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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

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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


Today we are in a seller s market

Today…We are in a Seller’s Market.

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

U s d a inspection marks

Processed Meat

Raw Poultry

Raw Meat

U.S.D.A. – Inspection Marks

Know manufacturer s code number and establishment number

Know Manufacturer’s Code Numberand Establishment Number

U s dept of commerce fish and wildlife act

U.S. Dept. of CommerceFish and Wildlife Act

Est. 036


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

Line item award

Line Item Award

Bottom line award

Bottom Line Award

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

Sample of item classification on draft bid

Sample of Item Classification on Draft Bid

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):




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

Final bid

Final Bid

Request for proposal rfp

Request for Proposal (RFP)

  • Allows evaluation of variables other than cost

  • Cost should exceed 50% of total points

Rfp evaluation

RFP Evaluation

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

Evaluation re evaluation


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

Standard stock order form

8 cases


Standard Stock Order Form







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