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.