Purchasing Outline l The Players The market

Purchasing: Outline l The Players » The market » The government – agencies – laws » The buyer l The Process » Types of purchasing » Methods of purchasing l The Procedure » Steps to take » Records to keep l The Product » Specifications » Determining yield » Make vs. Buy decisions

Purchasing l is getting the right ______ l to the right _____ l at the right _____ l in the right _____ l at the best _____

Purchasing: The Players l The market = _______ (of ownership) » ______ = basic source of supply » ____ = middlemen » _______ Marketing involves the product plus labor, packaging, transportation, advertising; overhead… l Every change of ownership increases _____! l

Marketing Share

The Food Dollar Retail trade; other transportation 7¢ 4¢ 4. 5 3. 5 18¢ ¢ ¢ packaging Finance; insurance 19 ¢ energy 34¢ processing farm value 16¢ Foodservice In the U. S. each $1 spent on food in 2008 went to: Source: USDA, ERS, Food Dollar Series Accessed 9/13/11 from http: //www. ers. usda. gov/Data/Food. Dollar/documentation. htm

The Food Dollar other 4¢ ? ? 4. 5 4¢ 22¢ ¢ advertising pre-tax profit fuels; electricity 8¢ transportation 39¢ labor farm value 18¢ packaging In the U. S. each $1 spent on food in 2006 went to: Source: USDA, ERS, Price Spreads from Farm to Consumer: Components of the Marketing Bill. Accessed 9/6/09 from http: //www. ers. usda. gov/Data/Farm. To. Consumer/Data/compon entstable. htm

The Food Dollar In the U. S. each $1 spent on food in 1996 went to: 8. 5¢ 4¢ 4¢ 4¢ 3. 5 15¢ ¢ fuels; electricity advertising pre-tax profit transportation packaging other 38¢ labor farm value 23¢

Purchasing: The Players l Value-added factors l Also, supply and demand, competition, government policy, economic trends, weather conditions can affect price

Purchasing: The Players l Government agencies » _____: meat, poultry, eggs, fish » _____: everything else – standards of identity – standards of quality – standards of fill – sanitation/food safety – labeling » National Marine and Fisheries Service » Public Health Service » EPA: pesticides, water safety » U. S. Treasury: alcohol

Purchasing: The Players l Laws » Law of agency: buyer’s authority to act for an organization; liability » Law of warranty: supplier’s guarantee of performance of goods » Law of contract: agreement of terms between two or more parties » Law of Title to Goods: when does the shipment change ownership? (FOB: Free-onboard vs. CIF: cash, insurance, freight)

Purchasing: The Players l The Buyer » Brokers vs. agents » Ethics? » Policies should be established beforehand

Purchasing: The Process l Types of purchasing • Single-unit purchasing • Warehouse clubs • Centralized purchasing • Group/cooperative purchasing

Purchasing: Methods of purchasing l Informal/Open-market vs. Formal Bid – If U. S. gov’t related business, must solicit bids from all qualified vendors l Purchasing arrangements » Cost-plus purchasing » Prime vending » Blanket purchase agreement » Just-in-Time purchasing

Purchasing: The Procedure 1. Identify needs v ________ system 2. Determine product ______ v name, grade, unit purchased, container sizes, count per container, form… 3. Determine _____ needed v depends on forecast, portion size, cash available, frequency of delivery, storage space… 4. 5. Research market for availability Negotiate and place an order v consider price, quality, service 6. Receive, pay, store…

Purchasing: The Procedure l Purchasing records: 1. purchase _____ § requisition #, date needed, budget account #, quantity needed, item description 2. ______ (PO) 3. ______

Purchasing: The Product Form l Quality l » Grades = comparison to government standards – scoring depends on type of product – is higher (best) grade always the best choice? » Brands » Condition at delivery l _____(V) = Quality (Q) Price (P)

Purchasing: The Product l ______ helps determine form and quantity to buy » AP = » EP = » AS = EP portion ÷ yield % = AP portion AP price ÷ yield % = EP price

Purchasing: The Product l Make vs. Buy decision » quality » equipment (availability, capacity, turnover time) » labor (availability, skill, training needed) » time » inventory (storage space) » cost l _______should be the last decision criteria

Practice Questions-Purchasing l A. List all the ways you can think of in which buying locally is a positive choice. (Think of the whole food system. ) l B. Briefly trace the general steps in food procurement, from identifying a need to the final delivery of the product.