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Orientation to School Nutrition Management
Instructor’s Manual
Procurement and Inventory Management
Time: 4 hours
National Food Service Management Institute
The University of Mississippi
ET104-11
2011
Instructor’s Manual
OSNM – Procurement and Inventory Management 2
Table of Contents
Preparation Checklist .......................................................................................................................3
Instructor’s Background Information ..............................................................................................4
Functional Area and Competencies .................................................................................................5
Lesson Objectives ............................................................................................................................5
Lesson-at-a-Glance ..........................................................................................................................6
Lesson Plan ......................................................................................................................................8
Follow-up Suggestions...................................................................................................................89
Key Terms ......................................................................................................................................90
Supplemental Resources ................................................................................................................91
References ......................................................................................................................................92
Pretest/Posttest ...............................................................................................................................93
Instructor’s Manual
OSNM – Procurement and Inventory Management 3
Preparation Checklist
Instructions: The following tasks are necessary for presenting this lesson. Assign each task to a specific person and determine the date that each task must be completed. Keep track of the progress by recording information on the tracking form and checking off tasks as they are completed.
Task Person
Responsible Completion
Date √
Reserve equipment and gather supplies as needed for use on the day of class (6 weeks prior). Instructor Manual Roster of participants attending for instructor Participants’ sign-in sheets Pretest and Posttest List of equipment and supplies needed Microphone (preferably wireless) Computer to present slides and DVD Projector and screen Wireless presenter device and laser pointer Flip chart paper (self-adhesive strip sheets) Painters’ tape (do not use masking tape) Markers (flip chart) Pen, pencils, note paper, highlighters, self-adhesive notes, page markers, index cards (each table) Name tags and table tents
Instructor
Participant’s Workbook Agenda, roster of presenters/participants, and handouts
Evaluation (lessons and/or overall for each participant)
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OSNM – Procurement and Inventory Management 4
Instructor’s Background Information
Note to Instructor: The purpose of the background information section is to help you become familiar with the context of the lesson. It is not a part of the lesson detail.
Procurement, or the purchasing function, supports the primary goal of the school nutrition
programs, which is “to protect the health and well-being of the nation’s children,” as stated in the
National School Lunch Act of 1946. Every purchasing decision made must be based on the
nutritional needs of children and support for the staff at the school site where food is prepared
and served. Procurement in school nutrition requires a multi-step process that occurs in a
dynamic environment that is always changing. According to food purchasing authority Marlene
Gunn, author of First Choice: A Purchasing Systems Manual for School Food Service,
“Procurement is not an exact science, and training is essential for successful decision-making
appropriate for the situation.” This lesson highlights the basics of procurement for school
nutrition. It takes many years of experience to become even a novice. This lesson is a starting
point.
Role of the School Nutrition Director The school nutrition director is charged with the responsibility of administration of the school
nutrition program within a school district. One of the responsibilities of the director is the
procurement of all items required to prepare and serve meals for students. The director must
understand the details of the procurement process in order to successfully establish procedures
which assure customers safe, nutritious, and quality meals at the best price possible and within
the requirements of local, state, and federal regulations. This lesson is an introduction to the
knowledge required to fulfill the duties and responsibilities of an aspiring school nutrition
director in terms of procurement. It will cover the very basics of procurement.
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OSNM – Procurement and Inventory Management 5
Functional Area and Competencies
Functional Area 8: Procurement and Inventory Management
Competency 8.1: Develops procurement guidelines that comply with established
regulations and support operational goals of the school nutrition program.
Competency 8.2: Establishes operational procedures to effectively manage receiving and
inventory systems.
Source: Competencies, Knowledge, and Skills for District-Level School Nutrition Professionals
in the 21st Century available on the NFSMI website:
http://nfsmi.org/ResourceOverview.aspx?ID=284
Lesson Objectives: At the end of this lesson, participants will be able to
1. Identify persons in the food distribution chain and know how to communicate with all
players in the chain.
2. Describe the role of ethics in procurement.
3. Identify federal, state, and local procurement regulations, policies, and procedures governing
all school nutrition program purchases.
4. Identify various types of acceptable purchasing systems.
5. Describe how to develop and use specifications, descriptions, and approved brands for
assembling a food bid.
6. Identify the basic types of pricing mechanisms.
7. Describe how to develop a critical path plan for procurement.
8. State the basics of receiving and inventory management.
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OSNM – Procurement and Inventory Management 6
Lesson-at-a-Glance Time Allowed Topic Activity Materials
10 minutes • Introduction to lesson
• Welcome • Pretest
Participant’s workbook Pretest
Objective 1: Identify persons in the food distribution chain and know how to communicate with all players in the chain 25 minutes • Food distribution
chain • Types of distributors
• Distribution chain flowchart
• Private label brands comparison chart
• School cooperative profile
Participant’s workbook
Objective 2: Describe the role of ethics in procurement 15 minutes • Ethical Behavior • Unethical behavior Participant’s workbook Objective 3: Identify federal, state, and local procurement regulations, policies, and procedures governing all school nutrition program purchases 40 minutes • Procurement
guidelines • Federal regulations • Regulatory
environment
• Purchasing sense survey • Standard of Identify • Label • Identify federal agencies
Participant’s workbook
Objective 4: Identify various types of acceptable purchasing systems 20 minutes • Four purchase
methods • Bid awards
• Identify section of a formal bid
• Line-item awards • Bottom-line categories
grouping
Participant’s workbook
Objective 5: Describe how to develop and use specifications, descriptions, and approved brands for assembling a bid 45 minutes • Specification and
descriptions • Product
classification • Brand approval
• Item classification • Taste testing product • Brand approval
Participant’s workbook Taste testing items (frankfurters, paper plates, toothpicks, napkins, thermometer)
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OSNM – Procurement and Inventory Management 7
Objective 6: Identify the basic types of pricing mechanisms 25 minutes • Pricing mechanisms • Pricing mechanisms
• Firm price bid • Final cost + fee
Participant’s workbook
Objective 7: Describe how to develop a critical path plan for procurement 15 minutes • Developing a critical
path • Critical path for
procurement Participant’s workbook
Objective 8: State the basics of receiving and inventory management 25 minutes • Receiving
• Storage • Inventory
• Receiving • Checklist for product
receiving • Storage guidelines • Standard stock
Participant’s workbook
10 minutes • Follow-up suggestions
• Lesson evaluation
• Posttest • Administer evaluation
Posttest Evaluation form
240 minutes = 4 hours
Instructor’s Manual
OSNM – Procurement and Inventory Management 8
Lesson Plan
Introduction
SHOW: Slide #1, Purchasing Orientation – First Choice
National Food Service Management Institute
The University of Mississippi
Procurement and Inventory Management
SAY: Welcome to Procurement and Inventory Management, an orientation lesson for school
nutrition directors. Locate the Lesson-at-a-Glance near the front of your workbook for a planned
outline of the topics and activities we will cover in today’s lesson. Our time here will only
scratch the surface of procurement. It will take many years of experience, trials, errors, and
troubles to master this topic. (Briefly go over the lesson.)
