Rachel Hyman

(Partners: Lauren Rubin, Rachel Neuhauser, Michal Goldstein, and Bonnie Leventhal)
FNES 275
Professor Johnson
10/22/15
Purchasing Project
Leader: Lauren Rubin
Scribe #1: Rachel Neuhauser
Scribe #2: Michal Goldstein
Organizer: Rachel Hyman
Presenter: Bonnie Leventhal
1. List 4 factors which affect the efficiency of your Food Service Operation? For each one,
please give 2 reasons why it impacts the operation.
The 4 factors which can affect the efficiency of the Food Service operation are the equipment
available, the budget, location, and the size of the facility being worked in.
1. Equipment available:
1) Depending on what equipment is available, one needs to take into
consideration how much time should be allotted to each procedure. With a lot of
equipment, the job will get done faster than having man doing everything by hand.
2) One needs to know whether they have a lot of fridge/freezer space because
that affects what kind of products you will buy. If you have space, you can purchase more
fresh products but if you dont, you must purchase more canned and packaged foods.
2. Budget:
1) Your budget affects if you can hire more workers or if you are limited to few.
2) Your budget affects the form of food you will purchase. If you have a lot of
money, you can buy precut and prewashed food, which makes your operation run quickly
and more efficiently. But if all the food preparation needs to be done, that takes more
time and labor.
3. Location:
1) If you are in a remote location, you need to take into consideration the means
of transportation for your goods/products. You may need to consider purchasing trucks to
transport food to and from your food service operation
2) If you are in a remote location, you need to take into consideration your
method of purchasing food. You need to decide which foods are worth buying locally and
which are not.
4. The size of the facility:

1) The size of the facility affects affect staffing. It affects how many can be hired
and how many can work at a time.
2) If a facility is too small and crowded, it can increase the chance of fires and
injuries.
2. What information would one need to know when planning an operating budget? Describe the
difference between a Capital Budget and an Operating Budget?
In order for one to plan an operating budget, one would have to have collected historical
data from records of past performances, both commercial and noncommercial operations, and
monitored the data on expenses including food, supplies, labor, energy, and overhead expenses.
Commercial operations use number of sales and covers as the primary indicators of performance,
whereas noncommercial operations use a number of other indicators such as resident census in
long-term care facilities, meal participation in schools, and meal equivalents per patient day in
hospitals. These groups of performance data are sometimes referred to as volume indicators and
provide the basis for future projections of activity and costs. All operations monitor historical
data on expenses including food, supplies, labor, energy, and overhead expenses.
Operating Budget:
An Operating Budget is a plan that minimally includes revenues and expenses. Its a
prediction of the organizations sales, expenses, and profit over a set period of time or fiscal year.
The operating budget is an integral component of the control process because it can be used as a
day-to-day operations guide to assist in financial decision-making. The operating budget
includes the statistics budget, which is an estimate of the volume of sales in commercial
operations or services in noncommercial operations.
Examples of the day-to-day expenses that the operating budget focuses on are wages,
rent, utilities, and other purchases of items that are not intended to last more than a year; a capital
budget, on the other hand, is a longer-term budget that is formulated to prepare for expenses that
are likely more costly and intended to last a greater amount of time.
Capital Budget:
A capital budget is a long-term plan prepared to estimate or predict the costs of capital
outlays or expenditures and their financing. Examples of capital expenditures include equipment
replacement, renovation projects, and facility expansion. Items addressed in the capital budget
are often defined by a dollar value. For example, an organization may define capital as any items
valued at more than $1,500.
Various methods of establishing line item amounts within individual budgets are used by
organizations. The most common methods are fixed, flexible, and zero-based. A fixed budget is a
set dollar amount based on a set, predetermined level of activity or transactions; generally based
on past activity indicators such as sales and costs with some consideration for future change.
Flexible budgets give a dollar range for low to high levels of predicted activity; this type of

operating budget is developed to reflect the variability in performance activities as expressed in

