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1 Explain 5 methods that can be practiced to reduce Acquired Portion Price

Methods Make or Buy Analysis Descriptions It is an analysis to determine weather it is cheaper to buy an item or to make it yourself. Fore example, there is always a potential saving if you do your own cutting of beef instead of purchasing the pre-cut beef. It is a method that allows hospitality operators to choose only the service that meet their specific needs. And then pay apropriately for only the services they receive. For example, the hotel can provide own pick-up service. It involves developing new specificatioins and seeking new bids of several potential suppliers tha might provide lower AP price. - Line item purchasing -Bottom-line, firm-price purchasing Making Blanket Order A blanket order is a form of volume discount because buyer includes enough amounts of miscellaneous item to avoid frequent ordering. It normally results in lower AP Price, if not, value can be increased through improved supplier services. It can also result in a more favorable credit terms or payment plans. It is giving cash advances for purchases while receiving cash rebate shortly after the supplier receives your proo of purchase. It is about considering the buying of products that are packed in adequate and not luxurious packaging materials. Since we gain no benefit from attractive packaging, there is a potential saving is the packaging does not contain cosmetic touches as pictures because they may add ot overall cost. It is a method of pulling ndividual small orders from a group of buyers so that one large orders qualifies for a large blanket order. It is a concept related to night and early morning deliveries of which the supplier is not distracted with traffic congestions. Thus, as the supplier remains efficient, the buyer is able to negotiate.

Providing own supplier service

Shopping around more frequently

Undertaking Improved Negotiatinos

Obtain Cash Discounts

Economical Packaging

Cooperative Purchases

Odd Hour Delivery

Lowering Quality Standards

It is an unusual practice which is not likely to be succesful in maintaining the overall quality of service. -must be selective of the items to be affected

Introductory Offers

Though it is a temporary in nature, buyers can take advantage of an cheap introduction offer and stock up the item with anticipation on using it up later. It is a rebate from the supplier that must be used by the buyer's company to promote the retail sale of the product. For example, a cheese manufacturer might grant a 2% rebate if the buyer agees to promote his/her product in the food operation.

Promotional Discounts

1.2Paying suppliers within the stipulated credit time will prevent the organization from incurring additional costs. Give 5 negative impacts towards the organization if it were to pay suppliers late.
You will gain a reputation as a slow-player. You will jeopardize your credit potential. You will damage your credit rating. You will be put on cash-on-delivery basis. You will incur interest charges and/or penalty charges. Loose cash discounts or other favorable price reductions. Incur legal difficulties. Difficult to find good suppliers. Only be able to purchase from suppliers who provide poor supplier services.

2.1 Write out 5 contributing factors of purchase and supply management.

1. Profit-Leverage Effect: A reduction on overall purchase cost has the potential of making additional profits that are not generated by sales elsewhere. 2. As information source. 3. Improve efficiency 4. Improves competitive position 5. Enhances image 6. As a training foundation for managers 7. Improves management strategy & social policy

2.2 You are required to calculate the cost of the soft drink stock at the bar by using FIFO,LIFO & Average costing method.

FIFO

Month

Purchased

Used

1 2 3

15can @ Rm3 30can @ RM3.20 35can @ RM3.60

12 20 30

1 2

15can@ Rm3 3can @Rm3 30can @RM3.20

12

13

10can @RM3.20 35can @RM3.60 15

Cost of ending inventory

= Beginning inventory + Cost of purchases - Cost of goods sold = 15 + (RM3x12 + RM3.20x20+ RM3.60x35) - 40 = 201 LIFO Total cost of goods sold

= 12Xrm3+ 20Xrm3.20 + 30Xrm3.60 = 108

3.1 Give 3 supplier selection criterias and explain how it impacts the organization
* Credit term = the buyer is looking for a supplier who can give them generous payment plans e.g. > 45 days Impacts the organization = it could be major criteria for selection, because usually the company try to find a supplier that can give them a a generous payment the longer the better for the organization * Delivery Schedules = rarely optimal from an operations standpoint, but a supplier who matches preferred delivery times should be looked at more closely. (Fixed schedules for different products) Impacts the organization = it very important to choose the supplier that can have a fixed schedules, meaning that they send it according to the schedules and not to send the products late because the delivery schedules also affect the work flow in the organization itself * Free Sample = Free samples from suppliers can increase product awareness and entice large accounts, but some buyers fell such samples may compromise their purchasing independence (For evaluation or tasting buyers could be obliged) Somehow, as a buyer we need to see the realization of the product itself, it is not easy for to buyer to convince when the supplier only describe the product. Free sample also use as a evaluation or tasting for the buyers before the purchase the product.

