RBR EBUENGA TLEHESFM PPT.pdf

PROCUREMENT/PURCHASING
Raymarc Brian R. Ebuenga
TLEHESFM

Procurement- refers to techniques, structured methods,
and means used to streamline an organization’s
procurement process and achieve desired results while
saving cost, reducing time, and building win-win supplier
relationships. Procurement can be direct, indirect,
reactive, or proactive in nature.
PROCUREMENT VS. PROCESSING

Processing- is the overarching process of obtaining
necessary goods and services on behalf of an
organization, procurement describes the activities
involved in obtaining them. The procurement process in
an organization is unique to its context and operations.
PROCUREMENT VS. PROCESSING

The purchasing process is an essential part of every food
service operation. All competent cooks should be skilled
in buying the appropriate ingredients, in accurate
amounts, at the right time, and at the best price.

Every kitchen operation has different purchasing
procedures. But there is one rule that should always be
followed:
• Buy only as much as it is anticipated will be needed
until the next delivery.

This will ensure that foods stay fresh and will create a
high inventory turnover. All foods deteriorate in time,
some more quickly than others. It is the job of the
purchaser to ensure that only those quantities that will
be used immediately or in the near future are purchased.

1. Process
The list of rules that need to be followed while reviewing,
ordering, obtaining, and paying for goods/services.
Checkpoints/steps increase with the complexity of the
purchase.
Key “players” in the Procurement Process

2. People
These are stakeholders and their specific responsibility
in the procurement cycle. They take care of initiating or
authorizing every stage of the process. The number of
stakeholders involved is directly proportional to the risk
and value of the purchase.

3.Paper
This refers to the paperwork and documentation
involved in every stage of the procurement process flow,
all of which are collected and stored for reference and
auditing reasons.

Inventory and purchasing are related because certain companies can
gain significant advantages by enhancing their purchase and inventory
management systems. Through a modernized and strategic approach,
they may expect to experience a significant increase in revenues,
acquire considerable competitive advantage, and raise brand value.
However, in order to reap these benefits, businesses must adhere to
buying and inventory control standards. They must keep things in
stock to meet client demand while avoiding overstocking items that
may spoil, be damaged, or become out of style before being used or
sold.
How inventory and purchasing functions are related?

Inventory is intrinsically tied to procurement. Server
Message Block or SMBs, in essence, keep track of
inventories and make ordering choices. When utilizing
manual methods, determining when to restock, how
much to purchase, or where to stock things can be
difficult.

The procurement process involves a series of activities
undertaken to ensure the required materials are
available at the right time in the right quantity.
Procurement is a strategic business function which
impacts the operations, supply chain, quality, cost and
profits of most business organization. Hence it is crucial
to have an effective Procurement Process.
Steps in the Purchasing Process

An effective procurement process involves
understanding and consolidating the procurement needs
of all departments/units of an organization, finding out
suitable vendors, evaluating their terms and conditions,
carrying out negotiations or bidding, identifying the right
vendor/suppliers, to ensure, procurement of best quality
goods and services at best possible prices.

Every procurement process involves several elements,
including requirements determination, supplier research,
value analysis, raising a purchase request, reviewal
phase, conversion to purchase order, contract
administration, monitoring/evaluation of received order,
three-way matching, payment fulfilment, and record
keeping. Here are the 7 steps involved in procurement
process:

1. Step 1: Needs Recognition
2. Step 2: Purchase Requisition
3.Step 3: Requisition review
4. Step 4: Solicitation process
5.Step 5: Evaluation and contract
6. Step 6: Order management
7. Step 7: Invoice approvals and disputes
8. Step 8: Record Keeping

The needs recognition stage of a
procurement process enables businesses
to sketch out an accurate plan for
procuring goods and services in a timely
manner and at a reasonable cost.
Step 1: Needs Recognition

Purchase requisitions are written, or
electronic documents raised by internal
users/customers seeking the
procurement team’s help to fulfil an
existing need. It comprises key
information that is required to procure
the right goods, services, or works.
Step 2: Purchase Requisition

The procurement process will officially commence only after the
purchase requisition is approved and cross-check for budget
availability. In the review stage, functional managers or department
heads review the requisition package and double-check if there is a
genuine need for the requested goods or service and also verify
whether necessary funding is available. Approved purchase requests
become POs, while rejected requests are sent back to the
requisitioned with the reason for rejection. All these can be handled
with a simple purchase order software.
Step 3: Requisition review

