OH 4-1
Agenda
 Chapter 4
 Inventory Project
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Invoices/Inventory Book set-up
Physical Inventory: Week of April 6 th ; wear uniform or chef coat, appropriate shoes, hair restraints (bring)
Inventory copy, and report due April 14 th
Reminder: schedule receiving with Metro chef
Summary of entire inventory project (due by April 28)
 Work on group presentations

OH 4-2
Key Term Review
 Acceptable trim
 Consumer trends
 Count
 Edible yield
 Individually quick frozen (IQF)
 Intended use
 Make-or-buy analysis
 Market form
 Packer’s brand name
 Portion-controlled
(PC)

OH 4-3
Key Term Review continued
 Product specification
 Quality standards
 Shelf life
 Stockout
 Throughput
 Value-added product

4
The Procurement Process and Supplier Selection
 Inventory and Purchasing

OH 4-5
Chapter Learning Objectives
 Outline the process for procuring products and services.
 Differentiate between perishable and nonperishable food products.
 Understand the importance of assessing and documenting purchasing requirements.
 Define perpetual and physical inventory.
 Identify optimal sources of suppliers.

OH 4-6
Channel of Distribution
 Sources – growers, manufacturers, processors
 Intermediaries –
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Distributors: specialty, full-line, broadline
Brokers: do not buy or sell – they promote
Manufacturers Representatives/ Agents
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Commissaries
Whole Sale Clubs – Buying Clubs
 Retailers (Hospitality Operations)
 Consumers

OH 4-7
The Procurement Process
The procurement process consists of
 Purchasing the ideal quality of product or service
 From the ideal supplier
 For the ideal edible portion (EP) cost
 At the ideal time

OH 4-8
The Procurement Process continued
 Making product (or service) selections does not complete the procurement process!
 The procurement process is only completed when products are properly
 Received
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Stored
Issued

OH 4-9
The Procurement Process continued
The steps in the procurement process:
1.
Assessing
2.
Selecting
3.
Ordering
4.
Receiving
5.
Storing and issuing

OH 4-10
The Procurement Process continued
Step 1 – Assess needs
 Perishable products
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Meats
Fish
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Poultry
Dairy and eggs
Produce
Beverage alcohols
 Nonperishable Products
 Are often nonfood items
 Are purchased less frequently
 Usually have higher costs
 Must be purchased with a long-term view toward replacement and repair

OH 4-11
The Procurement Process continued
Step 2 – Select criteria and quality standards
 When selecting products and services, as well as the vendors who will be chosen to supply them, purchasers must consider a large number of factors.

OH 4-12
Selection Factors
 Intended use
 Exact name
 Packer’s brand name
 Government grade
 Product/container size
 Type of container
 Vendor reputation
 Minimum weight per case
 Product yield
 Point of origin
 Product form
 Color
 Ripeness (and ripening process used)
 Preservation method

OH 4-13
The Procurement Process continued
Step 3 – Define ordering procedures
Operational needs
Purchase requisitions
Purchase orders

OH 4-14
The Procurement Process continued
Ordering products and services can be done
 In person
 By telephone
 Via fax
 Via email
 Online (Internet)

OH 4-15
The Procurement Process continued
Step 4 – Define receiving procedures
 The receiving step presents the operation with its final opportunity to ensure that quality standards have been met.

OH 4-16
The Procurement Process continued
Professional receiving depends upon:
 A suitable receiving dock area that is
 Clean
 Secure
 Well lit
 Well located

OH 4-17
The Procurement Process continued
Professional receiving depends upon:
 Appropriate receiving equipment
 Temperature probes
 Accurate scales
 Pallet jacks

OH 4-18
The Procurement Process continued
Professional receiving depends upon:
 Capable receiving personnel
 Remember that learning to identify quality food products requires the operation to have a clearly stated definition of quality for each item ordered.

OH 4-19
The Procurement Process continued
Professional receiving depends upon:
 A receiving schedule
 Receiving schedules must be acceptable to both the operation and the vendor.

