Ninth Edition PU R CHA S IN G Selection and Procurement for the Hospitality Industry ANDREW H. FEINSTEIN J E A N L . H E RT Z M A N J O H N M . S T E FA N E L L I VP AND EDITORIAL DIRECTOR EDITORIAL DIRECTOR EDITORIAL MANAGER EDITORIAL ASSISTANT CONTENT MANAGEMENT DIRECTOR CONTENT MANAGER SENIOR CONTENT SPECIALIST PRODUCTION EDITOR PHOTO RESEARCHER COVER PHOTO CREDIT George Hoffman Veronica Visentin Gladys Soto Ethan Lipson Lisa Wojcik Nichole Urban Nicole Repasky Christian Arsenault Alicia South (top left): MNStudio / Shutterstock; (top right): laurasiens / Shutterstock; (bottom left): Tavee Adam / Shutterstock; (bottom right): nanD_Phanuwat / Shuttersock Founded in 1807, John Wiley & Sons, Inc. has been a valued source of knowledge and understanding for more than 200 years, helping people around the world meet their needs and fulfill their aspirations. Our company is built on a foundation of principles that include responsibility to the communities we serve and where we live and work. In 2008, we launched a Corporate Citizenship Initiative, a global effort to address the environmental, social, economic, and ethical challenges we face in our business. Among the issues we are addressing are carbon impact, paper specifications and procurement, ethical conduct within our business and among our vendors, and community and charitable support. For more information, please visit our website: www.wiley.com/go/citizenship. Copyright © 2017, 2012, 2008, 2005 John Wiley & Sons, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per‐copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923 (Web site: www.copyright.com). Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030‐5774, (201) 748‐6011, fax (201) 748‐6008, or online at: www.wiley.com/go/permissions. Evaluation copies are provided to qualified academics and professionals for review purposes only, for use in their courses during the next academic year. These copies are licensed and may not be sold or transferred to a third party. Upon completion of the review period, please return the evaluation copy to Wiley. Return instructions and a free of charge return shipping label are available at: www.wiley.com/go/returnlabel. If you have chosen to adopt this textbook for use in your course, please accept this book as your complimentary desk copy. Outside of the United States, please contact your local sales representative. ISBN: 9781119148517 (PBK/BRV) ISBN: 9781119299554 (EVALC) The inside back cover will contain printing identification and country of origin if omitted from this page. In addition, if the ISBN on the back cover differs from the ISBN on this page, the one on the back cover is correct. 10 9 8 7 6 5 4 3 2 1 Contents Preface ix The Concepts of Selection and Procurement 1 1 • Introduction and Purchasing, Selection, and Procurement Definitions 2 • Sustainability and Corporate Social Responsibility 5 • Purchasing Functions in Different Types • • • • of Hospitality Operations 5 Technology Applications in Purchasing 13 2 • • • • 3 Key Words and Concepts 11 Questions and Problems 11 Experiential Exercises 12 References 12 Technologies that Distributors Use 14 Technologies that Hospitality Operators Use 17 What Lies Ahead? 23 Key Words and Concepts 25 • Questions and Problems 25 • Experiential Exercises 26 • References 26 Distribution Systems 29 • Distribution System for Food, Nonalcoholic • The Buyer’s Place in the Channel of • Distribution System for Beer, Wine, and Distilled • The Optimal Economic Values and Supplier • Distribution Systems for Furniture, Fixtures, • • • • Beverages, and Nonfood Supplies 30 Spirits 36 and Equipment and for Services 39 • What Happens Throughout the Channel of Distribution? 41 Distribution 43 Services 44 Key Words and Concepts 46 Questions and Problems 47 Experiential Exercises 48 References 48 iii iv C O NTE NT S Forces Affecting the Distribution Systems 51 4 • Economic and Intangible Forces 52 • Political and Ethical Forces 57 • Legal Force Related to Food Distribution and Labeling 61 • Other Legal Forces 69 • • • • Purchasing Activities 86 Research Activities and Projects 95 Purchasing Objectives 97 Problems of the Buyer 99 • • • • Key Words and Concepts 100 Questions and Problems 101 Experiential Exercises 103 References 103 The Organization, Administration, and Evaluation of Purchasing 105 6 • • • • • Planning 106 Organizing 107 Staffing and Training 112 Directing and Working with Others 116 Budgeting and Controlling Inventories 117 • Establishing and Following Selection and • • • • Procurement Policies 118 Key Words and Concepts 125 Questions and Problems 126 Experiential Exercises 128 References 129 The Purchase Specification: An Overall View 131 • Why Hospitality Operations Use Specifications 132 • What Information Does a Spec Include? 133 • What Influences the Types of Information Included on the Spec and Who Writes Them? 140 • Potential Problems with Specs 143 • The Optimal Quality to Include on the Spec 146 8 Technological Force 74 Key Words and Concepts 78 Questions and Problems 79 Experiential Exercises 80 References 80 An Overview of the Purchasing Function 85 5 7 • • • • • • • • • • • • Who Determines Quality? 146 Is the Quality Available? 147 Measures of Quality 148 Key Words and Concepts 151 Questions and Problems 152 Experiential Exercises 154 Reference 154 The Optimal Amount 155 • The Importance of the Optimal Inventory Level 156 • Correct Order Size and Order Time: Par Stock Approach 157 • Correct Order Size and Order Time: The Levinson Approach 161 • A Practical Approach to Determining Correct Order Size 164 • Correct Order Size and Order Time: A Theoretical • • • • • Approach 165 Considerations When Using the Theoretical Approach 171 Key Words and Concepts 173 Questions and Problems 173 Experiential Exercises 175 References 176 C ON TE NTS Determining Optimal Purchase Prices and Payment Policies 177 9 • Optimal Price and the Influence of AP Prices 178 • How AP Prices Are Determined 180 • Ways to Reduce AP Price and Increase Value: • • • • • • • • • Discounts 182 • Ways to Reduce AP Price and Increase Value: Purchasing and Receiving Procedures 185 • Ways to Reduce AP Price and Increase Value: Additional Methods 192 • Opportunity Buys 197 • Determining the Optimal Payment Policy 201 The Objective of Payment Policy 201 Cost of Paying Sooner Than Necessary 202 Cost of Paying Too Late 203 What is the Best Policy? 203 The Mechanics of Bill Paying 204 Key Words and Concepts 206 Questions and Problems 207 Experiential Exercises 210 References 211 The Optimal Supplier 213 10 Developing an Approved Supplier List 214 Trimming the Initial List 215 Buying Plans 216 Supplier Selection Criteria: Type and Size of Supplier 218 • Supplier Selection Criteria: Ordering and Delivery Policies and Procedures 220 • Supplier Selection Criteria: Price and Payment Policies and Procedures 225 • • • • Supplier Selection Criteria: Other Factors 227 Most Important Supplier Selection Criteria 229 Supplier–Buyer Relations 229 Salesperson–Buyer Relations 231 Evaluating Suppliers and Salespersons 233 Key Words and Concepts 237 Questions and Problems 238 Experiential Exercises 239 References 240 • • • • • • • • • Typical Ordering Procedures 243 11 • • • • • Purchase Requisitions 244 Ordering Procedures 246 The Purchase Order 247 Change Order 251 Expediting and Streamlining the Ordering Procedure 251 • • • • Key Words and Concepts 254 Questions and Problems 254 Experiential Exercises 255 References 256 • • • • • Reducing Receiving Costs 277 Key Words and Concepts 278 Questions and Problems 279 Experiential Exercises 280 References 280 Typical Receiving Procedures 257 12 • • • • • • The Objectives of Receiving 258 Essentials for Receiving 259 Invoice Receiving 262 Additional Receiving Duties 269 Alternative Receiving Methods 273 Good Receiving Practices 276 v vi C O NTE NT S Typical Storage Management Procedures 281 13 • • • • The Objectives of Storage 282 What is Needed to Achieve Storage Objectives? 284 Managing the Storage Facilities 287 Exercising Tight Control Over the Stock and Analyzing the Value of Storage Management Procedures 297 • • • • Key Words and Concepts 301 Questions and Problems 301 Experiential Exercises 303 References 303 Security in the Purchasing Function 305 14 • The Need for Security 306 • Security Problems 307 • Preventing Security Problems—Suppliers and Accounting and Inventory Procedures 311 • Preventing Security Problems—Employees 315 • Preventing Security Problems—Facilities and the • • • • Owner–Manager’s Role 318 Key Words and Concepts 321 Questions and Problems 321 Experiential Exercises 322 References 323 Fresh Produce 327 15 • The Importance and Challenges of Purchasing Fresh Produce 328 • Primary Selection Factors 330 • Size, Form, Packaging, and Related Considerations 339 • Purchasing Fresh Produce 344 • Procedures for Receiving, Storing, and Issuing Fresh • • • • Produce 348 Key Words and Concepts 354 Questions and Problems 355 Experiential Exercises 356 References 357 Processed Produce and Other Grocery Items 359 16 • Management Considerations 360 • Primary Selection Factors 366 • Size, Form, Packaging, and Related Considerations 370 • Supplier and AP Price Factors 377 • Purchasing Processed Produce and Other Grocery Items 379 • Procedures for Receiving, Storing, and • • • • Issuing Processed Produce and Other Grocery Items 382 Key Words and Concepts 384 Questions and Problems 385 Experiential Exercises 388 References 388 • • • • Key Words and Concepts 407 Questions and Problems 408 Experiential Exercises 409 References 410 Dairy Products 389 17 • • • • • Management Considerations 390 Primary Selection Factors 392 Size, Form, Packaging, and Related Considerations 398 Purchasing Dairy Products 401 Procedures for Receiving, Storing, and Issuing Dairy Products 403 C ON TE NTS Eggs 411 18 • Primary Selection Factors 412 • Size, Form, Packaging, and Related Considerations 416 • Purchasing Eggs 421 • Procedures for Receiving, Storing, and Issuing • • • • Key Words and Concepts 424 Questions and Problems 425 Experiential Exercises 426 References 426 • • • • Key Words and Concepts 444 Questions and Problems 445 Experiential Exercises 447 References 447 Eggs 423 Poultry 427 19 • • • • Primary Selection Factors 428 Size, Form, Packaging, and Related Considerations 434 Supplier and AP Price Factors 438 Procedures for Purchasing, Receiving, Storing, and Issuing Poultry 439 Fish 449 20 • The Importance and Challenges of Purchasing Fresh Fish 450 • Primary Selection Factors 451 • Size, Form, Packaging, and Related Considerations 461 • Purchasing Fish 466 • Procedures for Receiving, Storing, and Issuing • • • • Fish 470 Key Words and Concepts 474 Questions and Problems 475 Experiential Exercises 476 References 477 Meat 479 21 Management Considerations 480 Primary Selection Factors 486 U.S. Government Grades and Packer’s Brands 492 Size, Form, Packaging, and Related Considerations 497 • Purchasing Meat 502 • • • • • Procedures for Receiving, Storing, and Issuing • • • • Meat 504 Key Words and Concepts 509 Questions and Problems 510 Experiential Exercises 512 References 513 Beverages 515 22 • Management Considerations for Beverage • • • • • Alcohols 516 Selection Factors 526 AP Price and Supplier Factors 532 Purchasing Beverage Alcohols 533 Procedures for Receiving, Storing, and Issuing Beverage Alcohols 535 Management Considerations for Nonalcoholic Beverages 540 • Selection Factors for Nonalcoholic Beverages 541 • Procedures for Purchasing, Receiving, Storing, and • • • • Issuing Nonalcoholic Beverages 545 Key Words and Concepts 548 Questions and Problems 549 Experiential Exercises 551 References 551 vii viii C O NTE NT S Nonfood Expense Items 553 23 • Management Considerations—Types of Nonfood • Typical Nonfood Items—Permanent and Disposable • Management Considerations—Price and Supplier • • • • • Ware and Utensils 567 Typical Nonfood Items—Fabrics and Paper Goods 572 Key Words and Concepts 575 Questions and Problems 575 Experiential Exercises 577 References 578 • • • • • Consulting, Financial, and Insurance Services 598 Key Words and Concepts 