Agenda

1. Agenda • Sign in for all classes to earn credit for class • Sign up for Presentations • A test final test question will come from each of the group presentations • Chapter 1- Review Key terms • Chapter 2 – The Purchasing Function • Work on Presentations

2. As purchased (AP) price As served (AS) price Cash position Competitive advantage Cooperative or co-op buying Covers Customer count history Economies of scale Key Term Review

3. Edible portion (EP) price Franchise Popularity index Procurement Product selection Profit Purchasing Vendor Key Term Review continued

4. Review Your Learning • Chapter One – page 11 Competency Guide

5. The Purchasing Function • Inventory and Purchasing 2 OH 2-5

6. Test Your Knowledge • Chapter Two – page 14 Competency Guide

7. Chapter Learning Objectives • Describe how the purchasing function is organized in a foodservice operation. • Summarize the knowledge, skills, and abilities a purchaser must possess. • Describe the duties and responsibilities of purchasers. • Describe the ethical considerations related to purchasing. • Identify issues involved in administering purchasing activities.

8. Purchasing in All Foodservice Operations • Purchasing is a required activity. • Authority and responsibility for purchasing must be well-defined. • Effective purchasing directly impacts operational effectiveness and profitability.

9. Who Is a Purchaser? • Purchasing authority will vary based upon an operation’s size. • Purchasing authority may be based upon an individual’s specialized product (or service) knowledge.

10. Organization of the Purchasing Function

11. Organization of the Purchasing Function continued

12. The General Manager Because purchasing affects profits Because profit levels typically affect salary and bonuses Because, when discovered, illegal or unethical purchasing practices suggest poor leadership Other Managers The coordination of purchasing is extremely important when more than one manager purchases items. Purchasing Affects

13. Hourly Employees Because they need the tools and products necessary to effectively complete assigned tasks Other Departments and Teams Because purchasing impacts all areas of an organization, including marketing and sales Purchasing Affects continued

14. Purchasing Agent Qualifications • Purchasers need four purchasing skill sets: • Technical skills • Conceptual skills • Interpersonal skills • Other qualities

15. Purchasing Agent Qualifications continued • Technical Skills • Examples • Costing a recipe • Preparing a bid sheet • Calculating order quantities • Implementing new technology to improve the purchasing function

16. Purchasing Agent Qualifications continued • Conceptual skills • Examples • Budgeting expenditures • Forecasting sales • Organizing the purchasing function

17. Purchasing Agent Qualifications continued • Interpersonal Skills • Examples • Training receiving staff • Dealing with vendors and delivery agents (drivers) • Cooperating with other managers

18. Purchasing Agents Qualifications continued • Other Qualities • Examples • Education • Work experience • Ethical characteristics • Desire to advance

19. Negotiate contracts Investigate supplier’s facilities Define and monitor cost and inventory controls Maintain supplier price lists and contact data Research and identify new products Follow code of ethics Coordinate activities to procure services and goods Monitor the operating budget Duties of Purchasers

20. Develop purchase specifications Identify, select, and train purchasing staff Forecast trends Review requisitions Determine methods of procurement Monitor storeroom inventories Establish inventory (par) levels Follow shipping procedures Adhere to quality standards Control products Duties of Purchasers continued

21. Ethical Considerations Kickbacks • Money or other gifts received by an individual in return for purchasing from a specific vendor • Always unethical, in some cases kickbacks are also illegal.

22. Ethical Considerations continued Accepting Gifts • In most cases, ethical purchasers avoid accepting gifts from current or potential vendors.

23. Ethical Considerations continued Reciprocity • Reciprocity is an arrangement in which a buyer agrees to buy from a vendor in return for some kind of return business from that vendor.

24. Ethical Considerations continued Free Samples • Should be accepted only if the operation has a sincere interest in potentially purchasing the product

25. Ethical Considerations continued Personal Purchases • Also known as steward sales • These are employee purchases of goods to take advantage of the company’s purchasing power. • When offered, steward sales must be closely monitored to ensure payment.

26. Ethical Considerations continued To avoid any concern, only the buyer should have the authority to authorize a purchase.

27. Responsibility The set of activities managed by the purchaser (buyer) Authority The limits of power the purchaser (buyer) has to accomplish activities The Administration of Purchasing

28. The Administration of Purchasing continued • Types of vendor discounts • Quantity discounts • Volume discounts • Cash discounts • Promotional discounts

29. The Administration of Purchasing continued • Potential vendor service issues • Late deliveries • Substitutions • Back orders

30. Time Management • Time is usually a buyer’s scarcest resource. • Purchasing tasks must be completed on time for the operation to avoid service disruptions. • Create checklists to identify tasks that must be done: • Daily • Weekly • Monthly

31. How Would You Answer the Following Questions? • A buyer’s (authority/responsibility) describes the limits of power he or she has to accomplish assigned tasks. • A discount granted by a vendor in exchange for a large order of one specific item is known as: • A volume discount • Reciprocity • A promotional discount • A quantity discount • For purchasers, ___________ is often the resource in shortest supply. • A blanket discount is another term for a steward sale discount. (True/False).

32. Chapter Learning Objectives— What Did You Learn? • Describe how the purchasing function is organized in a foodservice operation. • Summarize the knowledge, skills, and abilities a purchaser must possess. • Describe the duties and responsibilities of purchasers.

33. More Chapter Learning Objectives—What Did You Learn? continued • Describe the ethical considerations related to purchasing. • Identify issues involved in administering purchasing activities.