Eighth Edition
Purchasing
Selection and Procurement for the Hospitality Industry
ANDREW HALE FEINSTEIN AND JOHN M. STEFANELLI
© 2011 John Wiley and Sons,
Inc.
All Rights Reserved
CHAPTER 5
An Overview of the
Purchasing Function
© 2011 John Wiley and Sons,
Inc.
All Rights Reserved
YOU SHOULD BE ABLE TO:
• Describe the purchasing activities in
a hospitality operation.
• Determine the purchasing
requirements of a hospitality
operation using value analysis and
make-or-buy analysis.
• Outline the objectives of the
purchasing function and the potential
problems that buyers encounter
when pursuing those objectives.
© 2011 John Wiley and Sons,
Inc.
All Rights Reserved
PURCHASING ACTIVITIES
• Hotel Purchasing Activities
• Determine when to order
• Control inventory levels
• Establish quality standards
• Determine specifications
• Obtain competitive bids
© 2011 John Wiley and Sons,
Inc.
All Rights Reserved
PURCHASING ACTIVITIES
• Hotel Purchasing Activities (cont.)
• Investigate vendors
• Arrange financial terms
• Oversee delivery
• Negotiate refunds
• Handle adjustments
• Arrange for storage
© 2011 John Wiley and Sons,
Inc.
All Rights Reserved
PURCHASING ACTIVITIES
• Food Service Purchasing Activities
• Recipe development
• Menu development
• Specification writing
• Approval of buying source
• Designation of approved brands
• Supplier evaluation
© 2011 John Wiley and Sons,
Inc.
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PURCHASING ACTIVITIES
• Food Service Purchasing Activities
(cont.)
• Negotiation
• Change of suppliers
• Change of brands
• Substitution
• Approval of new products
• Invoice approval
• Payment
• Order placement with supplier
© 2011 John Wiley and Sons,
Inc.
All Rights Reserved
MINIMUM PURCHASING
ACTIVITIES
• Selection and procurement plan
• How to select/procure products and
services
• Policies and procedures
• Purchasing trends
• Revise as necessary
• Determine requirements
• Variety of products, services, ff&e
• Work with staff on those decisions
© 2011 John Wiley and Sons,
Inc.
All Rights Reserved
MINIMUM PURCHASING
ACTIVITIES (CONT.)
• Supplier selection
• Dependable and consistent
• Approved supplier list
• Sourcing
• Process in which a supplier is selected
• Supplier can handle all products
• Maintain Inventory
• Optimal Inventory Management
© 2011 John Wiley and Sons,
Inc.
All Rights Reserved
MINIMUM PURCHASING
ACTIVITIES (CONT.)
• Conduct negotiations
• Everything is negotiable
• Buying Power = Negotiating Power
• Research activities
• Value analysis – cheaper alternative
• Forecasting – predicting the future
• What-if analysis – possible outcomes
• Make or buy – raw or convenience food
• Plant visits – evaluate facilities
© 2011 John Wiley and Sons,
Inc.
All Rights Reserved
MINIMUM PURCHASING
ACTIVITIES (CONT.)
• Maintain supplier diplomacy
• Trade Relations with suppliers
• Educate the suppliers
• Inform to improve services
• Obtain industry trends from them
• Purchase, receive, store and issue
products
© 2011 John Wiley and Sons,
Inc.
All Rights Reserved
MINIMUM PURCHASING
ACTIVITIES (CONT.)
• Disposal of excess and unsaleable
items
• Recycling
• Record-keeping controls
• Receipts, Invoices, Inventory records
• Organize and administer the
purchasing function
• Plan, organize, hire staff
© 2011 John Wiley and Sons,
Inc.
All Rights Reserved
MINIMUM PURCHASING
ACTIVITIES (CONT.)
• Self improvement
• Association Meetings, seminars
• Trade Shows
• Continuing Education
• Help competitors
• Lending in an emergency
• Learn about trends, rumors, etc.
• “Keeps friends close, enemies closer”
© 2011 John Wiley and Sons,
Inc.
All Rights Reserved
PURCHASING OBJECTIVES
• Maintain an adequate supply
• Minimize investment
• Maintain quality
• Obtain the lowest EP cost
• Maintain the company’s competitive
position
© 2011 John Wiley and Sons,
Inc.
All Rights Reserved
PROBLEMS OF THE BUYER
• Backdoor selling
• Excessive time spent
• Ethical traps
• Responsibility vs. authority
• Lack of time
• Internal team members/departments
© 2011 John Wiley and Sons,
Inc.
All Rights Reserved
PROBLEMS OF THE
BUYER (CONT.)
• Unreasonable demands
• Late deliveries, substitutions, back
orders
• Purchasing as a profit-making
department
• Lack of attention by supplier
• Receiving and storage inadequacies
• Returns and allowances
• Lack of appreciation
© 2011 John Wiley and Sons,
Inc.
All Rights Reserved
EVALUATION OF THE
PURCHASING FUNCTION
• How much should company spend to
achieve the purchasing objectives?
Salaries and other costs jump out at
management
Benefits of a conscientious
purchasing agent not always so
visible
© 2011 John Wiley and Sons,
Inc.
All Rights Reserved
