Chapters 12,13,14 Purchasing

Invoice

A bill from a vendor for goods or services, often presented as the goods are delivered or after the services are performed.

Application Service Provider

A company that distribute software over the internet from a central location to customers in other locations.

Bar code

A computerized label attached to most food packages. The information on the bars can be read by the computer and used to track inventory amounts and values.

Stock Requisition

A formal request made by an employee for items needed to carry out necessary tasks. It is given to the person managing the storage facilities. A typical control document used by large hotels.

Approved Supplier List

A list of all vendors who buyers are allowed to purchase from. An excellent security precaution.

Request for Credit Memo

A note sent by the buyer or receiving clerk to the supplier requesting that the hospitality operations account be credited because all or part of a shipment was unacceptable.

Purchase order draft

A purchase order that includes an attached check to cover the price of the goods and/or services. A form of prepaid order

Purchase Order (PO)

A request that the vendor deliver what you want, ideally at the time you want it, at an agreed upon AP price and credit terms. May include other conditions, such as minimum order amount, cost of delivery (if any) and so forth.

Receiving Sheet

A running amount deliveries maintained by the receiving agent.

Bonded Supplier

A supplier that has adequate insurance coverage demanded by the local government that issues business licenses

Stock Rotation

A system of using older products first. When a shipment arrives the older stock is moved to the front of the shelf and the newer stock is placed behind it.

Approved Supplier

A vendor that the buyer is allowed to buy from

Trade in Allowance

Amount of money a vendor credits your account when you buy a new piece of FFE (especially equipment) when turning in an older model.

Cash Discount

An award for prompt payment, for paying in advance of the delivery, or using a COD bill paying procedure

Common Carrier

An independent delivery service hired by the vendor to deliver goods to the restaurant operation. UPS would be an example of a common carrier.

Open Storeroom

An unlocked storage facility that can be accessed by employers as needed. Usually contains the less expensive foods, beverages and non food supplies.

Daily Bid Buying

Another term for call sheet buying

One stop shopping

Buying everything you need from one vendor. Alternatively, buying everything you need from the fewest possible purveyors.

Supplier Selection Criteria

Characteristics a buyer considers when determining if potential vendors should be added to the approved supplier list.

National Distribution

Clause in a national contract stipulating that all restaurants in the chain will be able to rely on getting the same types of products delivered to their back doors.

Dot system

Color coded stick on dots (usually a different color for each day) usually attached to inventories when they are received. They have enough blank space to pencil in dates, times, AP prices, and other info.

Invoice Receiving

Common type of receiving procedure. Involves comparing the invoice with the order record, and then proceeding to check quality, quantity, and AP prices of the items delivered.

Consulting Service

Company that specializes in helping others by giving advice and/or accomplishing specific task that clients do not wish to do on their own.

Ineligible Bidder

Company that would like to bid for a buyers business, but would not be allowed to bid because it does not meet certain qualifications set by the buyer. For instance, the company may not be large enough, it may not have sufficient financial strength, and so fourth.

Goods Received without Invoice Slip

Created by the receiving agent to record a shipment when no invoice or delivery document accompanies the shipment. Without a record of shipments received, a hospitality operation wouldn't be able to calculate actual costs.

Bill of Lading

Document that conveys title to the goods purchased

Receiving Objectives

Ensuring that the delivered items meet the qualities, AP prices, support functions and quantities ordered by the buyer and that they are delivered at the correct time.

Case price per unit

Equal to the AP price for one case divided by the number of units per case. For instance, if you pay 12.00 for a six-can case of tomatoes, the case price is 2.00 per can. If the vendor is willing to sell you less than one case, but charges you only 2.00 per can he is charging the case price and not a premium price for a broken (busted) case

Fill rate

Equal to the amount of items delivered divided by the amount of items ordered. For instance, if you ordered 10 items and the vendor delivered 9, the fill rate is 90%- A fill rate less than a 100% means that the vendor is out of some items and has to back order you.

Supplier buyer relations

Establishment of firm and fair business dealings and interactions between buyers and suppliers and their representatives.

Pick Up Memo

Gives the delivery driver permission to pick up something from you. Typically used when you want to return a product to the vendor and you arrange to have it picked up when the driver makes the next regularly scheduled delivery of things you purchased. - May also be used when a driver is delivering a substitute piece of equipment (such as a coffee urn) and needs to pick up the one you have so that it may be taken back to the shop and repaired.

Invoice Stamp

Information placed on the receiving agents copy of the invoice that indicates all appropriate checks were made and that the shipment was accepted.

Value Analysis

Involves examining a product to identify unnecessary costs that can be eliminated without sacrificing overall quality or performance.

Returned Merchandise

Items that do not meet the buyers and receiving clerks expectation, and therefore are returned to the supplier.

Purchase Requisition

Lists the products or services needed by someone in the hospitality operation. It is given to the buyer, who then goes into the marketplace to find the best deals. This requisition is typically used for things that the buyer doesn't purchase on a regular basis.