OH 4-20
The Procurement Process continued
Professional receiving depends upon:
 Copies of purchase orders available to receiving personnel
 It is impossible to ensure purchased items have been properly delivered if the items originally purchased are unknown.

OH 4-21
The Procurement Process continued
Professional receiving depends upon:
 Copies of product specifications readily available to receiving personnel

Invoice vs. Blind Receiving
Invoice
 Receiving clerk checks order against P.O. and invoice for
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Quality
Quantity
Prices
 Invoice also checked against
P.O.
Blind
 Receiving clerk des not know what should be delivered
 Must weigh, count and record all merchandise
 Added control, but very time consuming and $$$
OH 4-22

OH 4-23
Additional Receiving Duties
 Date the delivered items
 Price all of the delivered items
 Create bar codes
 Apply meat tags
 Housekeeping
 Update AP prices
 Backhaul recyclables

OH 4-24
Good Receiving Practices
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 Beware of excess ice, watered-down products, wrapping paper and packaging that can add dead weight to delivered products. This
“tare weight” should be subtracted from the gross weight to compute net weight of merchandise purchased by weight.
Check the quality under the top layer of products.
Examine packages for leakage or other forms of water damage, as well as swollen cans.
Check expiration dates and dating codes.
Weigh items separately
Be wary of drivers eager to help carry items to storage areas
Spot check portioned products for portion weights
Check merchandise for re-freezing or “slacked out”- supposedly fresh but actually frozen thawed and made to appear as if it was fresh

OH 4-25
Common Receiving Forms
 Request for Credit Memorandum
 Used when reject merchandise
 Pick Up Memorandum
 Used when you want to return merchandise previously accepted
 Transfer Slips
 Used to transfer between units (franchise operations)

OH 4-26
The Procurement Process continued
Step 5 – Define storing and issuing procedures
 Adequate storage settings include:
 Adequate facility and storage space
 Adherence to temperature requirements
 Storage facilities located in close proximity to the production units and receiving area
 Appropriate storage area regulations

OH 4-27
The Procurement Process continued
 Equipment Needs for Storage Areas
 Shelving: ideally modular, for refrigeration best is made from durable plastic or stainless steel coated with vinyl, for dry storage chrome or galvanized metal is ok but stainless steel is preferred
 Dunnage Racks: for stacking cases of product and items issued in bulk, i.e. bags of flour, sugar etc.
 Wall Racks: spices
 Can Racks
 Scales, work tables, sinks, thermometers

OH 4-28
The Procurement Process continued
 Other Storage Considerations:
 Group similar category items together such as bakery supplies, canned vegetables, pasta, oils, seasonings, paper goods, frozen meats, frozen vegetables, dairy items, etc.
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Store glass products and other breakables close to the floor
Store items that weigh more that 30 lbs at waist level or below and lighter items on upper shelves
Use dunnage racks for cases and heavier bulk items
Shelves and bins should be labeled
Rooms should have enough lighting to see all products
Equipment for reaching/moving product such as stepladders, carts and stools should be available but out of the way
Doors should be wide enough to allow carts and pallets through

OH 4-29
The Procurement Process continued
Step 5 – Define storing and issuing procedures continued
 Issuing perishables
 In most cases, perishables are issued directly to the departments that will use them.
 Issuing nonperishables
 In most cases, nonperishable food and nonfood items are sent to a central storage facility.

