Purchasing:Outline

The Players» The market» The government

– agencies– laws

» The buyer The Process» Types of purchasing» Methods of purchasing

The Procedure» Steps to take» Records to keep

The Product» Specifications» Determining yield» Make vs. Buy decisions

is getting the right ____________

to the right __________

at the right __________

in the right __________

at the best __________

Purchasing

Purchasing: The Players

The market = ______________ (of ownership)» ______ = basic source of supply» ________ = middlemen» _______

Marketing involves the product plus labor, packaging, transportation, advertising; overhead…

Every change of ownership increases _________!

Marketing Share

The Food Dollar

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pac

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pro

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18¢3.5¢

4.5¢

4¢7¢ 19¢

34¢ 16¢

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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/FoodDollar/documentation.htm

The Food Dollar

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22¢ 4¢4.5¢

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4¢ 8¢ 39¢ 18¢

lab

or

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/FarmToConsumer/Data/componentstable.htm

The Food Dollar

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15¢3.5¢

4¢4¢4¢ 8.5¢ 38¢ 23¢

lab

or

In the U.S. each $1 spent on food in 1996 went to:

Purchasing:The Players

Value-added factors

Also, supply and demand, competition, government policy, economic trends, weather conditions can affect price

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

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-on-board vs. CIF: cash, insurance, freight)

Purchasing:The Players

The Buyer» Brokers vs. agents

» Ethics?

» Policies should be established beforehand

Purchasing:The Players

Types of purchasing• Single-unit purchasing

• Warehouse clubs

• Centralized purchasing

• Group/cooperative purchasing

Purchasing:The Process

Informal/Open-marketvs. Formal Bid– If U.S. gov’t related business,

must solicit bids from all qualified vendors

Purchasing arrangements» Cost-plus purchasing» Prime vending» Blanket purchase agreement» Just-in-Time purchasing

Purchasing: Methods of purchasing

Purchasing:The Procedure

1. Identify needs ________ system ________ system

2. Determine product ____________

name, grade, unit purchased, container sizes, count per container, form…

3. Determine __________ needed depends on forecast, portion size,

cash available, frequency of delivery, storage space…

4. Research market for availability5. Negotiate and place an order

consider price, quality, service6. Receive, pay, store…

Purchasing:The Procedure

Purchasing records:1. purchase _________

requisition #, date needed, budget account #, quantity needed, item description

2. ___________ (PO)

3. ___________

Purchasing:The Product

Form Quality» Grades = comparison to

government standards– scoring depends on type of

product– is higher (best) grade always

the best choice?

» Brands» Condition at delivery

_____(V) = Quality (Q)

Price (P)

Purchasing:The Product

______ helps determine form and quantity to buy» AP =» EP =» AS =

EP portion ÷ yield % = AP portion

AP price ÷ yield % = EP price

Purchasing:The Product

Make vs. Buy decision» quality» equipment (availability,

capacity, turnover time)» labor (availability, skill,

training needed)» time» inventory (storage space)» cost

_______should be the last decision criteria

A. List all the ways you can think of in which buying locally is a positive choice. (Think of the whole food system.)

B. Briefly trace the general steps in food procurement, from identifying a need to the final delivery of the product.

Practice Questions--Purchasing