An Overview of the Purchasing Function

An Overview of the Purchasing Function5YOU SHOULD BE ABLE TO:Describe the purchasing activities in a hospitality operation.Determine the purchasing requirements of a hospitality operation using value analysis and make-or-buy analysis.Outline the objectives of the purchasing function and the potential problems that buyers encounter when pursuing those objectives.PURCHASING ACTIVITIESDetermine when to orderControl inventory levelsEstablish quality standardsDetermine specificationsObtain competitive bidsPURCHASING ACTIVITIES (CONT.)Investigate vendorsArrange financial termsOversee deliveryNegotiate refundsHandle adjustmentsArrange for storageSPECIFIC PURCHASING ACTIVITIESRecipe developmentMenu developmentSpecification writingApproval of buying sourceDesignation of approved brandsSupplier evaluationSPECIFIC PURCHASING ACTIVITIES (CONT.)NegotiationChange of suppliersChange of brandsSubstitutionApproval of new productsInvoice approvalPaymentOrder placement with supplierMINIMUM PURCHASING ACTIVITIESSelection and procurement planDetermine requirementsSupplier selectionSourcingMINIMUM PURCHASING ACTIVITIES (CONT.)Maintain a convenient and sufficient inventoryConduct negotiationsResearch activitiesValue analysisForecastingWhat-if analysisMake or buyPlant visitsMINIMUM PURCHASING ACTIVITIES (CONT.)Maintain supplier diplomacyEducate the suppliersPurchase, receive, store and issue productsDisposal of excess and unsaleable itemsRecyclingMINIMUM PURCHASING ACTIVITIES (CONT.)Record-keeping controlsOrganize and administer the purchasing functionSelf improvementHelp competitorsPURCHASING OBJECTIVESMaintain an adequate supplyMinimize investmentMaintain qualityObtain the lowest EP costMaintain the company’s competitive positionPROBLEMS OF THE BUYERBackdoor sellingWastes of timeEthical trapsResponsibility vs. authorityLack of timePROBLEMS OF THE BUYER (CONT.)Difficulties with other departmentsUnreasonable demandsLate deliveries, substitutions, and back ordersReceiving and storage inadequaciesReturns and allowancesLack of appreciationEVALUATION OF THE PURCHASING FUNCTIONHow much should company spend to achieve the purchasing objectives?Salaries and other costs jump out at managementBenefits of a conscientious purchasing agent not always so visible