volume indicators. Lastly, zero-based budgets are newly developed each fiscal year starting with
a blank piece of paper; this approach requires that the manager prepare a budget for each
activity of the department, thereby forcing the manager to evaluate all activities each year and
justify every request for funds. The zero-based budgets are commonly used for capital requests
such as equipment and renovation projects.
3. What are the 2 US Government Inspection Programs that ensure food safety? Who in your
operation should be knowledgeable about these regulations and why? What governmental agency
is responsible for inspection of fish and fish products? What is the function of the Environmental
Protection Agency (EPA) in the food service establishment?
The 2 US Government Inspection Programs that ensure food safety are the US
Department of Agriculture (USDA) and the Food and Drug Administration (FDA), an agency of
the Department of Health and Human Services. Government safety and inspection programs are
used to evaluate foods for signs of disease, bacteria, chemicals, infestation, filth, or any other
factor that can possibly render a food unfit for human consumption. Within the USDA, the Food
Safety and Inspection Service is responsible for enforcing the Meat Inspection Act, the Poultry
Products Inspection Act, and the Egg Inspection Act. Inspection of commodities for
wholesomeness is mandatory for meats, poultry, and fresh shell eggs. The FDA is an
enforcement agency within the Department of Health and Human Services. It is responsible for
the enforcement of the federal Food, Drug, and Cosmetic Act; the Fair Packaging and Labeling
Act; and the Nutritional Labeling and Education Act among others. The FDA also covers the
production, manufacture, and distribution of all food involved in interstate commerce except
meat, poultry, and eggs.
The person in an operation who should be knowledgeable about these regulations is the
manager, because they are the supervisor and should be overseeing all of the purchasing and
other on goings in the operation. It is their responsibility to make sure that the food being eaten
in their operation is fit for human consumption and it is their responsibility to make sure that all
their food is USDA and FDA approved. The governmental agency that is responsible for
inspection of fish and fish products is the National Marine and Fisheries Service. It is an agency
of the Department of Commerce and if the product carries a U.S. grade designation, the
purchaser is ensured of continuous in-plant inspection during processing by federal inspectors.
The function of the Environmental Protection Agency (EPA) in the food service
establishment is to regulate pesticides. This includes setting tolerance levels for pesticide
residues in foods, establishing the safety of new pesticides, and providing educational materials
on the safe use of pesticides. The EPA also determines quality standards for water.
4. Describe the 2 major structures/types of Food Purchasing. List 2 advantages and
disadvantages of both.

The two major structure/types of Food Purchasing are Centralized Purchasing and Group
and Cooperative Purchasing. Centralized Purchasing is when a purchasing department rather
than a department manager is responsible for obtaining needed supplies and equipment for all
units in the organization. In other words, a department within the organization has the main
responsibility for purchasing. This type of food purchasing is used in many large organizations,
for example, universities, schools, multiple-unit restaurants, and hospitals. When centralized
purchasing is used, the authority to buy products can be delegated to the foodservice, or in
multiple-unit organizations to the individual units. A unit manager has purchasing authority up to
a dollar amount. Two advantages of centralized purchasing are that it is cost effective and time
saving for the food service, by relieving the individual units of responsibility for interviewing
sales representatives, negotiating contracts, and placing orders. Two disadvantages of centralized
purchasing are that there can be friction in an organization between the purchasing department
and the foodservice unit if there is an unclear understanding of decision-making authority,
especially on quality standards and that the possibility of friction is very possible if the limits of
authority are not well defined and there is unclear communication.
Group and Cooperative Purchasing is an organization that represents member
organizations and oversees their purchasing function. This type of purchasing is beneficial for
buyers because it increases the volume and lowers the service requirements to improve leverage
with suppliers and then they can purchase what they need at lower prices. In order to increase the
volume, foodservice directors consolidate their buying power with other organizations. Examples
of cooperative and group purchasing are when many hospitals in a metropolitan area combine
their purchases in order to get lower prices and better service arrangements, or in a smaller
community, just a few foodservices, like a school, hospital, or nursing home join in a cooperative
purchasing agreement. Sometimes central warehousing is a part of cooperative purchasing, but if
there is a large enough volume then the vendors might agree to deliver the products directly to
the individual units. This type of purchasing is different from central purchasing because
members of the group in-group buying are independent organizations and are not under the same
management or within one organization. Here, the members are usually units of a larger system,
for example, schools in a citywide or countywide school system. The two advantages to group
and cooperative purchasing are the price advantages gained by increased volume, which can
attract more prospective vendors, and freedom from having to meet with sales representatives
and time savings through streamlined paperwork administration of the purchasing function for
the foodservice managers of the organization. Two disadvantages of this type of purchasing are
that the food preferences among the organizations may vary, so members need to occasionally be
willing to compromise their requirements for the benefit of the group, and that the structure of
purchasing within a group purchasing organization can be further complicated if it is a public
entity such as a federal prison or state-run hospital, because policy on purchasing at the
government level must be honored throughout all purchasing processes.

