Eighth Edition Purchasing Selection and Procurement for the

Eighth Edition Purchasing Selection and Procurement for the Hospitality Industry ANDREW HALE FEINSTEIN AND JOHN M. STEFANELLI © 2011 John Wiley and Sons, Inc. All Rights Reserved

CHAPTER An Overview of the Purchasing Function © 2011 John Wiley and Sons, Inc. All Rights Reserved 5

YOU SHOULD BE ABLE TO: • Describe the purchasing activities in a hospitality operation. • Determine the purchasing requirements of a hospitality operation using value analysis and make-or-buy analysis. • Outline the objectives of the purchasing function and the potential problems that buyers encounter when pursuing those objectives. © 2011 John Wiley and Sons, Inc. All Rights Reserved

PURCHASING ACTIVITIES • Hotel Purchasing Activities • • • Determine when to order Control inventory levels Establish quality standards Determine specifications Obtain competitive bids © 2011 John Wiley and Sons, Inc. All Rights Reserved

PURCHASING ACTIVITIES • Hotel Purchasing Activities (cont. ) • • • Investigate vendors Arrange financial terms Oversee delivery Negotiate refunds Handle adjustments Arrange for storage © 2011 John Wiley and Sons, Inc. All Rights Reserved

PURCHASING ACTIVITIES • Food Service Purchasing Activities • • • Recipe development Menu development Specification writing Approval of buying source Designation of approved brands Supplier evaluation © 2011 John Wiley and Sons, Inc. All Rights Reserved

PURCHASING ACTIVITIES • Food Service Purchasing Activities (cont. ) • • Negotiation Change of suppliers Change of brands Substitution Approval of new products Invoice approval Payment Order placement with supplier © 2011 John Wiley and Sons, Inc. All Rights Reserved

MINIMUM PURCHASING ACTIVITIES • Selection and procurement plan • • How to select/procure products and services Policies and procedures Purchasing trends Revise as necessary • Determine requirements • Variety of products, services, ff&e • Work with staff on those decisions © 2011 John Wiley and Sons, Inc. All Rights Reserved

MINIMUM PURCHASING ACTIVITIES (CONT. ) • Supplier selection • Dependable and consistent • Approved supplier list • Sourcing • Process in which a supplier is selected • Supplier can handle all products • Maintain Inventory • Optimal Inventory Management © 2011 John Wiley and Sons, Inc. All Rights Reserved

MINIMUM PURCHASING ACTIVITIES (CONT. ) • Conduct negotiations • Everything is negotiable • Buying Power = Negotiating Power • Research activities • • • Value analysis – cheaper alternative Forecasting – predicting the future What-if analysis – possible outcomes Make or buy – raw or convenience food Plant visits – evaluate facilities © 2011 John Wiley and Sons, Inc. All Rights Reserved

MINIMUM PURCHASING ACTIVITIES (CONT. ) • Maintain supplier diplomacy • Trade Relations with suppliers • Educate the suppliers • Inform to improve services • Obtain industry trends from them • Purchase, receive, store and issue products © 2011 John Wiley and Sons, Inc. All Rights Reserved

MINIMUM PURCHASING ACTIVITIES (CONT. ) • Disposal of excess and unsaleable items • Recycling • Record-keeping controls • Receipts, Invoices, Inventory records • Organize and administer the purchasing function • Plan, organize, hire staff © 2011 John Wiley and Sons, Inc. All Rights Reserved

MINIMUM PURCHASING ACTIVITIES (CONT. ) • Self improvement • Association Meetings, seminars • Trade Shows • Continuing Education • Help competitors • Lending in an emergency • Learn about trends, rumors, etc. • “Keeps friends close, enemies closer” © 2011 John Wiley and Sons, Inc. All Rights Reserved

PURCHASING OBJECTIVES • • • Maintain an adequate supply Minimize investment Maintain quality Obtain the lowest EP cost Maintain the company’s competitive position © 2011 John Wiley and Sons, Inc. All Rights Reserved

PROBLEMS OF THE BUYER • • • Backdoor selling Excessive time spent Ethical traps Responsibility vs. authority Lack of time Internal team members/departments © 2011 John Wiley and Sons, Inc. All Rights Reserved

PROBLEMS OF THE BUYER (CONT. ) • • Unreasonable demands Late deliveries, substitutions, back orders Purchasing as a profit-making department Lack of attention by supplier Receiving and storage inadequacies Returns and allowances Lack of appreciation © 2011 John Wiley and Sons, Inc. All Rights Reserved

EVALUATION OF THE PURCHASING FUNCTION • How much should company spend to achieve the purchasing objectives? Salaries and other costs jump out at management Benefits of a conscientious purchasing agent not always so visible © 2011 John Wiley and Sons, Inc. All Rights Reserved