1. Procurement and Inventory Management
ORIENTATION TO SCHOOL NUTRITION MANAGEMENT
Procurement and Inventory Management

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4. What is Procurement?
Multi-step process for obtaining goods, products and services
Proper planning is critical
Can be time-consuming
Ensure competitive procurement
Systematic approach

5. Objectives 1-3
1. Identify the stakeholders in the school nutrition food chain. 2. Discuss procurement considerations of a well-planned menu. 3. Recognize key information when forecasting menu items usage.

6. Objectives 4-6
4. Create a mock product description. 5. Identify various types of acceptable purchasing methods. 6. Identify ethical behaviors.

7. Objectives 7-8 7. Identify federal procurement
regulations, policies, and
procedures governing all school
nutrition program purchases.
8. Recognize general inventory
management practices.

8. Glossary
Refer to Glossary

9. Principles of Good Procurement
Free and open competition
Fairness and integrity
Qualified suppliers

10. Stakeholders School Nutrition Procurement Team Distributors
Manufacturers
Brokers
State agency
USDA (USDA Foods)

11. School Nutrition Procurement Team
School nutrition director
Managers, school nutrition staff
Business manager, a procurement officer
School board

12. The Distributor A commercial food company Sell, deliver, and bill
Sells products made by manufacturers
Velocity reports, SKUs

13. The Broker
Independent sales agents who negotiate sales for manufacturers
Work with food distributors and school nutrition operations

14. The Manufacturer
Companies responsible for processing raw food products
Involves pricing finished product
Introduce new products

15. State Agency Administrating Child Nutrition programs
Reviewing procurement procedures between SFA and Food Service Management Companies
Providing procurement updates and training

16. The U.S. Department of Agriculture (USDA)
Food Distribution Division of USDA’s Food and Nutrition Service
Coordinates the distribution of USDA Foods
Foods account for % of the foods in School Nutrition Programs (SNP)
100 percent American grown.
Meet the Meal Pattern requirements.

17. Stakeholders’ Expectations
A specific role
Expect each party to have some basic knowledge
Open communication

18. Stakeholders’ Responsibilities Activity
What do the stakeholders expect from each other?

19. Menus Driving force that begins the procurement process
Must meet federal guidelines
Consider: equipment, food costs, cultural food preferences, labor costs, skill levels, environmental friendliness, and the availability of USDA Foods

20. Utilize Cycle Menus Provides an efficient procurement process
Reduces inventory and saves on cost
Reduces repetitive tasks
Reduces labor
Implements cost-effective inventory management

21. Stock Keeping Units (SKUs)
Unique identifier for each unit product
Reduce number of SKUs–less than 50 servings or 25 servings in a small school
Allow only pre-approved substitutions
Multiple uses for same product

22. Standardized Recipes Used to prepare the menu items
Identify the specific quantity of ingredients
Number of servings
Portion sizes
Standardized recipes are used to prepare menu items and identify the specific quantity for each ingredient, the number of servings, and the portion size for the recipe.
A standardized recipe is a recipe that has been tried, adapted, and retried several times for use by a given school nutrition operation. The recipe has been found to produce the same good results and yield every time when the exact procedures are used with the same type of equipment and the same quantity and quality of ingredients.

23. Distinguish by Type of Products
Distributor’s Choice
Private Label
Manufacturer’s Brand

24. Distributor’s Choice Label
One or few ingredients
Any brand
Supplier substitute product- case and pack size must be same

25. Private Label Supplier’s brand Must conform to specification
Best practice- taste testing

26. Manufacturer’s Brand Label
Products recognized by name
Usually are main entrees and contain multiple ingredients
Tremendous variation

27. Forecasting Analyzing current and historical data
Predicting and estimating for coming year
Assessing needs
Allows procurement plans to evolve each year

28. Forecasting—Critical to Program
Ensures only responsive suppliers can meet needs
Inventory control
Menu items available

29. Forecasting—Stakeholders
Distributors and manufacturers need adequate time to receive product
Proprietary products
Good practice-minimum of six weeks in advance It

30. Average Daily Participation (ADP)
How many students are participating in your program
Tool to use for forecasting
Must still consider the preferences of the customer and the popularity of menu items

31. Velocity Report
Quantity, the date of purchase, and other valuable information
Generated by the distributor upon request
For products purchased during a specific time period
A tool for forecasting

32. Forecasting USDA Foods
USDA Foods Ready-to-eat products
Cost savings
High quality
Check with state food distributing agency

33. Bid Integrity
Strengthened when time is spent developing good forecasts
Quantities are accurate
Manufacturer and distributor inventory

34. Past, Present, Future Activity

35. Writing Product Descriptions
Essential for communicating with the supplier
Most single-ingredient foods often only need a brief specification
Do obtain samples and taste test the product
An approved equal

36. Product Description Clear description Description of product
Portion size
Manufacturer’s name, code number, and pack size

37. Case Pack and Weight How should the item be packaged?
How big are the cases?
How many servings in a case?

38. Minimum and Maximum Size and Pieces
What is the minimum size of the product?
What is the maximum size of the product?