Will Call

Merchandise not delivered to the restaurant; the buyer picks it up at the vendors location. The buyer may also have to pay for it when picking it up, unless the company has established credit with the vendor.

Levinson Approach to Ordering

Method of determining the appropriate order sizes. Takes into account forecasted sales, portion sizes, and yield percentages when calculating the amount of products to order.

Management Information System (MIS)

Method of organizing, analyzing, and reporting information to manage a business effectively. Typically involves the use of computerized record keeping.

Par Stock Approach to Ordering

Methods used to determine the appropriate amount to order. Involves setting par stocks for all items and subtracting the amount of each item on hand to calculate the order sizes.

Deposit

Money, or other asset, used to ensure that future products or services will be provided. Alternatively, money used to ensure that returnable items, such as reusable packing crates, will be returned to the vendor.

Backhaul

Occurs when a driver delivers a shipment to a hospitality operation and then refills the empty truck with items (such as recyclable materials) that need to be delivered to another location. The purple is to gain maximum efficiency by seeing to it that the truck is always full when it is on the road.

Accepting a delivery

Occurs when a receiving agent is satisfied that the delivered merchandise meets the company standards. Once the shipment is accepted, the receiving agent normally signs a copy of the invoice accompanying the delivery.

Cash Rebate

Occurs when a vendor charges the full AP price for an item, but later on, after you provide proof of purchase documentation, he will send you a check for a small amount of money or will credit this amount to your next bill.

Market Research

Organized effort to gather information about customers. Typically used by business to discover what people want, need or believe.

Buying Plan

Overall selection and procurement strategy. Includes reasons why it was selected, and relevant policies and procedures needed to carry it out successfully

Suppliers Forms

Paperwork documents or software the supplier provides to buyers, usually at no charge. They are typically intended for use by buyers who purchase products from the company providing them for free.

Free Sample

Part of the marketing strategy used by vendors to sell products buyers are allowed to test a product in their own facility without having to pay for it.

Lead time

Period of time between when you place an order with a vendor and when you receive it

Distributor Sales Representative (DSR)

Person employed by a vendor to sell products and provide support functions to restaurant operations.

Promotional Discount

Price discount awarded to the buyer if he or she allows the vendor to promote the product in the hospitality operation. Or if the hospitality operation agrees to personally help promote the sale of the product to its customers.

Relationship Marketing

Procedure that does not view marketing as selling products one at a time, that is it does not view marketing as a series of individual transactions. Instead, it refers to the need for vendors and customers to form personal alliances that will lead to the sell and purchase of products and services that mutually benefit one another.

Receiving

Process of examining shipments to determine if they should be accepted or refused.

Formal Issues System

Process where by all products a business uses are kept in warehouse or storeroom overseen by a clerk or manager. Products can be obtained only by authorized persons who are required to present a properly completed stock requisition.

In Process Inventory

Products located at employee workstations; most or all will be used during the shift.

Blanket Order

Purchase order that contains several different products.

Delivery Schedule

Purveyor's planned shipping times and dates

Odd hours Receiving

Receiving activities that are performed when examining an odd hours delivery

Standing Order

Route Sales person shows up and takes inventory bringing you to some determined par stock until the next time he visits your establishment

Mailed Delivery

Shipment that is delivered by the US Postal Service, Fed EX, DHL, UPS OR other similar services

Fixed Bid Buying

Shopping around and soliciting competitive bids for long term contracts.

Volume discount

Similar to quantity discount. Th buyer agrees to purchase a huge volume of good; however, unlike a quantity discount, he or she buys more than one type of merchandise.

Ordering Procedures

Standardized process used by the buyer to ensure that the correct amounts of needed products are ordered at the appropriate time.

Ordering procedures

Standardized process used by the buyer to ensure that the correct amounts of needed products are ordered at the appropriate time.

Source

Supplier at the beginning of the channel of distribution. For instance, a grower (farmer) would be at the beginning of the fresh produce channel of distribution. Also referred to as a primary source.

End user services

Support unctions provided to buyers by vendors. Includes everything except the sales effort, which is provided by a sales rep, such as a food broker.

Use tax

Tax charged by the state where the buyers hospitality operation is located (Home state) on products purchased from out of state.

Sales Tax

Taxes a company must pay to state and local governments for things purchased, such as cleaning chemicals, that will not be resold to customers.

House Account

Term used by a vendor to identify a very loyal customer. A customer who continually buys from a vendor and is not interested in buying from competing vendors.

Cost-Plus Buying

The AP price the buyer pays is equal to the vendors cost of the product plus an agreed-upon profit markup.

Ordering Cost

The amount of money spent to make an order, receive it, and store it. Includes things such as labor to perform the work and administrative cost such as faxing, photocopying, and cell phone charges.

Credit Period

The amount of time a borrower has before a bill must be paid

Cycle of Control

The day to day operating activities in a hospitality organization. Typically the cycle begins when the products are delivered to and received by the hospitality organization, and ends when they are used. Controls are established to ensure that what was received is used appropriately with little or no loss along the way.

