HTC 4093 PRINCIPLES OF PURCHASING DIPLOMA IN CULINARY ARTS

SUBJECT: HTC 4093

UNIT: 4/TOPIC 1 DURATION: 3 hours
PRINCIPLES OF PURCHASING

UNIT TITLE The Purchase Specification

OBJECTIVES

Explain the purpose of the purchase specification and its importance

To be able to list the information on the purchase specification

To identify the factors that influence the information on the purchase specification

Explain the potential problems related to purchase specifications

To describe how quality is measured

LESSON PLAN
CONTENTS

Steps in the Purchasing Cycle

Recognizing Need

Preparing Specifications

Selection of Supplier

Ordering Goods

Receiving Goods

The Purchase Specifications

Five Main Reasons to Create Purchase Specifications

Who decides what to include in the specs?

Information Included In a Purchase Specification

Factors that Influences the Information Listed in a Purchase Specification Include

Problems with Specs

What is Quality?

Objective Measures of Quality

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Steps in the Purchasing Cycle

Recognizing the need

To purchasing
Goods or services

Receiving the
Goods or services
Preparing
Specification

Ordering the
Goods or services

Selecting
A supplier

Recognizing Need

Top management typically sets standards for both product specifications and purchase
specifications, and then buyers or users handle the details. Generally, the authority to request a
needed item is vested in those responsible for running specific departments. For example:

Chef is responsible for daily menus, therefore, he would have the authority to request
needed food supplies

Bar Manager has the authority to request alcoholic beverages

In most of the larger organizations where purchasing department is centralized in the

purchasing department, these individuals will communicate their needs to purchasing
department personnel by way of purchase requisitions.

Preparing Specifications

Wherever practical, it is recommended that purchase specifications be completed for major

items of expenditure. Obviously, for many items purchased in a hospitality operation,
specifications may not be practical or necessary, particularly the items required on a daily basis.
However, food specifications should be encouraged for major food purchases such as meat,
fish and poultry items that can count for as much as fifty cent our of each food purchase dollar.

A specification is a carefully written description of the items desired. The specifications may be
drawn up by the department head who has the authority to purchase the item, or, it may need to
be prepared by a number of people, possibly in conjunction with an employee of the purchasing
department who has experience in that area, a top management official, or a combination of
these personnel.

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Selection of Supplier

There are many types of suppliers, such as manufacturer, wholesaler, retailer, and local
producer or farmer. Depending on the product to be purchased, a different type of supplier may
be contacted. The important consideration is to contract as many suppliers as is practical to
ensure that enough quotations are received so that the right quality of product is purchased at
the lowest possible price. A minimum of three market quotation are recommended, although
this may not be necessary or possible in every case, to ensure that competitive pricing prevails.

Ordering Goods

Where an organization is large enough to warrant a formalized system of purchase requisitions

and specifications, the ordering procedure should be similarly formalized with the use of
purchase orders. A purchase order describes the product, gives the specifications or refers to
the specification form number, and states the quoted price.

In many cases in the hospitality industry, particularly where it involves day-to-day food and
supplies ordering, a system of purchase order is just not practical since most orders are placed
at short notice and by telephone. In such cases, special procedures and forms will prevail.

Receiving Goods

In smaller establishments, it might be the person responsible for requesting and ordering the
supplies. In a larger establishment a separate receiving department will be responsible for
checking all deliveries before distributing the items to the individual departments or storerooms.

In all cases where purchase orders have been prepared, a copy of the purchase order should
be on hand while receiving. Where specifications have been prepared, they, too, should be
available, so that delivered goods can be checked in detail against the specifications. In
particular, quantities received should be checked against quantities ordered and invoiced.
Prices on invoices should be check against the quotation references or against the purchase
order. In some cases, a department head may be asked to verify the quality of an item if the
receiver is in any doubt.

The Purchase Specifications

Top management typically sets standards for both product specifications and purchase
specifications, and then buyers or users handle the details.

A product specification, can be referred to as product identification, is a precise and formal

statement describing all the characteristics of a product required to fill a specific production or
service needs. It typically includes product information that can be verified upon delivery and
that can be communicated easily from buyers to suppliers.

Unlike product specification, which includes only information about the product, the purchase
specification implies a much broader concept. The purchase specification includes all
product information, but, in addition, it includes information regarding the pertinent suppliers
services buyers require from suppliers who sell them products.

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The Purchase Specification would usually include:

Product characteristics, e.g.: name of item, specific quality required, form that item
should take.

Supplier services, e.g.: frequency with which the item is required

Other related purchasing details.

Five Main Reasons to Create Purchase Specifications

They create quality control and cost control standards

They help avoid misunderstandings between suppliers, buyers, users and other
company officials.

They provide back-up information for times when a buyer is unavailable

They can serve as useful training tools for trainee or new staff

They include all relevant details necessary for multiple suppliers to provide comparable
bids. Essential as a bidding device where a company can set down all relevant aspects
of the materials required and submit a list of these aspects to 2 or more suppliers and
ask the suppliers to bid their prices.

Who decides what to include in the specs?

