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Principles of Purchasing Chapter 4 Notes
Principles of Purchasing Chapter 4 Notes
Principles of Purchasing Chapter 4 Notes
OBJECTIVES
To identify the factors that influence the information on the purchase specification
LESSON PLAN
CONTENTS
Recognizing Need
Preparing Specifications
Selection of Supplier
Ordering Goods
Receiving Goods
What is Quality?
Receiving the
Goods or services
Preparing
Specification
Ordering the
Goods or services
Selecting
A supplier
Recognizing Need
Top management typically sets standards for both product specifications and purchase
specifications, and then buyers or users handle the details. Generally, the authority to request a
needed item is vested in those responsible for running specific departments. For example:
Chef is responsible for daily menus, therefore, he would have the authority to request
needed food supplies
Preparing Specifications
A specification is a carefully written description of the items desired. The specifications may be
drawn up by the department head who has the authority to purchase the item, or, it may need to
be prepared by a number of people, possibly in conjunction with an employee of the purchasing
department who has experience in that area, a top management official, or a combination of
these personnel.
Selection of Supplier
There are many types of suppliers, such as manufacturer, wholesaler, retailer, and local
producer or farmer. Depending on the product to be purchased, a different type of supplier may
be contacted. The important consideration is to contract as many suppliers as is practical to
ensure that enough quotations are received so that the right quality of product is purchased at
the lowest possible price. A minimum of three market quotation are recommended, although
this may not be necessary or possible in every case, to ensure that competitive pricing prevails.
Ordering Goods
In many cases in the hospitality industry, particularly where it involves day-to-day food and
supplies ordering, a system of purchase order is just not practical since most orders are placed
at short notice and by telephone. In such cases, special procedures and forms will prevail.
Receiving Goods
In smaller establishments, it might be the person responsible for requesting and ordering the
supplies. In a larger establishment a separate receiving department will be responsible for
checking all deliveries before distributing the items to the individual departments or storerooms.
In all cases where purchase orders have been prepared, a copy of the purchase order should
be on hand while receiving. Where specifications have been prepared, they, too, should be
available, so that delivered goods can be checked in detail against the specifications. In
particular, quantities received should be checked against quantities ordered and invoiced.
Prices on invoices should be check against the quotation references or against the purchase
order. In some cases, a department head may be asked to verify the quality of an item if the
receiver is in any doubt.
Top management typically sets standards for both product specifications and purchase
specifications, and then buyers or users handle the details.
Unlike product specification, which includes only information about the product, the purchase
specification implies a much broader concept. The purchase specification includes all
product information, but, in addition, it includes information regarding the pertinent suppliers
services buyers require from suppliers who sell them products.
Product characteristics, e.g.: name of item, specific quality required, form that item
should take.
They help avoid misunderstandings between suppliers, buyers, users and other
company officials.
They can serve as useful training tools for trainee or new staff
They include all relevant details necessary for multiple suppliers to provide comparable
bids. Essential as a bidding device where a company can set down all relevant aspects
of the materials required and submit a list of these aspects to 2 or more suppliers and
ask the suppliers to bid their prices.
2. The buyer
3. The user
A spec can be very short; it might include only a products name-nothing else. Alternately, it
might include several pages of detailed information, which is often the case with equipment
specifications. The following are the several considerations that a hotel should consider when
preparing a Purchase Specification:
Information Description
Performance Refer to the actual performance that is required or the intended
use of the material or service. It is the most important
information and should be clearly stated.
Exact Name of the Product Exact name or exact type of the product should be noted in the
or Service Purchase Specification. For example, if olives are one of the
ingredients needed, then state whether it should be black,
green or anchovy-stuffed, not just olives.
The Packers Brand Name, In most instances, a packers brand name is an indication of a
if appropriate certain quality. If brand identification is indicated on the
specification, be sure to add the words or equivalent right
after the brand name, to ensure that more than one supplier
can bid for the business.
Size Information In most instances, the desired size must be indicated for a
particular item. However, it can also be indicated by:
The exact weight portion-cut steaks
The desired weight range
Trim or Yield It is the indication of the minimum edible yield of a product that
you will accept. Acceptable trim, or the maximum amount of
waste tolerated for an item especially important spec for
fresh meat or produce.
Package Size In most instances, the size of the container you desire should
be indicated. For example, the can size must be noted when
purchasing canned items.
Preservation / Processing This procedure must be noted, for example, you could order
Method refrigerated meats or frozen meats, canned green beans or
frozen green beans. The type of preservation or processing
method selected often influences the taste and other culinary
characteristics of the finished food product.
Information Description
Point of Origin It is locating the exact part of the world or country where the
particular item is coming from, for example, fresh fish, lobster,
kiwi fruits, etc. It is important because:
The flavor and texture of an item differs according from the
place of origin.
It is to avoid a violation of the truth-in-menu regulations by
serving alternative product that is not indicated in the menu.
Degree of Ripeness This is generally important for fresh produce but it also applies
to beef items (age) and wines (vintage)
Approved Substitutes Listing approved substitutes will allow the supplier to source for
the substitute faster and saves effort when the normal item is
out of stock, also to ensure quality and compatibility
Expiry Dates Minimum requirement of period the item can last upon receive
from supplier. Example, items used in a mini bar needs to last
at least 10 months.
Chemical Standards It identifies the acceptable chemical use for the commodity
purchased. For example, you may purchase an organic
produce growth in chemical free soil, or meat and poultry
products raised without added chemicals in the animals diet.
Test / Inspection Procedure This is actually the general outcome of specifying the intended
use. It is an indication of the type of test that you will use to see
if the purchases will, perform adequately.
Cost & Quantity Indications It is an indication of how much an item or service would you
want to purchase at one time.
of a product
Specific Instructions to Suppliers who bid for your business may want to know
Suppliers Your bidding procedures
Your criteria for supplier selection
Qualifications and capabilities you expect from them
Factors that Influences the Information Listed in a Purchase Specification Include
Storage facilities
Menu requirements
Service style of the operation (e.g. cafeterias often need products with long hot-holding
life)
While writing specs created many benefits, it can also pose some costs to an operation,
including some cleverly hidden problems. Problems with specs can include:
Levels of quality set too high, resulting in specs no supplier can provide
Redundant favoritism, in which a buyer routinely chooses one supplier over others no
matter how competitive their bids are. Such practices waste other suppliers time, and
may make it difficult to work with them should the primary supplier fall out of favor.