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Procurement and Inventory Management

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  1. Procurement and Inventory Management National Food Service Management Institute The University of Mississippi

  2. Objective 1 Identify persons in the food distribution chain and know how to communicate with all players in the chain

  3. 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

  4. Types of Distributors • Full or broadline • Specialty wholesalers • Special breed distributors – restaurant chains • Supermarket or wholesale clubs

  5. Current Customer Base School Foodservice Health Care Colleges/Universities Other Commercial Correctional Facilities Other Non-commercial Hotels/Lodging Convenience Stores Restaurants

  6. Today…We are in a Seller’s Market.

  7. 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

  8. Objective 2 Describe the role of ethics in procurement

  9. 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

  10. Ethics Rule of Thumb: “If you question an action, then you should not proceed.”

  11. Objective 3 Identify federal, state, and local procurement regulations, policies, and procedures governing all school nutrition program purchases

  12. Procurement Guidelines What are they? • Federal Standards • State Standards • Local Standards Which do you use? • Most restrictive

  13. 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

  14. Federal Regulations • Only responsible contractors • Open and free competition • Written selection procedures • Staff may NOT accept cash or gifts • Domestic commodities

  15. 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

  16. USDA Grade Standards USDA Grade A USDA Grade B USDA Grade C

  17. 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

  18. Processed Meat Raw Poultry Raw Meat U.S.D.A. – Inspection Marks

  19. Know Manufacturer’s Code Numberand Establishment Number

  20. U.S. Dept. of CommerceFish and Wildlife Act Est. 036 PUFI Seal

  21. 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

  22. 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.

  23. Objective 4 Identify various types of acceptable purchasing systems

  24. Four Purchasing Methods • RFQ: Small purchase procedure • IFB: Competitive sealed bids • RFP: Request for proposals • Noncompetitive negotiation

  25. Sections of a Formal Bid • Transmittal & signature pages • Standard terms & conditions • Special instructions • Product list & descriptions • Billing address & delivery locations • Potential bidders

  26. Line Item Award

  27. Bottom Line Award

  28. Grouping Categories For open and free competition, group by specialists

  29. Bread Milk Paper Equipment Produce Frozen, dry & refrigerated Bottom Line Categories

  30. Prioritize: • Money Spent • Impact on meal quality

  31. Objective 5 Describe how to develop and use specifications, descriptions, and approved brands for assembling a food bid

  32. 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

  33. Product Classification • One ingredient: • Distributor's choice • One major ingredient: • Private label • Multiple ingredients (highly processed): Manufacturer’s brand

  34. sugar salt Distributor’s Choice NO Brand Restrictions

  35. 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)

  36. Manufacturer’s Brand High-volume products or products with quality problems Identify on final bid Manufacturer Code # Establishment # Maker 42104 Est. # 17842

  37. Sample of Item Classification on Draft Bid

  38. Brand Approval TWO APPROVAL SYSTEMS Brand orApprovedEqual/No Brands Pre-ApprovedBrands Only

  39. Brand decision made here. Steps: Brand Name or Approved Equal • Write product descriptions. • Issue final bid. • Open bids. • Evaluate bids. • Award bids.

  40. Problems • Decision of comparable quality made during bid evaluations • Bidder allowed to determine “equal” Brand Names or Approved Equal

  41. 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.

  42. 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

  43. Approved Brands Only • Screen brands • Paper screen • Appearance screen • Taste screen • Notify potential bidders of screening results • Accept alternative to brands that failed

  44. 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

  45. Testing Product: Phase I • Purpose: choose which formula will be bid • Products: from SAME manufacturer • Consider: • Nutritional impact • Price • Taste

  46. 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

  47. Testing Product: Phase II • Purpose: approve brands of the SAME formula • Products: from DIFFERENT manufacturers • Consider: • Nutritional comparability • Appearance • Taste

  48. 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

  49. Final Bid

  50. Request for Proposal (RFP) • Allows evaluation of variables other than cost • Cost should exceed 50% of total points