Profit Mark Up

The difference between the vendors cost of a product and its sales price. Alternatively, the difference between the EP cost of a menu item and its menu price.

Minimum Order Requirement

The least amount of an item a buyer needs to purchase before a vendor will agree to sell it. Alternatively, the least amount a buyer needs to purchase before he or she can qualify for free delivery.

Barter

The practice of trading your products or services for something you need. Intended to reduce your out-of-pocket expense.

Chain of Operating Activities

The sequence of day to day operating activities that hospitality business perform. Generally, they involve the following activities, in order: buying, preparation, service, customer consumption, and customer payment.

Credit Terms

The type and amount of financing a vendor will provide, along with the prescribed type of bill-paying procedures that must be followed. Also included are things such as a description of late fees, penalties, and so forth.

Issuing procedures

There are two types: Formal and Informal. The formal procedure requires a product user, such as a chef, to requisition products from a central warehouse or storage facility. The chef signs for the items and is responsible for them. / An Informal procedure allows the producer user to request from the manager what is needed, with the manager getting the product and handling the paperwork later on. Another informal process allows any product user to enter the warehouse or storage facility and take what's needed for production and/or service.

Backdoor Selling

This happens when a sales rep bypasses the regular buyer and goes to some other employee, such as the lead line cook, to make a sales pitch. The cook then puts pressure on the buyer to make the purchase.

Expediting

To move shipments through the distribution channel at an accelerated rate. Alternatively, the process used in a kitchen (or bar) to coordinate the orders from food servers (or cocktail servers) to ensure efficiency and timeliness.

Drop shipment

Typical shipping procedure used when engaging in direct buying. The shipment is delivered to the back door of the restaurant, usually by a common carrier.

Standing order

Under this procedure, a driver (usually referred to as a route salesperson) shows up, takes inventory of what you have, then takes off the truck enough product to bring you up to some predetermined par stock, enough to last until he visits you the next time. The driver writes up a delivery ticket after its determined what you need and the products are placed in your storage facility.

Request for Quote

Used by buyers who shop around for the best possible deals. It is a list of items needed and there specifications, given to potential vendors who are then asked to quote, or bid, the AP prices they would charge for them.

Change order

Used if a buyer wishes to alter a purchase order that was recently placed with a vendor. May be a written document, or it can be accomplished with a phone call or email.

Meat Tag

Used to control the usage of expensive items, such as meat, fish, and poultry. Contains two duplicate parts, one part is attached to the item when it is received and placed into storage, the other one goes to the controllers office. When an item is taken from storage and issued to production, the part on the item is removed and sent to the controller who matches it with the other part. The item is then removed from the inventory file. At that point, the storage supervisor is no longer responsible for the item, the chef is.

Call Sheet buying

Used when shopping around on a day to day basis. The buyer contacts several purveyors seeking their AP price quotes. He then purchases from the one with the lowest AP price.

Buyer profile

Vendor file that contains information about current and potential customers. Typically used by sales reps to help them prepare the best possible sales presentations.

Socially Responsible Supplier

Vendor who uses environmentally safe products and or procedures. Alternatively, vendor who promotes social causes, supports charities, and so forth.

Returns Policy

Vendor's procedure a buyer needs to follow to return products and receive credit for them.

Select Bid Procedure

Vendors AP price quotations are secret until they are all opened by the buyer at the same time. Typically done with fixed bid buying.

Buyout Policy

Vendors willingness to purchase from a customer, a competitors product, so that the customer can immediately begin purchasing similar products from them.

Forward Buying

When a buyer purchases a large amount of product (for example, a there month supply) and takes delivery of the entire shipment.

Stockless purchasing

When a buyer purchases a large amount of product, for example, a three month supply and arranges for the vendor to store it and deliver a little at a time.

Credit Slip

When a shipment, or partial shipment is unsatisfactory, the driver will provide a credit slip to the receiving clerk that will be applied to the restaurants account. It eliminates the need for the restaurant to prepare a request for credit memo.

Credit Memo

When a shipment, or partial shipment is unsatisfactory, the supplier will send one of these to the hospitality operation, signifying the amount of credit that will be applied to its account.

Bid Buying

When buyers shop around seeking current AP prices from vendors. The vendors are asked to quote, or bid, the prices they will charge. Intended to give the buyer competitive pricing information that will allow him or her to get the best possible value.

Blind Receiving

When the invoice accompanying a delivery contains only the names of the items delivered. Quantity and price information is missing. The receiving clerk is required to count everything and record it. An expensive way of controlling the receiving clerks work.

Back order

When your shipment is incomplete because the vendor did not have the item in stock, the invoice will state that the item is backordered. You will receive the item later.

Delivery Ticket

Written receipt summarizing what was ordered and delivered. It is typically written up by route salespersons when they are finished restocking the hospitality operation. Similar to an invoice.

Reciprocal Buying

You buy from me, I'll buy from you