SAY: Before we begin, let me tell you a little about myself.
Instructor’s Note: Give participants a brief introduction about your background and why you
are qualified to teach about procurement. You may want to have participants share their name,
school district and two interesting facts about themselves or two experiences they have had with
procurement.
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OSNM – Procurement and Inventory Management 9
Objective 1: Identify persons in the food distribution chain and know how to communicate with all players in the chain SHOW: Slide #2, Objective 1
Objective 1
Identify persons in the food distribution chain and know how to communicate with all players in the chain
SAY: Our first objective in the procurement lesson is to identify persons in the food distribution
chain and know how to communicate with all players in the chain. As a school nutrition
director, you will make decisions about the procurement of all food, supplies, and equipment
used to prepare and serve meals to customers in your school district. You will be expected to set
up an inventory management system that is compatible with the district’s procurement
procedures. It is a time-consuming endeavor.
ASK: How many of you are involved in bidding the food for your district? (Acknowledge the
number of participants who raise their hands.)
SAY: Procurement is a very complicated process and many of you may feel very frustrated with
the process. We hope we can provide you with information that will help in this short 4-hour
lesson. I strongly suggest that you sign up for the NFSMI purchasing course, First Choice, if
you have an opportunity. Check the NFSMI website for more information.
There are two levels of purchasing as it relates to management of school nutrition programs. The
school nutrition director can opt for the bottom level by simply placing food orders and hoping
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OSNM – Procurement and Inventory Management 10
for the best. Or, the director can elect to move to a higher level by purchasing goods and
services using a multi-step process which involves distinct phases of planning, writing
specifications, advertising the procurement, awarding a contract, and managing the contract.
SHOW: Slide 3, Food Distribution Chain
FOOD DISTRIBUTION CHAINfrom Grower to School
Growers
Manufacturers
Distributors
End users
Broker/sales rep
Distributor buying group
School/district purchasing co-op
UNIT 2 - Chapter 3 - 1
SAY: If the nutrition director expects to operate at the higher level, it is important to know who
is part of the food distribution chain and the demands of each other’s role. The food distribution
chain has become increasingly complex over the years. The situation has changed from a buyer's
to seller's market. Schools are no longer the dominant market segment and must learn to sell
themselves as customers. Communication failure is often the major source of controversy
between the vendor community and the schools.
To make wise decisions the person or persons in charge of purchasing for the school nutrition
program must understand the role of each player. If you look at the slide, you can see there are
basically four players who most often own the product.
ASK: Can someone tell me who they are? (Allow a volunteer to share the answers.)
FEEDBACK: Growers, Manufacturers, Distributors, and End Users
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OSNM – Procurement and Inventory Management 11
DO: (Workbook Activity) Food Distribution Chain from Grower to School
SAY: Look in your workbook for the flowchart that shows the place of the various players.
Below the chart, there is a list of food distribution players and their roles. Fill in the blank with
the name of the player that best fits the role described. Each player is listed on the flowchart.
The first blank is filled in for you. You may discuss your answers with your neighbors.
Instructor’s Note: The italicized words are blank in the Participant’s Workbook.
Food Distribution Chain from Grower to School
Buying Group
School/District Purchasing co-op
Growers
Manufacturers
Distributors
Government Agencies
End Users
Broker Sales Rep
Instructor’s Manual
OSNM – Procurement and Inventory Management 12
• The grower is the individual or group that actually grows the product.
• The manufacturer is the firm that converts the raw product to a further processed state.
Packer is another term for manufacturer.
• The distributor is the company that purchases the product from the manufacturer and sells
and delivers to the customer.
• The buying group is made up of independent distributors who maintain a private label and
provide services such as product control to local distributors.
• Government agencies such as the Food and Drug Administration, USDA, and the
Environmental Protection Agency are regulatory agencies that protect the safety of the
food supply. Notice that the government agencies impact every player in the chain.
• The broker or sales representative is the person or firm employed to sell the
manufacturer’s product to the distributor. They may call on the school nutrition director
or business manager to discuss the product.
• The school/district purchasing co-op administrator is the chief officer for school districts
that form a purchasing cooperative group.
• The end user is the school district that purchases a product to serve to the student
customer.
Instructor’s Note: Check answers by reading the statement and then asking a participant (by
name) to provide the answer.
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OSNM – Procurement and Inventory Management 13
SAY: It is important to know who the customer is in each link in the food distribution chain and
how the various players in the chain make money.
SHOW: Slide 4, Types of distributors
Types of Distributors
• Full or broadline
• Specialty wholesalers
• Special breed distributors – restaurant chains
• Supermarket or wholesale clubs
SAY: In the activity we just completed, we defined the distributor as the company that
purchases the product from the manufacturer and sells to the customer. There are four basic
types of distributors that schools need to recognize:.
• Full or broadline distributors handle a variety of products including frozen, refrigerated,
staples, paper goods, cleaning material, and even small equipment. They belong to a buying
group which may be organized as a cooperative or a corporation.
o Cooperatives benefit from increased buying power by belonging to a co-op, but each
location is autonomous.
o A corporation may require members to adhere to certain policies and often assign
territories for bidding purposes. The two largest corporations are US Foods and
Sysco.
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OSNM – Procurement and Inventory Management 14
• Specialty wholesale distributors carry only one line of products such as snack crackers or
all-beef products.
• Special breed distributors deliver to specific sites such as restaurant chains like Wendy’s or
McDonalds.
• Supermarket or wholesale clubs are businesses such as Sam’s Club or Costco. Some of
these clubs may offer bids on school business but are not usually equipped to deliver to all
schools.
SAY: Broadline distributors sell under private label brands that represent different qualities.
DO: (Workbook Activity) Private Label Brands Comparison Chart
SAY: Look at the private label brands comparison chart in your workbook.
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OSNM – Procurement and Inventory Management 15
Private Label Brands Comparison Chart
Company or Group 1st Quality Labeling 2nd Quality labeling 3rd Quality Labeling
ALL KITCHENS Emerald/Green Blue Red
CODE Elite / Regal Majestic -----
COMSOURCE Medallion / Merit Traditional Citation
FROSTY ACRES Gold / Frosty Acres Garden Delight -----
GOLBON Golbon
Green
Golbon
Red
Silbon
Blue
GORDON FOODSERVICE
GFS Premium Quality
GFS -----
NIFDS NIFDS—Prime Pak Chef – Pak Econo-Pak Brown
NUGGET Black Red Green
PARADE Red Blue Yellow
PLEE-ZING Pleezing – Blue Little – Mommie / Red Partake – Green
POCAHONTAS Pocahontas Mount Sterling Wigwam
SYSCO
Supreme – Gold
Imperial – Blue
Classic- Red
Reliance – Green Value Line – Brown
U.S. FOODSERVICE
Blue Red Harvest Value
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ASK: How can you verify that you received first quality from Parade? (Answer: Red Label)
What about Nugget? (Answer: Black Label) All Kitchens? (Answer: Green Label)
SAY: If you look at the chart, Red label represents first quality for Parade, second quality for
Nugget and third quality for All Kitchens. For this reason, the school nutrition director must pay
attention to detail when writing product descriptions, evaluating, and awarding bid items.
