Unit Title: Food
Service Management
Unit Number: 25
Unit Level: Level 5
Presentation by:
Yili Zhao
y.zhao@nelsoncollege.ac.uk
Recap of P1
1.1 Differing foodservice contexts and product ranges and
suppliers
✓Diversity of the foodservice
✓Planning Product ranges and suppliers
1.2 Food supply chain
✓Farmer
✓Processor
✓Transportation& Storage
✓Consumer
Differing foodservice contexts:
➢fine dining
➢casual dining
➢fast food and take away
➢pop-up food services
➢conferences and events
➢themed food services
Food Ranges: The range of products is the set of all types
and kinds of products offered to customers by the
company or any of its units.
The key players in the supply chain
Farmer Processor Transportation& Storage Consumer
5
Learning Outcomes
• Learning Outcome to be covered:
LO1: Investigate the sourcing and procurement processes within
a food service organisation (Part 2)
•Pass Criterion P2 :
P2 Discuss the principles of effective procurement and sourcing
processes for a food operation
By The End Of Today, You Will:
Assessment Criteria (P2):
• Understand the principles of effective procurement
and sourcing process for food service operation
• Understand how food supply chain approaches, and
procurement strategies can enhance organisational
effectiveness
1.3 Procurement management:
Procurement means?
• Procurement is the process of purchasing goods or
services and is usually in reference to business spending.
• Business procurement requires preparation, solicitation,
and payment processing, which usually involves several
areas of a company.
What is procurement management?
Procurement management is the
strategic approach to managing and
optimizing organizational spend. It
involves acquiring quality goods and
services from preferred vendors within a
stipulated budget, on or before the
deadline. The procurement management
process includes sourcing,
requisitioning, ordering, expediting,
inspection, and reconciliation.
The Key Stages of The Procurement Process
1. Identify Goods or Services Needed
2. Explore and Select supplier (Vendors)
3. Submit Purchase Requisition
4. Create Purchase Order
5. Receive Invoice and Order
6. Pay for Goods or Services
7. Record for Audit
accepted goods
rejecting goods
1.Identify Goods or Services Needed
• the Food Service Manager need to purchase products
that are:
➢ the right quality,
➢at the most cost-effective price,
➢in the most economic quantities and
➢ensure that they are available when needed
• Value for money here is not about achieving the lowest
initial price; it is defined as the optimum combination of
whole life costs (a technique used to establish the total
cost of ownership) and quality.
2.Explore and Select supplier (Vendors)
sourcing potential vendors and determining their ability to
provide the best value and quality for your goods or
services. While the stage seems straightforward, it’s
important to find vendors who not only deliver a highquality product for a competitive price, but who have a
strong reputation.
3.Submit Purchase Requisition
• Submit Purchase Requisition involves getting the
thumbs up from the internal department that controls
finances to purchase your goods or services. This
includes creating
• A purchase requisition a document and submitting it to
that department. It’s important to note here that you’re
not actually ordering anything from the vendor, you’re
getting the internal approval to do so.
Depending on your company’s procurement process this could
be straightforward or could include multiple steps of approval
depending on the value of the order.
4. Create Purchase Order
This is the part of the procurement process where the
buying happens. Once the purchase requisition has been
approved, the department that controls finances issues a
purchase order (PO) to the vendor.
5. Receive Invoice and Order
• Here, in the procurement process – receiving the invoice
and the order – may or may not happen together; one
may arrive before the other. The vendor sends an invoice
to the purchaser which describes exactly what the order
includes. The invoice confirms the sale and reaffirms
exactly when the payment is due.
• When the purchaser receives the order, three documents
➢Purchase orders
➢order receipts (which arrives with the order)
➢ vendor invoices
In case if notify the vendor of any issues with the good or
service
6. Pay for Goods or Services
Upon receiving the order and invoice as described, the
accounts payable team (finance team )will process the
invoice. Matching the invoice against an approved PO and
the delivery details for the order follows a best practice
called three-way matching in the account payable process.
If everything matches up the accounts team sends
payment to the vendor within the specified timeframe.
7. Record for Audit
The final stage in the procurement cycle is important for
all around good bookkeeping and for audit purposes.
Auditors require thorough documentation of all purchases,
so all relevant documents from purchase requisition
through invoice should be stored in one central location
Class Activity –Discussion
1. To think about when will
the buyers/customer
rejecting goods/service?
