Procurement and Inventory Management
description
Transcript of Procurement and Inventory Management
National Food Service Management Institute
The University of Mississippi
Procurement and Inventory Management
Objective 1
Identify persons in the food distribution chain and know how to communicate with all players in the chain
FOOD DISTRIBUTION CHAINfrom Grower to School
Growers
Manufacturers
Distributors
End users
Broker/sales rep
Distributor buying group
School/district purchasing co-op
UNIT 2 - Chapter 3 - 1
Types of Distributors
• Full or broadline
• Specialty wholesalers
• Special breed distributors – restaurant chains
• Supermarket or wholesale clubs
Current Customer Base
40%10%
10%
10% 10% 10%
4%
4%2%
RestaurantsConvenience Stores Hotels/LodgingOther CommercialHealth CareSchool FoodserviceColleges/UniversitiesCorrectional FacilitiesOther Non-commercial
Restaurants
Other Non-commercial
Correctional Facilities
Colleges/Universities
School Foodservice Health Care
Other Commercial
Hotels/Lodging
Convenience Stores
Today…
We are in a Seller’s Market.
To Sell Themselves, Schools Can Emphasize . . .
• No change in ownership• No bankruptcy • Fair pricing process • Early week delivery• No deliveries on major holidays• School district profile
Objective 2
Describe the role of ethics in procurement
Unethical Behavior
• Providing cost information to competitor PRIOR to supplier selection
• Sharing supplier’s proprietary information with competitor
• Accepting gifts or cash • Accepting free trips or entertainment
Ethics Rule of Thumb:
“If you question an action, then you should not proceed.”
Objective 3
Identify federal, state, and local procurement regulations, policies, and procedures governing all school nutrition program purchases
Procurement Guidelines
What are they?• Federal Standards• State Standards• Local Standards
Which do you use?• Most restrictive
Federal Regulations
• 7 CFR Section 3016• http://www.access.gpo.gov/cgi-bin/
cfrassemble.cgi• $100,000–Use formal purchase method OR state
requirement if less• No geographic preference allowed• Vendor who writes specs cannot offer price• Cost plus a percentage of cost NOT allowed
Federal Regulations
• Only responsible contractors• Open and free competition• Written selection procedures• Staff may NOT accept cash or gifts• Domestic commodities
Food and Drug Administration
Food, Drug, and Cosmetic Act• Controls labeling of food products• Prohibits
misbranded food products adulterated food products
• Establishes standards of identity, quality, and fill• Nutrition Labeling & Education Act - 1990
USDA Grade Standards
USDA Grade AUSDA Grade BUSDA Grade C
U.S.D.A.Poultry and Meat Inspections
• Poultry Products Inspection Act/Wholesome Poultry Products Act
Prevents misbranded or adulterated poultry products
• Meat Inspection Act
Established meat inspection program
U.S.D.A. – Inspection Marks
Processed Meat
Raw Poultry
Raw Meat
Know Manufacturer’s Code Numberand Establishment Number
U.S. Dept. of Commerce Fish and Wildlife Act
Est. 036 PUFI Seal
Additional Laws
• FDA - Public Health Service Act Model Food Code
• U.S. Customs Service - Tariff Act Labeling of imported foods – “Product of (country)”
• U.S. Dept of Justice - Antitrust Laws Sherman, Clayton, Robinson-Patman, and Federal
Trade Commission Acts Open and free competition
USDA Food Safety and Inspection Service: Names on Labels
• Ham - must be at least 20.5% protein in lean portion as described in 9 CFR 319.104. Added water is permitted
• Ham - water added: The product is at least 17.0% protein with 10% added solution.
• Ham with natural juices: The product is at least 18.5% protein.
• Ham Salad: Product must contain at least 35% cooked ham.