3.2 Rate of Stock Turnover is very important in effective stock management. Assuming in a 90 days business period, the stocks consumed is RM9,000. The opening stock is valued at RM2,000 and closing stock is RM700.
(a)Calculate the Rate of Stock Turnover. Rate of stock turnover = cost of item consumed average value of stock at cost price = 9000 (2000 + 700) / 2 = 6.67 (b) On an average, the stock is kept for how many days? Number of days the stock is kept = 90 days /6.67 = 13,49 days = 13 days

4.1 What are Purchase Request Form and Purchase Order Form? Give 2 main differences in the physical characteristic of the forms.
Purchase requisition form is a form that lists all the required items, which grant buyer with authorization to source for a supplier for the required items. It is an internal form used by the user department or store to request the Purchasing Department to source for materials. Purchase Oder form is 1 of the most important form that is used in the Purchasing Department. When the supplier receives the Purchase Order Form, it is the supplier's authority to produce the required items stated. It also represents the buyer's obligation to pay for the items. Besides, it is an external form used by the Purchasing Department to oder stocks from the suppliers. It is a contract between you and your supplier. The physical characteristic: 1. 2. Information Hotel Logo/Address Payment Terms Purchase Request Not necessary Not stated Purchase Order Must Stated

4.2 What are Purchase specification and product specification? List 4 information that needs to be includes in the purchase specification.
Purchase Specification * Includes all information regarding the pertinent suppliers services buyers require from suppliers who sell them products. Product Specification * Known as product identification * Precise and formal statement describing all the characteristics of a product required to fill a specific production or service needs. 4 Information that needs to be include in purchase specification a) Performance - actual performance that is required or the intended use of the material - It is the most important information and should be clearly stated. b) Exact Name of the product or service - exact name and exact type of the product should be noted in the purchase specification c) Size Information - the desired size must be indicated for a particular item. - it can be indicated by the exact weight and the desired weight range d) Package Size - In most instances, the size of the container you desire should be indicated.

5.1 List eight factors that influences the types of information included on the purchase specification.
1. Performance refer to the actual performance that is required in using of the material or service.The most important Information. 2. Trim or yield- The indication of the minimum edible yield of a product that u will accept.Important for fresh meat or produce. 3. Package size- All the size of the container or packaging should be indicate with the way you want.Example,can size must be stated when purchasing canned items. 4. Degree of ripeness- The most important for fresh produce and also applies to beef items and wines. 5.Form-It is important consideration for many processed items.example,cheese can be come in grated,brick or sliced form. 6. Color- Some items may come in different colors.For example, vegetables,fruit. 7.Trade association standards- It is important as some trade associations establish a minimum performance standard for items that carry the certificate seal. 8.Cost & Quantity Indications- It is an indication of how much an item or service would you want to purchase at one item.

5.2 Explain briefly 3 approaches to correct order size and time.

1. Par Stock Approach or Common Approach Number of items that a buyer feels must be on hand to maintain a continuing supply of the item from one delivery date to the next. A buyer subtracts what is on hand from the par stock number, and then orders that amount a long with any additional amount necessary to cover anticipated special events or increased sales volume. 2. Levinson Approach This is more complicated approach that requires systemic computerized inventory management. First, need to forecast expected total number of customers and popularity indexes for each menu item, then calculate the portion factor (PF) and find the portion divider (PD). Lastly, to calculate order size, divide the number of customers expected by the PD. PF = unit of measurement serving size of an item order size = # of pax PD This approach usually used for special events. PD = PF x edible yield

3. Theoretical Approach Used when inventory value reaches multimillion dollar to justify major spending and purchasing systems. The correct order size is influenced by storage cost / carrying cost (estimate 10-25% of inventory value) and ordering cost (expenses associated with processing and receiving an order cost of paperwork, telephone, fax, wages and salaries, receiving and invoice processing, etc).

6.1 List and explain 6(six) common problems faced by purchaser. Refer to notes Pg 12 to Pg 13 6.2 To achieve the essential objective in storage management, an organization needs to look into 4 criteria. List the criteria and explain them
1. Adequate space A well-managed facility allocates about 10 to 12 percent of the total property for the storage function 2. Adequate temperature and humidity requirement A hospitality operation that houses food service facilities will need to follow the temperature and humidity requirement set by its local health authority 3. Adequate and appropriate shelving A proper storage area requires at least three types of equipment: shelving, racks, trucks and covered containers. The local health authority typically mandates shelving specification as well. For instance merchandise must be stored about 4 inches from the walls, ceiling, and floor 4. Proximity to the receiving and production areas Hospitality operation should install the storage facilities close to the receiving dock and to the production departments, and if possible, on the same floor level. This saves time and ensures the products are not out of their storage environments for excessive periods.

7.1 Besides performing the purchasing function for the hotel, the Purchasing Department also serves as an information source. Give 2 examples of information that the Purchasing Department can provide and explain how it benefits the hotel.
1. Supplier Performance,Purchasing Services expects the highest possible performance from all suppliers. Suppliers are periodically evaluated on actual performance in service/delivery and completion schedules, ability to respond to urgent requests, quality of workmanship, quality of goods and services. By doing so, the hotel will be able to maintain the best product to serve to guests. 2. Market Price, hotel could know what the latest innovation in the market, and to keep competitive image in the market.

7.2What is a Lead time? How does it effects the purchasing process?

Lead time is the time-span from the moment the stocks are ordered until it arrives at the premises. The shorter the lead time, the better for buyers. This has effect on: 1. Stock levels The longer the lead time, the more stock a hospitality organization has to keep in the store. 2. Freshness of product Having short lead time will ensure the stocks come in fresh, if possible daily. It is utmost important especially in perishables. 3. Payment Having a short lead time will enable the hospitality organization to order in less quantity and at a higher frequency. As such, the payment to the suppliers is broken down into lesser amount. This in return will have some saving for the hospitality organization.

7.3 Answer please refer to Pg 19.