Once a requisition is approved and PO is generated, the procurement
team will develop an individual procurement plan and sketch out a
corresponding solicitation process. The scope of this individual
solicitation plan depends ultimately on the complexity of the
requirement. Once the budget is approved, the procurement team
forwards several requests for quotation (RFQ) to vendors with the
intention to receive and compare bids to shortlist the perfect
vendor.
Step 4: Solicitation process

Once the solicitation process is officially closed, the
procurement team in conjunction with the evaluation
committee will review and evaluate supplier quotations to
determine which supplier will be the best fit to fulfil the
existing need.
Step 5: Evaluation and contract

Once a vendor is selected, the contract negotiation and
signing are completed, and the purchase order is then
forwarded to the vendor. A legally binding contract activates
right after a vendor accepts a PO and acknowledges it.
Step 5: Evaluation and contract

The vendor delivers the promised goods/services within the
stipulated timeline. After receiving them, the purchaser
examines the order and notifies the vendor of any issues with
the received items.
Step 6: Order management

This is a crucial step in the procurement process and having
procurement software like Kiss flow Procurement Cloud gives
you a competitive edge over others. With Kiss flow, you can
perform three-way matching between GRN, Supplier Invoice
and PO to check if you have received the order correctly and
there aren’t any discrepancies. Once three-way matching is
complete, the invoice is approved and forwarded to payment
processing.
Step 7: Invoice approvals and disputes

After the payment process, buyers make a record of it for
bookkeeping and auditing. All appropriate documents right
from purchase requests to approved invoices are stored in a
centralized location.
Step 8: Record Keeping

Valued customer
A high value customer is a client or account that makes a
significant impact on a company’s bottom line. These buyers
are incredibly important in customer service because they
purchase from the business the most and can influence how
other people perceive the brand?
Characteristics of a valued “customer” buyer

3 aspects of customer value
• Economic
• Business
• Personal

Customers buys when they perceive that the value outweigh
the cost of the investment what we need to realize that there
are three components of value. Economic value - is the
financial impact of the investment. What will be your return
on investment? What will it do for the company financially?
Will it cut operational costs, increase inventory turns,
increase revenues or cash flow? Economic value is of most
importance to the economic buyer – someone who makes
decisions based solely on the financial elements of the
solution.
Economic

Business value- is the primary consideration to the user of the
solution. What can the investment do for the organization and how
can it increase productivity, efficiencies and effectiveness for
those that use the solution. Even those sold on this value can
meet obstacles when they try to convey the value to the C-suite.
The problem with business value is many times when we sell to the
user group that sees great value; they can’t convey that value to
the economic decision maker such as the CFO. In other words, the
business value needs to be conveyed in economic terms to other
decisions makers involved.
Business

Personal value- is the third type of value that needs to be considered. This is
more of an intangible value. What will the decision do for me personally? Will
I get a promotion, a bonus, peace of mind, or improve my influence with
other organizations? Personal value is equally as important as the business
and economic and sometimes can be the determining factor in the decision.
Why? We need to understand that in the brain emotions always trump logic.
We make decisions based on emotion and then back them up logically.
Personal value can only be uncovered when there is trust and a strong
relationship with the decision maker. We also need to realize that personal
value will be different for each person involved in the decision-making
process since personality styles influence what is valued.
Personal

4 types of customer value
• Functional value
• Monetary value
• Social value
• Psychological value

The sources of value are not equally important to all consumes,
how important a value is depending on the consumer and the
purchase, values should always be defined through the eyes of
the consume.

List of the customer characteristics
• Communication.
• Patience.
• Adaptability.
• Reliability engineering.
• Time management.
• Customer Characteristics.

• Informed About Your Company, Industry, & Events.
• Eager for Solutions.
• Social with Other Customers.
• Connected to Various Devices & Channels.
• Opinionated & Vocal.
• Willing to be Self-Sufficient.

• Critical of Competitive Customer Experiences.
• Expecting Businesses to be Proactive.