Objective 4
Identify various types of acceptable purchasing systems
Four Purchasing Methods
• RFQ: Small purchase procedure
• IFB: Competitive sealed bids
• RFP: Request for proposals
• Noncompetitive negotiation
Sections of a Formal Bid
1. Transmittal & signature pages
2. Standard terms & conditions
3. Special instructions
4. Product list & descriptions
5. Billing address & delivery locations
6. Potential bidders
Line Item Award
Product NamePotential Vendor A
Potential Vendor B
Potential Vendor C
Peaches $20.36 low $22.94 $23.41
Pears $22.49 $23.95 $22.46 low
Sugar $19.06 $18.75 low $21.45
Bottom Line Award
Product Name
Est.Units
Unit Price
Vendor A Ext.
Total
Unit Price
Vendor B Ext.Total
Unit Price
Vendor C Ext.Total
Peaches 25 cs $20.19 $504.75 $22.02 $550.50 $21.50 $537.50
Pears 10 cs $20.94 $209.40 $20.48 $204.80 $21.50 $215.00
Sugar 15 bg $15.98 $239.70 $16.63 $249.45 $14.10 $211.50
Bottom line total
$953.85Low $1004.75 $964.00
Grouping Categories
For open and free competition, group by specialists
Bottom Line Categories
Milk
Equipment
Frozen, dry & refrigerated
Paper
Produce
Bread
Prioritize:
•Money Spent
• Impact on meal quality
Objective 5
Describe how to develop and use specifications, descriptions, and approved brands for assembling a food bid
Specifications and Descriptions
Specifications: complicated and lengthy•May be a couple of pages for one product, labor intensive
Descriptions: short and measurable•Limited to those characteristics that are essential for communication with the supplier such as CN label •Can be identified by the receiver and measured at the point of receipt
Product Classification
One ingredient: Distributor's choice
One major ingredient: Private label
Multiple ingredients (highly processed): Manufacturer’s brand
Distributor’s Choice
NO Brand Restrictions
sugarsalt
PRIVATE LABELS AND QUALITY
Third = Standard Substandard Quality (70-80) (below 70)
Second = Extra Standard Quality Standard
(80-90) (70-80)
First = Extra Fancy ChoiceQuality Fancy
(90-100) (80-90)
VEGETABLES FRUITS
1. High-volume products or products with quality problems
2. Identify on final bid
Manufacturer Code # Establishment # Maker 42104 Est. # 17842
Manufacturer’s Brand
Sample of Item Classification on Draft Bid
Item Description Item Classification Bid Unit
Est. Units
1516 Chicken, Pat; BR’D; white meat; NO VPP; w/dried egg; CN label verifies 2oz. M/MA; 3 oz
Approved brands only svg 215,639
2200 Peaches, Cling U.S. Choice; packed in packed in juice; 6/#10
Private Label cs 500
6340 Salt, Iodized; 24/26 oz Distributor’s choice cs 25
Brand Approval
Brand orApprovedEqual/No
Brands
Pre-ApprovedBrands
Only
TWO APPROVAL SYSTEMS
Steps: Brand Name or Approved Equal
1. Write product descriptions.2. Issue final bid.3. Open bids.4. Evaluate bids.5. Award bids.
Brand decision made here.
Problems
• Decision of comparable quality made during bid evaluations
• Bidder allowed to determine “equal”