2. In the FSM how to
reduce the rejecting of
good?
Accepted goods
• Goods are deemed to be accepted by buyers when they
intimate to sellers that they have accepted them, or when the
goods have been delivered and buyers do any act in relation
to them which is inconsistent with the ownership of the
seller.
• If goods are delivered to a buyer who has not previously
examined them, the buyer is not deemed to have accepted
them until they have had a reasonable opportunity of
examining them for the purpose of:
• ascertaining whether they conform with the contract
• where the contract is a sale by sample, comparing the bulk with the
sample.
• If the goods are kept for a reasonable time and the buyer
does not tell the seller that the goods have been rejected, they
could be deemed to have accepted them unless there is a
justifiable reason for the delay.
Rejecting goods
• Most suppliers have a returns policy and it is good practice for Food
Service Manager to familiarise themselves with this before placing the
order.
• When a product is delivered, FSMs should check as much as possible
while the delivery person waits. If they are in a hurry, the delivery note
should be signed and a note made of “unchecked” on it.
• If an item is damaged, the supplier should be informed immediately, and
all telephone calls backed up with a written confirmation.
• The law allows purchasers a reasonable amount of time to check
deliveries and report faults.
• Deliveries should therefore be fully checked as soon as is possible.
• If the goods match the purchase order but the wrong item or incorrect
quantity has been bought, it will be down to whether or not the supplier
is willing to assist.
• The supplier has no legal requirement to accept goods back which have
been ordered.
Different types of profit opportunities
• Profit is the reward to business owners for investing.
• It is vital that profit is considered during an
organisation’s procurement process.
• This can be done via the following means:
• Direct, and Indirect cost
• Best Deal Evaluation
• Pricing and purchasing approaches
Direct and indirect cost
Direct cost is a price that can
be completely attributed to
the production of specific
goods or services.
• Example is manufacturing
material for a particular
food product.
• Profit opportunity arise
here by using less
expensive materials,
equipment or labour.
Indirect costs are expenses that
cannot be traced back to a single
cost object or cost source
• Example:Rent, utilities.
• Profit opportunity arise here via
the following means:
• Comparing vendors to make
sure you are getting the best
deal.
• Cut down utility bill by
conserving energy
• Reduce cost of advertising.
E.g. Use social media rather
than paid advert
‘best deal’ evaluations
• In a best deal system, the value of procured goods or
services can be simply described as a comparison of
costs and benefits.
• cost means consideration of the whole life cost
• quality means meeting a specification which is fit for
purpose and sufficient to meet the customer’s
requirements
Types of Pricing Approaches
• Cost-Based Pricing Approaches
• Buyer-Based Pricing Approaches
• Competition-Based pricing Approaches
Purchasing approaches
• Quality control is a necessity for any food service company,
predicting and controlling the entire process from farm to
fork so consumers receive a safe product that meets their
expectations for consistently high quality.
• Some ways to ensure quality and quantity control during
sourcing are:
• Use of supplier credibility: Quality teams must continually monitor
the quality and consistency of raw materials from both existing and
new suppliers and prioritize future procurement from these
suppliers.
• Carrying out random checks: This can be used to ensure quality
of product is consistent.
• Use of approved supplier lists: this is a list of companies the food
service organisation has successfully worked with in the past.
Maintaining quality and quantity controls
1.4 Sourcing considerations
What is Sourcing?
• This stage comes before any purchases are made.
In the context of our study, it involves locating sources of
the food/product your company needs to satisfy its
customers’ needs.
• It is considered a subsection of the procurement
process. Whereas procurement is concerned with the
logistics of acquiring materials, sourcing focuses on
finding the best and least-expensive suppliers for those
goods.
Before sourcing can begin, you must assess your purchasing
needs, map out a plan, conduct market research, and identify
potential suppliers.
When this is completed, you’ll then evaluate the suppliers,
and then choose the most suitable supplier for the need.
A sourcing process has four distinct phases includes:
SPECIFICATION MARKET
ASSESSMENT NEGOTIATION CONTRACT
Specification
• At this point the FSM’s key objective are two fold:
• Reduce total costs
• Safeguard a competitive market at the upcoming negotiation
stage
• To achieve the afore-mentioned outcome, the FSM must
have determined the following:
• Customer needs
• What the market has to offer
• Exact specifications required
• A winning criteria to achieve the end goal
Market assessment
• Once a clear picture of the business requirements has
been obtained, the next step is for the FSM to formally
invite suppliers to quote for the business requirements.
