Methods of Purchasing

Lesson 06 : Food Purchase

Methods of Purchasing

Purchasing policy may be established by each food service institution for different types of foods. Methods of buying will depend on the quantities of various items purchased at one time.

The different methods of buying food:

  1. Open market buying: Quotations are invited for suppliers for items according to the specifications. Supplier is then selected on the basis of the sample, price, delivery terms and other services offered. This an informal method of buying. Used for purchasing perishable foods like fruits, vegetables, meat etc. helps to know the market prices – useful for small establishments.

  2. Formal buying: Formal quotations are invited from sellers against written specifications for each category of foods. News papers, printed materials widely distributed or posted to interested sellers who may be contracted on phone. Conditions such as last date of quotation, general time between the order and delivery may be specified. Quotations are opened in the presence of the bidders by the purchasing manager and other representatives from user departments, accounts etc. Lowest quotations with best possible quality are selected/approved.

    Competitive bidding purchase ( CBP ). Generally adopted by government establishments for which central purchasing is done- hospitals, Government schools, home for handicapped etc.

  3. Negotiated buying: Negotiations between the buyer and the seller regarding prices and quantities- used for seasonal items which are limited in supply – both buyer and seller and keen that the product is lifted quickly. Involves quick decisions in a fluctuating market. Sellers are contracted directly, prices are negotiated and the quantity and request bids are submitted as soon as possible. Quick, more flexible and less formal than CBB. This method of purchasing may be adopted when food is purchased directly from the farmers or manufacturers.

    Two types of contracts:
    FAOP: “Firm at Opening Price” contract: The buyer agrees to take the supplies at a price established in the future when yield is known – contract is not signed till the seasonal yield is known.
    SAP: “Subject to Approval at Price” contract: The buyer has the option of rejection if price fixed in the future is not acceptable to him.

  4. Wholesale buying: Contract is signed with a wholesaler for purchase of goods at a specific price for a fixed period. The details of deliveries, along with quantities required and time etc. are specified. Suitable for large organizations or central purchase departments.
Last modified: Thursday, 24 May 2012, 5:11 AM