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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




Distributor buying group

from Grower to School

Broker/sales rep


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


Other Commercial

Correctional Facilities

Other Non-commercial


Convenience Stores


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
  • $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






Frozen, dry & refrigerated

Bottom Line Categories
  • 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



Distributor’s Choice

NO Brand Restrictions

private labels and quality


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


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.
  • 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


_____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