7 characteristics of the modern customers
1. Customers reign supreme. They control the experience they
want; they research, explore, and share.
2. Customers are ALWAYS connected. 24 hours a day, 7 days a
week, on any internet-enabled device. 77% of Americans own a
smartphone today, compared to 35% in 2011.
3. Customers expect personal interactions. 87% of customers
believe brands could deliver more consistent experiences.

4. Customers compare, and compare, and compare. They look at products
they’re interested in across multiple channels and devices, and it’s likely any
brand-owned channels are the last place they look.
5. Customer’s trust word-of-mouth over brands. 70% of consumers trust
online recommendations more than brand statements.
6. Customers think in terms of “I want it now.” They expect to be able to get
everything right away. 64% of customers expect real-time.
7. Customers are highly opinionated. They’re ready to talk to anyone about a
good or bad experience. Customers are three times more likely to recommend
a brand after they’ve had a positive interaction with them.

LIST FACTORS TO CONSIDER IN CHOOSING SUPPLIERS
Finding the right supplier for your business is vital, so it’s not a
decision that you should take lightly. If you choose to work with
the wrong supplier, it could have a knock-on effect throughout
your whole business.

Not only could you end up paying more than you should for
your goods or services, but the delivery times may not be
suited to your business – which could delay your business
operations.
Your suppliers are your partners, and you wouldn’t enter a
partnership without doing your research, would you?

So, when you’re looking at your suppliers you should weigh up
your options. We recommend that you make a list and compare
all the different options on offer. That way, you can compare
the competition against each other and can see the different
areas in which they excel.

• Accountability
• Production capabilities
• Ease of communication
• Ethics
• Prioritizing building relationships

For example, an embroidery machine, whether it’s your first
one or an upgrade, is quite an investment. Not only are they
your most expensive cost but they’re your most important
commodity, without them, you can’t produce your products.
Plus, you need one that’ll cope with your customer demands,
so you should compare an array of different options from
suppliers.

Explain the concept of “good service” from a supplier.
Suppliers have a hugely important role at every stage of the
product lifecycle. From sourcing raw materials to helping ramp
up production, and to finding better options for raw materials
as the market starts becoming saturated, companies need to
work closely with their suppliers to get the best out of their
products.

The right suppliers provide the most suitable goods or services
at the most suitable prices and in the right time frames for your
specific business needs.

Importance and key components of product specifications
The specification provides clear instructions on project intent,
performance, and construction. It can reference the quality
and standards which should be applied. Materials and
manufacturers' products can be clearly defined. Installation,
testing and handover requirements can be identified.

Steps in the ordering process
Order management processes start right after a customer
place their order and pays for it. The details of the order are
sent to the store’s inventory, where warehouse workers
manage the picking, packing, and shipping. The process ends
with the store checking in with the customer to figure out if
they were happy with their purchase. Here are the steps of a
typical process.

Most order management processes can be broken down into 3
stages: receiving a customer’s order, fulfilling the order, and
then handling the after-sales processes. Let’s see how each
stage works in detail:

Stage 1 – Receiving the customer’s order
The first stage of any order management process begins when
a customer places an order with your business. Receiving
includes accepting the order from the customer and collecting
payment for it. After this is done, the details of the purchase
are forwarded to your warehouse so your staff can start
working on getting the products ready for shipment.

Stage 2 – Fulfilling the customer’s order
In the second stage, you actually fulfil your customer’s order.
This stage can be split into 3 different steps:

Step 1 – Picking
Fulfilling an order starts with the picking process, in which the
items are retrieved from the warehouse. Warehouses are
usually lined with shelves that are each stocked with different
types of products, so warehouse workers need to be able to
pick the right items for an order quickly and accurately. Once
the items have been picked, they are sent to a packing station
to be packed.

Step 2 – Packing
The packing station has more responsibilities than just packing
items and sending them off for shipping. They are also in
charge of using the right packaging materials for each product
so that it reaches the customer intact and in good condition,
while also using resources efficiently. For example, extremely
fragile items like glassware need to be packed with bubble wrap
or air pillows, and in a properly sized box to avoid wasting
packing material.

Step 3 – Shipping
After you’ve picked and packed the correct order, the next step
is to ship it. The warehouse employees working at the shipping
station typically take care of 3 tasks:
1. Attaching the applicable shipping label and invoice to the
order
2. Marking the order as shipped in all of your sales channels
3. Sending out shipping confirmation and order tracking emails
to the customer.