Brand Names or Approved Equal
Approved Brands Only
1. Write product descriptions & develop draft bid.2. Classify products as
Distributor’s Choice Private Label Manufacturer’s Brand
3. Hold individual pre-bid conferences.
Individual Pre-Bid Conference
• Explain classification system• Explain brand pre-approval• Request nutritional data & copy of labels of
brands they want screened• Discuss test schedule• Order product to test
Approved Brands Only
4. Screen brands Paper screen Appearance screen Taste screen
5. Notify potential bidders of screening results6. Accept alternative to brands that failed
Brand or Approved Equal
7. Screen second group of brands8. Issue final draft of product/brand list9. Conduct final pre-bid conference
Brand decisions already made.10. Issue bid11. Open all bids in a public meeting12. Evaluate final bids13. Award bids to the successful bidder
Testing Product: Phase I
• Purpose: choose which formula will be bid
• Products: from SAME manufacturer• Consider:
Nutritional impact Price Taste
Major Components of Chicken Patties or Nuggets
Meat block:a. Breast, white or breast w/rib b. Chicken , natural proportionc. Dark meat
Egg: Dried whole egg Vegetable protein product (VPP):
a. Flourb. Concentratec. Isolate
Testing Product: Phase II
• Purpose: approve brands of the SAME formula
• Products: from DIFFERENT manufacturers• Consider:
Nutritional comparability Appearance Taste
Taste Test Rules
• Product delivered in full-case, sealed container
• Students rate product• Part of regular meal• Prepared in typical equipment• Test only one product per day• Allow NO company representatives• Do NOT disclose brand name
Final Bid
Item Description Item Classification Bid Unit
Est. Units
1516 Chicken Nuggets; Br’d; white meat; NO VPP;
w/dried egg; CN label verifies 2 oz M/MA; 3 oz min. weight
Whip-O-Will Farms 60150 Est # P-246 Variety 2543 Est # P-2543;Chickly Foods 10821 Est # P-399
svg 215,639
2200 Peaches, Cling U.S. Choice; packed in juice; 6/#10
Private Label cs 500
6340 Salt, Iodized; 24/26 oz Distributor’s choice cs 25
Request for Proposal (RFP)
• Allows evaluation of variables other than cost
• Cost should exceed 50% of total points
RFP Evaluation
Evaluator name
CRITERIAMAX. PTS ALLOWED
SCORE AWARDED
1. Bottom Line Figure 55
2. Service 20
3. Available technical support 10
4. Availability of parts 10
5. History of reliability 5
TOTAL 100
RFP Budget Evaluation
Maximum: 55 pointsTwo responses: $4,000 and $5,000$4,000 = 55 points$4,000 $5,000 = 80%80% of 55 points = 44 points$5,000 = 44 points
Direct to Manufacturer
• Sealed bids
• Line item for most products
• Firm price with petition for escalation/de-escalation
• Requires a bid for distribution
Objective 6
Identify the basic types of pricing mechanisms
Pricing Mechanisms
1. Firm for duration of contract2. Market–Escalation/Deescalation3. Cost + Fixed Fee Fee may not increase duration of
contract including extensionMonitored based on Market
Objective 7
Describe how to develop a critical path plan for procurement
To Develop a Critical Path
• Determine delivery time• Complete time needed for each task• Start with delivery date & work back to
beginning date• Minimum of 36 weeks required
Evaluation/Re-evaluation
Objective 8
State the basics of receiving and inventory management
Receiving is . . .
. . . the critical link in procurement and food quality
Personnel Training
• Inspecting deliveries using district receiving procedures
• Taking food temperatures• Reading food labels• Following district clerical
procedures• Reporting product quality problems
Storage Guidelines
• Use FIFO• Store in original packaging• Separate raw from cooked or ready-to-eat foods• Store min. of 6” off floor and away from wall• Keep areas clean and dry• Inspect and treat regularly for pests• Use clean equipment to transport• Store in appropriate area.
Inventory and Cost Control
• Inventory is a major component of cost control
• JIT (Just-in-Time) deliveries
• Limit days food supplies are in inventory
• Excess inventory = $ tied up
Seven-Day Inventory
Formula:
_____Annual $ for food______Number of serving days in year X 7
( )
Standard Stock
1. Determine number of cases neededa. Previous year’s invoicesb. Delivery frequency
2. Change with seasonal foods3. Add 50% to base amount4. Develop pre-printed order form
Standard Stock Order Form
Product Product #Current
InventoryStanding
OrderAdjusted
OrderIndividual
catsup 100445 2 cases 10 cases
Individual mustard 100569 ½ case 3 cases
Individual mayonnaise 100720 ½ case 1 case
Dill pickle 208965 1 - 5 gallon 1 - 5 gallon
8 cases
none
Cooperatives
33,000
4,000
6,000
23,000