605 Questions and Problems 605 Experiential Exercises 607 References 607 Expense Items 554 Factors 559 • Purchasing Nonfood Expense Items 561 • Typical Nonfood Items—Cleaning and Maintenance Items 563 Services 579 24 • • • • • Management Considerations 580 General Procedures in Service Purchasing 584 Cleaning and Maintenance‐Related Services 585 Other Facilities-Related Services 590 Advertising 593 Furniture, Fixtures, and Equipment 609 25 • • • • • Management Considerations 610 General Procedures in FFE Purchasing 614 Primary Selection Factors 616 Operating Characteristics 620 Cost and Service Factors 627 Glossary 643 Index 675 • • • • • Financing the FFE Purchase 633 Key Words and Concepts 639 Questions and Problems 640 Experiential Exercises 642 References 642 Preface N icholas, the general manager of a large independent foodservice operation had recently decided to employ a variety of social media marketing tools to build a regular customer base and keep it up to date with restaurant specials and events. Dinner business had been steadily declining over the past several months. His marketing campaign included a new Facebook page, offering half off meals through Groupon and a certificate for $10 on Restaurant.com. Business had been particularly slow on Monday nights. One Monday morning, he decided to tweet his 600 followers that the restaurant would be offering 50 percent off on all entrees that evening. He also posted this on his Facebook page. Around 5:30 p.m., Nicholas was pleasantly surprised to notice a steady increase of walk‐in customers. Shortly thereafter, the restaurant filled up and the wait for a table exceeded 45 minutes. While he smiled, Rachel, the restaurant’s purchasing manager, approached him and said, “It sure would have been nice if you let me know about your half‐off idea. I estimate that in about one hour, we will run out of food.” Nicholas learned a very valuable lesson that evening—one that stuck with him for years—the importance of the purchasing function in the hospitality industry. This text is not written necessarily for those who wish to become managers or directors of purchasing in the hospitality industry. It is written for those who will be involved with some phase of purchasing throughout their careers, and as the preceding scenario illustrates, most individuals involved in the management of a hospitality operation will interact with the purchasing function. In essence, this book is a purchasing book for nonpurchasing agents. It provides a comprehensive and understandable view of the activity, as well as its relationship to the management of a successful operation. Although the text is primarily written as the foundation of a hospitality purchasing course, it is structured in a way that also acts as a comprehensive reference guide to the selection and procurement functions within the hospitality industry. This structure is particularly evident in the later chapters, which provide specific details on numerous categories of items and services commonly procured in this industry. Another reference attribute is the comprehensive glossary of key terms used throughout the text and the detailed index that provides context to many hospitality purchasing terms and concepts. ix x Preface The text has a storied history, spanning numerous editions. In that time, we have maintained the original objectives of the text, while keeping up to date with this evolving field. Along with our staff, we spend thousands of hours on each new edition, ensuring that you are provided with current information and insights into the purchasing field from both academics and industry professionals. Purchasing: Selection and Procurement for the Hospitality Industry, Ninth Edition is the most comprehensive and up‐to‐date hospitality purchasing text on the market today. ORGANIZATION OF THE TEXT T his ninth edition of Purchasing: Selection and Procurement for the Hospitality Industry continues its successful recipe of balancing purchasing activities with product and information from a management perspective. Moreover, each chapter is revised so that it includes the most current concepts available, while providing even more in‐depth coverage of hospitality purchasing. In essence, great care has been taken to maintain the integrity and readability of the original text while modernizing the discussions of purchasing techniques and practices currently being employed in the hospitality industry. The text is divided into two parts. The first 14 chapters focus on the theory and application of selection and procurement concepts. The chapters are structured in a way that allows the reader to first gain insight into the typical organizational structure of a hospitality operation and the integration of the purchasing function. A discussion of concepts then progresses to provide the reader an expanding understanding of many of the facets of this complex, intertwined, and integral part of the industry. Along the way, the reader is provided numerous examples, questions, and exercises to reinforce these concepts. Although the organizational structure of the first 14 chapters provides an effective instructional path through hospitality purchasing theory, each chapter is written with the insight that some may wish to reorganize their order and/or select only a few to read. Because of this structure, the hospitality professional can also find significant value in this text by using the detailed table of contents or index to identify a particular concept to refresh or learn. The remaining 11 chapters focus on items and services commonly procured in the hospitality industry. They are written in a modular and self‐contained manner, and their sequence can be easily restructured by the instructor. Further, the hospitality professional can use these chapters as a reference guide when procuring these items and services. Although many of the theoretical underpinnings of the purchasing function have not changed in the years since the text was created—product distribution channels and forces that affect the price of goods remain relatively unchanged, and specifications and purchase orders are still required to order these goods—the use of technology when implementing and maintaining effective purchasing policies and procedures has changed drastically. To inform readers about these changes, technology applications in the purchasing function are discussed throughout the majority of the first 14 chapters that encompass purchasing principles. Chapter 2, “Technology Applications in Purchasing,” also covers this topic in depth. We have also significantly expanded the number of discussions and interviews with industry executives who are purchasing experts. More than 25 experts discuss topics as diverse as the role What’s New for the Edition of the broker, handling waste, green purchasing opportunities and responsibilities, and energy cost considerations, to name a few. We hope that these short stories provide even more insight into this complex and rapidly evolving field. WHAT’S NEW FOR THE EDITION M any important changes and additions have been made to Purchasing: Selection and Procurement for the Hospitality Industry to make the text even more useful. Among the most significant changes are the following: • The former Chapter 6—The Organization and Administration of Purchasing—is combined with former Chapter 7—The Buyer’s Relations with Other Company Personnel. This revision builds on the importance of staffing, training, directing, and overall administration of the purchasing function. • The former Chapter 10—The Optimal Price—is combined with Chapter 11—The Optimal Payment Policy. This new chapter, “Determining Optimal Purchasing Prices and Payment Policies,” more accurately reflects the interrelationship between price and payment policies. • Industry Insights throughout the text have been updated. More than 27 discussions and interviews with industry executives are interwoven throughout. These stories include insights that provide insider information about current and future trends related to purchasing. All are written by experts in the purchasing field, providing perspectives of the future of purchasing, novel approaches to procurement, and new techniques for calculating the amount of products to purchase. • Chapter 1 now includes definitions of the concepts of supply chain management and logistics. Chapter 2 has been updated to include more information on purchasing technology. Technology applications in purchasing—such as online ordering and group purchasing organizations—are addressed in chapters throughout the text. • There is much more discussion of sustainability, green practices, and corporate social responsibility throughout the text. We also added substantial new information about organic and natural products in product chapters where appropriate. • Chapter 4 contains new information on ethical concerns and procurement laws, such as the Food Safety Modernization Act. • The updated glossary contains hundreds of purchasing‐specific terms and detailed definitions. This glossary is a vital reference for students and those already working as purchasing professionals. • New, revised, and updated illustrations and photographs of concepts, companies, and products relating to the purchasing function have been included. • The end‐of‐chapter Questions and Problems have been updated and are now organized with the problems at the end to make it easier for instructors to decide which to assign to their classes. There are now Experiential Exercises for each chapter. xi xii Preface FEATURES P urchasing: Selection and Procurement for the Hospitality Industry, Ninth Edition is a learning‐centered textbook that includes several pedagogical enhancements in an effort to help the reader quickly acquire and retain important information. • Each chapter begins with a Purpose section, which provides several learning objectives. These objectives, written using Bloom’s Taxonomy of Educational Objectives – Cognitive Domain, direct readers’ attention to the major headings and important themes discussed throughout the chapter. • Industry interviews and insights are interspersed throughout all chapters of this text. Some of the interviews are “day‐in‐the‐life” features that demonstrate how a typical purchasing agent functions day‐to‐day, whereas others are detailed discussions of specific areas within the purchasing function and how the purchasing agent makes an impact on decisions made for the benefit of the hospitality organization. • At end of each chapter, a list of Key Words and Concepts provides the reader with an additional resource to assist in the retention of important topics. Readers can review these terms to ensure that they have grasped all relevant information from the chapter. Further, all Key Words are available in the glossary at the end of the text. • The Questions and Problems section can be used for classroom discussion or assigned to students as homework. The accompanying Instructor’s Manual provides detailed answers to each of these questions. • Most chapters also include a References section. Along with citing sources of information within the chapter, these entries provide additional articles, websites, and texts should the reader wish to explore further particular topics. • All chapters include Experiential Exercises. These allow the reader to actively learn about the function of purchasing through hands‐on activities and projects. SUPPLEMENTS A completely revised Instructor’s Manual (ISBN XXXX) accompanies this book; it provides several syllabus examples, teaching suggestions, test questions, answers to the book questions, and term projects. It can be obtained by contacting your Wiley sales representative. If you don’t know who your representative is, please visit www.wiley.com, click on “Resources for Instructors,” and then click on “Who’s My Rep?” An electronic version of the Instructor’s Manual is available to qualified instructors on the companion website, at www.wiley.com/ college/feinstein. Revised and updated PowerPoint slides are also available to students