Instructor’s Note: Continue to go over the chart and ask questions until all participants
understand how to compare private labels.
SHOW: Slide #5, Current Customer Base
Current Customer Base
10%40%
4%
2%
4%
10%10%
10%
10%
Restaurants
Other Non-commercial
Correctional Facilities
Colleges/Universities
School Foodservice Health Care
Other Commercial
Hotels/Lodging
Convenience Stores
SAY: Many school nutrition directors feel that school foodservice is a big part of distributors’
business, and it was years ago. That is no longer the case. Currently, school business represents
only 10% of a distributor’s customer base. In many cases, distributors do not care to bid on
school nutrition products because the profit margin is less for school business. Schools do not
always pay promptly, and school districts are often perceived as unfair. Distributors believe
schools do not compare products fairly and that they play favorites.
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SHOW: Slide #6, Today We Are in a Seller’s Market
UNIT II - Chapter 3 - 7
Today…
We are in a Seller’s Market.
SAY: Today, school districts represent buyers that currently operate in what is known as a
seller’s market. That means the seller is at an advantage and the school nutrition program must
promote itself as a worthwhile buyer. Many distributors demand schools agree to a minimum
dollar amount for each delivery in order for the company to agree to deliver to each school site.
ASK: Do any of you have minimum delivery drops? What is the dollar amount? (Ask
participants to share if they answer yes.)
SHOW: Slide #7, To Sell Themselves, Schools Can Emphasize…
To Sell Themselves, Schools Can Emphasize . . .
• No change in ownership• No bankruptcy • Fair pricing process • Early week delivery• No deliveries on major holidays• School district profile
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OSNM – Procurement and Inventory Management 18
SAY: School districts need to remind prospective distributors that
• school systems never change ownership,
• they never go bankrupt, and
• someone will always bail out the school nutrition program.
Other selling points to remember are
• Schools prefer delivery early in the day and early in the week as opposed to restaurants
whose busy times are generally weekends.
• Schools are closed on major holidays – again a busy time for most other customers of the
distributors.
• Schools provide the distributor with a concise picture/profile of the school. This is important
because distributors want to know total annual expenditures on food and supplies, number
and frequency of deliveries, average daily participation, enrollment figures, and special
requirements such as refrigerated trucks.
DO: (Workbook Activity) School Cooperative Profile (Have participants go over profile.)
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OSNM – Procurement and Inventory Management 19
School Cooperative Profile 2001 Central Avenue, Hometown USA: Child Nutrition Statistics
School Year 2010-2011
ADP $ SPENT # OF SCHOOL
COUNTY OCTOBER 2010 ENROLLMENT FOOD & PAPER DELIVERIES - '10-'11
Lunch Brkfst OCTOBER 2010 ANNUAL 2008-
09 Frequency PER MONTH 1 2 4 8
Bay 2,994 2,198 4,687 1,069,764.95 15
Core 9,000 4,200 12,485 2,028,000.00 24 2
Den 20,828 10,154 31,702 5,336,816.50 69
Forest 2,703 1,615 3,685 897,193.36 10
Lorna 4,215 2,697 6,531 580,657.35 17
Metro 2,910 2,120 4,320 1,150,000.00 10 2
Nate 1,540 3,169 4,688 718,824.00 12
Taylor 6,600 3,600 9,048 2,300,000.00 18 4
Waverly 4,783 2,166 7,733 1,821,325.93 19
TOTALS 55,573 31,919 84,879 $15,902,582.09 194 8
Total Number of Deliveries in 2008-2009 school year: (36 weeks of delivery to 194 schools plus 8 schools receive 72 deliveries) 36 weeks x 194 schools 6984 72 deliveries x 8 schools 576 TOTAL 7560 deliveries Total Expenditures (2008-2009) = 15,902,582.09 Average $ amount per delivery TOTAL = 2,103.52 Current Bid Section A Food & Supplies Brands Approved - March/April Bid Issued - June 2010 Bid Awarded - August – 1st week Contacts Co-Chair: June Smith Phone: Fax: E-mail:
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OSNM – Procurement and Inventory Management 20
Objective 2: Define the role of ethics in procurement
SHOW: Slide #8, Objective 2
Objective 2
Describe the role of ethics in procurement
Say: Our second objective for today is to recognize the role of ethics in procurement.
SHOW: Slide #9, Unethical Behavior
Unethical Behavior
• Providing cost information to competitor PRIOR to supplier selection
• Sharing supplier’s proprietary information with competitor
• Accepting gifts or cash • Accepting free trips or entertainment
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OSNM – Procurement and Inventory Management 21
SAY: Contact and interaction with industry representatives is encouraged. However, it must
ALWAYS be ethical. Unfavorable publicity due to questionable behavior with business partners
is damaging to all–and sadly, it taints the reputation of the entire school nutrition program.
ASK: Can you think of actions that would be considered unethical behavior in the purchasing
process? (Allow participants to discuss the topic until most situations have been covered.)
DO: (Workbook Activity) Unethical Behavior
FEEDBACK: (Include these ideas if no one mentions them.)
• Providing cost information to the competitor or to another supplier prior to the bid opening
sets up a situation where the results could be altered; Although the business benefiting from
the information may be pleased, they could reveal the discrepancies at a later date and
implicate the school nutrition director.
• Sharing supplier's proprietary information with the competitor; Do not mention one vendor
to another and never suggest to Vendor B, “Vendor A will give a 1% discount, will your
company?” Sharing this type information can have tragic results–no company will do
business with a school district that allows this to happen.
• Accepting gifts, cash, free trips, or entertainment for personal use; Even if the director’s
immediate superior says these are acceptable, they are not in the eyes of the federal
government. The school district should have this policy in writing and provide training for
all staff.
• Allowing personalities to enter into purchasing decisions
• Giving preference to a supplier based on long-term business relationship, political
connections, or pressure from management
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OSNM – Procurement and Inventory Management 22
SHOW: Slide #10, Ethics Rule of Thumb
Ethics Rule of Thumb:
“If you question an action, then you should not proceed.”
UNIT 1 - Chapter 1 - 6
SAY: Look at the screen for the “Ethics Rule of Thumb.” (Call on someone to read the
information on the screen.) The rule is provided in your workbook as a reminder.
“If you question an action, then you should NOT proceed.”