Picking, packing, and shipping can only happen in that order if
your business has the necessary products in stock. So, what do
you do when a customer places an order for a certain product,
but you’re out of stock? In cases like this, businesses are left
with two choices: they can either turn the customer away or
postpone the order delivery to a later date using backordering
or drop shipping.

For backordering, the business places a purchase order with
their supplier for the product that is out of stock. The supplier
will give the business a date when they receive the new stock,
and in turn the business gives their customer a tentative date
to expect to receive their order. With drop shipping, the
business forwards the customer’s order to the supplier, who
delivers the product directly to the customer without sending
it to the business first.

Stage 3 – Handling the post-sales processes
The last stage of order management is handling the after-sales
processes. This is where businesses follow up with customers
to receive feedback and make sure that they are satisfied with
their purchase, and to manage any returns and refunds if they
are not.

All three stages together make up a typical order management
process. Some businesses like to customize their order
management strategy to suit their needs better. Order
management is also applicable for businesses that offer
services instead of goods, although the process is slightly
different. For instance, consider a mobile network provider.
Instead of having to pick, pack, and ship products, a mobile
network company has to receive each customer’s request to
activate a network, and then set it up on the customer’s mobile
phone.

Amount to order given inventory (par level and on hand
amount)
The Order Point Qty/ Par Level field functions as an ordering
trigger to the purchasing team. For min/max style
replenishment, users see this trigger when they interact with
Purchase Order Generator. The Order Point Qty/ Par Level can
be easily calculated by taking item usage x the lead time x
safety stock factor.

List information typically included on a purchase order.
Purchase Order
A purchase order is a document used in commercial
transactions that identifies the quantity, type, and price for a
product or service. Purchase orders are not invoices, but they
are legally binding.

• What Your Purchase Order Should Include
It’s important for purchase orders to contain detailed
information about both the company and the vendor. Fields
such as quantity, price, description, taxes, and payment terms
must be completed so that both parties agree. If discrepancies
arise, the purchase order can be consulted for verification.

• Contact Information
The name, address, email, phone number and other contact
information for both companies should be completed. Since
the purchase order will be used by both the ordering business
and the contractor, contact information is critical for future
communication.

• PO Number
Both the ordering company and the outside vendor will need to
track purchase orders, probably within a centralized computer
system. Assigning a clear PO number will help both parties
access the information quickly and efficiently.

• Item SKU
If an order involves raw materials, one should include
individual SKU numbers on the purchase order. This ensures
the correct items are being selected, packed, and invoiced. The
purchase order can also be used to cross-check received items.

• Item Description
The name of the items, as well as identifying information such
as size, colour, or model number should be listed in further
detail. This is often easier to identify than an alphanumeric
number or barcode.

• Price
Prices for each item should be listed with the quantities so that
both parties can clearly see the original amounts being
charged. Typically, discounts or sale amounts are listed
elsewhere on the purchase order.

• Subtotals, Taxes and Totals
These totals are usually found on the bottom right side of the
purchase order. These amounts allow both parties to see the
taxes being charged as well as at the grand total of the order. If
discounts are applied, they can be calculated in this area as
well.

• Payment Due Date
Both the ordering company and the vendor should have
determined payment terms during the contract negotiations.
Listing the payment due date on the purchase order allows
everyone to be on the same page. Both parties know when the
invoice will be billed and when it should be paid.

• Why Businesses Use Purchase Orders
Purchase orders provide a legally binding way to help both the
ordering business and vendor keep track of orders. They are
paper or electronic documents that can be created, filed, and
accessed if disputes arise. They also provide a summary of
payment and delivery agreements.

• Legally Binding
Purchase orders are legally binding documents and should be
kept either in paper or electronic form. You may need them to
prove that an order was delivered or received if disputes come
up.

• Track Orders
Both the purchasing company and the vendor use purchase
orders to keep track of transactions over time. Both businesses
may want to look at their purchase orders as a whole to save
money or increase efficiency.

• Set Expectations
Although agreements and contracts are typically drawn up
before a purchase order is issued, the PO provides
documentation. If either party cannot recall the terms, they are
clearly laid out in the purchase order.

