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Chapter 1- Review Key terms

Chapter 2 – The Purchasing Function

Work on Presentations

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Key Term Review

As purchased (AP) price

As served (AS) price

Cash position

Competitive advantage

Cooperative or co-op buying

Covers

Customer count history

Economies of scale

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Key Term Review continued

Edible portion (EP) price

Franchise

Popularity index

Procurement

Product selection

Profit

Purchasing

Vendor

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Review Your Learning

Chapter One – page 11 Competency Guide

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The Purchasing Function

Inventory and Purchasing

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Test Your Knowledge

Chapter Two – page 14 Competency Guide

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Chapter Learning Objectives

Describe how the purchasing function is organized in a foodservice operation.

Summarize the knowledge, skills, and abilities a purchaser must possess.

Describe the duties and responsibilities of purchasers.

Describe the ethical considerations related to purchasing.

Identify issues involved in administering purchasing activities.

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Purchasing in All Foodservice Operations

Purchasing is a required activity.

Authority and responsibility for purchasing must be well-defined.

Effective purchasing directly impacts operational effectiveness and profitability.

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Who Is a Purchaser?

Purchasing authority will vary based upon an operation’s size.

Purchasing authority may be based upon an individual’s specialized product (or service) knowledge.

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Organization of the Purchasing Function

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Organization of the Purchasing Function continued

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Purchasing Affects

The General Manager Because purchasing affects profits

Because profit levels typically affect salary and bonuses

Because, when discovered, illegal or unethical purchasing practices suggest poor leadership

Other Managers The coordination of purchasing is extremely

important when more than one manager purchases items.

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Purchasing Affects continued

Hourly Employees

Because they need the tools and products necessary to effectively complete assigned tasks

Other Departments and Teams

Because purchasing impacts all areas of an organization, including marketing and sales

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Purchasing Agent Qualifications

Purchasers need four purchasing skill sets: Technical skills

Conceptual skills

Interpersonal skills

Other qualities

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Purchasing Agent Qualifications continued

Technical Skills

Examples Costing a recipe

Preparing a bid sheet

Calculating order quantities

Implementing new technology to improve the purchasing function

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Purchasing Agent Qualifications continued

Conceptual skills

Examples Budgeting expenditures

Forecasting sales

Organizing the purchasing function

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Purchasing Agent Qualifications continued

Interpersonal Skills

Examples Training receiving staff

Dealing with vendors and delivery agents (drivers)

Cooperating with other managers

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Purchasing Agents Qualifications continued

Other Qualities

Examples Education

Work experience

Ethical characteristics

Desire to advance

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Duties of Purchasers

Negotiate contracts

Investigate supplier’s facilities

Define and monitor cost and inventory controls

Maintain supplier price lists and contact data

Research and identify new products

Follow code of ethics

Coordinate activities to procure services and goods

Monitor the operating budget

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Duties of Purchasers continued

Develop purchase specifications

Identify, select, and train purchasing staff

Forecast trends

Review requisitions

Determine methods of procurement

Monitor storeroom inventories

Establish inventory (par) levels

Follow shipping procedures

Adhere to quality standards

Control products

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Ethical Considerations

Kickbacks

Money or other gifts received by an individual in return for purchasing from a specific vendor

Always unethical, in some cases kickbacks are also illegal.

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Ethical Considerations continued

Accepting Gifts

In most cases, ethical purchasers avoid accepting gifts from current or potential vendors.

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Ethical Considerations continued

Reciprocity

Reciprocity is an arrangement in which a buyer agrees to buy from a vendor in return for some kind of return business from that vendor.

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Ethical Considerations continued

Free Samples

Should be accepted only if the operation has a sincere interest in potentially purchasing the product

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Ethical Considerations continued

Personal Purchases

Also known as steward sales

These are employee purchases of goods to take advantage of the company’s purchasing power.

When offered, steward sales must be closely monitored to ensure payment.

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Ethical Considerations continued

To avoid any concern, only the buyer should have the authority to authorize a purchase.

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The Administration of Purchasing

Responsibility

The set of activities managed by the purchaser (buyer)

Authority

The limits of power the purchaser (buyer) has to accomplish activities

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The Administration of Purchasing continued

Types of vendor discounts Quantity discounts

Volume discounts

Cash discounts

Promotional discounts

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The Administration of Purchasing continued

Potential vendor service issues Late deliveries

Substitutions

Back orders

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Time Management

Time is usually a buyer’s scarcest resource.

Purchasing tasks must be completed on time for the operation to avoid service disruptions.

Create checklists to identify tasks that must be done: Daily Weekly Monthly

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How Would You Answer the Following Questions?

1. A buyer’s (authority/responsibility) describes the limits of power he or she has to accomplish assigned tasks.

2. A discount granted by a vendor in exchange for a large order of one specific item is known as:

A. A volume discountB. ReciprocityC. A promotional discountD. A quantity discount

3. For purchasers, ___________ is often the resource in shortest supply.

4. A blanket discount is another term for a steward sale discount. (True/False).

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Chapter Learning Objectives— What Did You Learn?

Describe how the purchasing function is organized in a foodservice operation.

Summarize the knowledge, skills, and abilities a purchaser must possess.

Describe the duties and responsibilities of purchasers.

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More Chapter Learning Objectives—What Did You Learn? continued

Describe the ethical considerations related to purchasing.

Identify issues involved in administering purchasing activities.