and instructors on the companion website. These graphically rich presentations are classroom tested and provide a detailed outline of each chapter. They can be easily modified to suit any instructor’s preferences. Acknowledgments The Test Bank for this text has been specifically formatted for Respondus, an easy‐to‐use software for creating and managing exams that can be printed to paper or published directly to Blackboard, Canvas, Desire2Learn, eCollege, ANGEL, and other eLearning systems. Instructors who adopt Purchasing: Selection and Procurement for the Hospitality Industry, Ninth Edition, can download the Test Bank for free. Additional Wiley resources also can be uploaded into your Learning Management System (LMS) course at no charge. To view and access these resources and the Test Bank, visit www.wiley.com/college/feinstein, select Purchasing: Selection and Procurement for the Hospitality Industry, Ninth Edition, click on the “visit the companion sites” link. ACKNOWLEDGMENTS T he authors would like to thank the following individuals for their continued assistance in developing and refining this text: Audrey Alonzo for research and writing assistance. Tanya Ruetzler for her work on updating the Instructor’s Manual. Ryan Kirk‐Bautista for providing student input and research assistance. Abigail Lorden at Hospitality Technology Magazine Robert Grimes at Constrata Tech Glenn Millar at Red Rock Capital Management Danny Campbell at Cannery Casino Resorts Camille Godwin‐Austen at IHOP Robert Hartman at Robert Hartman Consulting Mark Mignogna at Sysco Jerry Burawski at Lake Tahoe’s Squaw Valley USA Rebecca Kohn at San Jose State University John Howeth at the American Egg Board Joe Micatrotto Jr. at MRG Marketing and Management, Inc. George Baggott, Baggott Consulting, Ltd., formerly at Cres Cor Lisa Hogan at Santa Monica Seafood Seth Larson at Newport Meat Company John Smith and Drew Levinson at Wirtz Beverage Nevada Wayne Bach at Four Queens Hotel and Casino Dennis Lambertz at Nevada Food Brokerage Robert Lindsay at House of Blues, Live Nation Entertainment Mark Kelnhofer at Return on Investments Mark Perigen at the USDA, AMS, Livestock, Poultry, and Seed Program xiii xiv Preface Don Odiorne at the Idaho Potato Commission Daniel Celeste at University of Nevada, Las Vegas Mark Lawson, Bill Leaver, and Jeff Bradach at Nevada Beverage Company Sara Janovsky at Open Table ‐‐‐‐‐ JoAnna Turtletaub, James Metzger, and Julie Kerr at John Wiley & Sons. CHAPTER 1 THE CONCEPTS OF SELECTION AND PROCUREMENT The Purpose of This Chapter After reading this chapter, you should be able to: • Define several terms associated with selection and procurement. • Distinguish among different types of hospitality operations, and describe purchasing functions within those operations. 1 2 C HA P TE R 1 The Concepts of Selection and Procurement INTRODUCTION AND PURCHASING, SELECTION, AND PROCUREMENT DEFINITIONS T here is not a single job in the hospitality industry that does not involve purchasing in one way or another. A flight attendant must keep careful inventories of bottled water and soft drinks to know how much to request for restocking. The manager of a hotel must be able to find the best price for sheets and pillows in a reasonable quantity for her size of operation. An accountant for a hotel chain must know enough about the company’s purchasing agreements to take advantage of discounts based on timely payments. An event designer must know the current price for flowers and décor so that he can make appropriate recommendations in the guest’s price range. These are just a few of hundreds of scenarios where purchasing plays a critical role in the hospitality industry. Think about it for just a moment; it is the person in charge of purchasing who spends the majority of the money made by a hospitality operation, and it is this person’s skills and knowledge that significantly assist in achieving profitability in an operation. It could easily be said that purchasing is one of the most important functions in any hospitality operation. This book has been designed for those students who expect to have careers in the hospitality industry, but we realize not everyone will specialize in hospitality purchasing. We emphasize the managerial principles of the purchasing function and intertwine the purchasing function with the other related management duties and responsibilities that the hospitality operator faces on a day‐to‐day basis. This book includes enough product information so that you can easily prepare the product specifications required to select and procure an item if necessary, but also includes information on related purchasing activities, such as bill paying, that most purchasing agents do not perform. The typical hospitality manager eventually becomes involved with many of these related ­activities. We also incorporate a great deal of information on technology applications related to the purchasing function that will enable a hospitality student to learn the technological aspects of procurement. Similarly, in areas where appropriate, particularly the specific product chapters, the concepts of sustainable and green practices and organic and natural products will be addressed. It is our goal that wherever your career takes you within the hospitality industry, you will be adequately prepared to interact with the selection and procurement functions of an operation. With this in mind, we begin our discussion of selection and procurement for the hospitality industry. For most people, the term purchasing means simply paying for an item or purchasing Paying for a service. For hospitality professionals, this meaning is far too restrictive because product or service. it fails to convey the complete scope of the buying function. For our use, the selection Choosing from terms selection and procurement better define the processes involved. among various alternatives. Selection can be defined as choosing from among various alternatives on a number of different levels. For example, a buyer can select from among several competing brands of chicken, various grades of chicken, particular suppliers, or fresh and processed chicken Introduction and Purchasing, Selection, and Procurement Definitions 3 products. One person, generally referred to as a buyer or purchaser, may not procurement An perform all these activities or make all these choices at one time. But they may orderly, systematic exchange between a seller be involved in most of them at some level. and a buyer. The process Procurement, as opposed to selection, can be defined as an orderly, of obtaining goods and systematic exchange between a seller and a buyer. It is the process of obtaining services, including all activities associated with goods and services, including all the activities associated with determining the determining the types of types of products needed, making purchases, receiving and storing shipments, products needed, making purchases, receiving and and administering purchase contracts. storing shipments, and Procurement activities are the nuts and bolts of the buyer’s job. Once buyers administering purchase know what is needed, they set about locating the suppliers who can best fulfill contracts. their needs. Buyers then attempt to order the correct amounts of products or services at the appropriate times and best prices, see to it that shipments are timely, and ensure that the delivered items meet company requirements. A host of related duties surrounding these activities include: being on the lookout for new items and new ideas, learning the production needs of the departments they serve, appraising the reliability of suppliers, identifying new technologies for procurement, and so on. Not all operations have full‐time buyers. Many have managers and supervisors who do the buying in addition to their other duties. To these employees, buying means more than what the term procurement by itself implies. These employees must also be aware of the relationship be­tween purchasing and the other activities in the hospitality operation. Because there are so few full‐time purchasing agents in our field, a textbook that focuses solely on hospitality buying principles and procedures or product identification, although useful to some, would unnecessarily restrict operating managers and supervisors in hospitality. For example, it is not enough to simply know how to procure chicken. The typical operating manager must also consider what form of chicken to purchase, as well as whether or not chicken should even be on the menu. ■■ Supply Chain Management In today’s complex world, even the term procurement does not reflect the full range of activities that are involved in obtaining the products and services necessary to accommodate our hospitality guests. A much wider concept is that of supply chain management. The Council of Supply Chain Management Professionals (CSCMP) defines supply chain management in the following way: “Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities.” These may sound like big words, but in essence supply chain management means that businesses are concerned with knowing and coordinating everything starting with where the product is made or grown, to how it moves through distribution channels (discussed in Chapter 3), to how it is handled within the business, and how it is utilized by the end‐user, our hospitality guest. Supply chain supply chain management Process encompassing the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. sourcing Procurement practices aimed at finding, evaluating, and engaging suppliers of goods and ­services. conversion Converting supplies into ­finished products. 4 C HA P TE R 1 The Concepts of Selection and Procurement management integrates supply and demand management within and across companies. Supply chain activities focus on product development, sourcing, production, and logistics, as well as the information systems needed to coordinate these activities. The CSCMP advocates that supply chain management is successful when the goal of getting the right product to the right customer at the lowest costs is achieved. The concept of logistics management, which is part of a company’s logistics management supply chain, involves the movement of products and services to the cusThe part of the supply chain management that tomers. The CSCMP defines logistics management as “that part of the plans, implements, and supply chain management that plans, implements and controls the efficient, controls the efficient, effective flow and storage of goods, services and related information beteffective flow and storage of goods, services, and ween point of origin and the point of consumption in order to meet cusrelated information bettomer requirements” (p. 1). From the definition, the core idea of logistics ween point of origin and the point of consumption management is to meet customers’ needs through optimizing movement in order to meet customer of products and services within the company. Some activities in logistics ­requirements. management include controlling the flow of goods into the operation and out to the guest, sourcing and procurement, planning and customer service at strategic, tactical, and operational levels.1 ■■ Technology Today, operating managers must also deal with technology that has revolutionized how buyers and suppliers procure products and services. This technology enables purchasing managers to complete complex procurement functions online with a few clicks. e‐commerce Refers to Transactions done ­electronically are commonly referred to as e‐commerce, for transactions done online. electronic commerce. B2B e‐commerce is the term used for business‐­to‐business B2B e‐commerce electronic transactions, and B2C e‐commerce refers to business‐to‐consumer Online interaction between businesses. Typically e‐commerce. Amazon.com, for example, relies on B2C e‐commerce to sell its involves the sale and purproducts to consumers. B2B e‐commerce that focuses specifically on procurechase of merchandise or services. ment activities is referred to as e‐procurement, for