• How Purchase Orders Differ from Invoices
Invoices usually follow purchase orders. While POs are initiated
to order goods, work order invoices are sent to request
payments once goods are received. Buyers send POs while
sellers send invoices.

• Requesters Differ
Purchase orders and invoices are sent by different companies.
The business ordering goods or services initiate a purchase
order. The vendor or third-party organization sends the invoice
once goods have been shipped.

• What is Requested is Different
Just like the company issuing the purchase order and invoice
are different, so are the requests themselves. Purchase orders
ask for items or services to be shipped or performed. Invoices
request payment to be sent.

• Timing Varies
Typically, purchase orders are sent at the beginning of a
transaction, requesting that goods are sent. Invoices usually
follow at a later time once the goods have been received and
accepted.

• Purchase Order Example
Although you can do it with a variety of systems, generating
purchase orders using a CMMS can streamline the process. For
example, in Upkeep, you can automatically create a purchase
order when your inventory is running low.

When a work order uses enough parts to trigger a low inventory
warning, Upkeep can initiate a purchase order.
Factors That Impact Prices
Food products in particular fluctuate in price over the year,
due to many factors:

• Seasonality: When food is in season, there is more of it
available in the local food supply, bringing prices down.
Additionally, foods in season are usually of higher quality and
have longer shelf life than those that are out of season and
need to be transported long distances to market.

• Weather: Severe weather can have a huge impact on the cost
of food. Drought, flooding, and unseasonable frost have all
affected major produce-supplying areas of the world in recent
years, causing a rise in prices for many items.

• Costs of transportation: If the cost of fuel or transportation
rises, so does the cost of food that needs to travel to market.
• Commodity prices: A number of foods are traded on the
commodity market, such as meats and grains. These prices
fluctuate as buyers who trade in these products in large
volumes buy and sell, much like the stock market.

Before purchasing any food items, ask the following questions.
• When is the item to be used?
• Which supplier has the best price and the best quality? Where
an item is purchased should be determined by the price and
the quality of the available supplies. When ordering supplies, it
is advisable to get prices from at least three sources, then
purchase from the supplier who quotes the best price for
comparable quality.

• When will the item be delivered? Depending on the distance
of the food service establishment from the supplier, delivery
may take hours or days. Remember, it is extremely difficult to
maintain food quality and consistency if you do not know when
your order will be delivered. For this reason, menu planning
and a running inventory are two of the most important aspects
of purchasing procedures.

Specifications
Meat, seafood, poultry, processed fruits and vegetables, and
fresh fruits and vegetables can be ordered under different
specifications. For example,

• Meats can be ordered by grade, cut, weight/thickness, fat
limitation, age, whether fresh or frozen, and type of packaging.
• Seafood can be ordered by type (e.g., fin fish/shellfish),
species, market form, condition, grade, place of origin, whether
fresh or frozen, count, size, and packaging,
• Poultry can be ordered by type, grade, class (e.g., broiler,
fryer), style (e.g., breasts, wings), size, whether fresh or frozen,
and packaging.

• Processed fruits and vegetables can be ordered by grade
(sometimes), variety, packaging size and type, drained weight,
count per case, packing medium, and whether canned or
frozen.
• Fresh fruits and vegetables can be ordered by grade
(sometimes), variety, size, weight per container, growing area,
and count per container.

Contract Buying
Some restaurants and hotels, particularly those belonging to chains, will
have contracts in place for the purchasing of all products or for certain
items. This may mean that the property can only purchase from a specific
supplier, but in return it will have negotiated set pricing for the duration of
the contract. This has advantages and disadvantages. On the positive side,
the contract price remains stable and the job of managing food costs
becomes more consistent since there are no price fluctuations. On the
negative side, contract buying takes away the opportunity to compare prices
between suppliers and take advantage of specials that may be offered.

Purchasing Procedures
In most kitchens, purchasing and ordering are done by the chef and sous-
chefs, although in larger hotels there may be purchasing departments
assigned this responsibility. Most kitchens will have a list of suppliers,
contacts, delivery dates and schedules, and order sheets with par stock
levels to make purchasing easier. For a special function or event, such as a
banquet, it may also be necessary to determine the required supplies for
that function alone.

RBR EBUENGA TLEHESFM PPT.pdf

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