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Procurement and Inventory Management. National Food Service Management Institute The University of Mississippi . Objective 1. Identify persons in the food distribution chain and know how to communicate with all players in the chain. Growers. FOOD DISTRIBUTION CHAIN. Manufacturers.

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procurement and inventory management

Procurement and Inventory Management

National Food Service Management Institute

The University of Mississippi

objective 1
Objective 1

Identify persons in the food distribution chain and know how to communicate with all players in the chain

food distribution chain

Growers

FOOD DISTRIBUTION CHAIN

Manufacturers

Distributor buying group

from Grower to School

Broker/sales rep

Distributors

School/district purchasing co-op

End users

UNIT 2 - Chapter 3 - 1

types of distributors
Types of Distributors
  • Full or broadline
  • Specialty wholesalers
  • Special breed distributors – restaurant chains
  • Supermarket or wholesale clubs
current customer base
Current Customer Base

School Foodservice

Health Care

Colleges/Universities

Other Commercial

Correctional Facilities

Other Non-commercial

Hotels/Lodging

Convenience Stores

Restaurants

to sell themselves schools can emphasize
To Sell Themselves, Schools Can Emphasize . . .
  • No change in ownership
  • No bankruptcy
  • Fair pricing process
  • Early week delivery
  • No deliveries on major holidays
  • School district profile
objective 2
Objective 2

Describe the role of ethics in procurement

unethical behavior
Unethical Behavior
  • Providing cost information to competitor PRIOR to supplier selection
  • Sharing supplier’s proprietary information with competitor
  • Accepting gifts or cash
  • Accepting free trips or entertainment
ethics rule of thumb
Ethics Rule of Thumb:

“If you question an action, then you should not proceed.”

objective 3
Objective 3

Identify federal, state, and local procurement regulations, policies, and procedures governing all school nutrition program purchases

procurement guidelines
Procurement Guidelines

What are they?

  • Federal Standards
  • State Standards
  • Local Standards

Which do you use?

  • Most restrictive
federal regulations
Federal Regulations
  • 7 CFR Section 3016
  • http://www.access.gpo.gov/cgi-bin/cfrassemble.cgi
  • $100,000–Use formal purchase method OR state requirement if less
  • No geographic preference allowed
  • Vendor who writes specs cannot offer price
  • Cost plus a percentage of cost NOT allowed
federal regulations1
Federal Regulations
  • Only responsible contractors
  • Open and free competition
  • Written selection procedures
  • Staff may NOT accept cash or gifts
  • Domestic commodities
food and drug administration
Food and Drug Administration

Food, Drug, and Cosmetic Act

  • Controls labeling of food products
  • Prohibits
    • misbranded food products
    • adulterated food products
  • Establishes standards of identity, quality, and fill
  • Nutrition Labeling & Education Act - 1990
usda grade standards
USDA Grade Standards

USDA Grade A

USDA Grade B

USDA Grade C

u s d a poultry and meat inspections
U.S.D.A.Poultry and Meat Inspections
  • Poultry Products Inspection Act/Wholesome Poultry Products Act
    • Prevents misbranded or adulterated poultry products
  • Meat Inspection Act
    • Established meat inspection program
additional laws
Additional Laws
  • FDA - Public Health Service Act
    • Model Food Code
  • U.S. Customs Service - Tariff Act
    • Labeling of imported foods – “Product of (country)”
  • U.S. Dept of Justice - Antitrust Laws
    • Sherman, Clayton, Robinson-Patman, and Federal Trade Commission Acts
    • Open and free competition
usda food safety and inspection service names on labels
USDA Food Safety and Inspection Service: Names on Labels
  • Ham - must be at least 20.5% protein in lean portion as described in 9 CFR 319.104. Added water is permitted
  • Ham - water added: The product is at least 17.0% protein with 10% added solution.
  • Ham with natural juices: The product is at least 18.5% protein.
  • Ham Salad: Product must contain at least 35% cooked ham.
objective 4
Objective 4

Identify various types of acceptable purchasing systems

four purchasing methods
Four Purchasing Methods
  • RFQ: Small purchase procedure
  • IFB: Competitive sealed bids
  • RFP: Request for proposals
  • Noncompetitive negotiation
sections of a formal bid
Sections of a Formal Bid
  • Transmittal & signature pages
  • Standard terms & conditions
  • Special instructions
  • Product list & descriptions
  • Billing address & delivery locations
  • Potential bidders
grouping categories
Grouping Categories

For open and free competition,

group by specialists

bottom line categories

Bread

Milk

Paper

Equipment

Produce

Frozen, dry & refrigerated

Bottom Line Categories
prioritize
Prioritize:
  • Money Spent
  • Impact on meal quality
objective 5
Objective 5

Describe how to develop and use specifications, descriptions, and approved brands for assembling a food bid

specifications and descriptions
Specifications and Descriptions

Specifications: complicated and lengthy

  • May be a couple of pages for one product, labor intensive

Descriptions:short and measurable

  • Limited to those characteristics that are essential for communication with the supplier such as CN label
  • Can be identified by the receiver and measured at the point of receipt
product classification
Product Classification
  • One ingredient:
    • Distributor\'s choice
  • One major ingredient:
    • Private label
  • Multiple ingredients (highly processed): Manufacturer’s brand
distributor s choice

sugar

salt

Distributor’s Choice

NO Brand Restrictions

private labels and quality
PRIVATE LABELS AND QUALITY

VEGETABLES FRUITS

First = Extra Fancy Choice

Quality Fancy

(90-100) (80-90)

Second = Extra Standard Quality Standard

(80-90) (70-80)

Third = Standard Substandard Quality (70-80) (below 70)

manufacturer s brand
Manufacturer’s Brand

High-volume products or products with quality problems

Identify on final bid

Manufacturer Code # Establishment #

Maker 42104 Est. # 17842

brand approval
Brand Approval

TWO APPROVAL SYSTEMS

Brand orApprovedEqual/No Brands

Pre-ApprovedBrands Only

steps brand name or approved equal

Brand decision made here.

