After Reviewing Module 22 Lecture, You Should Be Able To

Module 22 – Domain IV: Procurement, Receiving, & Inventory Management

After reviewing Module 22 lecture, you should be able to:

Describe purchasing principles, concepts, and methods.
Discuss purchasing decisions.
Describe receiving and storage.
Discuss inventory management.

Procurement, receiving, and inventory management

Procurement principles, concepts, and methods

Bidding – bids gathered and contract generally given to lowest bidder meeting standards

Open-Market Buying - generally used by small foodservices; bid quotes via phone or fax
Formal Competitive Bid Buying - specifications are written and submitted to vendors so they may bid, usually sealed and opened on a certain date; advantages - clearly written with little misunderstandings with quality, price, etc.; disadvantages - time consuming
sealed bid –A sealed bid involves sending written request for bids and opening all bids at a set time
line-item bid – A line item bid occurs when foods are accepted or rejected line by line
bottom line bid – bottom line bid occurs when foods are all accepted or all rejected
fixed bid– price does not change during time period of the contract, often used for large amounts (non-perishable)
daily bid – bids may vary based on supply and fluctuations of goods (for perishable items)

Specification development

specifications– describes the product being purchased between the seller and buyer; may include grade, fresh or frozen, amount, etc.
U.S. Department of Agriculture (USDA) grades are often used as standards for food specifications when ordering foods
US Grade No. 1 - wholesale fresh fruit and vegetables grade
US Grade A - canned, frozen, or dried fruits and vegetable
USDA Grade A - grade for eggs
USDA Prime, Select, Choice - beef grades based on fat content, juiciness, and tenderness
types of food
canned – low cost and convenient
No. 10 can = 12-13 cups or 96-117 oz.
No. 3 cyl can = 5 3/4 cups or 51 oz or 46 fl oz
No. 2 ½ can = 3 ½ cups or 26-30 oz.
No. 2 can = 2 ½ cups or 20 oz or 18 fl oz
Fresh – increased preparation and quality, lower ?? cost
Frozen – increased quality and convenience if temperatures are accurately maintained

Purchasing Types

Prime vendor - agreement with single vendor to purchase majority of goods or product needs
Group purchasing - independent foodservices with similar needs join to purchase together to receive increased choices and cost reductions due to large purchasing volume
Centralized– appointed purchasing office buys goods for organization as a whole
Independent– all departments in the organization buy goods for themselves
Just in Time - purchase as needed for production without having to store products

Contracts

Type A Contract (Exclusive)– buyer agrees to purchase from only one vendor/seller generally for a specific period of time
Type B Contract (Partially Exclusive)– buyer agrees to purchase from one vendor unless insubstantial supply then allowed to go to another vendor
Type C Contract (Open)– buyer may purchase with any vendor
Dual A Contract– similar to Type A Contract but buyer is able to purchase from 2 vendors
Primary Vendor– majority of goods are supplied by one vendor

Procurement decisions

product selection – based on equipment, staffing, budget, etc.
cost analysis – categorizes cost to evaluate marketing activities and cost effectiveness of the current marketing activities

Receiving and storage

blind receiving– clerk uses a record form which quantities are blocked out to record items actually delivered; good security measure to ensure products are checked in and documented accurately
invoice receiving– items are checked in by comparing delivered items to the purchase order

Dry Storage

Temperature should be between 50-70 degrees F; humidity 50-60%
Number of doors should be limited to increase security

Refrigerator and freezer storage

Temperatures must be maintained and cross contamination must be avoided
Refrigeration temperatures
Dairy, eggs, meat – 32-40 degrees
fruit and vegetables – 40-45 degrees
Humidity - 80-95%
Freezer temperatures 0 to -20 degrees

Inventory management

Control Procedures:

ABC Method– places goods into classifications (A = most expensive items such as meats, B = lesser value such as canned fruits, C = lowest amount such as pasta)
LIFO/FIFO system (Last in first out) and (First in first out) – FIFO the first items purchased are the first items sold and costed on the income statement (under the cost of goods sold section).

