PROCUREMENT (Week 10)
-Procurement is defined as systematic exchange b/w a seller & buyer to obtain goods &
services which incl determining the types of products needed, making purchases,
receiving & storing shipments & administering purchase contracts; those responsible for
it is called Director of Procurement/Purchasing director.
-Purchasing is the activity concerned w/ the acquisition of products; the right product, in
right amt of time & at the right price. If the person doesn’t understand food, it can
become a problem when there is a need for substitutions. The central purchasing dep is
the person who identifies product needs & have other dep they are purchasing for.
-The buyer is the one who listens to the desires of customers, who determines what is
grown & packaged & who understands how items are processed/manufactured, shipped,
sold & consumed. Buyers need to be skilled in interpersonal comm., customer focus,
making decisions, negotiation & analytical ability, managing change, conflict resolution,
problem solving, influence & persuasion & comp literacy.
-Purchasing can be viewed as: the profit center (generates revenues greater than expenses
& creates profit for the org.) & the cost center (has expenses but do not generate profits to
cover expenses). In a hosp-based environment, the profit center is the cafeteria, kiosk vs.
the cost center is the patients; there’s a budget for each patient that doesn’t depend on
-the market is the medium through which a change in ownership moves commodities
from producer to consumer.
-The producer is someone who produces raw food to sell. The processors/manufacturers
are org that takes raw food items & transforms them into packaged products for sale to
customer in foodservice ops. The distributor is the wholesaler responsible for transferring
products from processorsupplier; classified as the wholesalers (purchases from various
manufacturers/processors & provides storage, sells & deliver products to supplier),
brokers (independent sales & marketing rep who contracts w/ manufacturers/processors/
prime-source producers to sell local marketing programs w/ wholesalers, suppliers/
foodservice ops) & manufacturer’s rep (represents a manufacturing company & informs
suppliers of products by this manufacturer). The supplier is the org that offers products
for sale. The customer is anyone who is affected by a product/service.
Sustainability in purchasing
-involves the origin of product, type of packaging, composition of product & waste
-What are the benefits of buying locally? Aiding the local economy, maintaining good
public relations, buying food in smaller quantities & having fresher food, reduces use of
fossil fuel for transpo & gas emissions, dec dist food needs to travel & provides food w/
face, high recycled content & less packaging, healthier & safer for employees &
customers, less toxic, minimally polluting, more energy efficient & fragrance-free.
-What are the obstacles of buying locally? Ability to purchase these foods the entire year,
having access to sufficient quantity to meet the op’s needs & often having to work w/
multiple growers to obtain quantities needed.
-Hospitals don’t necessarily buy local b/c of seasonal availability of most foods, they
need to have a year round purchasing contract b/c of seasonality & the ability to supply food routinely (even if you can buy potatoes locally all year, can they handle vol of 300
patients; it’s only an item out of many so it’s possible but need a diff perspective.
-The inc in value caused by both processing/manufacturing & marketing/distribution,
exclusive of the cost of materials, packaging or overhead. The objective of value added is
to inc the marketing value of raw & semiprocessed product. Eg. you can buy already
peeled potatoes esp if you need that for some dishes but wouldn’t it be easier to buy
unpeeled ones & just keep the skin on?—depends on the dish or may compromise
Eg. AP flour—value added cost for this incl miller, research scientist, necessary
production facilities & distribution
-Government: enacts federal legislation that protects consumer. Promotes competition
-Industry: satisfies consumer while making profit. Responsible for complying w/
-Consumer: alerts gov’t about food safety, nutrition & environment concerns. Expects
industry to produce appropriate products.
-A methodical investigation of all components of an existing product or service with the
goal of discovering & eliminating unnecessary costs w/o interfering w/ the effectiveness
of the product or service. Ie. Used for cost reduction; important in enhancing eff &
-In foodservice, the essence of quality is suitability. Eg. A supplier gives the buyer the
quality of product identified in the specification but part of the price is due to packaging,
storage, production & financial management features that are not suitable for the product
used in foodservice, a simpler package would’ve been adeq & likely to be less expensive.
-How is a value analysis conducted? Value is the result of the relationship b/w the price
paid for the item & its use in the function it fulfills. 1 product is evaluated, problem is
stated, products evaluated, methodology, results (cost evaluation) & recommendation.
-Product selection: what is involved in the knowledge of purchasing? Buyers must know
not only the products to be procured but also the market, buying procedures & market
trends; how the materials are produced, processed & move to market; must be able to
forecast, plan, organize, control & perform other management-level functions. The
primary function of the buyer is to procure req products for desired use at minimal cost.
-The manager has 3 basic choices for the production of a menu item: produce item
completely from raw foods, purchase some ingredients & assemble & purchase item in
final form from the wholesaler. The 4 factors whether a menu item will be purchased is
quantity (right size, not too big/small), quality (tastes good), service (reliable delivery &
predictable service) & cost (comparing cost from supplier w/ estimated cost of making
-Sometimes depends on the price (Jello made from scratch/ready-made), availability
(kosher, pureed foods) or type of equip (potato peeler) Types of Specifications: statement readily understood by buyers & suppliers of the req
quality of products incl allowable limits of tolerance, ie. A list of detailed characteristics
in a product for a specific use.
-Technical=indicates quality by objective & impartial test results, eg. size, weight, parts
& metals in equipment like aluminum/stainless steel, detergents/cleaning compounds
used; particularly applicable to graded food items.
-Approved brand=indicates quality by specifying brand name/label, branded products
captures customer’s attention, eg. Heinz ketchup, Pepsi, Coca-cola
-Performance=indicates quality by functioning characteristics of product, eg.
effectiveness/efficiency of equipment, pH levels of detergent, # dishes to be washed/min.
Writing Criteria for specifications
-Good specifications are:
-clear, simple & suff specific
-consistent w/ products/grades on the market
-verifiable by label statements, grades, weight determination, etc.
-fair to supplier & protective to buyer (eg. if supplier ships you the wrong product
& you clearly specified what you wanted, you could be granted a refund)
-realistic quality stds
-capable of being met by several bidders to enable competition
-Specifications for food products should incl: name of product (trade or brand)/std;
federal grade, brand or other quality designation; capacity of container (weight, can size);
count per container or approx # of lbs (# of pcs if applicable) & unit on which price will
Methods of purchasing
-Informal: price quotations are given & orders are made by telephone or personally w/ a
salesperson, often used when time is critical. Done if the amt of purchase is so small that
time req for formal purchasing can’t be justified; an item can be obtained only from ½
sources of supply; need is urgent & immediate delivery is req; stability of market &
prices is uncertain; & size of op may to small to justify formal procedures. Have little
-Formal: tax supported institutions usually are req to use competitive bidding which is
optional for private institutions & c