Steps: Brand Name or Approved Equal
  • Write product descriptions.
  • Issue final bid.
  • Open bids.
  • Evaluate bids.
  • Award bids.
problems
Problems
  • Decision of comparable quality made during bid evaluations
  • Bidder allowed to determine “equal”

Brand Names or Approved Equal

approved brands only
Approved Brands Only
  • Write product descriptions & develop draft bid.
  • Classify products as
    • Distributor’s Choice
    • Private Label
    • Manufacturer’s Brand
  • Hold individual pre-bid conferences.
individual pre bid conference
Individual Pre-Bid Conference
  • Explain classification system
  • Explain brand pre-approval
  • Request nutritional data & copy of labels of brands they want screened
  • Discuss test schedule
  • Order product to test
approved brands only1
Approved Brands Only
  • Screen brands
    • Paper screen
    • Appearance screen
    • Taste screen
  • Notify potential bidders of screening results
  • Accept alternative to brands that failed
brand or approved equal
Brand or Approved Equal
  • Screen second group of brands
  • Issue final draft of product/brand list
  • Conduct final pre-bid conference

Brand decisions already made.

Issue bid

Open all bids in a public meeting

Evaluate final bids

Award bids to the successful bidder

testing product phase i
Testing Product: Phase I
  • Purpose: choose which formula will be bid
  • Products: from SAME manufacturer
  • Consider:
    • Nutritional impact
    • Price
    • Taste
major components of chicken patties or nuggets
Major Components of Chicken Patties or Nuggets

Meat block:

a. Breast, white or breast w/rib

b. Chicken , natural proportion

c. Dark meat

Egg: Dried whole egg

Vegetable protein product (VPP):

a. Flour

b. Concentrate

c. Isolate

testing product phase ii
Testing Product: Phase II
  • Purpose: approve brands of the SAME formula
  • Products: from DIFFERENT manufacturers
  • Consider:
    • Nutritional comparability
    • Appearance
    • Taste
taste test rules
Taste Test Rules
  • Product delivered in full-case, sealed container
  • Students rate product
  • Part of regular meal
  • Prepared in typical equipment
  • Test only one product per day
  • Allow NO company representatives
  • Do NOT disclose brand name
request for proposal rfp
Request for Proposal (RFP)
  • Allows evaluation of variables other than cost
  • Cost should exceed 50% of total points
rfp budget evaluation
RFP Budget Evaluation

Maximum: 55 points

Two responses: $4,000 and $5,000

$4,000 = 55 points

$4,000  $5,000 = 80%

80% of 55 points = 44 points

$5,000 = 44 points

direct to manufacturer
Direct to Manufacturer
  • Sealed bids
  • Line item for most products
  • Firm price with petition for escalation/de-escalation
  • Requires a bid for distribution
objective 6
Objective 6

Identify the basic types of pricing mechanisms

pricing mechanisms
Pricing Mechanisms
  • Firm for duration of contract
  • Market–Escalation/Deescalation
  • Cost + Fixed Fee

Fee may not increase duration of contract including extension

Monitored based on Market

objective 7
Objective 7

Describe how to develop a critical path plan for procurement

to develop a critical path
To Develop a Critical Path
  • Determine delivery time
  • Complete time needed for each task
  • Start with delivery date & work back to beginning date
  • Minimum of 36 weeks required
objective 8
Objective 8

State the basics of receiving and inventory management

receiving is
Receiving is . . .

. . . the critical link in procurement and food quality

personnel training
Personnel Training
  • Inspecting deliveries using district receiving procedures
  • Taking food temperatures
  • Reading food labels
  • Following district clerical procedures
  • Reporting product quality problems
storage guidelines
Storage Guidelines
  • Use FIFO
  • Store in original packaging
  • Separate raw from cooked or ready-to-eat foods
  • Store min. of 6” off floor and away from wall
  • Keep areas clean and dry
  • Inspect and treat regularly for pests
  • Use clean equipment to transport
  • Store in appropriate area.
inventory and cost control
Inventory and Cost Control
  • Inventory is a major component of cost control
  • JIT (Just-in-Time) deliveries
  • Limit days food supplies are in inventory
  • Excess inventory = $ tied up
seven day inventory
Seven-Day Inventory

Formula:

_____Annual $ for food______Number of serving days in year

(

)

X 7

standard stock
Standard Stock
  • Determine number of cases needed
    • Previous year’s invoices
    • Delivery frequency
  • Change with seasonal foods
  • Add 50% to base amount
  • Develop pre-printed order form
cooperatives

4,000

6,000

23,000

Cooperatives

33,000

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