39. Main Ingredient(s)
What are the main ingredients?

40. Other Product Ingredients
What other ingredients can be included in the product?

41. Prohibited Ingredients
What ingredients will be excluded from the product?
Examples include:
Product cannot contain pork
No MSG

42. Nutritional Standards
What are the nutritional standards for the product?
Are there minimum or maximum nutrient or ingredient requirements or limitations?

43. Meal Pattern Requirements/CN Labels
CN Label- provides guarantee to SFA and FNS meal program operators

44. Unit Award Is Made
How will the procurement team determine which company is offering the best price for an acceptable product?
How will the unit price be determined for an acceptable product?

45. Quality Indicators
What are some quality indicators?

46. Product Description Activity
Key Information to Include in Product Description Specifications Activity

47. Free and Open Competition
Free and open competition means that all suppliers are “playing on a level playing field” and have the same opportunity to compete.
Procurement procedures may never unduly restrict or eliminate competition.

48. Why Is Competition Important?
Best price for the best quality or service

49. Competitive Procurement
All procurements, regardless of dollar value, must be competitive.

50. Small Purchases Federal threshold is $150,000
States and localities may have more restricted threshold
Relatively simple
Must be competitive

51. Small Purchases— Good Practices
Price or rate quotations from adequate number of qualified sources
Obtain in writing, three sources who are eligible, able, and willing to provide the product or service

52. Keep in Mind…
The law prohibits breaking up bids to smaller units (keeping individual purchases under the small purchase threshold) in order to avoid the competitive sealed bidding process.

53. Some Items are Often Bid Separately
Specific market often supports the need to separate from overall procurement
Examples:
Milk
Bread
Produce

54. Invitation for Bid (IFB)
Primary consideration is cost
Lowest price
No substantive difference among the product or service

55. Request for Proposal (RFP)
Type of competitive procurement
Evaluation factors
Price alone is not sole basis for award
Publicized

56. Two Elements in RFPs Technical proposal- how task will be accomplished
Cost proposal-cost

57. Competitive Procurement Activity
Determining appropriate procurement methods

58. Contracts
Do all procurement methods result in the same type of contract?
SFA decision
Fixed price contract
Cost reimbursable contract

59. Fixed Price Contract IFB or RFP
An agreed upon amount that is fixed at the inception of the contract
May contain an economic price adjustment tied to an appropriate index

60. Benefits of a Fixed Price Contract
Same price throughout the duration of the contract
Maximum incentive for vendor to control costs

61. Cost Reimbursable Contract
Legally enforceable contract that reimburses the contractor for costs incurred under the contract.
Does not provide for any other payment to the contractor.
Allowable costs paid from the nonprofit school food service account.
Net all discounts, rebates, and other applicable credits.

62. Procurement Trivia Question
Why are cost plus a percentage of cost contracts not allowed?

63. Ethics
Can be defined as the moral standards individuals use to guide decisions in their personal and professional lives
Practices that promote free and open competition
Accurate documentation is important to demonstrate compliance
Ethical violations in the workplace are a serious matter

64. Supplier Relations Establishing and understanding the parameters
Attending supplier-hosted events —no obligation
The impression of impropriety

65. Gifts and Gratuities
A gift is anything of monetary value, including food, meals, travel, or entertainment.
Refer to district’s policy.
If there is a doubt—then do not accept it.
A gift is anything of monetary value, including food, meals, travel, or entertainment.
Refer to district’s policy.
If there is a doubt—then do not accept it.

66. Monetary Dealings
Soliciting or accepting money, loans, credits, prejudicial discounts, or services
Never lend money to or borrow money from suppliers!