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Objective 3: Identify federal, state, and local procurement regulations, policies, and procedures governing all school nutrition program purchases SHOW: Slide #11, Objective 3
Objective 3
Identify federal, state, and local procurement regulations, policies, and procedures governing all school nutrition program purchases
SAY: Our third objective for this lesson is comprehensive and will take time to absorb. It is to
identify federal, state, and local procurement regulations, policies, and procedures governing all
school nutrition program purchases.
SHOW: Slide #12, Procurement Guidelines
Procurement Guidelines
What are they?• Federal Standards• State Standards• Local Standards
Which do you use?• Most restrictive
SAY: One of your major responsibilities as a school nutrition director is to know procurement
guidelines and ensure they are practiced. There are federal, state, and local standards that must
be followed when you are using taxpayer’s money–which is true in all three government areas.
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OSNM – Procurement and Inventory Management 24
The dilemma sometimes comes when the three government branches have standards that
conflict. The rule of thumb that is the most restrictive standard applies. If federal standards
require bidding when spending is $100,000 and the state standards require $75,000, the school
district must abide by the state standard of $75,000.
The school nutrition director must be responsible for finding the state and local standards that
apply to the school district for purchasing. I strongly recommend that you discuss and request
the state standards from your state agency and local standards from your school business
manager.
Federal Purchasing Regulations
SAY: As we review the laws and guidelines, remember that it is not the role of the NFSMI to
interpret the regulations; but rather to make sure that you are aware there are very specific rules
that must be followed when you purchase products for the school nutrition program. You must
rely on your state agency and your local district to provide further explanation of the
procurement regulations.
Before we review the regulations, take a minute to complete a short survey about your
understanding of purchasing regulations. There are seven statements in the survey. Check
whether you agree or disagree with each statement. You can verify your answers as we discuss
the federal regulations that govern the procurement process. (Allow no more than 2 minutes.)
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OSNM – Procurement and Inventory Management 25
DO: (Workbook Activity) Purchasing Sense Survey
Procurement Practice Agree Disagree
1. To purchase items costing more than $100,000 in the aggregate requires a formal purchasing method. Public organizations must follow the most restrictive of local, state, or federal law or rules.
2. Geographic preference, commonly called “local preferences,” is not allowed.
3. Any vendor who writes the specifications for major equipment is not allowed to participate in the bidding.
4. Cost plus a percentage of cost purchase is not an allowable purchasing system.
5. Only responsible contractors who possess the ability to perform successfully can get contracts under the terms and conditions of a proposed procurement.
6. The purchase system must ensure open and free competition.
7. Schools must maintain written selection procedures for awarding bids.
8. School food authorities are required to the maximum extent possible to use domestic commodities.
SAY: Now that you have agreed or disagreed with each statement, we will look at what they
convey to us in more detail.
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SHOW: Slide #13, Federal Regulations
Federal Regulations
• 7 CFR Section 3016• http://www.access.gpo.gov/cgi-
bin/cfrassemble.cgi• $100,000–Use formal purchase method OR
state requirement if less• No geographic preference allowed• Vendor who writes specs cannot offer price• Cost plus a percentage of cost NOT allowed
SAY: Federal Regulations pertaining to procurement are found in 7 CFR Section 3016. Follow
along and make notes as we discuss some of the information about rules governing purchasing.
1. Federal regulations require the use of a formal purchasing method when spending $100,000
in the aggregate, which applies to even the smallest school system. If state regulations are
more restrictive, the state regulations apply.
2. Federal regulations prohibit geographic preference. Some states have laws that allow a
percentage deducted from an in-state vendor’s quote–which obviously gives an advantage
over any out-of-state firm.
3. Any vendor who assists in writing specifications for an item a school district plans to
purchase is not allowed to participate in bidding for that item. This means that if you get a
local equipment distributor to write specifications for a piece of equipment, that distributor
cannot bid to sell you the equipment. However, you may invite several vendors to discuss
important features of the item you wish to purchase. Take copious notes from each
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OSNM – Procurement and Inventory Management 27
conversation; and after all meetings conclude, find the common features mentioned by all
and use those in your description. This protects you and does not give an advantage to any
one vendor.
4. When using federal funds, one may NOT engage in a cost-plus-percentage contract. The
district may use a contract which requests a price for the cost of the product and a “fixed fee”
for each. At no time during the contract or extension of the contract may the fixed fee be
changed.
SHOW: Slide #14, Federal Regulations
Federal Regulations
• Only responsible contractors• Open and free competition• Written selection procedures• Staff may NOT accept cash or gifts• Domestic commodities
5. School districts are not required to do business with irresponsible businesses. However, you
must be careful to document such behavior in writing and maintain that information in a
manner that could be used in a court of law.
6. The district must maintain free and open competition. This means that any organization
accepting and spending federal funds MUST allow any company the opportunity to
participate in school business. For example, if a company only sells beef products and
requests to submit a bid on the school district’s beef products, the district bid must be
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OSNM – Procurement and Inventory Management 28
organized so that one section contains only those beef products, allowing that vendor a
chance to participate in the bidding process. Remember, this particular regulation can result
in legal implications.
7. School districts must maintain written procurement procedures – and must establish a policy
that no district employee may accept cash or gifts from a vendor or prospective vendor.
8. Domestic commodities refer to foods grown in the USA. Agencies accepting federal funds
may not purchase foods grown in another country unless it is not produced in the USA or is
not found in sufficient amounts. Examples of foods acceptable from other countries are
pineapple, olives, coffee, tuna, and Mandarin oranges.
The Federal Trade Commission requires that any food grown and packed in another country
include a statement of origin on the label. For example, the label must read “Product of (country
of origin).” If the food was grown in another country and packed in the U.S., it will not be
obvious on the label.
The Regulatory Environment
SAY: There are several federal agencies that impact food used in school nutrition programs.
They establish standards for food products and monitor their compliance.
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SHOW: Slide #15, Food and Drug Administration
Food and Drug Administration
Food, Drug, and Cosmetic Act• Controls labeling of food products• Prohibits misbranded food productsadulterated food products
• Establishes standards of identity, quality, and fill• Nutrition Labeling & Education Act - 1990
SAY: A major player in monitoring the quality of food is the Food and Drug Administration
(FDA). The Food, Drug, and Cosmetic Act gives FDA the authority to control the labeling of
food products. It prohibits manufacturers from misbranding food or allowing adulterated foods.
A valuable tool when writing bid descriptions is the FDA Standard of Identity.
DO: (Workbook Activity) What is a Standard of Identity?
ASK: Can anyone tell me what is meant by the term Standard of Identity? (Pause to allow
participants an opportunity to answer.) Will someone locate the definition in your workbook
and volunteer to read what Standard of Identity means? (Call on someone who locates the
answer.)