• This can be done via the following means:
• Request For Information: This is usually a simple and short
questionnaire for the supplier, which enables the buyer to
judge if the supplier is promising and has a good chance to
win the business
• Request for Quotation: This is a formal request to the supply
market to quote for your business. It is a more complex
document with a company presentation, bidding instructions
for suppliers and detailed information about the company
requirements.
Negotiation
• Here, the FSM can analyse the offers presented and
select the most promising suppliers to negotiate with.
• During the negotiation meeting, the FSM’s goal is to
clarify the terms of the offer and get additional value
beyond what has been offered, this might range from the
following:
• a lower price,
• a better quality product,
• improved payment terms etc.
• At the end of this process, the FSM will conclude the
deal with the best supplier
Contract
• At this point, the FSM can now prepare a formal
contract with the supplier agreed in the previous phase,
• Care should be taken during the preparation of the
contract to limit the FSM’s companies’ exposure.
Procurement vs Sourcing
• Procurement is the process of getting the materials you
need. Sourcing is finding and vetting the suppliers of
those materials.
• The main difference is sourcing focuses on direct goods
and services, while procurement focuses on indirect
goods and services.
Sourcing considerations
Careful thought and contemplation must be put into
sourcing decisions to ensure that any conclusions made
benefits the organisation.
Example of considerations that can be made are:
• Traceability of product origin
• Value for money
• The range/choice on offer
• Aftersales services and warrantees
• Types of supplier payment options and methods
Different methods of supply and trace origin data
• Traceability in the Food Service sector is the ability to
identify the origin of food, ingredients and food sources.
• This becomes particularly relevant when products are
found to be faulty.
• Methods of tracing are as follows:
• External traceability: This requires all traceable items to be
uniquely identified, and information to be shared between all
affected distribution channel participants.
• Internal traceability: This means processes must be
maintained within an enterprise to link identities of raw
materials to those of the finished goods.
Value for money
• This is succinctly described as the most advantageous
combination of cost, quality and sustainability to meet
customer requirements.
• It is also often described in terms of the ‘three Es’ –
economy, efficiency and effectiveness:
➢economy – minimising the cost of resources for an activity
(‘doing things at a low price’)
➢efficiency – performing tasks with reasonable effort (‘doing things
the right way’)
➢effectiveness – the extent to which objectives are met (‘doing the
right things’).
The range/choice on offer
• Range/Choice essentially represent the options available
to the buyer prior to a purchase decision being made
• It can be relevant to have a range of options during
sourcing because it helps to confirm that the appropriate
decision has been made.
Aftersales services and warrantees
• Good after sales service helps improve firms long-term
brand image and brand loyalty.
• Offering after sales service can help to convince a Food
Service Organisation (FSO) to trust the firm and
purchase the food product in the first place.
• Warranties are considered a common type of signal sent
by “high quality” firms to reduce the consumers’
information gap on the quality of their products.
• Here, the term “quality” indicates unobservable product
characteristics and, more specifically: product durability.
Types of supplier payment options and methods
• Payment method or option is the way that a buyer
chooses to compensate the seller of a good or service
that is also acceptable to the seller.
• Have varied payment options can be a positive sourcing
consideration as people tend to resist that which is
forced upon them.
• Some examples of payment options are: payment plans,
using credit or debit card, online payments, checks, cash,
money orders, cashiers checks, automatic withdrawals
etc
Next Week’s lesson Learning points
P3
• Analysis tools to assess business performance.
• Product placement.
Any Question?
Reference:
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Introduction. 3rd ed.Delmar, New York: Cengage Learning.
• HANNAGAN, T. (2008) Management Concepts and Practices.
5th ed. Harlow: Pearson.
• HILL, A. and HILL, T. (2012) Operations Management. 3rd ed.
Hampshire: Palgrave Macmillan.
• PAYNE-PALCIO, J. and THEIS, M. (2016) Foodservice
Management: Principles and Practices. 13th ed. Harlow: Pearson.
• REYNOLDS, D. and McCLUSKY, K. (2013) Foodservice
Management Fundamentals. Chichester: John Wiley & Sons Inc.