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Purchasing

The document discusses the objectives and considerations for good purchasing practices. It is important to achieve the right amount, quality, level, and price of stock. There are advantages to using a single main supplier, such as reduced costs, but it also limits availability. Using multiple suppliers allows taking advantage of different promotions while increasing paperwork. The costs of purchasing include acquisition, holding, and stock outs. Key stages are determining needs, establishing specifications, evaluating tasks, and selecting reliable suppliers based on factors like price, quality, and delivery. Quality and quantity purchased must meet needs while specifications communicate requirements and allow for evaluation.

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87 views7 pages

Purchasing

The document discusses the objectives and considerations for good purchasing practices. It is important to achieve the right amount, quality, level, and price of stock. There are advantages to using a single main supplier, such as reduced costs, but it also limits availability. Using multiple suppliers allows taking advantage of different promotions while increasing paperwork. The costs of purchasing include acquisition, holding, and stock outs. Key stages are determining needs, establishing specifications, evaluating tasks, and selecting reliable suppliers based on factors like price, quality, and delivery. Quality and quantity purchased must meet needs while specifications communicate requirements and allow for evaluation.

Uploaded by

suprotim sarkar
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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PURCHASING

The objective of good purchasing is to achieve the right amount of stock, at the
right quality, at the right level & at the right price.

Purchasing consideration:

Using one main supplier:

a)This has the advantage of buying from one supplier rather than many, which
reduces administrative cost .

b) Delivery will be regular & will cover all items.

c) Discount can be available from supplier.

d) Stock/ availability of the products will be limited.

e) Establishment becomes dependent only on one supplier.

Using a variety of suppliers:

a) Establishment of being able to achieve a particular range of beverages &


reduces dependency on any one source.

b) Advantages can be taken of special promotions or discount at different times


& from different sources.

c) These process approaches increase the number of separate deliveries,


increase paper work & can lead to inconsistencies in the range of beverages
on offer.

THE COST OF PURCHASING.

There are three areas of cost associated with purchasing

1) The cost of acquisition:

a) Preliminary cost: Preparation & specification, supplier selection, negotiation.

b) Placement cost: Order preparation, stationary, postage, telephone


c) Post placement cost: Processing, receipt & inspection of goods, payment of
invoices.

2) The holding cost:

a) Financial costs

b) Losses through deterioration, pilferage, wastage.

c) Storage cost: space, handling & inspection, storage lighting,


heating/refrigeration, clerical costs & documentation.

3) The cost of stock outs:

a) The Cost of stock outs: Buying at enhanced prices & using more expensive
substitutes.

Six important stages of purchasing:

1) Know the market.

2) Determine purchasing needs.

3) Establish & use specifications.

4) Design & purchase procedure.

5) Evaluating the purchasing tasks.

Knowledge require in terms of purchasing:

a) Where they are grown.

b) Seasons of production.

c) Approximate cost.

d) Conditions of supply & demand.

e) Laws & regulations governing the market & the products.


f) Market agents & their services.

g) Processing

h) Storage requirements.

i) Commodity & product, class & grade.

Classification of markets & method of purchasing:

The primary market: Raw materials may be purchased at the source of supply,
the grower, producer or manufacturer.

The secondary market: Goods are bought wholesale from a distributor or agent,
the food service establishment will pay whole sale prices & possibly obtain a
discount.

The tertiary market: The retail or cash & carry purchase is a method suitable for
smaller companies. There is no way to discuss regarding quality & prices.

METHOD OF BUYING:

A) Informal buying: informal buying generally involves oral negotiations,


talking directly to sales people, face to face or using telephone.

1) The quotation & order sheet method: This uses a list of particular
commodities always wanted in quality & quantity. Columns are provided
to record prices from different suppliers. Prices are compared & orders
given.

2) The blank cheque method: This is when there is an extreme shortage


of a commodity or some other market conditions exists where the buyer
must get the commodity at any cost. This is usually operates only in
extreme circumstances.

B) Formal buying: This is also known as competitive buying, giving


suppliers written specifications & quantity needs. Negotiations are normally
written & methods are detailed as follows:
1) The competitive bid method: The sellers are invited to submit bids
through communication. Bids are opened at a specified time to determine
awards. The invitation to bid usually contains certain conditions, these will
include:

Terms of payment.

Discounts

Method of delivery.

2) The negotiated method: This is used when suppliers are hesitant to bid
because of time restrictions, fluctuating market conditions or a high perish
ability of the product. Negotiations may occur using the telephone & later
confirmed in writing. Several suppliers are usually contacted to compare
prices.

Selecting suppliers:
Selecting suppliers is important in the purchasing process. Firstly, consider how a
supplier will be able to meet the needs of your operation, considering the following
criteria.

Price

Delivery.

Quality/standards

Suppliers are also selected on experience. A buyer soon gets to know the reliable
suppliers. Considerations leading to a decision to continue to do business with a
supplier include:

a)If the supplier anticipates the needs of the organization. The supplier notes
market conditions & informs the company buyers.

b) Supplier should regularly give product & market information.

c) Supplier should always maintain adequate stock.

d) Evaluate credit terms & discount available.

e)Asses delivery conditions.


f) A supplier may be able to offer a wide range of goods & services. Saving can
often be made by consolidating products & services.

DETERMINING QUANTITY & QUALITY


When considering the quantity the following things are considered:

a) The number of people to be served in a given period.

b) The sales history.

c) Portion sizes, determined yield testing a standard portion control


list drawn up by the chef & management teams.

When considering the quality the following things are considered:

a) Different packaging sizes such as jar, bottle, cans.

b) Colour

c) Texture

d) Size

e) Absence of defects.

f) Irregular shape

g) Maturity.
STANDARD PURCHASING SPECIFICATION:
Purchasing specifications have two functions.

a) They communicate to a supplier what the specifier wishes to have


supplied in terms of goods & services.

b) They provide criteria against which the goods & services supplied can
be compared.

PURCHASING SPECIFICATIONS:
A) Quality products

B) Quality services.

C) Acceptable prices.

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