LIFO is the opposite of FIFO. LIFO - the Last In are the First Out (the last, or most current items to be purchased and then resold to customers are recorded on the income statement (under the cost of goods sold section).

mini-max system– establishes minimum and maximum amount of stock needed on hand; maximum level = order quantity + minimum level; minimum level = time to reorder
perpetual inventory– on going record of amounts on hand; incoming amounts are added to those on hand
physical inventory– actual count of items at a specified time. It is good practice to take a physical inventory count at least once every year.

Forecasting involves foreseeing future needs of goods

Value analysis involves equal acceptability at differing costs

Ethics

Code of Ethics for the Profession of Dietetics

The Ethics Code applies in its entirety to members of The American Dietetic Association who are Registered Dietitians (RDs) or Dietetic Technicians, Registered (DTRs). Except for sections solely dealing with the credential, the Code applies to all members of The American Dietetic Association who are not RDs or DTRs. Except for aspects solely dealing with membership, the Code applies to all RDs and DTRs who are not members of The American Dietetic Association. All of the aforementioned are referred to in the Code as "dietetics practitioners." By accepting membership in The American Dietetic Association and/or accepting and maintaining Commission on Dietetic Registration credentials, members of The American Dietetic Association and Commission on Dietetic Registration credentialed dietetics practitioners agree to abide by the Code.

PRINCIPLES

The dietetics practitioner conducts himself/herself with honesty, integrity, and fairness.
The dietetics practitioner practices dietetics based on scientific principles and current information.
The dietetics practitioner presents substantiated information and interprets controversial information without personal bias, recognizing that legitimate differences of opinion exist.
The dietetics practitioner assumes responsibility and accountability for personal competence in practice, continually striving to increase professional knowledge and skills and to apply them in practice.
The dietetics practitioner recognizes and exercises professional judgment within the limits of his/her qualifications and collaborates with others, seeks counsel, or makes referrals as appropriate.
The dietetics practitioner provides sufficient information to enable clients and others to make their own informed decisions.
The dietetics practitioner protects confidential information and makes full disclosure about any limitations on his/her ability to guarantee full confidentiality.
The dietetics practitioner provides professional services with objectivity and with respect for the unique needs and values of individuals.
The dietetics practitioner provides professional services in a manner that is sensitive to cultural differences and does not discriminateagainst others on the basis of race, ethnicity,creed, religion, disability,sex, age, sexual orientation, or national origin.
The dietetics practitioner does not engage in sexual harassment in connection with professional practice.
The dietetics practitioner provides objective evaluations of performance for employees and coworkers, candidates for employment, students, professional association memberships, awards, or scholarships. The dietetics practitioner makes all reasonable effort to avoid bias in any kind of professional evaluation of others.
The dietetics practitioner is alert to situations that might cause a conflict of interest or have the appearance of a conflict. The dietetics practitioner provides full disclosure when a real or potential conflict of interest arises.
The dietetics practitioner who wishes to inform the public and colleagues of his/her services does so by using factual information. The dietetics practitioner does not advertise in a false or misleading manner.
The dietetics practitioner promotes or endorses products in a manner that is neither false nor misleading.
The dietetics practitioner permits the use of his/her name for the purpose of certifying that dietetics services have been rendered only if he/she has provided or supervised the provision of those services.
The dietetics practitioner accurately presents professional qualifications and credentials.
The dietetics practitioner uses Commission on Dietetic Registration awarded credentials ("RD" or "Registered Dietitian"; "DTR" or "Dietetic Technician, Registered"; "CSP" or "Certified Specialist in Pediatric Nutrition"; "CSR" or "Certified Specialist in Renal Nutrition"; and "FADA" or "Fellow of The American Dietetic Association") only when the credential is current and authorized by the Commission on Dietetic Registration. The dietetics practitioner provides accurate information and complies with all requirements of the Commission on Dietetic Registration program in which he/she is seeking initial or continued credentials from the Commission on Dietetic Registration.
The dietetics practitioner is subject to disciplinary action for aiding another person in violating any Commission on Dietetic Registration requirements or aiding another person in representing himself/herself as Commission on Dietetic Registration credentialed when he/she is not.
The dietetics practitioner withdraws from professional practice under the following circumstances:
The dietetics practitioner has engaged in any substance abuse that could affect his/her practice;
The dietetics practitioner has been adjudged by a court to be mentally incompetent;
The dietetics practitioner has an emotional or mental disability that affects his/her practice in a manner that could harm the client or others.
The dietetics practitioner complies with all applicable laws and regulations concerning the profession and is subject to disciplinary action under the following circumstances:
The dietetics practitioner has been convicted of a crime under the laws of the United States which is a felony or a misdemeanor, an essential element of which is dishonesty, and which is related to the practice of the profession.
The dietetics practitioner has been disciplined by a state, and at least one of the grounds for the discipline is the same or substantially equivalent to these principles.
The dietetics practitioner has committed an act of misfeasance or malfeasance which is directly related to the practice of the profession as determined by a court of competent jurisdiction, a licensing board, or an agency of a governmental body.
The dietetics practitioner supports and promotes high standards of professional practice.The dietetics practitioner accepts the obligation to protect clients, the public, and the profession by upholding the Code of Ethics for the Profession of Dietetics and by reporting alleged violations of the Code through the defined review process of The American Dietetic Association and its credentialing agency, the Commission on Dietetic Registration.