electronic procurement. Examples of companies that make e‐procurement applications available to a wide B2C e‐commerce Online interaction between variety of industry ­segments include Perfect Commerce, Ariba, and Sterling businesses and consumers. Commerce (a subsidiary of IBM). Typically involves the sale These companies have successfully revolutionized the way procureand purchase of merchandise and services. ment is conducted. One major company that focuses on the development e-procurement Ordering of e‐­ procurement applications in the food industry is iTradeNetwork products and services from (ITN). Companies such as Aramark, Sodexo, CKE Enterprises, Subway, various purveyors online. Smash Burger, and PF Chang’s, rely on ITN’s supply chain solutions to Alternately, ordering these things from a particular streamline their selection and procurement functions.2 Avendra, one of the vendor who provides prolargest procurement ­ services companies,3 has primarily focused on develprietary software to the oping e‐­procurement applications for hotels. The company was formed by buyer, who is then allowed to enter the vendor’s ClubCorp USA, Inc., Fairmont Hotels & Resorts, Hyatt Hotels Corporation, electronic system. Marriott International, Inc., and Six Continents Hotels. Purchasing Functions in Different Types of Hospitality Operations SUSTAINABILITY AND CORPORATE SOCIAL RESPONSIBILITY N o purchasing textbook can be relevant today without including the importance of sustainability and corporate social responsibility. Whether referring to an independent restaurant that buys produce and meats from local farms or a corporation, like Marriott, whose core values and ­heritage statement includes “Serve our World,” hospitality companies must evaluate the effect of all their practices on the environment, people, and the global economy. We will discuss these concepts in more detail in the chapters detailing the forces that affect purchasing, supplier considerations, and purchasing specific types of products. sustainability The ability to not harm the environment or deplete natural resources. corporate social responsibility The practice of a company self-regulating the effect of their practices on the environment, people, and the global economy. PURCHASING FUNCTIONS IN DIFFERENT TYPES OF HOSPITALITY OPERATIONS T he hospitality industry includes three major segments (see Figure 1.1). The commercial hospitality first segment is commercial hospitality operations—the profit‐oriented operations Profit‐­ oriented company. companies (see Figure 1.2). The second is the on‐site segment, which used noncommercial to be commonly known as i­nstitutional—those facilities that are operated on hospitality operations a break‐even basis. The third is the military segment—those operations that Another term for on‐site include troop feeding and housing, as well as the various military clubs and or military hospitality operation. military exchanges that exist within military installations. The second and third segments are collectively referred to as noncommercial hospitality operations. The following types of operations are generally ­considered part of the commercial segment: • • • • • • • Hotels • • • • • Table‐service (full‐service) restaurants Motels Types of Hospitality Operations Casinos Resorts Lodges Spas Quick‐service (limited‐service, casual s­ervice, or fast‐food) restaurants Snack bars Commercial Profit-Oriented Operations Noncommercial On-Site Operations Military Operations Food courts Taverns, lounges, and bars Cafeterias F I G U R E 1 . 1 A major segment outline of the hospitality industry. 5 6 C HA P TE R 1 The Concepts of Selection and Procurement • • • • • • Buffets • ontract foodservice comC panies, which typically operate in plants, office buildings, day care facilities, assisted care facilities, senior care facilities, schools, recreation centers, hospitals, and sports centers • • • On‐premises caterers Off‐premises caterers Vending‐machine companies Ice cream parlors and stands In‐transit foodservices (e.g., cruise ships and airlines) FIGURE 1.2 An example of a commercial hospitality operation. ©atmoomoo/Shutterstock Convenience stores with foodservices Supermarkets with foodservices Department stores and discount stores with foodservices The following types of operations are generally considered part of the noncommercial division of the hospitality industry: • • • • • • • • • • • • • • • • Employee‐feeding operations Public and parochial elementary‐ and secondary‐school foodservices College and university housing and foodservices Transportation foodservices, such as the Meals on Wheels program Hospitals Assisted living facilities Extended‐care facilities Clubs Self‐operated community centers, such as senior centers and day care centers Military installations Camps Public institutions, such as the foodservices in some government facilities Adult communities Correctional facilities Religious facilities Shelters Purchasing Functions in Different Types of Hospitality Operations In Chapter 6, we offer a detailed discussion of the purchasing functions found in the various types of hospitality operations. In this introductory chapter, however, we provide you with sufficient understanding to get you started. When we discuss t­ raditional hospitality operations, we think first of the independent operation. In addition, those in the trade usually group the independent operations according to size: the small, medium, and large independents. The other major type of hospitality operation includes the multiunits and the franchises. ■■ franchises A business form where the owner (franchisor) allows others (franchisees) to use his or her operating procedures, name, and so forth, for a fee. The Independent Operation The small independent, such as a local Chinese restaurant or a bed and breakfast inn, is typically run by an owner–manager, who usually does all the buying for the business. He or she also oversees the other related purchasing activities, such as receiving deliveries and paying the bills. The medium‐sized independent generally involves more than one person in the purchasing function. Usually, the general manager coordinates the various activities that other management personnel perform. For instance, he or she typically coordinates the purchases of department heads, such as the dining room manager who needs china and glassware, the bartender who requires alcoholic beverages, and the chef who needs food. The general manager also oversees other related purchasing activities. The large independent, such as a hotel, implements the purchasing function in much the same way that the medium independent does, except that it may employ a full‐time buyer. This buyer purchases for the various production departments, such as housekeeping, maintenance, engineering, and foodservice. Alternately, a designated employee from each executive steward of these departments may be doing the purchasing; for example, a hotel may Oversees cleaning crews. employ an executive steward to order supplies and to supervise the sanitaTypically also has purchasing responsibilities tion crew. Often the large independent operation has a full‐time food buyer, for things such as soaps, a beverage buyer, and a buyer who purchases equipment and other nonfood chemicals, and other supplies. A purchasing vice president or an equivalent official may or may not cleaning supplies. May also control the china, glass, supervise these three buyers. The buyers are, almost certainly, supervised by a flatware inventories, and management person. single‐use (paper, plastic, In the past, small and medium‐sized businesses may have had a tough time etc.) ­products. competing in the same markets as larger companies. This was mainly because these smaller businesses had to pay higher prices for many of the products that they procured because they were not afforded the same discounts as large companies (we talk more about these discounts in Chapter 6). However, e‐procurement has leveled the playing field in many instances by enabling these smaller hospitality companies to procure products at more competitive prices and, therefore, to be more competitive pricewise with larger hospitality operations. Today, hospitality buyers can select and procure goods and services from suppliers and distributors all over the world. An idea addressed more completely in Chapter 6 is co‐op buying, a concept that enjoys popularity among some independent hospitality operations, particularly some foodservice operations. 7 8 C HA P TE R 1 The Concepts of Selection and Procurement co‐op buying The banding together of several small operators to consolidate and enhance their buying power. referral group A type of co‐op where independent operators join together to send business to one another. For instance, Best Western is a referral group that has a central reservations system available to each member. In addition, these groups typically provide some purchasing advantages, as well as other types of support, to its members. aggregate purchasing company Another term for buying club. group purchasing organization (GPO) Another term for buying club. real estate investment trust (REIT) A legal business entity that buys, sells, and manages commercial and residential properties. portal Web access point. Presents a starting point and access to multiple sources of similar online information. e‐commerce marketplace An online application allowing buyers to locate vendors, research products and services, solicit competitive bids, and place orders electronically. commissary Similar to a central distribution center. The major difference is that at a commissary, raw foods are processed into finished products, which is not the case in a central distribution center. Could be considered a restaurant company’s personal convenience food processing plant. As the phrase implies, co‐op buying is a system whereby hospitality operations come together to achieve savings through the purchase of food and supplies in bulk. Either the operations rotate the purchasing duties among themselves, or they hire someone (or a company) to coordinate all of the purchasing for them. Another type of co‐op involves referral groups, which are independent operators joining together to send business to one another. For instance, Best Western is a lodging referral group that has a central reservations system available to each member. E‐commerce has significantly affected co‐op buying. Companies are currently aggregating purchasing processes for similar hospitality organizations throughout the country. These companies are commonly referred to as aggregate purchasing companies or group purchasing organizations (GPOs). Examples of GPOs include Entegra, Foodbuy, and Dining Alliance. GPOs do not buy or sell products. Instead, they negotiate contracts on behalf of restaurants, hotels, management companies, resorts, and real estate investment trusts (REITs). Each company enrolling in this group might receive a purchasing guide that includes the names, e‐mail addresses, websites, and telephone numbers of suppliers, along with a brief description of the programs negotiated on purchasing companies’ behalf. Buyers can then access a private e‐commerce marketplace—or portal—to conduct business with approved distributors or suppliers. As more buyers become members of the GPO, purchasing power increases and so do savings. Typically, either buyers pay a participation fee that provides access to the aggregate purchasing companies’ pricing or the GPO takes a percentage of the savings. ■■ The Multiunits and Franchises The second major category of hospitality operations in the purchasing function includes multiunit companies, franchises, and chains. These interlocking operations organize their purchasing somewhat differently from independent organizations. One usually finds, when examining a chain of hospitality operations, for example, a centrally located vice president of purchasing. Moreover, the company may maintain one or more central distribution points, such as a commissary or distribution warehouse. The