1. National Food Service Management Institute The University of Mississippi Procurement and Inventory Management

2. Objective 1 Identify persons in the food distribution chain and know how to communicate with all players in the chain

3. FOOD DISTRIBUTION CHAIN from Grower to School Growers Manufacturers Distributors End users Broker/sales rep Distributor buying group School/district purchasing co-op UNIT 2 - Chapter 3 - 1

4. Types of Distributors Full or broadline Specialty wholesalers Special breed distributors – restaurant chains Supermarket or wholesale clubs

5. Current Customer Base Restaurants Other Non-commercial Correctional Facilities Colleges/Universities School Foodservice Health Care Other Commercial Hotels/Lodging Convenience Stores

6. Today… We are in a Seller’s Market.

7. To Sell Themselves, Schools Can Emphasize... No change in ownership No bankruptcy Fair pricing process Early week delivery No deliveries on major holidays School district profile

8. Objective 2 Describe the role of ethics in procurement

9. Unethical Behavior Providing cost information to competitor PRIOR to supplier selection Sharing supplier’s proprietary information with competitor Accepting gifts or cash Accepting free trips or entertainment

10. Ethics Rule of Thumb: “If you question an action, then you should not proceed.”

11. Objective 3 Identify federal, state, and local procurement regulations, policies, and procedures governing all school nutrition program purchases

12. Procurement Guidelines What are they? Federal Standards State Standards Local Standards Which do you use? Most restrictive

13. Federal Regulations 7 CFR Section 3016 http://www.access.gpo.gov/cgi- bin/cfrassemble.cgi $100,000–Use formal purchase method OR state requirement if less No geographic preference allowed Vendor who writes specs cannot offer price Cost plus a percentage of cost NOT allowed

14. Federal Regulations Only responsible contractors Open and free competition Written selection procedures Staff may NOT accept cash or gifts Domestic commodities

15. Food and Drug Administration Food, Drug, and Cosmetic Act Controls labeling of food products Prohibits  misbranded food products  adulterated food products Establishes standards of identity, quality, and fill Nutrition Labeling & Education Act - 1990

16. USDA Grade Standards USDA Grade A USDA Grade B USDA Grade C

17. U.S.D.A. Poultry and Meat Inspections Poultry Products Inspection Act/Wholesome Poultry Products Act  Prevents misbranded or adulterated poultry products Meat Inspection Act  Established meat inspection program

18. U.S.D.A. – Inspection Marks Processed Meat Raw Poultry Raw Meat

19. Know Manufacturer’s Code Number and Establishment Number

20. U.S. Dept. of Commerce Fish and Wildlife Act Est. 036 PUFI Seal

21. Additional Laws FDA - Public Health Service Act  Model Food Code U.S. Customs Service - Tariff Act  Labeling of imported foods – “Product of (country)” U.S. Dept of Justice - Antitrust Laws  Sherman, Clayton, Robinson-Patman, and Federal Trade Commission Acts  Open and free competition

22. USDA Food Safety and Inspection Service: Names on Labels Ham - must be at least 20.5% protein in lean portion as described in 9 CFR 319.104. Added water is permitted Ham - water added: The product is at least 17.0% protein with 10% added solution. Ham with natural juices: The product is at least 18.5% protein. Ham Salad: Product must contain at least 35% cooked ham.

23. Objective 4 Identify various types of acceptable purchasing systems

24. Four Purchasing Methods RFQ: Small purchase procedure IFB: Competitive sealed bids RFP: Request for proposals Noncompetitive negotiation

25. Sections of a Formal Bid 1. Transmittal & signature pages 2. Standard terms & conditions 3. Special instructions 4. Product list & descriptions 5. Billing address & delivery locations 6. Potential bidders

26. Line Item Award Product Name Potential Vendor A Potential Vendor B Potential Vendor C Peaches$20.36 low $22.94$23.41 Pears$22.49$23.95$22.46 low Sugar$19.06$18.75 low $21.45

27. Bottom Line Award Product Name Est. Units Unit Price Vendor A Ext. Total Unit Price Vendor B Ext. Total Unit Price Vendor C Ext. Total Peaches25 cs$20.19$504.75$22.02$550.50$21.50$537.50 Pears10 cs$20.94$209.40$20.48$204.80$21.50$215.00 Sugar15 bg$15.98$239.70$16.63$249.45$14.10$211.50 Bottom line total $953.85 Low $1004.75$964.00

28. Grouping Categories For open and free competition, group by specialists

29. Bottom Line Categories Milk Equipment Frozen, dry & refrigerated Paper Produce Bread

30. Prioritize: Money Spent Impact on meal quality

31. Objective 5 Describe how to develop and use specifications, descriptions, and approved brands for assembling a food bid

32. Specifications and Descriptions Specifications: complicated and lengthy May be a couple of pages for one product, labor intensive Descriptions: short and measurable Limited to those characteristics that are essential for communication with the supplier such as CN label Can be identified by the receiver and measured at the point of receipt

33. Product Classification One ingredient: Distributor's choice One major ingredient: Private label Multiple ingredients (highly processed): Manufacturer’s brand

34. Distributor’s Choice NO Brand Restrictions sugar salt

35. PRIVATE LABELS AND QUALITY Third = Standard Substandard Quality (70-80) (below 70) Second = Extra Standard Quality Standard (80-90) (70-80) First = Extra Fancy Choice Quality Fancy (90-100) (80-90) VEGETABLES FRUITS

36. 1. High-volume products or products with quality problems 2. Identify on final bid Manufacturer Code # Establishment # Maker 42104 Est. # 17842 Manufacturer’s Brand

37. Sample of Item Classification on Draft Bid Item DescriptionItem Classification Bid Unit Est. Units 1516 Chicken, Pat; BR’D; white meat; NO VPP; w/dried egg; CN label verifies 2oz. M/MA; 3 oz Approved brands onlysvg215,639 2200 Peaches, Cling U.S. Choice; packed in packed in juice; 6/#10 Private Labelcs 500 6340 Salt, Iodized; 24/26 ozDistributor’s choicecs 25

38. Brand Approval Brand or Approved Equal/No Brands Pre-Approved Brands Only TWO APPROVAL SYSTEMS

39. Steps: Brand Name or Approved Equal 1.Write product descriptions. 2.Issue final bid. 3.Open bids. 4.Evaluate bids. 5.Award bids. Brand decision made here.