FEEDBACK: A Standard of Identity label is the mandatory, federally set requirements that
determine what a food product must contain in order to be marketed under a certain name in
interstate commerce. For example, the law requires a specific percent of eggs and oil in any
product labeled Mayonnaise. Consequently, when including it on a bid, the description can
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OSNM – Procurement and Inventory Management 30
merely say “mayonnaise.” Additional terms may be added such as “Lite” or “Reduced Fat” to
add specificity.
The Nutrition Labeling and Education Act of 1990 is also administered by FDA. The law gives
FDA the authority to require nutrition labeling of most foods regulated by the agency and to
require that all health and nutrient content claims such as ‘high fiber’ or ‘low-fat’ meet FDA
regulations. Effective January 1, 2006, the Nutrition Facts Labels on packaged food products are
required by the FDA to list the grams of trans fat contained within one serving of the product.
Remember, trans fats are not allowed in school nutrition products!
SHOW: Slide #16, USDA Grade Standards
USDA Grade Standards
USDA Grade AUSDA Grade BUSDA Grade C
SAY: USDA is another federal agency that establishes standards for products. USDA marks
products that the agency inspects and grades during packing. Label designations are either in a
grade shield or a label that indicated the product was packed under inspection of the U.S.
Department of Agriculture. There are three Grade Standards–A, B, and C. For example, fruits
and vegetables that are designated as Grade A products have a better appearance, fewer
blemishes, and fewer broken pieces. There is no difference in nutritional levels of Grades A, B,
and C.
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SHOW: Slide #17, USDA: Poultry and Meat Inspections
U.S.D.A.Poultry and Meat Inspections
• Poultry Products Inspection Act/Wholesome Poultry Products Act
Prevents misbranded or adulterated poultry products
• Meat Inspection Act
Established meat inspection program
SAY:
• The Poultry Products Inspection Act and the Wholesome Poultry Products Act
established compulsory federal inspection of all poultry moving across state lines and in
foreign commerce. The act also requires that state standards be at least equal to federal
standards.
• Meat Inspection Act establishes standards for meat inspection and grading. It ensures a
high level of cleanliness and safety of meat products.
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SHOW: Slide #18, USDA: Inspection Marks
U.S.D.A. – Inspection Marks
Processed Meat
Raw Poultry
Raw Meat
SAY: There are three types of inspection marks shown on the slide. The first is found on all
processed meat products and carries the establishment number of the manufacturing facility in
which the product was processed. The inspection mark carries the abbreviation EST followed by
the establishment number where the product was processed. Each plant is given a number.
Products processed in a poultry plant will be preceded with a “P.” This is important information
for the buyer. For example if the establishment number of frankfurters that are described as “all
meat” is preceded with a “P,” the franks probably contain chicken or turkey.
The second inspection mark shown on the screen is found on raw poultry, and the third
inspection mark is used to label raw meat. Raw meat is stamped with a roller that runs the entire
length of the carcass.
ASK: Why is it important to recognize and interpret the establishment number in the school
nutrition program? (Allow a couple of participants to volunteer answers.)
FEEDBACK: When there is a USDA recall, the order will specify the establishment number. It
is important to learn to recognize these numbers and where they are located. The government
link for recall information is http://www.fsis.usda.gov/fsis_recalls/open_federal_cases/index.asp
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For more information about establishment numbers, a publication entitled Urner Barry’s Meat
and Poultry Directory lists all establishment plants by number, company name, addresses, and
contact information. The link for Urner Barry is http://www.urnerbarry.com/.
A link to the Meat, Poultry, and Inspection Directory, a government link for establishment names
and numbers is
http://www.fsis.usda.gov/regulations/Meat_Poultry_Egg_Inspection_Directory/index.asp.
DO: (Workbook Activity) Label
SAY: You have a sample label in your workbook that has an establishment number, a product
code number, CN label number, and the run number. Find each number, circle, and label the
number. (Allow 2 minutes for participants to complete the activity.)
SHOW: Slide #19, Know Manufacturer’s Code Number and Establishment Number
Know Manufacturer’s Code Numberand Establishment Number
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SAY: Check your answers with the label on the slide or the label provided in your workbook.
• The establishment number identifies the plant where the product was processed. A
manufacturer may operate several plants and a product could be produced in more than one
plant, but in the case of a recall, only the plant where the contamination occurred is listed in
the recall order.
• Each manufacturer has a product code number assigned to each and every product. While
different distributors may have the same manufacturer’s product in their warehouses, each
distributor assigns a code number pertaining to their inventory. It is important for receiving
personnel to distinguish the difference between these code numbers.
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• The CN label is for a specific product assigned by USDA. It verifies the product’s
contribution to the Child Nutrition Program requirements and specifies the number of pieces
that must be served to comply with the label verification.
• The “Run” number identifies the production line, and the last few digits correspond to the
manufacturer’s code number.
This sample label is useful for training receiving personnel about establishment and code
numbers for manufacturers. It is important for school nutrition directors to train the nutrition
staff to read labels and recognize the establishment and product code numbers.
SHOW: Slide #20, U.S. Department of Commerce – Fish and Wildlife Act.
U.S. Dept. of CommerceFish and Wildlife Act
Est. 036PUFI Seal
National Food Service Management Institute
SAY: Another federal agency that impacts food safety and quality is the U.S. Department of
Commerce (USDC). Fish products are inspected and certified under the USDC Seafood
Inspection Program. Only those products which meet all specified requirements and criteria can
bear one or more of the official marks or statements associated with the program. The stamp on
those products may resemble either of these stamps on the screen.
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The U.S. Grade A mark signifies that a product meets the highest level of quality established by
the applicable U.S. grade standard and has been processed under the USDC Seafood Inspection
Program in a sanitarily approved facility. For example, if a fish product is Grade A, there is
more actual fish in the product.
The Processed Under Federal Inspection (PUFI) mark or statement signifies that the product is
certified to be safe, wholesome and properly labeled; conforms to quality and other criteria in the
approved specification; and has been officially inspected in a participating establishment under
federal inspection.
The HACCP mark may be used alone or in conjunction with existing grade marks to distinguish
that the product was produced under the HACCP Quality Management Program. The following
link provides further information: http://www.seafood.nmfs.noaa.gov/ServicesBrochure.pdf
SHOW: Slide #21, Additional Laws
Additional Laws
• FDA - Public Health Service ActModel Food Code
• U.S. Customs Service - Tariff Act Labeling of imported foods – “Product of
(country)”• U.S. Dept of Justice - Antitrust Laws Sherman, Clayton, Robinson-Patman, and Federal
Trade Commission ActsOpen and free competition
Chapter 2: The Regulatory Environment 21
SAY: There are a few additional laws that impact food procurement. They are shown on the
slide.
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• The Public Health Services Act developed model codes to assist state and local
governments to initiate and maintain effective programs to prevent foodborne illness. FDA
maintains an updated Model Food Code to assist food control jurisdictions at all levels of
government.
