Purchasing Notes from Chapter 1-6

1. Five values in purchasing

 Quality, service, availability, information, price

2. Secondary member of food service distribution channel

 Sales and marketing

3. Primary member of food service distribution channel

 Source-harvester, farmer, rancher

 Distributor

4. Advantages of operating a chain restaurant:

 Chains readily acquire cash, long term lease

5. Distributor assessment includes:

 Physical and Service

6. Initial control point in food service system

 Menu planning

7. Internal customers contribute to purchasing process by listening to guests and discovering their
preferences.

8. Purchasing process begins with the customer requirement.

9. Distributor help an operation develop purchase specification by informing operators about available
products.

10. Basic options for e-serving are – online forward auctions and online reverse auctions.

11. Purchasing is the activity of acquiring goods or services to accomplish the goals of an organization.

12. Objectives of purchasing:

 Maintain quality and value of product

 Minimize cash tied up in inventory
 Maintain flow of inputs to maintain flow of outputs
 Strengthen the organization’s competitive position.

13. NIFDA National institutional food distributional association founded in 1950 A.D.
14. Characteristic qualities of an entrepreneur:

 Responsible
 Unique / creativity
 Leadership
 Profit
 Decision making and management skills
 Knowledge

15. Purchasing considerations:

 Goals and long term, sustainability, how to reach goals

16. Food Service Operators:

 Commercial (goal is to maximize the profit)-Restaurants, fast food, cafeteria

 Non-commercial(minimize the expenses)-Prison, hospital, army

17. On-Line specialty houses-specific item seller

18. Forces affecting distribution channel

 Ethics-doing the right thing, dependability, accountability, responsibility

 Economic forces-Supply and demand of basic commodities, manufactured products and created
services.
 Legal forces- Local, state, national and international laws affecting the channel.
 Political forces-Globalization, political conflict or strife, bioterrorism
 Technology-internet has increased the volume of the sales through a lot of information

19. Value considerations in purchasing:

 Physical market forms-convenience food, easier accessible food

 Transportation-price depends on local or imported product
 Packaging-Vacuum packing delays spoilage
 Branding-adds value being unique or different.

20. Assessing a distributor partner:

 Physical assessment-on site, cleanliness, appearance, attitude

 Service assessment-respect of the promises

21. Food Service Operations classifications:

 Independent-run by owner
 Chain-Mc Donalds
 Franchise-sell your concept to others who pay you for using your name, procedures, rules and
guidance.
22. Factors influencing menu changes:

 External factors-guest requirements, economic factors, competition, supply levels and industry
trends.
 Internal factors-change in meal pattern, concept and theme, menu mix.

23. Truth in menu:

 Product origin
 Size, weight, portion
 Preparation technique with temperature
 Additional charges for extras-payment modes should not be hidden in the invoice

24. Characteristics of purchasing control point

 Purchasing=next step after menu planning

 Potential cost analysis

25. Important sources of information for forecasting prices:

 Historical records of food service operation

 Judgement of distributors
 Judgement of independent forecasting firms

26. Role of internal customers in purchasing process:

 Define specification needs while purchasing

 Define volume requirement
 Working in a team

27. Sources of market research:

 Professional trade associations

 Distributors in the food service distribution channel
 Internet sites

28. Group Purchasing Organization:

 Common organization coordinating purchasing for number of individual food service operations
 Achieve efficient purchasing system, resulting in lower for products, services and supplies with
same, improved quality.
 Standardized quality, reduced prices, enhanced competitive advantage

29. Types of GPO’s:

 Buying Groups and GPO’s –smaller independent distributors competitive by joining buying
groups.
 Co-ops-usually noncommercial, on site, and non-for-profit segment categories.
 Procurement Service Companies-purchase best available products, supplies and services at the
lowest possible cost to the operators.
  Automatic Merchandising Buying Groups-help members save money through rebates on group
purchases made under contractual agreements