67. Legitimate Discounts, Rebates, or Credits
Offset expenses and act as a purchasing incentive
Need to be taken directly off the invoice which can serve as your documentation

68. Ethical Situations Activity
Is this Ethical?

69. Supplier Relations: Is This Ethical?
A vendor tells you there is a special on whole grain-rich dinner rolls. He states the rolls meet the USDA whole grain- rich criteria. The rolls will only be offered at a special price on Thursday. To receive the special price, you will need to attend a luncheon hosted by the vendor and purchase the rolls during this time.
A vendor tells you there is a special on whole grain-rich dinner rolls. He states the rolls meet the USDA whole grain-rich criteria. The rolls will only be offered at a special price on Thursday. To receive the special price you will need to attend a luncheon hosted by the vendor and purchase the rolls during this time. (Allow the participants to respond.)
SHOW SLIDE: Gifts and Gratuities: Is this Ethical?
SAY:
A vendor has learned of your engagement and sends you a new house-warming gift. You take it home, and it looks beautiful on your fireplace mantle. How did he know exactly what to buy! You can’t wait to thank him the next time you place an order.
(Allow the participants to respond.)
SHOW SLIDE: Monetary Dealings: Is this Ethical?
Your son calls and says he will need a new track uniform and money to purchase a $200 pair of tennis shoes. You tell him the shoes are not in the budget. A vendor over hears the conversation and offers you a loan. You accept the offer and plan to pay him back in the near future.
SHOW SLIDE: Legitimate Discounts, Rebates, or Credits: Is this Ethical?
A vendor indicates the product you purchased is eligible for a manufacturer’s rebate. When you review your invoice you do not see the rebate. After contacting the vendor you discover he totally forgot to process the rebate, and the offer is no longer available. He states he will give you free product valued at the dollar amount of the rebate.

70. Gifts and Gratuities: Is This Ethical?
A vendor has learned of your engagement and sends you a new house-warming gift. You take it home, and it looks beautiful on your fireplace mantle. How did he know exactly what to buy! You can’t wait to thank him the next time you place an order.
A vendor tells you there is a special on whole grain-rich dinner rolls. He states the rolls meet the USDA whole grain-rich criteria. The rolls will only be offered at a special price on Thursday. To receive the special price you will need to attend a luncheon hosted by the vendor and purchase the rolls during this time. (Allow the participants to respond.)
SHOW SLIDE: Gifts and Gratuities: Is this Ethical?
SAY:
A vendor has learned of your engagement and sends you a new house-warming gift. You take it home, and it looks beautiful on your fireplace mantle. How did he know exactly what to buy! You can’t wait to thank him the next time you place an order.
(Allow the participants to respond.)
SHOW SLIDE: Monetary Dealings: Is this Ethical?
Your son calls and says he will need a new track uniform and money to purchase a $200 pair of tennis shoes. You tell him the shoes are not in the budget. A vendor over hears the conversation and offers you a loan. You accept the offer and plan to pay him back in the near future.
SHOW SLIDE: Legitimate Discounts, Rebates, or Credits: Is this Ethical?
A vendor indicates the product you purchased is eligible for a manufacturer’s rebate. When you review your invoice you do not see the rebate. After contacting the vendor you discover he totally forgot to process the rebate, and the offer is no longer available. He states he will give you free product valued at the dollar amount of the rebate.

71. Monetary Dealings: Is This Ethical?
Your son calls and says he will need a new track uniform and money to purchase a $200 pair of tennis shoes. You tell him the shoes are not in the budget. A vendor over hears the conversation and offers you a loan. You accept the offer and plan to pay him back in the near future.
A vendor tells you there is a special on whole grain-rich dinner rolls. He states the rolls meet the USDA whole grain-rich criteria. The rolls will only be offered at a special price on Thursday. To receive the special price you will need to attend a luncheon hosted by the vendor and purchase the rolls during this time. (Allow the participants to respond.)
SHOW SLIDE: Gifts and Gratuities: Is this Ethical?
SAY:
A vendor has learned of your engagement and sends you a new house-warming gift. You take it home, and it looks beautiful on your fireplace mantle. How did he know exactly what to buy! You can’t wait to thank him the next time you place an order.
(Allow the participants to respond.)
SHOW SLIDE: Legitimate Discounts, Rebates, or Credits: Is this Ethical?
A vendor indicates the product you purchased is eligible for a manufacturer’s rebate. When you review your invoice you do not see the rebate. After contacting the vendor you discover he totally forgot to process the rebate, and the offer is no longer available. He states he will give you free product valued at the dollar amount of the rebate.