• The U.S. Customs Service, as part of The Tariff Act, requires a statement of the country of
origin on the label of imported foods. If the food was grown in another country and packed
there, the label will include the statement of origin; foods grown out of the country and
packed in the USA will not always indicate the country of origin.
• The U.S. Department of Justice through The Antitrust Laws such as the Sherman Act, the
Clayton Act, the Robinson-Patman Act, and the Federal Trade Commission Act prohibit
unreasonable business practices that deprive consumers of the benefits of competition.
SHOW: Slide #22, USDA Food Safety and Inspection Service: Names on Labels
USDA Food Safety and Inspection Service: Names on Labels
• Ham - must be at least 20.5% protein in lean portion as described in 9 CFR 319.104. Added water is permitted
• Ham - water added: The product is at least 17.0% protein with 10% added solution.
• Ham with natural juices: The product is at least 18.5% protein.
• Ham Salad: Product must contain at least 35% cooked ham.
SAY: The Food Safety and Inspection Service under the USDA provides definitions and
standards of identity or composition. For example, in order to be labeled as “Ham,” the product
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must be at least 20.5% protein in lean portion as described in 9 CFR 319.104. Added water is
permitted in a product labeled as “Ham.”
• Ham - Water Added: The product is at least 17.0% protein with 10% added solution.
• Ham with Natural Juices: The product is at least 18.5% protein.
• Ham Salad: Product must contain at least 35% cooked ham. Chopped ham may be used
without it appearing in the product name.
• Ham and Water Product: The added solution may exceed 10%; the label must state percent
by weight of added ingredients.
SAY: Be sure to check your buying guide when purchasing ham or ham products. It will take a
larger portion to meet meal requirements if water is added to the ham.
Objective 4: Identify various types of acceptable purchasing systems
SHOW: Slide #23, Objective 4
Objective 4
Identify various types of acceptable purchasing systems
SAY: Our next objective is to identify various types of acceptable purchasing systems.
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SHOW: Slide #24, Four Purchasing Methods
Four Purchasing Methods
• RFQ: Small purchase procedure
• IFB: Competitive sealed bids
• RFP: Request for proposals
• Noncompetitive negotiation
SAY: There are four purchasing methods allowable by Federal Regulations. They are listed in
your workbook.
1. Request for Quote (RFQ) is used for making small purchases such as an item ordered for a
special holiday. An example could include a Christmas or Valentine cookie. A description
of the item must be written and then at least two vendors contacted for a price quote. The
transaction must be documented in writing.
2. Invitation for Bid (IFB) is a sealed bid prepared and mailed to various vendors. They must
return the bid by the specified time and day after which the district will evaluate and award
the contract to the lowest bidder.
3. Request for Proposal (RFP) is a method that permits evaluation of additional conditions that
may be as critical as the costs. This is a particularly good method to use for purchasing
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services such as general repair or pest control, and items such as large equipment, computer
hardware, and computer software.
4. Noncompetitive negotiation requires only one vendor; however there are stipulations that
must be observed.
a. It must be USDA authorized.
b. One vendor may be used in case of emergency as defined by USDA.
c. The product being purchased must be a “one source” item and documented as such.
Invitation for Bid
SHOW: Slide #25, Sections of a Formal Bid
Sections of a Formal Bid
1. Transmittal & signature pages2. Standard terms & conditions3. Special instructions4. Product list & descriptions5. Billing address & delivery locations6. Potential bidders
SAY: A formal bid document contains several sections that should be included in all bids. You
may want to refer to Appendix A in your workbook as we discuss the various sections.
• Section 1–Invitation to Bid, signature, and transmittal page. It should contain a certification
statement related to debarment or suspension.
• Section II–Standard Terms and Conditions. Examples of items in this section might be
o How and when the bid shall be returned
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o Explanation of bid terminology
o Declaration of conditions for bottom line
o Conditions and steps for contract cancellation
o All federal requirements
• Section III–Special instructions. This section might contain information about
o extensions, drained weights, brands approved, whether to offer alternate brands or
substitutions,
o evidence of vendor participation in HACCP,
o guidelines for escalation/de-escalation, and
o vendor practice regarding check of criminal records of delivery personnel.
• Section IV– Product List and Descriptions. In this section, the list of products to be
purchased, along with descriptions, and approved brands are detailed.
• Section V–Billing Address and Delivery Locations. This section specifies the delivery
locations by name and street address. It might also indicate the delivery frequency of such
locations. For example, a notation of schools that require delivery during the summer months
should be included here.
• Section VI–Potential Bidders. Include a list of vendors that have been pre-approved to
receive the solicitation for bid. Including a list of potential bidders will indicate competition
and may result in better pricing.
Bid Awards
SAY: The two basic methods for awarding bids to vendors are line item or bottom line.
• In a line item award the price offered on each product is considered independently.
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• In bottom line awards the prices offered on products are considered as a group.
A formal bid must identify which method will be used.
Vendor Award Method: Line Item
ASK: How many of you use line item? (Pause and allow participants to raise their hands.)
How many of you use bottom line? (Pause and note the number.)
SAY: Look in your workbook for an example of a line item award based on the lowest price.
SHOW: Slide #26, Line Item Award
Line Item Award
Product NamePotential Vendor A
Potential Vendor B
Potential Vendor C
Peaches $20.36 low $22.94 $23.41
Pears $22.49 $23.95 $22.46 low
Sugar $19.06 $18.75 low $21.45
SAY: In this line item award, the peaches are awarded to Vendor A, the sugar to Vendor B, and
the pears to Vendor C.
Instructor’s Note: The chart below is in the Participant’s Workbook.
Vendor Award Method: Line Item
Product Name Potential Vendor A Potential Vendor B Potential Vendor C
Peaches $20.36 low $22.94 $23.41
Pears $22.49 $23.95 $22.46 low
Sugar $19.06 $18.75 low $21.45
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SAY: Line item bids are more time consuming due to processing purchase orders and invoices
for several vendors. They are more cumbersome to monitor for receiving personnel since they
must remember several buying group quality labels. The delivery cost is almost the same
whether the distributor delivers one case or 100 cases. Line item bids offer the distributor no
guarantee about the number of cases that will be delivered or what is commonly called the
delivery drop size.
Vendor Award Method: Bottom Line
SHOW: Slide #27, Bottom Line Awards
Bottom Line Award
Product Name
Est.Units
Unit Price
Vendor A Ext.Total
Unit Price
Vendor B Ext.Total
Unit Price
Vendor C Ext.Total
Peaches 25 cs $20.19 $504.75 $22.02 $550.50 $21.50 $537.50
Pears 10 cs $20.94 $209.40 $20.48 $204.80 $21.50 $215.00
Sugar 15 bg $15.98 $239.70 $16.63 $249.45 $14.10 $211.50
Bottom line total
$953.85Low
$1004.75 $964.00
SAY: Bottom line awards makes business more attractive to distributors because the system
guarantees increased drop size. Hidden costs associated with school purchasing also go down
with bottom line, notably the cost of processing purchase orders, receiving, and invoice
processing. It is important for the school district to cooperate with distributors so they can
survive as solvent business partners; future affordable prices depend on that.