There are four potential decision making entities are involved:

1. The owner-manager or another top management official

2. The buyer

3. The user

4. Some combination of these three

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Information Included In a Purchase Specification

A spec can be very short; it might include only a products name-nothing else. Alternately, it
might include several pages of detailed information, which is often the case with equipment
specifications. The following are the several considerations that a hotel should consider when
preparing a Purchase Specification:

Information Description
Performance Refer to the actual performance that is required or the intended
use of the material or service. It is the most important
information and should be clearly stated.

Exact Name of the Product Exact name or exact type of the product should be noted in the
or Service Purchase Specification. For example, if olives are one of the
ingredients needed, then state whether it should be black,
green or anchovy-stuffed, not just olives.

The Packers Brand Name, In most instances, a packers brand name is an indication of a
if appropriate certain quality. If brand identification is indicated on the
specification, be sure to add the words or equivalent right
after the brand name, to ensure that more than one supplier
can bid for the business.

Authorized Local or It provides the buyer with an option of using an independent

International Quality opinion of product quality when preparing specifications.
Grades, if appropriate

Size Information In most instances, the desired size must be indicated for a
particular item. However, it can also be indicated by:
The exact weight portion-cut steaks
The desired weight range

Trim or Yield It is the indication of the minimum edible yield of a product that
you will accept. Acceptable trim, or the maximum amount of
waste tolerated for an item especially important spec for
fresh meat or produce.

Package Size In most instances, the size of the container you desire should
be indicated. For example, the can size must be noted when
purchasing canned items.

Type of Package In most instances, the type of packaging materials used is

highly standardized. For example, frozen products should
come in packaging sufficient to withstand the extreme cold
without breaking. Thus, while the quality of the product may
meet your specification, the poor packaging will result in a
rapid deterioration of this once-acceptable item.

Preservation / Processing This procedure must be noted, for example, you could order
Method refrigerated meats or frozen meats, canned green beans or
frozen green beans. The type of preservation or processing
method selected often influences the taste and other culinary
characteristics of the finished food product.

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Information
Point of Origin
Packaging Procedure
Degree of Ripeness
Form
Color
Trade Association
Standards
Approved Substitutes
Expiry Dates
Chemical Standards
Test / Inspection Procedure
Cost & Quantity Indications
General Instructions
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DIPLOMA IN CULINARY ARTS
Description
It is locating the exact part of the world or country where the
particular item is coming from, for example, fresh fish, lobster,
kiwi fruits, etc. It is important because:
The flavor and texture of an item differs according from the
place of origin.
It is to avoid a violation of the truth-in-menu regulations by
serving alternative product that is not indicated in the menu.
It is important because carefully packaged products will have a
longer shelf life and they will tend to maintain their appearance
and culinary quality characteristics much longer than the
products that are packaged indiscriminately. The examples of
packaging procedures include individually wrapped products
layered in a package.
This is generally important for fresh produce but it also applies
to beef items (age) and wines (vintage)
It is important consideration for many processed items. For
example, cheese may come in brick, grated or slice form.
It is important as some items may come in different colors. For
example, fresh peppers (capsicum) may come in red, green or
yellow.
It is important as some trade associations establish a minimum
performance standard for items that carry the certificate seal.
Listing approved substitutes will allow the supplier to source for
the substitute faster and saves effort when the normal item is
out of stock, also to ensure quality and compatibility
Minimum requirement of period the item can last upon receive
from supplier. Example, items used in a mini bar needs to last
at least 10 months.
It identifies the acceptable chemical use for the commodity
purchased. For example, you may purchase an organic
produce growth in chemical free soil, or meat and poultry
products raised without added chemicals in the animals diet.
This is actually the general outcome of specifying the intended
use. It is an indication of the type of test that you will use to see
if the purchases will, perform adequately.
It is an indication of how much an item or service would you
want to purchase at one time.
These instructions include:
Delivery procedure
Credit terms, if possible
Allowable number or returns, stock-outs and production
substitutions
Whether the product purchased must be available to all units
in the establishment
Other supplier services like sales help in advising new uses
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of a product
Specific Instructions to Suppliers who bid for your business may want to know
Suppliers Your bidding procedures
Your criteria for supplier selection
Qualifications and capabilities you expect from them
Factors that Influences the Information Listed in a Purchase Specification Include

Company goals and policies

Available time and money

Production systems used by the hospitality operation

Storage facilities

Employee skill levels

Menu requirements

Sales price or budgetary limitations

Service style of the operation (e.g. cafeterias often need products with long hot-holding
life)

While writing specs created many benefits, it can also pose some costs to an operation,
including some cleverly hidden problems. Problems with specs can include:

Higher AP prices due to unreasonable delivery requirements or other limits based on

quality tolerance, cost or quantity.

Lack of supplier eligibility due to overly precise or tight specs

Levels of quality set too high, resulting in specs no supplier can provide

Over reliance on government grades

Lack of periodic revisions to the specs

Lack of expertise among receiving personnel

Redundant favoritism, in which a buyer routinely chooses one supplier over others no
matter how competitive their bids are. Such practices waste other suppliers time, and
may make it difficult to work with them should the primary supplier fall out of favor.

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