5. What knowledge and skills are essential for a successful food buyer? (List 4). How can the
buyer locate new vendors and stay current with local trends in commodity and price? Why is
ethics in Purchasing important?
A successful food buyer should buy the amount and quality of food that the food service
needs, within the budget and financial guidelines for that institution. The buyer should be aware
of internal factors, such as the customers, the menus, recipes, labor accessibility and capabilities,
utensils, storage accommodations and amount of food that is required. External factors that the
buyer should be knowledgeable in are the marketing system, food standards and quality, product
obtainability and purchasing methods. It is important for the buyer to have wide-ranging
knowledge and comprehension of legal guidelines, particularly those associated with orders and
contracts.
An effective buyer has outstanding communication skills, so he can form partnerships.
Listening and writing skills are helpful in creating efficient specifications and contracts. A
particular skill that is important is the ability to negotiate, which is a way of communicating with
others to come to an agreement or compromise.
The buyer can find new vendors in the market through media, including the Internet, local and
federal market reports and the press. In addition, buyers can receive information through
technical and trade association meetings and magazines, research reports, speaking with sales
representatives and travels to the markets and wholesale distributors. When choosing a vendor,
the buyer can either select a broad line vendor, which carries large selections of food, or a
specialty vendor, which offers a narrow selection of products. With either type of vendor, the
buyer should assess the vendors range of products and services, by asking about the product
line, services offered, and dependability in following the contract.
The buyer can stay current with local trends in commodity and price by being aware of changes
and conditions including government policy, economic patterns, and poor weather conditions.
Food prices can be influenced by poor growing conditions, strange consumer requests, and
seasonal changes. Certain foods are perishable and their prices can rise and fall throughout the
year.
Ethics is extremely important in purchasing, since it ensures that the institution is getting the best
products. Since the buyer is the go-between for the institution, it is within the buyers power to
make decisions about the quality, price, and amounts to buy. Often, the buyer is presented with
bribes or other types of incentives to impact his buying decisions. For example, a buyer will take
money or merchandise for a vendor in return for a sale. Items should be purchased based on
quality, price, and service, to ensure that the organization receives the best products.
6. List 4 factors which need to be considered when selecting food for your operation? Explain
each briefly. List 2 advantages and disadvantages of local sourcing.
When choosing food for your operation, the following factors must be taken into account:
quality, equipment, labor, time, inventory and total cost. The quality of the food must be