managers of the company‐owned outlets receive supplies from the central distribution points under the authority of the vice president of purchasing. Often these managers may also do a minimal amount of purchasing from local or national suppliers that this vice president approves; in some cases the managers may order from approved suppliers without consulting the vice president of purchasing, or they may order everything from a commissary. In company‐owned outlets, the internal organization for buying, particularly for restaurants, stipulates that the unit manager order most products from the central commissary or approved suppliers. The unit managers may, Purchasing Functions in Different Types of Hospitality Operations 9 however, have the authority to make a few purchases on their own, such as a cleaning service or a locally produced beer. When the unit managers do this sort of purchasing, however, they nevertheless need to follow company policies and procedures. In company‐owned, large‐hotel properties, a system similar to that of the large independents generally exists while applying the broader concepts of supply chain management. That is, the vice president of purchasing at corporate headquarters may draw up some national contracts, research and buy commodity items such as coffee or shrimp in consideration of global commodity A basic, supply and demand, establish purchase specifications, and set general purchasraw food ingredient. It is considered by buyers to ing policy. He or she may also purchase the stock for the company’s central disbe the same regardless of tribution warehouses and/or central commissaries. By and large, however, vice which vendor sells it. For instance, all‐purpose flour presidents of purchasing handle overall policy, while the individual hotel units, is often considered a comalthough they do not have complete freedom, exercise a great deal of purchasing modity product, for which discretion within established limitations. any processor’s product is acceptable. The typical franchisee receives many supplies from a central commissary, but many of these non‐company‐owned units try to do some purchasing locally— central distribution center A large warehouse to maintain good relations in the community, if nothing else. However, they owned by a multiunit quickly discover that they save considerable time, money, and energy by using hospitality company that orders merchandise directly the commissary and/or central distribution center as much as possible. If no from primary sources, central commissaries and distribution centers are available, the franchisees usutakes delivery, stocks the ally order their needed stock from suppliers that the vice president of purchasmerchandise, and then delivers it to company‐ ing has prescreened and approved. Franchisees are, however, usually free to buy affiliated units in the area. from anyone as long as that supplier meets the company’s requirements. A DAY IN THE LIFE Wayne Bach, Purchasing Manager ■■ THE FOUR QUEENS HOTEL AND CASINO, LAS VEGAS, NEVADA O pened in 1966, the Four Queens Hotel and Casino is one of the classic gaming hotels on Fremont Street in downtown Las Vegas. The property has 690 rooms including 45 suites, three full‐service restaurants, two fast‐service restaurants, three cocktail lounges, 22,000 square feet of meeting and event space, and a gift shop to accompany its 32,000 square feet of casino space. Wayne Bach and Karen Ashe comprise the tag team that ensures that there are enough food, beverage, and supplies to provide superior products and services to their guests 24 hours a day. Wayne holds the title of purchasing manager. He reports directly to the controller and then to the financial director. Wayne is responsible for buying all food and beverage products so he also indirectly reports to the chef and the food and beverage directors. Wayne starts his day early; he arrives at 6:00 a.m. to his office right inside the receiving and storage warehouse. Wayne feels that being right on the floor is essential to have control over the operation and to know exactly what is happening in his department. When he arrives, the first thing he does is check e-mails for notices from the chef regarding special needs and from suppliers regarding any 10 C HA P TE R 1 The Concepts of Selection and Procurement A DAY IN THE LIFE (continued) product shortages or the product bid sheets he receives an average of twice per week. Then he grabs his inventory sheet and walks through all the storage areas, refrigerators, and freezers. Because he manages the four receiving clerks, he checks to see that they are doing their jobs to keep the areas clean and the product rotated. He makes sure they check the weight and quality of all deliveries, especially fresh meat and seafood items. Twice a week he does a check to see that the par stocks on hand match the amounts that the computer shows should be available. The Four Queens does not have as sophisticated a computer system as some of the ones that will be discussed later in this book, but it does use a Stratton‐Warren inventory system. After the food products are received, an inventory control clerk enters the quantities of products and prices from the invoices into the system. Wayne spends 20–25 percent of his time placing orders. He emphasizes that it takes a lot of research to ensure that he is buying the proper products and that he is helping the chef and food and beverage director learn about new products in the marketplace or that might fulfill existing needs better. He attends many trade shows such as restaurant association shows, Catersource, the Nightclub and Bar show, and distributor shows as well as reads as many trade magazines as possible. He also arranges for brokers and vendors to provide samples and perform taste tests. Food items get bid sheets twice per week. Due to the relatively small size of the warehouse, Wayne orders produce and some dairy items daily, meat and liquor three times a week, and grocery items/ dry goods twice a week. The inventory control system is not as strict as in some of the larger properties where Wayne has worked such as the Plaza Hotel in New York. About 75 percent of the product used from inventory is issued from a requisition, but chefs and others can enter the storeroom, especially in the evening hours when the receiving clerks are not present, and still grab what they need. One of the biggest parts of the job is deciding how much and when to order. The hotel sets pars (the minimum amount that you always need to have on hand) for all products. But these pars can be greatly affected by the amount of banquet business. At the Four Queens, the chef decides how much extra food is needed to let Wayne know how much to order. With all the special events on Fremont Street such as concerts and festivals, Wayne says that for beverages, they often need to order as much as 50 percent over the pars, especially beer to satisfy all the people thirsty from the heat in Las Vegas. Another employee maintains par stocks for all the nonfood items for the hotel, such as plates, glassware, flatware, disposable items, linens, towels, and even the coffeemakers. Some of the biggest challenges are keeping enough glassware because the breakage is so high. Pillowcases are another high demand item as on a busy weekend the housekeepers may change out as many as 1,000 of them in an hour. The hotel buys many logo items that require special procedures. It has blanket purchase orders with the companies that supply items such as logo cocktail napkins and glasses. Because the price is cheaper to buy the items in large quantities but there is not enough storage space to hold that much product, it uses stockless purchasing where the supplier keeps the product in its warehouse until needed. When soliciting bids for these items every six months, the ability of the company to store the product is even more important than the price. Wayne says that the hardest part of his job is accommodating and finding products for last‐­minute requests. But the best part is the job is lots of fun. “There is always something different to do and new things to learn. Know your products, know your vendors, know your menu/recipes, know your customer.” Questions and Problems A DAY IN THE LIFE (continued) Wayne is a Culinary Institute of America trained chef and worked for the Plaza Hotel in New York for 20 years prior to moving to Las Vegas. The major differences between his job at the Plaza and at the Four Queens are that the Plaza had stricter inventory controls and also had many early morning and off-hours deliveries. Key Words and Concepts Aggregate purchasing companies Business‐to‐business (B2B) e‐commerce Business‐to‐consumer (B2C) e‐commerce Central distribution center Commercial hospitality operations Commissary Commodity Conversion Co‐op buying Corporate social responsibility E‐commerce E‐commerce marketplace E‐procurement Executive steward Franchise Group purchasing organization (GPO) Logistics management Noncommercial hospitality operations Portal Procurement Purchasing Real estate investment trust (REIT) Referral group Selection Sourcing Supply chain management Sustainability Questions and Problems 1. Define the term selection. 2. Define the term procurement. 3. Define the term supply chain management. 4. Define the term logistics. 5. Explain the advantages of studying the broad view of the purchasing function. 6. What is an e‐procurement application? 7. Briefly describe the major segments of the hospitality industry. 8. Briefly differentiate among the ways in which the small and the large independents ­generally do their purchasing. 9. Briefly describe co‐op buying. 10. How has e‐commerce affected co‐op buying? 11 12 C HA P TE R 1 The Concepts of Selection and Procurement Questions and Problems (continued) 11. Briefly describe two typical purchasing procedures found in multiunits and franchises. 12. Briefly describe how a local restaurant that is part of a large restaurant chain probably does its purchasing. 13. Name one reason why a franchise might do some local buying. 14. Describe three duties of a vice president of purchasing in a large hotel or restaurant chain. 15. Why might a small, independent hospitality operation be interested in co‐op buying? 16. Under what conditions do you think a franchise operation might be interested in co‐op buying? 17. Define the term purchasing. 18. What is a referral group? 19. Briefly describe the benefits of e‐commerce. 20. How do you think e‐commerce has changed the hospitality industry? Experiential Exercises 1. Ask a manager of a local franchise operation the five following questions. Write a report detailing your findings. Do you currently purchase items from a commissary? If so: What items are you required to purchase from the commissary? Do you have to follow specific guidelines on the other products you purchase outside of the commissary? What are the benefits of purchasing from a commissary? What are the drawbacks of purchasing from a commissary? 2. Interview a noncommercial hospitality operator. Ask him or her to describe the job and explain how the responsibilities differ from those of a commercial hospitality operator. Write a report detailing your discussion with the operator. 3. Shadow (follow around) a purchasing agent for a day. Prepare a diary of all duties and responsibilities performed by the agent. References 1. Council of Supply Chain Management Professionals (CSCMP), Logistics Management, 2010. Retrieved from http://cscmp.org/aboutcscmp/definitions.asp. See also, R. Handfield, What Is Supply Chain Management? 2011. Retrieved from http://scm.ncsu .edu/scm‐articles/article/what‐is‐supply‐chain‐management. CHAPTER 2 TECHNOLOGY APPLICATIONS IN PURCHASING The Purpose of This Chapter After reading this chapter, you should be able to: • Describe how distributors utilize technology to assist in the management of their products and to streamline their services. • Explain how technologies are used by hospitality operators in the selection, procurement, and inventory management process. • Discuss what may lie ahead for the future of hospitality selection and procurement. 