30. Comprehensive Recall Process:

 Actions taken by businesses to remove a product from the market

31. 3 Recall classes:

 Class I: serious health emergencies or death

 Class II: undeclared food colors, allergen, pesticide residue
 Class III: wrong item in the wrong package

32. Cost plus: contract developed to price goods at a specified rate over the distributor’s rate.

33. Buy-and-Inventory: product bought and stored in inventory

34. Long term contract: based on fixed or accelerating prices

35. Hedging: investment to reduce risk of price movement in an asset.

36. Inventory Value Calculations:

 FIFO
 LIFO
 Actual Cost
 Weighted average

37. Security:

 Kickbacks-money or gifts
 Fictious companies
 Reprocessing
 Delivery invoice errors
 Credit memo problems
 Purchaser theft

38. Negotiation Strategy:

 Ask DSR for item prices before placing order

 DSR must know operator does not purchase all the products
 DSR must know that the operator understands distributor’s cost

39. Primary Distributors:

 Better rates, time saving

 Higher rates, lack of specialized information
 Decreased variety within a product line
40. Secondary Distributor:
 Offer unique, special products sometimes at better prices
 Back up to the prime distributor
 Provide another source of price comparisons, for the food service operator

41. Physical Facilities Security:

 Authorized member only allowed.

 Refrigerators, freezer, beverage storage areas should be completely lockable.
 Manual or combination locks should be changed routinely.
 Keys to be securely locked in Managers office when not in use.
 Modern locking systems like pins, combination code, plastic cards
 Change locks when a staff leaves the employment.

42. Operator buys from distributor because

 Interactions- face to face, telephone, e-purchasing tools, reduce inventory cost, and effectively
manage inventory control and receiving.
 E-purchasing
 Strategic alliance-long term, positive
 Communication- solving problems, shared values
 Trust- honesty, straight forward
 Performances – listening skills
 Mutual benefits
 Commonalities in distributor and the buyer
 Emotional intelligence-adaptability, conflict management, empathy, cooperation

43. Alliances are a purchasing organization that facilitates relationships between buyers and sellers like
co-op and buying group.

44. GPO-Group purchasing organization is a common organization that coordinates purchases

purchasing for a number of individual food service operations.

45. Negotiations and conflict resolution is another key element of communication in purchasing.

46. Purchasing performance evaluation:

 Department Managers are responsible for it.

47. Distribution relationship management: The concept of customer relationship management as

applied to an operations distributors.

48. Balance scorecard-a way for an operation to indicate capital other than financial capital. It includes:
 Customer satisfaction
 Financial results
 Human resources
 Organizational effectiveness
 Marketing / growth
49. Strategic goals:

 A goal developed to describe in details how the values, vision and mission will become reality.
 Plan of action, based on behaviors to move organization towards its vision with its mission as
the guide

50. Code of ethics:

 A written expression of acceptable conduct.

51. Collaborative: compromise is a conflict, give and take exchange better than no settlement at all.

52. Competitive: beginning with tough and reasonable demands. Conflict continues unresolved
throughout the entire process.

53. Purchaser advantages:

 Location, timing, negotiation method, communication, authority

54. Audit Trail: organized and systematic flow of documents through the food service distribution
system. These documents determine if the system is working properly.

 In accounting: sequence of paperwork validating or invalidating accounting entries.

 In computing: electronic or paper log used to track computer activity.

55. Components of audit trails:

 Purchase requisitions
 Purchase orders
 Receiving reports
 Invoices
 Disbursements-payment vouchers

56. Receiving process:

 Check incoming product against purchase orders or records

 Check incoming products against standard purchase requisitions
 Check incoming products against delivery invoice.
 Accept incoming products
 Move accepted products to storage immediately.
 Complete necessary receiving documents.

57. Credit Memos

 Note problems with products on invoice.

 Issue request for credit memo, sign with delivery person and send copy to distributor with
invoice
 Hold invoice in separate file until the case is solved.