There is a chart that illustrates a bottom line vendor award in your workbook if you want to make
notes. Vendor A received the bid for the three items based on the bottom line results.
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Vendor Award Method: Bottom Line
Product Quantity Potential Vendor A Potential Vendor B Potential Vendor C Name Unit Price Extended Unit Price Extended Unit Price Extended Peaches 25 cs $20.19 $504.75 $22.02 $550.50 $21.50 $537.50
Pears 10 cs $20.94 $209.40 $20.48 $204.80 $21.50 $215.00
Sugar 15 bags $15.98 $239.70 $16.63 $249.45 $14.10 $211.50
Bottom Line $953.85 $1,004.75 $964.00 Total low
SHOW: Slide #28, Grouping Categories
Grouping Categories
For open and free competition,group by specialists
SAY: When grouping products for bottom line bids, it is critical that the items are grouped so
they allow free and open competition. As a general rule, products are grouped according to
similar characteristic or use.
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DO: (Workbook Activity) Bottom Line Categories Groupings
SAY: Work with your neighbors to identify items that might make up bottom line categories for
a typical district. (Allow a couple of minutes for participants to work on the groupings before
showing the next slide. Ask group members to share their ideas.)
SHOW: Slide #29, Bottom Line Categories
Bottom Line Categories
Milk
Equipment
Frozen, dry & refrigerated
Paper
Produce
Bread
FEEDBACK: Several apparent groupings might include:
• Milk and dairy products
• Bread and bakery products
• Paper and cleaning supplies
• Small equipment
• Frozen, dry, and refrigerated foods
• Produce; the best pricing for produce may be a weekly bid. The use of technology such as
the Internet and fax machine allows most districts to manage weekly bidding.
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It is important to provide an estimate of the number of units the district expects to purchase in all
categories for the contract period. There can be a variance of plus or minus 10%. It is also
recommended that the district ask for a list of products the vendor has slotted specifically for the
school’s contract. It is wise to track those items and make every effort to provide estimates for
each item based on historical data. Estimates should be within 10% to 30% of actual needs. If
requested, distributors will provide an annual or monthly usage report which will help with this
task.
SAY: More and more companies want to be awarded the whole thing or nothing. But that does
not allow free and open competition, so it is important to divide your bid to allow smaller
companies an opportunity to bid.
SHOW: Slide #30, Prioritize
Prioritize:
•Money Spent
•Impact on meal quality
SAY: When you consider there can be as many as 700-800 items on a typical school bid, it may
be a little overwhelming. The time required for a school nutrition director to write 800 product
descriptions and judge the quality of each product is a huge responsibility. It is imperative to
prioritize your time and spend your efforts on the products where you plan to spend the most
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dollars. And most importantly, the time and effort spent on the bidding process should include
consideration of how each product will impact the meal quality.
Objective 5: Describe how to develop and use specifications, descriptions, and approved brands for assembling a food bid
SHOW: Slide #31, Objective 5
Objective 5
Describe how to develop and use specifications, descriptions, and approved brands for assembling a food bid
SAY: As we have said, one of the most important purchasing activities when assembling a food
bid is the development of specifications and descriptions along with the procedure for brand
approval. Our fifth objective is to describe how to develop and use specifications, descriptions,
and approved brands for assembling a food bid. Directors constantly struggle with this aspect of
procurement; especially when evaluating bids. Remember…you can’t compare apples to
oranges. Well written specifications or product descriptions can prevent you from facing this
dilemma. Let’s spend a few minutes discussing specifications and product descriptions and how
they are used to communicate the quality desired.
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SHOW: Slide #32, Specifications and Descriptions
Specifications and Descriptions
Specifications: complicated and lengthy•May be a couple of pages for one product; labor intensive
Descriptions: short and measurable•Limited to those characteristics that are essential for communication with the supplier such as CN label •Can be identified by the receiver and measured at the point of receipt
SAY: A specification is detailed and complicated. Specifying one product may require a couple
of pages. For example, a commodity specification for frozen cooked breaded chicken nuggets
and patties is approximately 2 ½ pages long. The question is, “how are we to know all those
details on more than 300 different items purchased in a school nutrition program?”
An alternative to using specifications is the use of product descriptions. Descriptions
communicate to the manufacturer exactly what is being requested and are limited to the features
that can be identified by the receiver.
A valuable resource for bid descriptions is Choice Plus. It includes standards and suggested
descriptions for all food products including entrees, fresh fruits and vegetables, and grains and
breads. It is available online from NFSMI.
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SHOW: Slide #33, Product Classification
Product Classification
One ingredient: Distributor's choice
One major ingredient: Private label
Multiple ingredients (highly processed): Manufacturer’s brand
SAY: A technique which maximizes valuable time is the classification of products in one of
three categories: Distributor’s Choice, Private Label, or Manufacturer’s Brands. In the next few
slides, we will identify what each classification means to you as a school nutrition director.
SHOW: Slide #34, Distributor’s Choice
Distributor’s Choice
NO Brand Restrictions
sugarsalt
SAY: Distributor’s Choice items are products like salt or flour. There is usually little difference
in the quality of different brands of salt. The school nutrition program may want to specify salt
as iodized, but the brand of salt does not affect quality and certainly not dollars spent.
SHOW: Slide #35, Private Labels and Quality
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PRIVATE LABELS AND QUALITY
Third = Standard Substandard Quality (70-80) (below 70)
Second = Extra Standard Quality Standard
(80-90) (70-80)
First = Extra Fancy ChoiceQuality Fancy
(90-100) (80-90)
VEGETABLES FRUITS
SAY: Private labels are products packed under industry-accepted standards and labeled for one
of the private cooperative/corporate groups. These products normally contain one major
ingredient and other seasoning ingredients. An example of private label could be green beans or
canned peaches. You need to add a statement regarding the quality desired. For example, if you
will accept only the first quality green beans, then the product description would have to state
first quality.
• “First Quality” label designates Extra Fancy to Fancy for vegetables and Choice for fruits
such as peaches and pears.
• “Second Quality” labels are packed as Extra Standard vegetables and Standard fruit.
• “Third Quality” labels are packed Standard vegetables and Substandard fruits.
It is important to add the quality level of private labels that are acceptable when writing
descriptions of fruits and vegetables. It is also a good idea to add a chart showing label quality
of the Buying Groups in your area to the “Standard Conditions” section of the school nutrition
bid.
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SHOW: Slide #36, Manufacturer’s Brand
1. High-volume products or products with quality problems
2. Identify on final bid
Manufacturer Code # Establishment # Maker 42104 Est. # 17842
Manufacturer’s Brand
SAY: Manufacturer’s Brand designates products that contain multiple ingredients, are highly
processed, and are subject to tremendous variations in quality among brands. There are several
facts to remember about Manufacturer’s Brands.
