© 2011 John Wiley and Sons, Inc. All Rights Reserved Selection and Procurement for the Hospitality Industry Purchasing ANDREW HALE FEINSTEIN AND JOHN M. STEFANELLI E i g h t h E d i t i o n

© 2011 John Wiley and Sons, Inc. All Rights Reserved CHAPTER Distribution Systems 3

© 2011 John Wiley and Sons, Inc. All Rights Reserved YOU SHOULD BE ABLE TO: Summarize the various distribution systems in the hospitality industry Differentiate sources’, intermediaries’, and retailers’ involvement in the supply chain. Distinguish between the economic values added to products and services as they journey through the channel of distribution.

© 2011 John Wiley and Sons, Inc. All Rights Reserved THE CHANNEL OF DISTRIBUTION

© 2011 John Wiley and Sons, Inc. All Rights Reserved DISTRIBUTION SYSTEM There are approximately 945,000 foodservice operations and about 48,062 lodging facilities A typical nonchain hospitality property uses about suppliers; multi-unit uses 6-8.

© 2011 John Wiley and Sons, Inc. All Rights Reserved FOOD, NONFOOD SUPPLIES Primary Sources Growers – farmers and ranchers Fresh Food Manufacturers – produces an item from raw materials Tree to paper napkins Processors – assembles a new product from various foods Frozen Pizza from Flour, Tomato Paste, etc.

© 2011 John Wiley and Sons, Inc. All Rights Reserved FOOD, NONFOOD SUPPLIES Intermediaries Distributors (wholesalers) Specialty distributor – one type of product Full-line distributor – food and nonfood supplies Broad-line distributor – food, nonfood, and ff&e Brokers (promoter on commission) Manufacturer’s Representatives Manufacturer’s Agents

© 2011 John Wiley and Sons, Inc. All Rights Reserved FOOD, NONFOOD SUPPLIES Intermediaries (cont.) Commissaries – a central distribution center Wholesale clubs – used by small operators who might not order enough Cash-and-carry –Costco Buying clubs (price clubs) Co-op – joining together for buying power

© 2011 John Wiley and Sons, Inc. All Rights Reserved ALCOHOLIC BEVERAGES Primary Sources Brewers – fermented beverages from grains Beer Wine Makers – fermented beverages from grapes Wine, Champagne Distillers – beverage has undergone distillation Whisky, vodka

© 2011 John Wiley and Sons, Inc. All Rights Reserved ALCOHOLIC BEVERAGES Intermediaries Importer-wholesalers Imports to states and sells to retail establishment Distributors Buys from primary sources and distribute by the laws set by authorities Alcohol Beverage Commission (ABC) Controls the sale and purchase of alcoholic beverages

© 2011 John Wiley and Sons, Inc. All Rights Reserved FURNITURE, FIXTURES, AND EQUIPMENT (FF&E) Primary Sources Manufacturer – producer of the items Intermediaries Dealers (equipment dealer) Catalog House – no stock Storefront Dealer – minimum inventory, smaller items Heavy Equipment Dealer – large equipment installations Full Service Dealer – full line plus services Brokers

© 2011 John Wiley and Sons, Inc. All Rights Reserved FFE INTERMEDIARIES Intermediaries (cont.) Designers – consultants Architects – much like a designer Construction contractors Distributors – sells replacement items Leasing companies – lease, rent to own

© 2011 John Wiley and Sons, Inc. All Rights Reserved SERVICES SOURCES Few large national sources exist Most are local Franchisees of a national firm

© 2011 John Wiley and Sons, Inc. All Rights Reserved ECONOMIC VALUES Time Value When to buy the items Financing Terms Form Value Packaging Processed products Place Value Locality

© 2011 John Wiley and Sons, Inc. All Rights Reserved ECONOMIC VALUES Information Value Most Controversial Information that comes with the products Supplier Services Value Intangible economic value Additional Services added Rush Orders