40. Problems Decision of comparable quality made during bid evaluations Bidder allowed to determine “equal” Brand Names or Approved Equal

41. Approved Brands Only 1.Write product descriptions & develop draft bid. 2.Classify products as  Distributor’s Choice  Private Label  Manufacturer’s Brand 3.Hold individual pre-bid conferences.

42. Individual Pre-Bid Conference Explain classification system Explain brand pre-approval Request nutritional data & copy of labels of brands they want screened Discuss test schedule Order product to test

43. Approved Brands Only 4.Screen brands  Paper screen  Appearance screen  Taste screen 5.Notify potential bidders of screening results 6.Accept alternative to brands that failed

44. Brand or Approved Equal 7.Screen second group of brands 8.Issue final draft of product/brand list 9.Conduct final pre-bid conference Brand decisions already made. 10.Issue bid 11.Open all bids in a public meeting 12.Evaluate final bids 13.Award bids to the successful bidder

45. Testing Product: Phase I Purpose: choose which formula will be bid Products: from SAME manufacturer Consider:  Nutritional impact  Price  Taste

46. Major Components of Chicken Patties or Nuggets Meat block: a.Breast, white or breast w/rib b.Chicken, natural proportion c.Dark meat Egg: Dried whole egg Vegetable protein product (VPP): a.Flour b.Concentrate c.Isolate

47. Testing Product: Phase II Purpose: approve brands of the SAME formula Products: from DIFFERENT manufacturers Consider:  Nutritional comparability  Appearance  Taste

48. Taste Test Rules Product delivered in full-case, sealed container Students rate product Part of regular meal Prepared in typical equipment Test only one product per day Allow NO company representatives Do NOT disclose brand name

49. Final Bid Item DescriptionItem ClassificationBid Unit Est. Units 1516 Chicken Nuggets; Br’d; white meat; NO VPP; w/dried egg; CN label verifies 2 oz M/MA; 3 oz min. weight Whip-O-Will Farms 60150 Est # P-246 Variety 2543 Est # P-2543; Chickly Foods 10821 Est # P-399 svg215,639 2200 Peaches, Cling U.S. Choice; packed in juice; 6/#10 Private Labelcs 500 6340 Salt, Iodized; 24/26 ozDistributor’s choicecs 25

50. Request for Proposal (RFP) Allows evaluation of variables other than cost Cost should exceed 50% of total points

51. RFP Evaluation Evaluator name CRITERIA MAX. PTS ALLOWED SCORE AWARDED 1. Bottom Line Figure55 2. Service20 3. Available technical support10 4. Availability of parts10 5. History of reliability5 TOTAL100

52. RFP Budget Evaluation Maximum: 55 points Two responses: $4,000 and $5,000 $4,000 = 55 points $4,000  $5,000 = 80% 80% of 55 points = 44 points $5,000 = 44 points

53. Direct to Manufacturer Sealed bids Line item for most products Firm price with petition for escalation/de-escalation Requires a bid for distribution

54. Objective 6 Identify the basic types of pricing mechanisms

55. Pricing Mechanisms 1.Firm for duration of contract 2.Market–Escalation/Deescalation 3.Cost + Fixed Fee Fee may not increase duration of contract including extension Monitored based on Market

56. Objective 7 Describe how to develop a critical path plan for procurement

57. To Develop a Critical Path Determine delivery time Complete time needed for each task Start with delivery date & work back to beginning date Minimum of 36 weeks required

58. Evaluation/Re-evaluation

59. Objective 8 State the basics of receiving and inventory management

60. Receiving is...... the critical link in procurement and food quality

61. Personnel Training Inspecting deliveries using district receiving procedures Taking food temperatures Reading food labels Following district clerical procedures Reporting product quality problems

62. Storage Guidelines Use FIFO Store in original packaging Separate raw from cooked or ready-to-eat foods Store min. of 6” off floor and away from wall Keep areas clean and dry Inspect and treat regularly for pests Use clean equipment to transport Store in appropriate area.

63. Inventory and Cost Control Inventory is a major component of cost control JIT (Just-in-Time) deliveries Limit days food supplies are in inventory Excess inventory = $ tied up

64. Seven-Day Inventory Formula: _____Annual $ for food______ Number of serving days in year X 7 ( )

65. Standard Stock 1.Determine number of cases needed a. Previous year’s invoices b. Delivery frequency 2.Change with seasonal foods 3.Add 50% to base amount 4.Develop pre-printed order form

66. Standard Stock Order Form ProductProduct # Current Inventory Standing Order Adjusted Order Individual catsup 1004452 cases10 cases Individual mustard 100569½ case3 cases Individual mayonnaise 100720½ case1 case Dill pickle 2089651 - 5 gallon 8 casesnone

67. Cooperatives 33,000 4,0006,00023,000