Eighth Edition
Purchasing
Selection and Procurement for the Hospitality Industry
ANDREW HALE FEINSTEIN AND JOHN M. STEFANELLI
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
CHAPTER
An Overview of the
Purchasing Function
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
5
YOU SHOULD BE ABLE TO:
• Describe the purchasing activities in a
hospitality operation.
• Determine the purchasing requirements of
a hospitality operation using value analysis
and make-or-buy analysis.
• Outline the objectives of the purchasing
function and the potential problems that
buyers encounter when pursuing those
objectives.
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
PURCHASING ACTIVITIES
• Hotel Purchasing Activities
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Determine when to order
Control inventory levels
Establish quality standards
Determine specifications
Obtain competitive bids
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
PURCHASING ACTIVITIES
• Hotel Purchasing Activities (cont.)
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Investigate vendors
Arrange financial terms
Oversee delivery
Negotiate refunds
Handle adjustments
Arrange for storage
© 2011 John Wiley and Sons, Inc.
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PURCHASING ACTIVITIES
• Food Service Purchasing Activities
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Recipe development
Menu development
Specification writing
Approval of buying source
Designation of approved brands
Supplier evaluation
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
PURCHASING ACTIVITIES
• Food Service Purchasing Activities (cont.)
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Negotiation
Change of suppliers
Change of brands
Substitution
Approval of new products
Invoice approval
Payment
Order placement with supplier
© 2011 John Wiley and Sons, Inc.
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MINIMUM PURCHASING
ACTIVITIES
• Selection and procurement plan
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How to select/procure products and services
Policies and procedures
Purchasing trends
Revise as necessary
• Determine requirements
• Variety of products, services, ff&e
• Work with staff on those decisions
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
MINIMUM PURCHASING
ACTIVITIES (CONT.)
• Supplier selection
• Dependable and consistent
• Approved supplier list
• Sourcing
• Process in which a supplier is selected
• Supplier can handle all products
• Maintain Inventory
• Optimal Inventory Management
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
MINIMUM PURCHASING
ACTIVITIES (CONT.)
• Conduct negotiations
• Everything is negotiable
• Buying Power = Negotiating Power
• Research activities
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Value analysis – cheaper alternative
Forecasting – predicting the future
What-if analysis – possible outcomes
Make or buy – raw or convenience food
Plant visits – evaluate facilities
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
MINIMUM PURCHASING
ACTIVITIES (CONT.)
• Maintain supplier diplomacy
• Trade Relations with suppliers
• Educate the suppliers
• Inform to improve services
• Obtain industry trends from them
• Purchase, receive, store and issue
products
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
MINIMUM PURCHASING
ACTIVITIES (CONT.)
• Disposal of excess and unsaleable items
• Recycling
• Record-keeping controls
• Receipts, Invoices, Inventory records
• Organize and administer the purchasing
function
• Plan, organize, hire staff
© 2011 John Wiley and Sons, Inc.
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MINIMUM PURCHASING
ACTIVITIES (CONT.)
• Self improvement
• Association Meetings, seminars
• Trade Shows
• Continuing Education
• Help competitors
• Lending in an emergency
• Learn about trends, rumors, etc.
• “Keeps friends close, enemies closer”
© 2011 John Wiley and Sons, Inc.
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PURCHASING OBJECTIVES
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Maintain an adequate supply
Minimize investment
Maintain quality
Obtain the lowest EP cost
Maintain the company’s competitive
position
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
PROBLEMS OF THE BUYER
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Backdoor selling
Excessive time spent
Ethical traps
Responsibility vs. authority
Lack of time
Internal team members/departments
© 2011 John Wiley and Sons, Inc.
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PROBLEMS OF THE
BUYER (CONT.)
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Unreasonable demands
Late deliveries, substitutions, back orders
Purchasing as a profit-making department
Lack of attention by supplier
Receiving and storage inadequacies
Returns and allowances
Lack of appreciation
© 2011 John Wiley and Sons, Inc.
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EVALUATION OF THE
PURCHASING FUNCTION
• How much should company spend to
achieve the purchasing objectives?
Salaries and other costs jump out at
management
Benefits of a conscientious purchasing
agent not always so visible
© 2011 John Wiley and Sons, Inc.
All Rights Reserved