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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


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

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

Standard stock order form

8 cases


Standard Stock Order Form