13 14 C HA P TE R 2 Technology Applications in Purchasing TECHNOLOGIES THAT DISTRIBUTORS USE T echnology applications in the selection and procurement function continue to evolve rapidly. Today, many forms of technology are available to help distributors and buyers transact business. Very few businesses can do without these tools that can considerably streamline the cycle of purchasing, distribution, receiving, storage, issuing, and product usage. Distributors use software applications to track and analyze many business middleman or intermediary functions. A distributor is the middleman or intermediary between a source Other terms for vendor. and retailer (to be discussed further in Chapter 3) and, therefore, must keep track of information such as customers, sources, costs, and specifications.1 ■■ Customer Databases Typically, distributors use specialized software that integrates with the hospitality operation’s point‐of‐sale (POS) system that buyers use to input their orders. The distributors also use their management information systems to build valuable customer databases. For example, these databases can help predict the hospitality business’s product needs and behavior so the right products will always be available and can even forecast profitability by analyzing the buyer’s food costs of items sold. Customer databases also provide information to the marketing department for the development of special promotions. This software is also used to estimate, or forecast, the number and types of hospitality operations that might, or should, open in a particular area, allowing the distributor to make informed decisions regarding hiring and expansion. These days, the development and management of customer databases customer relationship is more commonly included in an operation’s customer relationship management (CRM) management (CRM) strategy that places the emphasis on the cusAnother term for customer. Sometimes also referred to tomer. CRM is “all the tools, technologies and procedures to manage, as customer ­relationship improve, or facilitate sales, support and related interactions with cusmarketing. Forming tomers, prospects, and business partners” throughout the business. This personal alliances that will lead to the sale and could include customer contact information, product preferences, buying purchase of products and habits, and satisfaction levels regarding service, just to name a few eleservices. ments.2 Using CRM in this type of business‐to‐business (B2B) environment assists in developing critical masses of information and can be integrated with other technology solutions to make all processes more efficient. Salesforce.com is one of the largest CRM systems according to Softwareadvice.com. Its hospitality clients include distributors and producers such as Sysco, Coca‐Cola, and Pernod Ricard (a premium wine and spirits company). ■■ Ordering Systems Distributors also utilize software applications to facilitate the sales process. For instance, most distributors now have all inventories counted, priced, organized, and stored in product databases that their customers can access online. This detailed information enables distributors to Technologies That Distributors Use 15 manage and price their products quickly and easily. It is much more convenient for everyone than the old method, whereby buyers would receive printed product lists from distributors that noted product names, manufacturers, identification numbers, and other descriptive information. To obtain the product status—availability or current prices— product status Indicates buyers had to call either the sales representative or the distributor directly whether a product is available from the vendor or if and in some cases had to receive daily fax order sheets to update prices, espeit is on backorder. cially dairy, meat, fish, poultry, produce, and bread prices. The buyer then had to call in the order or place it with the sales representative. This old method is still used, although most buyers now go online to procure products or request them from their central warehouses. When buyers go online to acquire products, they utilize an online online ordering system ­ordering system, commonly referred to as a web order entry system. Ordering products from vendors over the Internet Through this type of system, buyers and distributors communicate directly or directly from a purveyor with one another online. This method of communication permits buyers using his or her proprietary to order products directly and receive instant feedback on pricing and availsoftware. ability. Such systems also minimize the ordering function and the paper trail web order entry system Refers to a method of for buyers and distributors. Distributors commonly provide these services ordering p ­ roducts online. free of charge. Companies using these types of Web order entry systems include U.S. Foodservice and Sysco. These companies are two of the largest broadline foodservice ­distributors in the United States. Examples of other companies that utilize Web order entry systems include the following: Cheney Brothers, Inc. iTradeNetwork HFM Foodservice (Pacific region and Hawaii) J. Kings Food Service Professionals, Inc. Phoenix Wholesale Foodservice Schoenmann Produce Co. FreshPoint Preferred Meats GFS—Gordon Foodservice Ecolab Coca‐Cola ■■ GPS With the rapid development of inexpensive global positioning systems (GPS), many distributors use logistics and mapping software to outline the routing sequences their delivery drivers must follow when delivering products.3 This technology is commonly referred to as a “GPS vehicle tracking system.” A distributor can enter into the GPS all the locations logistics and mapping software Software used by vendors to outline the routing sequences its delivery drivers must follow when delivering shipments. Intended to increase delivery efficiency. 16 C HA P TE R 2 Technology Applications in Purchasing F I G U R E 2 . 1 GPS screen as seen by a delivery driver. Courtesy of Discrete Wireless, Inc. drivers need to visit the following day simply by typing an address or placing a marker on a digital map (such as Google Maps or Mapquest). The sequence of deliveries and routing also impacts how the trucks and items are loaded and placed within the vehicles. Fleet management software can then be utilized to determine fleet management software Software that the most efficient route to take and will assist in determining the optisuppliers use to schedule mal number of delivery trucks to use (Figure 2.1). This software can also vehicles and other equipestimate both driver downtime and the amount of product that should ment usage, required repair and maintenance work, be delivered per hour by taking into account street traffic flow (utilizing and preventive mainteroadside sensor networks or applications such as Waze), various times nance activities. of day, and the expected time spent loading and unloading shipments. roadside sensor network Software can then compare these estimates with actual results. Companies Vehicles that contain a variety of onboard sensors such as Fleetgistics and USA Fleet Solutions specialize in providing these that collect real‐time data types of technologies. on current traffic condiRelated software can be utilized to track delivery errors, discrepancies, and tions that can then be used to reroute complaints or comments by customers, receiving agents, or salespersons. All ­automatically the of these software programs can be integrated to form one information techvehicles’ scheduled routes. nology (IT) solution. This enables the distributor to minimize order‐placing Some networks also include safety warning and delivery costs, as well as to resolve problems quickly, ultimately increasing ­features. margins and profitability. Technologies That Hospitality Operators Use ■■ 17 RFID Although a relatively new technology in the hospitality industry, RFID is predicted to be able to dramatically change the RFID tags Radio fremanagement and distribution quency identification tags of products (see Figure 2.2). placed on boxes, crates, pallets, and the like. They RFID (radio f­requency identi­ are used by distributors fication) tags are miniscule and retailers to monitor micro­chips, some as small as a automatically inventory and storage areas. A grain of sand, that can be uti- wireless technology is lized in tracking everything from used—the same technolcars to basic inventory, and even ogy that allows electronic wireless toll payment people. For instance, they can in many states or the F I G U R E 2 . 2 An RFID scanner. be attached to apples to transmit ExxonMobil SpeedPass ©ermingut/Getty Images location information and mon- wireless payment system—to transmit itor temperature throughout the channel of distribution. RFID can also be data wirelessly to a sensor. useful in overall supply chain management and can assist with more accurate It could be argued that RFID tags are a major inventory counts and order reconciliations, ensuring product is fresh and free improvement over the from organisms that cause foodborne illness, and reducing out‐of‐stock situ- bar code technology used ations.4 More information on the basics of RFID can be found in the online by most distributors and retailers today. RFID Journal. TECHNOLOGIES THAT HOSPITALITY OPERATORS USE M any technological products have been developed to streamline the selection and procurement process and make life easier for buyers. Hospitality operators have generally been eager to adopt labor‐ and time‐saving electronic equipment to enhance the purchasing function and the overall inventory control process. ■■ Fax Machine It is hard to believe that just 30 years ago, fax machines were one of the most innovative types of technology used in purchasing. The ability to send documents over phone lines significantly reduced the confusion and mistakes sometimes associated with verbal orders and allowed printed output to be stored for historical records, used to verify orders and prove they were sent, and establish usage patterns. Today, most fax machines are multipurpose devices that can scan, print, fax, email, and copy at incredible speeds in high resolution and color. eFax 18 C HA P TE R 2 Technology Applications in Purchasing ­ ocuments can also be sent from within various applications and via email. However, they have d been almost fully displaced by personal computers (PCs), notebooks, tablets, smart phones, and other smart devices. ■■ Personal Computers, Tablets, Smart Phones, and Other Smart Devices The personal computer (PC) is certainly the most powerful and useful tool that a hospitality owner–manager can have. Although the majority of students reading this book cannot imagine a time without computers, PCs in 1979 (VisiCalc) revolutionized how hospitality operators could analyze huge amounts of data and manage inventories more effectively. Previously, the majority of inventory costing and counting had been done by individuals armed with calculators, paper, and pencils. PCs have also made it possible for hospitality operators to base their purchasing decisions on the most up‐to‐date data, such as current food costs, item availability, and menu item popularity. Today, the mobility, flexibility, and convenience of wireless devices mean supply chain managers can coordinate processes at every link in the chain, regardless of their physical location. They also can access data on all devices that can support browser applications such as Internet Explorer, Google Chrome, Apple Safari, and other proprietary applications. Although some would argue that the PC is becoming obsolete, others feel that it will still have a place for business and personal use for many more years.5 point-of-sale (POS) system Computerized device used to record sales revenue and maintain a considerable amount of management information, such as number of guests served, server productivity statistics, amount of cash collected, number of each menu item sold, and so forth. ■■ Point‐of‐Sale Systems Before the introduction of the point‐of‐sale (POS) system, it was very difficult to track sold menu items. The gear‐driven cash register merely stored cash and provided some limited sales information on printed receipts while ­reporting based on how many times a specific key was hit on the keyboard. Today, POS systems are networked PCs that are highly inte­ grated in the daily functions of operations (see Figure 2.3). These systems can tabulate and organize tremendous amounts of sales data very quickly Many POS systems actually include a back‐ office PC or access to cloud computing, where all data are stored, reported, manipulated, and integrated with other hardware and software applications inside and outside the operation. Most POS systems use touch‐screen PCs that allow authorized users to delete menu items, track employee activity, analyze worker productivity, force order modifiers (such as F I G U R E 2 . 