Code of ethics for the profession of dietetics. Journal of the American Dietetic Association, 1999:99 (1): 99-113. Reproduced with permission. The complete version of the ADA Code of Ethics can be found either in the Journal of the American Dietetic Association or the ADA Website.

Now that you have read the lecture, consider the following:

Describe purchasing principles, concepts, and methods. Include:
Describe open competitive bid buying. What is meant by fixed bid and daily bid?
Which organization would you look to for specification standards?
What would a specification include when purchasing eggs? For fresh fruit?
Discuss purchasing decisions. Include:
Ethics of purchasing.
cost analysis
You overhear a fellow dietitian discussing a patient with a friend when on a break. Based on the Code of Ethnics, discuss how to handle this situation.
A dietitian's practice is based on what?
Describe the best and most accurate method to receive orders to ensure actual product received is documented.
Discuss physical versus perpetual inventory. Describe the mini-max method for inventory.

1. Which of the following bids would include a price that remains unchanged during a time period?

a. daily bid

b. line-item bid

c. bottom line bid

d. fixed bid

2. Which of the following bids may vary based on supply of goods?

a. daily bid

b. line-item bid

c. bottom line bid

d. fixed bid

3. Specifications are written and sent to vendors when using:

a. open market buying

b. formal competitive bid buying

c. daily bid

d. fixed bid

4. Which type of bid buying is generally used by small foodservices?

a. formal competitive bid buying

b. daily bid

c. fixed bid

d. open market buying

5. You are ordering ingredients for a fruit salad and need 36 cups pineapple, 24 cups peaches, 24 cups pears, and 18 fl. oz. orange juice. Which of these should you order?

a. 2-#10 cans pineapple, 1-#10 can peaches, 1-#10 can pears, 1-#2 can orange juice

b. 4-#10 cans pineapple, 3-#10 cans peaches, 3-#10 cans pears, 1-#3 cyl. can orange juice

c. 3-#10 cans pineapple, 2-#10 cans peaches, 2-#10 cans pears, 1-#2 can orange juice

d. 5-#10 cans pineapple, 4-#10 cans peaches, 4-#10 cans pears, 1-#3 cyl. can orange juice

6. When goods are received, a clerk uses a record form which quantities are blocked out to record items actually delivered. This is known as:

a. blind receiving

b. value analysis

c. cost analysis

d. invoice receiving

7. When goods are received, items are checked in by comparing delivered items to the purchase order. This is known as:

a. blind receiving

b. invoice receiving

c. cost analysis

d. value analysis

8. You are counseling a 20 year-old female for an eating disorder. Occasionally, the client's father calls to discuss progress without consulting the client. You are concerned with:

a. personal bias

b. objective evaluation

c. confidentiality

d. none of these

9. Recommended humidity for canned goods is:

a. 50-60%

b. 45-60%

c. 60-70%

d. 40-45%

10. Recommended humidity for refrigerated storage is:

a. 70-80%

b. 50-60%

c. 80-95%

d. 60-70%

11. You are making chicken noodle soup for a long-term care lunch. The recipe calls for 1 gallon of chicken stock. How many No. 3 cyl. cans of chicken stock do you order?

