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Exam 3 HTM 3414
Inventory/Purchasing Methods
35
Health Care
Undergraduate 4
04/09/2013

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Cards

Term
Perishables:
Definition
fruits, meats, refrigerated, ect
i. Should be purchased in small amounts frequently
1. Price and supply varies
2. Use informal methods of buying
3. Never pay cash because no one will extend their credit
ii. Daily Inventory is required
iii. Refrigerated and freezer space is critical
iv. Usually bought from open market; whatever is available
1. Visit market when possible or call
v. Forecast
vi. Waste and spoilage: calculate into costs but if you purchase properly their won’t be any
Term
staple items
Definition
canned, bottled, packaged, anything in dry storage

use formal and informal methods to purchase: bid pricing and volume buying

extended shelf life --> dry storage space avaialble, min and max ordering facots, turn time


10-12% of total square footage is given to dry storage space
Term
dead stock
Definition
anything that sits on the shelf for 90 days or longer costs 2% of its original cost
Term
buy and hold method
Definition
buy a large quantity of something really cheap and the 2% monthly cost does not over power it
Term
systems to track items : Physical Inventory
Definition
lists and counts all food in the kitchen, refridgerators and in storage.
Term
system to track items perpetual inventory (running)
Definition
system maintains items on going and tracks what items come in and what items go out (done daily)

physical and perpetual inventory never match up
Term
par stock
Definition
minimum level of inventory to carry production between delivery dates

check constantly, keep updated, anyone can make order, reduces spoliage, reduces theft and dollar investment, allows you to handle demand
Term
4 main goals of food purchasing
Definition
1. Have food items on hand when needed
2. Purchase food for intended purpose
3. Buy Low
4. Keep Inventory Low
Term
Open Market (purchasing method)
Definition
(Informal, verbal agreement) everyone uses it, choose the purveyors you do business with, recieve price quotas

price is what drives the decision
used often for purchases perishables

a: easy to use
d: limits the buyer to whatever is available in the market at the time of purchase

* purveyors require you to have a minimum drop you can spend
Term
Sealed Bid
Definition
(fixed bid)(formal): used in volume production and works best for staple items (does not work for perishables)

advantage: gets the best price and a steady supply of goods; guarantees a set price, give you the ability to buy low

disadvantage: involves a lot of hands on labor (cumbersome)
Term
Daily Bid
Definition
informal, most often for perishable items
Term
Prime Vendor
Definition
formal, bid on supplying select goods to a company. Company agrees to buy all goods from this vendor for a given period of time

a: increased competition and lower prices, reduced cost of inventory, spec and order processing

d: potential gradual price increase and decrease in competition, limited number of vendors with whom the operation conducts business
Term
Cost Plus
Definition
formal, takes place in writing: negotiate with vendor, they usually give a lower price and the buyer will pay less in the long run

a: some prices that fluctuate frequentitly will remain the same for the buyer beecause of the contract even if the price in the market is higher
Term
Co-Op
Definition
Informal, group of operators to agree to purchase products together in order to recieve price reduction on volume purchases ex. multiple restaurants buy from same supplier
Term
Warehouse club
Definition
informal --> costco, sames club

a: reduces overhead by buying in bulk
Term
just in time
Definition
informal --> recieves orders the day the product foes into production

a: keeps inventory low and assets liquids
d: takes time to forecast what food will be needed for each day, may be hard to find a vendor that delivers each day
Term
standing order
Definition
hire guys to come everyday to make sure your operation isnt going over or under min-max inventory

a: FIFO your fridge, frequently used for daily products
d: expensive

expensive

FIFO
Term
specification
Definition
description of an item stated in such a way that the exact requirements are understood by both buyer and seller, common language between buyer and seller
Term
requirements
Definition
clear, concise, simple --> compiles with standards, does not omit any essential information, leaves no room for misintrpetations
Term
Four conditions required
Definition
1. common or trade name
2. unit/container the price is quoted on
3. name size weight of basic unit
4. amount to be purchased
Term
information on a spec require (5)
Definition
name of item, intended use, unit size, packaging information (MAP) and other
Term
Monthly Storeroom Difference
Definition
Opening Inventory + Purchases – Issued Food
Term
perishables 1.
Definition
1. price and supply varies 2. use informal methods of buying 3. never pay cas because no one will extend there credit
Term
considerations for making purchases
Definition
1. food purchasing is determined by the menu
2. 2. Management decides upon foods that are readily available, foods that meet target needs, buying things that are attainable
Term
how much to buy
Definition
the more you buy the lower the price
Term
food and liquor
Definition
most frequently stolen items in the world so physical inventory is very importnat
Term
4 main goals - 1 (3)
Definition
Have foot items on hand when needed

1. forecasting simplest form - use sales history
2. staple items used daily
3. take daily inventory
Term
4 main goals - 2 (2)
Definition
ii. Purchase food for Intended Purpose
1. Management makes the decision of which product to use based on the type of operation and market demographics. Mgmt never wants to stray from the marketing plan
2. Items that are purchased for specific recipe and don’t end up being used can cost an operation in 3 ways
a. Food costs
b. Variation in consistency
c. Customer loyalty and loss of business
Term
4 main goals - 3
Definition
buy low - find the best cost on food products and use the approporiate purchasing method
Term
4 main goals - 4
Definition
iv. Keep Inventory Low
1. Proper purchasing allows minimal investment in product in order to keep assets liquid
2. Diligent inventory purchasing methods for products is required
Term
sealed bid: how it is used effectively
Definition
iii. How it is used effectively:
1. Forecasts requirements for extended periods
2. Prepares detailed specifications for each item requested
3. Required to have less variation
4. Consolidate: buy all items from the same buyer if buying the same products→ leads to you having buying power
Term
sealed bid: invitation to bid
Definition
to bid on a specification you must give a price quote on the product.
1. The bid is returned in a sealed envelope
2. It consists of a contract in writing: guaranteed the product will be delivered for a specific time at a certain place
Term
sealed bid: process
Definition
1. Buyer prepares specs
2. Spec sent to the qualified suppliers
3. Forecast requirements for extended periods
4. Sealed responses delivered to buyer
5. Contract awarded
Term
branding
Definition
provides product consistency and increases prices of products
Term
5 factos that effect purchasing
Definition
1. type and image of establishment
2.style of operation and system of service
3. occasion for which the item is needed
4. amount of storage abialble
5. financial resources and buying policies of the organization
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