3 POS system. doneness of a steak), and up‐sell (upgrade ©Oracle Corporation, used with permission Technologies That Hospitality Operators Use your meal to a large Coke and fries?). Some POS systems allow a waiter to carry a wireless ordering system to the table. There are also POS systems on top of or ­embedded at the table, ­allowing customers to order themselves and complete other functions such as comment cards, server paging, nutritional information, wine ordering, and games. Jack in the Box was one of the first quick‐service restaurants (QSRs) to install kiosks at which guests can order their food.6 Stacked in California is a great example of a restaurant company that allows guests to build their own menu item on a tabletop computer and send the order directly to the kitchen. POS systems are networked and communicate with a central computer, referred to as a server, or through the Internet. This system can track sales from the connected computers in all departments or areas within the hospitality operation and instantly provide vital information to managers. These systems integrate with inventory‐tracking systems that automatically delete from inventory the standard amount of each ingredient used to make each menu item. The integration of POS and inventory systems provides the manager with a theoretical inventory usage figure that can later be compared with actual physical counts. Furthermore, some POS systems facilitate the ability to send purchase orders directly to the distributors, based on sales and inventory reduction information.7 Back‐office systems and applications often include additional software modules such as production forecasting, training, labor scheduling, time and attendance, and human resource information systems (HRIS) that includes all human resource and employee‐related functionality. ■■ 19 order modifier Point‐ of‐sale (POS) software prompt that forces the server to answer questions about a guest’s order. For instance, if the server enters one steak into the system, the computer will ask, “What temperature?” The server will then answer the question to complete the order before sending it to the kitchen. server Central computer to which other computers, such as individual PCs, are networked. It communicates with all the other computers on the network. theoretical inventory usage Expected amount of inventory usage based on recorded sales. For instance, if 100 steaks are recorded as sold, there should be only 100 steaks missing from inventory. Bar Code Reader Many hospitality operations are now placing bar code labels on their inventory items (or use those the distributors applied) to streamline the inventory‐control process (see Figure 2.4). Bar code labels are vertical lines of varying thicknesses separated by blank spaces. These lines and spaces, or “elements,” provide a bar code reader with an identification code (ID). This ID is used to look up the product on a database. Bar code elements, IDs, and corresponding product information are based on a standard that associates these pieces of bar code element The lines and spaces on a bar information. The most commonly used standard is the Universal Product code label. Code (UPC) in the United States. However, other standards include EAN, Code 128, Code 39, Interleaved 2‐of‐5, PDF417, MaxiCode, Data Matrix, and QR Code. Information on these standards is available on the websites of GS1 US, Scandit, and Barcode Graphics. When a bar code system is used, the physical inventory count of a hospitality operation usually consists of scanning each product in the storeroom with a portable bar code reader.8 Bar code readers of today sometimes are specialized devices, but also can be an add‐on or an application to a smart phone or other tablet device. There is no need to spend large amounts of time locating a product on a lengthy printed inventory list and recording, by hand, the total number of units in inventory at the end of the month. Instead, the portable bar code reader quickly gathers and 20 C HA P TE R 2 Technology Applications in Purchasing Clear Area Bar Code Bearer Bar 000 12345 Start Indicator Number System Indicator Assortment Indicator A 67890 5 Case Check Item Digit Number HumanReadable Code Stop Indicator Manufacturer’s Identification Number B F I G U R E 2 . 4 (A) A UPC description. (B) Using a bar code reader for inventory. ©Bacho/Shutterstock downloads the data to the computer for instant analysis. Bar code readers provide wireless communication to a computer and can instantaneously download and upload information over radio frequencies (RFs). The bar code reader also automates the counting of in‐process inventories and in particular is used frequently in beverage operations to control inventory. This will be discussed in more detail in Chapter 22. bar code reader Device used to read labels that contain bar code elements. ■■ Product Identification and Specifications Buyers have many options available to “spec out” or compare similar products for their hospitality operations. Traditional forms include buyers’ guides, such as the North American Meat Processors Association (NAMP) publication, The Meat Buyer’s Guide (MBG), originally North American Meat Processors Association published in 1963. This printed guidebook, with specific product information, (NAMP) Trade orgacontains many full‐color photographs. The newest version of this guide (March nization representing 2011) can be purchased in print or for online access, or a combination of both meat‐processing companies and associates who share a at the association’s w ­ ebsite. continuing commitment Other products on the market can also streamline the product to provide their customers identification and specification process. These resources enable users to with safe, reliable, and consistent meat, poultry, search products and product categories and may also provide information seafood, game, and other about the distributors who sell them. They can contain a seemingly endless related products. amount of information. If a product is made somewhere in the world and is product identification distributed, chances are it can be found online. Another term for product specification. An example is the Food and Beverage Market Place, started in print form 100 years ago as the Thomas Food Industry Register (TFIR). This subscription‐ specification A description of a product’s based service (also available in print) brings buyers and sellers together required characteristics. through a searchable database of more than 40,000 company listings and nearly 6,000 product categories. All company listings are cross‐indexed, and one may search by product, location, company, or brand name. The Thomas Register produced a printed version Technologies That Hospitality Operators Use 21 of this product for more than 100 years. Websites can also help buyers spec out products. For example, many marketing boards in the United States provide information about a particular product. The California Avocado Commission, for instance, is responsible for promoting the sale and purchase of avocados. This board, as well as many others, such as the Australian Pork Corporation, the National Paper Trade Association, and the British Contract Furniture Association, have websites to distribute information about their products. The sites might feature product specifications, availability reports, trends, and other information. These sites also enable viewers to engage in question/answer activities with the board administrators. ■■ Product Ordering As discussed in Chapter 1, several companies have developed systems that permit buyers to order products online. These e‐procurement applications, e‐procurement often made available by the distributors, streamline and minimize a buyer’s ­application Software that 9 allows c­ ustomers to select ordering procedure, thereby creating a value‐added service for the buyer. and purchase products At the same time, when a buyer uses this ordering system, he or she online. streamlines the order‐taking process at the distributor’s end. Previously, a distributor had to enter a buyer’s order manually from a fax, telephone call, or written purchase order. The new system eliminates the inefficiencies of the “multiple‐ordering” process. Instead, a buyer enters the order and sends it directly to the distributor. This process reduces labor costs and time on the buyer’s and the distributor’s ends. For the buyer, the goal is to have “perfect orders.” The payoff for companies with high rates of “perfect orders”—those that are complete, in the right place, undamaged, and on time—can be substantial. An AMR Research survey cited by the American Hotel and Lodging Association (AHLA) concluded that increasing the total number of perfect orders would result in a one‐­percent profit increase for an organization. Companies that ranked high in the amount of perfect orders carried less inventory, had shorter times between when they purchased products and when the product was sold to the hospitality companies’ guests, and were more profitable overall.10 Another distributor benefit of the process is the likelihood that users of this easy‐to‐use ordering system will become loyal ­customers who are sometimes referred to as house house account Term accounts or prime‐vendor accounts. used by a vendor to idenLarge, multiunit hospitality operations leverage this technology by negotify a very loyal customer. tiating contractual pricing agreements on selected products prior to ordering. A ­customer who continually buys from a vendor and is A unit operator can then go online to order products that have been approved not interested in buying by the main office. Upon entering the distributor’s ordering site and logging in, from competing vendors. the unit operator would see only a list of items that they are approved to buy. prime‐vendor account Product information on e‐procurement applications can typically be A consistent and significantly large account a buyer retrieved in several formats, unlike the typical printed catalog in which has with a vendor that, everything is listed alphabetically and/or by product categories. For because of its size and the ­instance, databases on the e‐marketplace enable users to search for and loyalty of the buyer, may be eligible for discounts and/ evaluate all of the types of hot dogs a particular vendor sells. Buyers might or other special privileges. view hot dogs by size, types of ingredients, and packers’ brands. Users can 22 C HA P TE R 2 Technology Applications in Purchasing also narrow the search, for example, to 4–1 (four hot dogs per pound), pure‐beef, or Oscar Mayer® brand hot dogs. From this narrow list, users can then choose the desired product or continue to refine and narrow the search. Once users find the desired product, the hospitality operators can then “tag,” or choose, products they want to procure. Orders are then instantly communicated to the vendor, who might forward this information to a local distribution center for processing and delivery. ■■ Inventory‐Tracking and Storage Management If product orders have been made online, ordering information can be utilized to