considered, which includes deciding whether quality standards of the organization can be met.
One must consider and evaluate the accessibility, volume and batch turnover time of the
equipment to guarantee that product demands can be achieved. The obtainability, skills, and
training requirement of the labor must be reviewed. When selecting food, one must consider the
time for product setup, production, and service time based on the predicted demand for the
product. One must think about the current inventory and evaluate the necessary storage and
holding space that will be required for the new product. Finally, the total cost must be assessed,
which is done by performing total cost analysis of all resources spent on making or buying the
product. After taking the time to analyze the other factors, the cost should be used as a
determinant whether to purchase the product or not.
Additionally, the form of the food should be considered; specifically, the physical shape
and temperature of the food. The shape could be whole, sectioned or diced, and the temperature
could be dry, frozen or refrigerated. Also, the buyer should decide whether to buy the food in its
natural form, or in a partly prepared or ready to eat form. For example, a buyer may select a
partly prepared food or completely processed food due to limited space, equipment, or labor.
An advantage of local sourcing is that it is more efficient, since it reduces the high costs
in packaging, travel, and overhead. A second advantage is that ingredients that are locally
sourced are fresher, which makes them more nutritious and have a better taste. A disadvantage of
locally sourced food is that it is expensive, and since they are usually not grown with industrial
agricultural methods, more labor is required. A second disadvantage is that locally sourced food
spoils faster since there are usually no added preservatives. In addition, there is a limited
selection of items since the food varies by season, and therefore one will not always be able to
obtain desired ingredients.
7. Describe how Prime Vending works? Give 2 advantages of Prime Vending. Explain Value
added Service and give one example of a food product that can be purchased using this method.
Prime Vending is one of the main methods of purchasing. It involves a formal agreement
with a single vendor to supply majority of the products needed by the buyer. One advantage of
Prime Vending is the discounted prices given for volume purchasing. Another advantage is the
development of a strong, and trusting relationship between the buyer and vendor. This
relationship can help the buyer with advice for future purchases. Value Added Services are
support equipment provided by vendors with the purchase of certain food products. These
services are included with the purchase of a product for no additional price. It can also be
described as the upgraded deal that a company gives its product in order to attract buyers. Value
Added Service is a method used by companies to eliminate competition by offering an add-on
feature to their product. This add-on feature tries to entice buyers to use one company over
another. One example of a food product that can be purchased using this method is popcorn. A
company can sell popcorn and says that if you buy popcorn from them, then you will also get the
popcorn machine.

8. List two financial records used in purchasing food and describe how each is used.
Two financial records used in purchasing food are the Purchase Order form and the
Request for Proposal. A Purchase Order form is a legal document with the first official offer
issued by a buyer to the vendor. The order form indicates the specific product description, the
count, the package type and the quantities desired for purchase. When the seller accepts the
purchase order, it forms a contract between the buyer and vendor. An RFP, also known as a
Request for Proposal, is a financial document that states an organization's business goal,
objective and proposal in purchasing a specific food/good. In this document the buyer provides
information to the potential suppliers about the terms/conditions and details of requirements,
goods or services that they need.

9. Describe the two principal methods of Purchasing (A) Informal Open Market vs. (B) Formal
Competitive Bidding. Describe how each function and list the advantages and disadvantages.
Informal or Open Market buying is a purchasing method that is usually in smaller quantities and
without contract or negotiation. When food and supplies are in demand the buyer requests quotes
on specific items, amounts, quality, and services from one or more suppliers. The buyer and
vendor connect through fax, Internet, or a sales representative who calls on account- personal
contact. This system is advantageous to the buyer because they can check in on the market and
goods of other vendors, which allows the buyer to compare. The quantities and prices should be
established before the goods are delivered. A potential disadvantage of Open Market purchasing
is the instability of prices on goods. When quotations are given daily, weekly, or monthly, the
prices constantly change and it becomes more difficult to outline your estimated bill.
In Formal Competitive-Bid buying, Specifications are written and submitted by buyers to
vendors so they may bid, usually sealed at a certain date. The buyer will place the order with the
vendor with the lowest bid. The bid request may be formal for example, in a newspaper or come
through a less formal form of communication. Purchasing agents for local, state, or federal
government controlled institutions are customarily obligated to present bids to all vendors who
wish to be invited. However, private organizations dont need to abide by this rule.
Because a formal bid is very specific, there is little room for misunderstandings in the
order. This method of purchasing is best used for frozen products, canned goods, sanitation,
paper supplies, staples and other non-perishables. Although there are clear advantages to this
form of purchasing, there are major disadvantages as well. This system is very time consuming,
the orders must be planned in advance, and the facility may be locked into the products for a
long time.
10. Problem:

Purchase price for a 10 1b. case of chicken/ 4 oz. portions, is $79.90.

a. What is the price per lb.? $7.99 $8.00
b. What is the cost one 4 oz. cutlet? $1.99 $2.00
c. In order to make a 50% profit, how much should each chicken cutlet be sold for? $ 3.00,
rounded from $2.99.

How did your group function?

Our group functioned very efficiently. Everyone was assigned specific tasks, and each of us
completed said tasks. If anyone had any questions or needed advice on an answer other members
of the group were there to assist. There were no problems completing this assignment because
the group worked extremely well together.