Transcript Purchasing

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
Purchasing

is getting
the right ____________

to the right __________

at the right __________

in the right __________

at the best __________
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
processing
Retail trade; other
Foodservice
transportation
7¢ 4¢ 4.5 3.5 18¢
19¢
¢ ¢
packaging
Finance; insurance
34¢
energy
16¢
farm value
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
In the U.S. each $1 spent on food in
2006 went to:
other
4.5 4¢ 22¢
¢
advertising
pre-tax profit
fuels; electricity
4¢ ?
?
transportation
8¢
packaging
39¢
labor
farm value
18¢
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/compone
ntstable.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

Value-added factors

Also, supply and demand,
competition, government
policy, economic trends,
weather conditions can
affect price
Purchasing:
The Players

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-onboard vs. CIF: cash,
insurance, freight)
Purchasing:
The Players

The Buyer
» Brokers vs. agents
» Ethics?
» Policies should be
established beforehand
Purchasing:
The Process

Types of purchasing
• Single-unit purchasing
• Warehouse clubs
• Centralized purchasing
• Group/cooperative purchasing
Purchasing: Methods
of purchasing
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Informal/Open-market
vs. 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:
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.
5.
Research market for availability
Negotiate and place an order
 consider price, quality, service
6.
Receive, pay, store…
Purchasing:
The Procedure
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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
Practice Questions-Purchasing
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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.