PURCHASING

The objective of good purchasing is to achieve the right amount of stock, at the
right quality, at the right level & at the right price.

Purchasing consideration:

Using one main supplier:

a)This has the advantage of buying from one supplier rather than many, which
reduces administrative cost .

b) Delivery will be regular & will cover all items.

c) Discount can be available from supplier.

d) Stock/ availability of the products will be limited.

e) Establishment becomes dependent only on one supplier.

Using a variety of suppliers:

a) Establishment of being able to achieve a particular range of beverages &

reduces dependency on any one source.

b) Advantages can be taken of special promotions or discount at different times

& from different sources.

c) These process approaches increase the number of separate deliveries,

increase paper work & can lead to inconsistencies in the range of beverages
on offer.

THE COST OF PURCHASING.

There are three areas of cost associated with purchasing

1) The cost of acquisition:

a) Preliminary cost: Preparation & specification, supplier selection, negotiation.

b) Placement cost: Order preparation, stationary, postage, telephone

 c) Post placement cost: Processing, receipt & inspection of goods, payment of
invoices.

2) The holding cost:

a) Financial costs

b) Losses through deterioration, pilferage, wastage.

c) Storage cost: space, handling & inspection, storage lighting,

heating/refrigeration, clerical costs & documentation.

3) The cost of stock outs:

a) The Cost of stock outs: Buying at enhanced prices & using more expensive
substitutes.

Six important stages of purchasing:

1) Know the market.

2) Determine purchasing needs.

3) Establish & use specifications.

4) Design & purchase procedure.

5) Evaluating the purchasing tasks.

Knowledge require in terms of purchasing:

a) Where they are grown.

b) Seasons of production.

c) Approximate cost.

d) Conditions of supply & demand.

e) Laws & regulations governing the market & the products.

 f) Market agents & their services.

g) Processing

h) Storage requirements.

i) Commodity & product, class & grade.

Classification of markets & method of purchasing:

The primary market: Raw materials may be purchased at the source of supply,
the grower, producer or manufacturer.

The secondary market: Goods are bought wholesale from a distributor or agent,
the food service establishment will pay whole sale prices & possibly obtain a
discount.

The tertiary market: The retail or cash & carry purchase is a method suitable for
smaller companies. There is no way to discuss regarding quality & prices.

METHOD OF BUYING:

A) Informal buying: informal buying generally involves oral negotiations,

talking directly to sales people, face to face or using telephone.

1) The quotation & order sheet method: This uses a list of particular
commodities always wanted in quality & quantity. Columns are provided
to record prices from different suppliers. Prices are compared & orders
given.

2) The blank cheque method: This is when there is an extreme shortage

of a commodity or some other market conditions exists where the buyer
must get the commodity at any cost. This is usually operates only in
extreme circumstances.

B) Formal buying: This is also known as competitive buying, giving

suppliers written specifications & quantity needs. Negotiations are normally
written & methods are detailed as follows:
 1) The competitive bid method: The sellers are invited to submit bids
through communication. Bids are opened at a specified time to determine
awards. The invitation to bid usually contains certain conditions, these will
include:

Terms of payment.

Discounts

Method of delivery.

2) The negotiated method: This is used when suppliers are hesitant to bid
because of time restrictions, fluctuating market conditions or a high perish
ability of the product. Negotiations may occur using the telephone & later
confirmed in writing. Several suppliers are usually contacted to compare
prices.

Selecting suppliers:
Selecting suppliers is important in the purchasing process. Firstly, consider how a
supplier will be able to meet the needs of your operation, considering the following
criteria.

Price

Delivery.

Quality/standards

Suppliers are also selected on experience. A buyer soon gets to know the reliable
suppliers. Considerations leading to a decision to continue to do business with a
supplier include:

a)If the supplier anticipates the needs of the organization. The supplier notes
market conditions & informs the company buyers.

b) Supplier should regularly give product & market information.

c) Supplier should always maintain adequate stock.

d) Evaluate credit terms & discount available.

e)Asses delivery conditions.

f) A supplier may be able to offer a wide range of goods & services. Saving can
often be made by consolidating products & services.

DETERMINING QUANTITY & QUALITY

When considering the quantity the following things are considered:

a) The number of people to be served in a given period.

b) The sales history.

c) Portion sizes, determined yield testing a standard portion control

list drawn up by the chef & management teams.

When considering the quality the following things are considered:

a) Different packaging sizes such as jar, bottle, cans.

b) Colour

c) Texture

d) Size

e) Absence of defects.

f) Irregular shape

g) Maturity.
STANDARD PURCHASING SPECIFICATION:
Purchasing specifications have two functions.

a) They communicate to a supplier what the specifier wishes to have

supplied in terms of goods & services.

b) They provide criteria against which the goods & services supplied can
be compared.

PURCHASING SPECIFICATIONS:
A) Quality products

B) Quality services.

C) Acceptable prices.