streamline the inventory process. For instance, it can be linked to other software and used in the equations and formulas noted in Chapters 8, 9, and 13. Today, almost all hospitality operators use technology to increase their inventory‐control and cost‐control efforts. For example, some small operators develop elaborate spreadsheets using generic spreadsheet software, most commonly in Microsoft Excel®. They list all their products in inventory and then develop mathematical formulas to calculate costs and usage. On the last day of each month, they physically count their storeroom and in‐process inventories and enter this information on the spreadsheet. They also enter all product costs, which usually come from typing in invoice receipts for the month or from directly downloading the information from an ordering system they are using. The information currently entered is the “ending inventory,” and the information entered the previous month becomes the “beginning inventory.” Once the major variables have been entered (beginning inventory, ending inventory, purchases, and other end‐of‐month adjustments), cost of goods sold calculations are automatic. Some hospitality operators use off‐the‐shelf software packages and services that manage inventory in a hospitality environment, such as Eatec®, CrunchTime!, Compeat, MenuLink by NCR, and Stratton Warren system by Agilysys. These software packages can streamline the back‐of‐the‐house hospitality operation and be linked to an operator’s POS system, whether it is on a server or in the cloud. These packages can also cost recipes, analyze a recipe’s nutritional information, calculate food and beverage costs, evaluate a food item’s sales history, forecast sales, develop audit trails, allow instant stock level information, and enhance menu planning efforts (see Figure 2.5). In addition, many of these software packages can track employee work schedules, attendance patterns, and work‐hour accumulations. When generic spreadsheet programs and off‐the‐shelf software do not meet a hospitality operator’s needs, he or she might hire a software‐consulting firm that specializes in the hospitality industry. A specialist can develop customized software applications to satisfy almost any need. Alternately, the developers of some off‐the‐shelf software products can customize some or all of their software packages, but in today’s environment this is becoming less and less a requirement. Two large consulting groups specializing in hospitality procurement and software are Hospitality Purchasing Consultants and the Parker Company. This brings up the concept of “all‐in‐one” solutions versus “best‐of‐breed” solutions. The all‐in‐one is where all the various applications are provided by a single back‐office software provider. In a best‐of‐breed solution, the operator chooses the best individual software applications for each specific purchasing function and then What Lies Ahead? F I G U R E 2 . 5 A wireless free‐pour liquor inventory management system. ©Skyflo™ Automatic Bar Controls, Inc. provides integration between the systems to allow them to share and use the data collected by each individual application. WHAT LIES AHEAD? I t is hard to believe that the use of computer technology in the selection and procurement function is only in its infancy. In the future, technology will bring more ideas, tools, and information to hospitality operators. And it cannot come too soon because hospitality operators will continue to experience more competitive markets, slimmer profit margins, and a shrinking labor force. As the American Hotel and Lodging Association states, purchasing technology offers substantial return on investment (ROI) by more precise ordering through managed par levels, instant access to lowest price information, the ability to hold people accountable for differences in sales versus product used, and better communication with vendors. In a competitive environment, hospitality operators have less time to make key managerial decisions. Making the correct decisions quickly can be done, but only if operators have access to the necessary technological tools. In the future, distributors will probably bear more of the burden of providing hospitality operators with the proper technology to suit a more technical selection and procurement p ­ rocess, as well as the burden of helping operators control their businesses more efficiently. Because hospitality businesses are the distributors’ customers, it is in their best interests to ensure that these companies make the correct purchasing and other key management decisions. Distributors, therefore, will be more actively involved with their customers, helping them to develop and evaluate new menus, substitution possibilities, inventory management procedures, and marketing strategies, as well as assisting them with streamlining the process of electronic commerce. 23 24 C HA P TE R 2 Technology Applications in Purchasing one‐stop shopping Buying everything you need from one vendor. Alternately, buying everything you need from the fewest possible purveyors. In the future, the distinguishing factors between distributors most likely will be the services they provide and the technology they use and can share with hospitality operators. In addition, because of time constraints, competition, and economies of scale, many industry experts feel that more hospitality operators will practice one‐stop shopping, thereby teaming with prime vendors to enhance their competitive positions. BETTER PROCUREMENT Abigail A. Lorden, editor-in-chief, Hospitality Technology ■■ FIVE KEY FEATURES FOR AN EFFECTIVE INVENTORY MANAGEMENT SOLUTION M anaging food and beverage inventories is a critical element in operating a restaurant. Whether following a philosophy of long‐term contract negotiation, or buying in bulk when the price is right, all well‐run restaurant operations share at least one common denominator: controlling their inventories. A procurement system is a central component in any effective inventory management strategy. More and more restaurant operators are turning to Web‐based procurement systems for ordering and tracking their inventory, and members of the technology vendor community are adding procurement and inventory management to their point‐of‐sale and back‐office systems. Copyright 2009 by Edgell Communications, Inc. All rights reserved. Before settling on any procurement or inventory management solution, restaurant operators should work to understand their operations’ specific needs and choose a vendor that can offer a tailored solution. Although the features and functions of the “right” inventory management solution will vary by restaurant operation, here’s a lineup of five important features that aid in effective procurement and inventory management. User‐friendly. As with most technology systems within the restaurant, it’s not the IT directors, but the managers and front‐line staff that regularly interface with systems. As such, any procurement solution should offer a user interface that’s easy to understand. Though complex algorithms might be used to calculate food costs per unit, or determine quantities needed, the algorithms should remain on the back end of the system so that the day‐to‐day user can easily navigate the software. Considering the high degree of turnover in the foodservice industry, the system should also require minimal training and be intuitive to use. Life cycle product tracking. Restaurant ingredients tend to be purchased in larger quantities or cases, are then broken down into individual units (such as cans of sauce or corn), and then applied in recipes by smaller units of measure. For this reason, a procurement solution should be able to track the product’s life cycle from receipt through consumption. The software should use conversion tables and algorithms that can account for and relate different units for the same ingredient. Integration into the POS. Most inventory cost control systems use information that is captured from the point of sale to make projections about inventory. The systems track items on hand and ongoing sales to monitor inventory and can be set up to automatically generate a purchase order when the inventory of a specific item drops below a preset minimum. Managing the procurement process also requires that Questions and Problems BETTER PROCUREMENT (continued) restaurants account for the lead and lag time required in shipping an item. Integration into the POS can give an inventory management system the real‐time data needed to avoid out‐of‐stocks. Customized reporting. To get the most from an inventory management solution, restaurant operators should have the ability to create customized reporting that can help them address operational concerns, including the optimization of on‐hand inventory based on supplier lead and lag times. Comprehensive systems often offer a dashboard view of consumption and pricing trends and can be customized to include the entire portfolio of restaurants, specific regions, or even certain suppliers or departments. Remote access and real‐time data increases the usability of such dashboard reporting tools. Nutritional information. With the social push toward health‐conscious eating, and several state governments mandating that nutritional information be made available to customers, inventory and procurement solutions are starting to incorporate a nutrition module. In this case, the software would assign nutritional values to individual inventory items as well as recipes. Having this information available can be helpful to restaurants when building customized menus for special events or adding healthy food choices to their regular menus. Key Words and Concepts Bar code element Bar code reader Customer relationship management (CRM) E‐procurement applications Fleet management software House account Intermediary Logistics and mapping software Middleman North American Meat Processors Association (NAMP) One‐stop shopping Online ordering system Order modifier Point‐of‐sale system (POS system) Prime‐vendor account Product identification Product specifications Product status RFID tags Roadside sensor network Server Theoretical inventory usage Web order entry system Questions and Problems 1. How has a Web order entry system changed the ordering process? 2. Explain what a customer relationship management (CRM) system is and how it would be used by a hospitality supplier. 25 26 C HA P TE R 2 Technology Applications in Purchasing Questions and Problems (continued) 3. Explain how the use of global positioning systems (GPS) has affected the distribution process. 4. How can a spreadsheet program, such as Microsoft Excel, assist managers in controlling their inventories? 5. How could a wireless ordering system improve customer service in a hospitality o­ peration? 6. How can placing bar codes on all products in inventory streamline the order‐taking ­process? 7. What are the advantages and disadvantages of using online versions of product guides such as The Meat Buyers Guide or the Fresh Produce Manual versus the hard copy versions? 8. What type of considerations would a hospitality operation have when deciding whether to buy off‐the‐shelf purchasing software and systems or whether to develop the program itself? Experiential Exercises 1. Visit a local distributor to view its ordering, routing, delivering, and invoicing system. 2. Research a current hospitality‐related purchasing and inventory system. Provide a one‐ page report explaining the capabilities of the system. 3. Research a current hospitality‐related POS system. Provide a one‐page report explaining the capabilities of the system. 4. Visit the website for a food and beverage marketing board. Just a few examples are the National Cattleman’s Beef Association, the Distilled Spirits Council of the United States (DISCUS), California Avocado Commission, and the American Egg Board. Write a one‐page report evaluating the site based on the following criteria: • Graphical design • Ease of use • How this information would be used to guide th...
Purchase answer to see full attachment