheet
Consider urgency of needing products

26. Making the Purchase List of selected and approved suppliers
Identify local retailers that carry product
Create an order record
Column for each vendor on the form
Completed order forms saved in a secure location
Use purchase order or blanket P.O.

27. Making the Purchase (cont’d.)
Standing orders
Volume commitment for daily delivery
Daily orders
Delivered within 24 hours
Drop shipments
Seller arranges for wholesaler or manufacturer to deliver to buyer directly

28. Buyer-Seller Relations: A Win-Win Approach
Relationships between buyers and sellers should be mutually beneficial
When both parties consider relationship advantageous, future business together is sought after and encouraged

29. Conducting Sales Meetings
Regularly scheduled and planned in advance
Negotiate purchases
Create partnerships
Understand the needs of both parties
Know yourself

30. Supplier Performance Evaluation
Evaluate both the product and the process
Develop a cross-functional team to identify priorities that should be evaluated
Define most important factors to evaluate
Determine a rating scale

31. Ethical and Professional Standards and Practices
Management should articulate ethical standards of the organization
Management may not benefit personally from the company’s financial gains
Do not allow conflict of interest
Avoid tips, supplier gifts, or bonuses

32. Summary
Buyers and sellers should strive for a mutually beneficial relationship
Many different types of purchasing exist
Developing a policies and procedures manual is important
Evaluating suppliers and maintaining ethical standards key for success