72. Legitimate Discounts, Rebates, or Credits: Is This Ethical?
A vendor indicates the product you purchased is eligible for a manufacturer’s rebate. When you review your invoice, you do not see the rebate. After contacting the vendor you discover he totally forgot to process the rebate, and the offer is no longer available. He states he will give you free product valued at the dollar amount of the rebate.
A vendor tells you there is a special on whole grain-rich dinner rolls. He states the rolls meet the USDA whole grain-rich criteria. The rolls will only be offered at a special price on Thursday. To receive the special price you will need to attend a luncheon hosted by the vendor and purchase the rolls during this time. (Allow the participants to respond.)
SHOW SLIDE: Gifts and Gratuities: Is this Ethical?
SAY:
A vendor has learned of your engagement and sends you a new house-warming gift. You take it home, and it looks beautiful on your fireplace mantle. How did he know exactly what to buy! You can’t wait to thank him the next time you place an order.
(Allow the participants to respond.)
SHOW SLIDE: Monetary Dealings: Is this Ethical?
Your son calls and says he will need a new track uniform and money to purchase a $200 pair of tennis shoes. You tell him the shoes are not in the budget. A vendor over hears the conversation and offers you a loan. You accept the offer and plan to pay him back in the near future.
SHOW SLIDE: Legitimate Discounts, Rebates, or Credits: Is this Ethical?
A vendor indicates the product you purchased is eligible for a manufacturer’s rebate. When you review your invoice you do not see the rebate. After contacting the vendor you discover he totally forgot to process the rebate, and the offer is no longer available. He states he will give you free product valued at the dollar amount of the rebate.

73. Conflicts of Interest
A conflict of interest occurs when the individual involved in the decision-making process or someone close to this individual benefits by signing the contract.
Examples:
The company bidding on a contract with your school district is owned by your personal friend, relative, or school board member.
You own stock in the company.
Your friend or relative is an employee at the company in a position where they would profit from gaining the contract.
SHOW SLIDE: Conflicts of Interest
SAY:
Sometimes circumstances may arise that create a personal or professional conflict of interest. A conflict of interest is any action that allows a person to benefit at the expense of the public interest or the expense of their employer. A conflict of interest occurs when the individual involved in the decision making process or someone close to this individual benefits by signing the contract. In this situation, any individuals involved in the conflict of interest should excuse themselves from the selection process.
SHOW SLIDE: Conflicts of Interest—Examples
The following are some examples of what may be perceived as a conflict of interest for individuals in the decision making process.
The company bidding on a contract with your school district is owned by your personal friend, relative, or school board member.
You own stock in the company.
Your friend or relative is an employee at the company in a position where they would profit from gaining the contract.

74. Confidentiality
Providing confidential information of any kind to any person or entity that was not designated to be privy to that information is considered unethical.

75. Where Do I Find the Requirements for Conducting Procurements?
Contact State Agency
Refer to the latest Policy Memos from USDA
There is a listing in the Participant’s Workbook

76. Inventory Management
Inventory is the value of food and supplies on hand, whether at the food preparation site or in a central warehouse or facility.
Effective inventory management is essential for managing and controlling costs.

77. Traceability Added component of inventory management
Traceability is the ability to track food items back to their original source.
Encompasses additional record keeping

78. Key Steps Knowing your food needs
Knowing where and how much food you have on hand
Controlling waste, loss and theft
Maintaining only as much as you need

79. Activity
Identify Inventory Management Best Practices

80. Key Step: Understanding How Much Food You Need
Calculating food needed to purchase = food needed for a recipe or service
As Purchased (AP) refers to the weight of the product as it exists when purchased.
Edible Portion (EP) refers to the part of the product that can be consumed.

81. Food Buying Guide and Calculator
Food Buying Guide resource
Food Buying Guide Calculator

82. Storage Area Organization
Storage areas should appropriately hold goods under proper conditions to assure
quality and safety until time of use (prevents spoilage/loss).

83. Controlling Waste Order only food needed for menu production.
Store food properly.
Control portions.
Plan to utilize leftovers.
Survey students—determine menu preference.
Present food in appealing manner.
Equip coolers and freezers with an alarm system.

84. Theft & Fraud Prevention
Implement procedures to prevent:
Customer theft
Employee theft
Vendor theft
Implement key and lock control

85. Other Factors Affecting Inventory Management
Menu planning
Recipe development
Procurement
Forecasting
Ordering
Receiving

86. Menu Planning Cycle menus make planning easier
Advantages: easier to project the correct amount of product to order when you have a history of previous production records, reduce waste, can take advantage of seasonal foods

87. Inventory Just-in-Time (JIT)
When products are delivered once a week or more often, it is called Just-in-Time (JIT) delivery.
Advantages: reduced inventory, reduced costs, reduced paperwork, and limited space

88. Par Stock
A par stock is established through a thorough evaluation of product use over the amount of time between deliveries.
For example, if you have weekly deliveries and know you use three cases of fresh, sliced, onions a week, you would always want three cases of onions in inventory.

89. First-In-First-Out (FIFO)
The First-in-First-Out (FIFO) rotation system is the process of rotating the older product to the front and the newer items to the back of the shelf.

90. Assess Current Inventories and Orders On Hand
Inventory may be scattered throughout the schools, or in a number of district-owned warehouses
What should be in inventory, but projections of usage for a recent period may have been more or less than actual usage

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