OH 4-30
Agenda
 Chapter 4
 Inventory Reports
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Red Lobster – Brigida & Erin
Ted’s Nebraska Grill – David Campbell
Blue Sushi – Brandon Thomas
McKenna’s – Meredith Beaver
Omaha Hilton – Stephanie Hatch
Stephanie Gigax
Red Robin - Kyle Shoemaker
Village Inn – Jessica Thomas
Michelle Hood

OH 4-31
Agenda
 Inventory Project
 Invoices/Inventory Book set-up
 Physical Inventory: Week of April 6 th ; wear uniform or chef coat, appropriate shoes, hair restraints (bring)



Inventory copy, and report due April 14 th
Reminder: schedule receiving with Metro chef
Summary of entire inventory project (due by April 28)
 Chapter Five
 Work on group presentations

OH 4-32
Supplier Selection
Supplier types
 One-stop shop—the operation selects one
(or two) suppliers to meet all of the operation’s buying needs.
 Bid buying—the operation allows for various suppliers to periodically respond to a request-for-bid or request-for-price (RFP).

OH 4-33
Supplier Selection Criteria
 Supplier facilities must be sanitary.
 Facilities that supply meat, poultry, and eggs must be inspected by the U.S. Department of Agriculture (USDA).
 Suppliers must comply with applicable local, state, and federal laws.
 Suppliers should be able to provide a list of references.
 Suppliers must have adequate delivery equipment
(trucks and temperature control units).
 Supplier personnel should practice proper personal hygiene.

OH 4-34
Contract Points to Include
After selecting a supplier:
 Arrange a supplier visit to the operation to ensure the supplier understands the unique features of your operation.
 Review the receiving area for adequacy, exits, entrance doors, and the like.
 Establish allowable delivery times.

OH 4-35
Supplier-Related Terms to Know
 Independent delivery services
 Stockless purchasing
 Cost-plus purchasing
 Standing orders
 Return and replacement policy
 Credit terms

OH 4-36
Cost of Paying Early
 If You Pay $50,000 Two Weeks Early and Bank
Pays 3.5% interest
 $50,000 x 3.5% = $1,750
 $1,750/52 weeks = $33.65 lost interest per week
 $33.65 x 2 weeks - $67.30 lost interest

OH 4-37
Cost of Paying Late
 Incur Interest and Penalty Charges
 Damage Credit Rating
 Suppliers Could Insist on C.O.D.
 Legal Difficulties

OH 4-38
How Would You Answer the Following Questions?
1.
2.
3.
4.
A (purchase requisition/purchase order) is an internal purchasing document.
Which of the following is not an important procurement step?
A.
B.
Paying
Ordering
C.
D.
Storing
Assessing
Which items are typically delivered directly to the department that will use them?
Suppliers of meats, poultry, and eggs voluntarily choose to have their facilities inspected by the USDA who may/will at the same time grade their products. (True/False)

OH 4-39
Inventory Project – 100 points
 Students will be required to set up an Inventory
Book from invoices provided by the instructor (in class directions will be provided) – 20 points
 Handout & Instructions

OH 4-40
Inventory Project – 100 points
 Week of April 6 th , each student will participate in the process of physical inventory at a site to be chosen by the student and submit a copy of the inventory sheets. Students must wear
ICA uniform; chef coat, appropriate shoes and hair restraints ( bring your hat or hairnet)– 30 points.
 An interview will be conducted by the students at the inventory site with the purchasing manager or general manager – 20 points. Interview questions must include the topics on the interview sheet provided.
 The students will present a 5 minute group report of their inventory experience to the class on April 14 th , the week following the physical inventory, including the information from the manager interview – 10 points.
 The copy of the inventory and report are due April 14 th

OH 4-41
Inventory Project – 100 points
 Students will participate in the receiving function for one vendor order (to be scheduled with Metro
Kitchen Chef or if student can receive an order at place of employment, this may also be done if arranged in advance with instructor) – 10 points
 The form for the receiving component was included in the Purchasing Project Worksheet or can be found on Sharepoint.
 The entire project is due April 28 th
 Any questions of the Inventory Project?

OH 4-42
Chapter Learning Objectives—
What Did You Learn?
 Outline the process for procuring products and services.
 Differentiate between perishable and nonperishable food products.
 Understand the importance of assessing and documenting purchasing requirements.
 Define perpetual and physical inventory.
 Identify optimal sources of suppliers.