a. 2

b. 4

c. 5

d. 3

12. When considering products to order, why would canned products be of benefit?

a. increase preparation

b. increased quality

c. convenient and low cost

d. none of these

13. Which of the following types of purchasing involves appointed purchasing department which buys goods for organization as a whole?

a. none of these

b. centralized

c. group

d. independent

14. Which of the following would include cost savings due to foodservices with like needs purchasing together?

a. group

b. none of these

c. independent

d. centralized

15. A dietitian who is in private practice runs an advertisement in the local newspaper promising "Lose 20 lbs. in 20 days with my consultations". Which ethical principal is she violating?

a. The dietetics practitioner promotes or endorses products in a manner that is neither false nor misleading.

b. The dietetics practitioner recognizes and exercises professional judgment within the limits of his/her qualifications and collaborates with others, seeks counsel, or makes referrals as appropriate.

c. none of these

d. The dietetics practitioner provides professional services with objectivity and with respect for the unique needs and values of individuals.

16. As foodservice director you agree to a contract similar to Type A Contract but you are able to purchase from 2 vendors. Which type of contract is this?

a. Type A

b. Type C

c. Primary Vendor

d. Dual A contract

17. As foodservice director you agree to a contract in which majority of goods are supplied by one vendor. Which type of contract is this?

a. Type A

b. Dual A contract

c. Primary Vendor

d. Type C

18. Which of the following establishes minimum and maximum amount of stock needed on hand?

a. ABC Method

b. mini-max inventory

c. physical inventory

d. LIFO/FIFO system

19. A clerk counts your inventory by hand every 3rd Saturday of the month. This is an example of which type of inventory?

a. mini-max inventory

b. physical inventory

c. LIFO/FIFO system

d. ABC method

20. A clerk keeps an on going record of amounts on hand and adds incoming amounts to those on hand. Which type of inventory is being used?

a. physical inventory

b. ABC method

c. LIFO/FIFO system

d. perpetual inventory

21. A clerk categorizes goods according to cost. Which type of inventory is being used?

a. Perpetual inventory

b. LIFO/FIFO system

c. ABC method

d. Physical inventory

22. Which of the following inventory systems might use most updated prices or prices for the oldest stock?

a. LIFO/FIFO system

b. Physical inventory

c. Perpetual inventory

d. ABC method

23. Using the ABC method, in which category would you place pasta?

a. A

b. B

c. Dual A

d. C

24. Last Labor Day’s employee picnic you ran out of corn on the cob. You plan for an additional 20 lbs of corn on the cob. This is known as:

a. none of these

b. forecasting

c. planning

d. cost analysis

25. A whole grain roll is provided via a distributor. You find a comparable grain roll at a lower cost. After testing the newly found roll for acceptability, you decide to begin ordering the new roll to lower costs. This is an example of:

a. cost analysis

b. forecasting

c. planning

d. value analysis

Module 22 – Domain IV Quiz

Procurement, Receiving, & Inventory Management

1. Which of the following bids would include a price that remains unchanged during a time period? Correct
a. daily bid
b. line-item bid
c. bottom line bid
d. fixed bid
A fixed bid is large amounts; non perishable foods.
2. Which of the following bids may vary based on supply of goods? Correct
a. daily bid
b. line-item bid
c. bottom line bid
d. fixed bid
A daily bid is perishable foods.
3. Specifications are written and sent to vendors when using: Correct
a. open market buying
b. formal competitive bid buying
c. daily bid
d. fixed bid
Formal competitive bid buying includes specifications written and submitted to vendors so they may bid, usually sealed and opened on a certain date.
4. Which type of bid buying is generally used by small foodservices? Correct
a. formal competitive bid buying