Chapter 1- The Purchasing Function: An Overview

blanket purchase order

A financial arrangement between buyer and seller that authorizes the buyer to spend up to a specified dollar amount during a specified period of time with the seller.

broadline vendor

A large food service distributor that sells a broad variety of products, including food, supplies, and equipment.

trade

Exchange of goods and services

shelf life

How long a product may be stored before use.

appropriate uses of each formal and informal types of buying

Informal buying is often practiced by smaller operations where the chef or owner does the buying; this type of buying includes competitive buying and single-source buying. Formal buying is used by larger operations where there are specific storeroom staff responsible for purchasing; this type includes bid buying, cost plus fixed-fee, volume buying and warehousing, prime vendor contracts, long-term contracts, and hedging.

daily bid

Price quote from a supplier that is good for a very limited amount of time, typically 1 to 3 days. also known as a daily quotation

negotiate

To discuss something in an attempt to reach agreement

cooperative buying

Where an association of persons voluntarily joins together to achieve a common economic end through the formation of a democratically controlled business organization.

service contracts

a business arrangement, between 2 or more parties, that details specific work for specific compensation

cost plus fixed-fee

a food service operator agreement to purchase most of the needed products from one broadline or full-line food service distributor for a fixed mark-up beyond the seller's actual costs

purchase order

a form requesting that a vendor sell merchandise to a business

policies and procedures manual

a formal document specifying guidelines for operations of an institution

bid request form

a formal document, issued by the buyer to potential sellers requesting a quote for various products or services specified in the document over a specified period of time

code of ethics

a set of principles established to govern an organization's employees

purveyor

a supplier with goods or services for sale. also known as a vendor, seller, or supplier

drop shipment

a type of retailing where the seller does not keep goods in stock, but instead passes the customer's order and shipment details to the wholesaler, who then dispatches the goods to the customer directly

long-term contracts

agreements between two firms to provide agreed-upon goods and services to each other for a specific period of time

standing order

an established contract from a buyer for repetitive or specified services or items from a single supplier

selection

choosing from among many alternatives

staff position

employees in support of others who are directly involved in food production or sales

fixed bids

established pricing offered by a supplier for goods or services for an extended period of time. often used by larger organizations which buy great quantities of perishable or nonperishable items over a long period of time

5 attributes required to be a modern buyer

ethical standards, conceptual skills, communication skills, mathematical skills, computer skills, market awareness, understanding of the laws of commerce and product knowledge

daily order

food that is ordered on a daily basis from a vendor

sealed bid

goods or services, offered at a specific price for a specific period of time, confidentially submitted to a company by an announced deadline, and then publicly opened by the buyer

buyer's order forms

lists created by the buyer, and separated by the nature of their contents, to assist in purchasing different categories of goods

safety stock

minimum desired level of inventory

line-item bidding

selecting the vendor who quotes the lowest price for a single product.

prime vendor

sellers agreeing to sell their products at a set price, often based on cost plus fixed-fee, to the buyer; similar to a cost plus fixed-fee contract

conceptual skill

the ability to analyze and solve complex problems

volume buying and warehousing

the ability to negotiate a contract for large quantities of singular products to be received over an extended period of time

competitive buying

the application whereby the buyer solicits quotes from various sellers, either orally or written, and compares them to discover the lowest price for the same product

business-to-business e-commerce

the area that encompasses electronic buying and selling transactions between organizations and in which e-procurement is a central function

single-source buying

the buyer orders what is needed from one source with the hope that the price and quality are favorable

5 important product characteristics to consider when buying

the buyer's philosophy, pricing methods, where their product comes from, potential delivery, sales representative services

procurement

the buying and reselling of goods that have already been produced

commerce

the buying and selling of goods

optimal purchasing

the concept of matching the specific characteristics of the product to the specific needs of the business

hedging

the practice of investing in the futures market, by the buyer, for products that are forecasted to increase in price. Also known as forward contracting or forward buying

ethics

the principles of right and wrong that guide an individual in making decisions

food service distributor

the supplier to the restaurant. the purchase from producer-packers and distribute to restaurants

line positions

those employees directly involved in the food production or service

bottom-line bidding

to select a vendor by comparing quotes from different purveyors and purchasing the lowest priced product. also known as bottom-line buying.