• They are usually high-volume items or items that do not have grade standards. Examples are
fish portions and processed chicken nuggets.
• The school nutrition director should test and pre-approve Manufacturer’s Brands prior to
issuing the bid.
• This category also applies to any product with which there have been quality problems – it
could occur with something as innocuous as crackers.
• Manufacturer’s Brands are identified on the bid with the manufacturer’s name, code number,
and establishment number.
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SHOW: Slide #37, Sample of Item Classification on Draft Bid
Sample of Item Classification on Draft Bid
Item Description Item Classification Bid Unit
Est. Units
1516 Chicken, Pat; BR’D; white meat; NO VPP;w/dried egg; CN label verifies 2oz. M/MA; 3 oz
Approved brands only svg 215,639
2200 Peaches, Cling U.S. Choice; packed inpacked in juice; 6/#10
Private Label cs 500
6340 Salt, Iodized; 24/26 oz Distributor’s choice cs 25
SAY: A draft bid may look similar to the one on the screen after classification of items. Notice
the chicken patties are approved brands only. Peaches are specified as U.S. Choice Private Label
and salt is a Distributor’s Choice item.
DO: (Workbook Activity) Item Classification
SAY: Let’s see if you can determine which products to approve as distributor’s choice, private
label, or manufacturer’s brand. Locate the sample bid document with the descriptions for
chicken nuggets, peas, and shortening in your workbook. Read through each description and
decide which type of pre-approval you would provide. Take about 3 minutes and we will discuss
your decisions.
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Sample Bid Document
Item Description Approved Brands Chicken nuggets, breast: fully cooked; breaded; NO dried whole egg: NO VPP; CN labeled to provide 2 oz. meat/meat alternate; max 5 pieces per serving. Approved Brands only _________________________________________________________________________ Peas, early green; First Quality; to be packed to US Grade A; #3 size; 6/#10 Private Label ___________________________________________________________________________ 7320 Shortening, baking and all purpose cooking: Vegetable oils; NO tropical oils Distributor’s Choice ___________________________________________________________________________
Note: The italic answers are blank in the Participant’s Workbook.
Instructor’s Note: Ask for a couple of volunteers to share their decisions.
SHOW: Slide #38, Brand Approval
Brand Approval
Brand orApprovedEqual/No
Brands
Pre-ApprovedBrands
Only
TWO APPROVAL SYSTEMS
SAY: There is no hard and fast rule when it comes to assigning approved brands to products. It
is really up to the school nutrition director and should be based on experiences with the various
products. Most directors spend their time approving brands for those items that are high dollar
volume and represent a large portion of the food budget.
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There are two methods of brand approval.
1. Brand Name or Approved Equal or No Brand
2. Pre-Approved Brands Only
SHOW: Slide #39, Steps: Brand Name or Approved Equal
Steps: Brand Name or Approved Equal
1. Write product descriptions.2. Issue final bid.3. Open bids.4. Evaluate bids.5. Award bids.
Brand decision made here.
SAY: There is quite a difference in the number of steps in each procedure for approving brands.
When using Brand Name or Approved Equal, the school nutrition director will follow at least
five steps. They include
1. Writing product descriptions
2. Issuing the final bid
3. Opening competitor’s bids
4. Evaluating bids
5. Officially awarding the bid to the successful bidder
Brand selection decisions are made at the point of evaluation, which is a rather stressful time to
make such an important decision. Part of the stress results from the fact that the award is
generally made approximately four (4) weeks prior to food deliveries.
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SHOW: Slide #40, Problems
Problems
• Decision of comparable quality made during bid evaluations
• Bidder allowed to determine “equal”
Brand Name or Approved Equal
Problems that tend to occur when using Brand Name or Approved Equal include the difficulty of
determining whether the brands offered are of comparable quality or are truly equal. There is
very little time to investigate and it is difficult to obtain the information required under a limited
time frame.
In addition, when this procedure is used, it is left up to the bidder to determine whether products
are of equal quality. Most school nutrition directors are not food technologists who are qualified
to identify quality. This opens up a situation that can easily turn into a confrontation between the
distributor who declares the brand offered is of comparable quality and the school district
director who feels differently.
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SHOW: Slide #41, Approved Brands Only
Approved Brands Only
1. Write product descriptions & develop draft bid.2. Classify products asDistributor’s ChoicePrivate LabelManufacturer’s Brand
3. Hold individual pre-bid conferences.
SAY: When choosing the Approved Brand Only procedure, there are 13 steps compared to 5
steps when using the Brand Name or Approved Equal procedure. However, the end result has
the advantage that decisions are made at a time when there is less stress and more time to
investigate quality.
The steps that are required when using Approved Brand Only are
1. Write product descriptions and complete the draft bid.
2. Classify products as Distributor’s Choice, Private Label, or Manufacturer’s Brand
3. Hold a pre-bid conference with prospective distributors. Provide the conferees with the draft
prior to the meeting.
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SHOW: Slide #42, Individual Pre-Bid Conference
Individual Pre-Bid Conference
• Explain classification system
• Explain brand pre-approval
• Request nutritional data & copy of labels of brands they want screened
• Discuss test schedule
• Order product to test
SAY: I want to talk about the logistics of holding a pre-bid conference before we continue
discussing the steps in pre-approval of brands. The school district should schedule each
company for an individual meeting of about an hour in length. During the meeting
• Review the draft bid with the company decision-makers and bid coordinator, not sales staff.
• Explain the classification system and remind those in attendance that all items classified as
Manufacturer’s Brand must be approved. The meeting provides the company with the
opportunity to identify brands which comply with product descriptions for testing purposes.
It is imperative that the company representatives understand that only brands listed on the
final bid may be bid–NO alternative brands may be added.
• Request that companies provide nutritional data and a copy of labels with ingredients listed
for each item submitted for testing. If the nutritional information is not acquired at this time,
it will be difficult to obtain later.
• Discuss test schedule. Inform the company that the district will order and pay for a case of
product to test. Tell companies when the test will occur and assure them they will be notified
of test results. Remind them again that nutritional data must be submitted.
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• If two companies submit the same product brand and code for testing, distribute purchases of
test products so each company has some of the business.
• Record whether there are items that each company is unable to bid. This is critical in
grouping or sectioning the bid for open and free competition.
SHOW: Slide #43, Approved Brands Only
Approved Brands Only
4. Screen brandsPaper screenAppearance screenTaste screen
5. Notify potential bidders of screening results6. Accept alternative to brands that failed
SAY: The fourth step is to screen the brands.
4. There are three ways to screen brands – paper, appearance, and taste.
a. Conduct a paper screening by developing charts which allow comparison of
ingredient lists and nutritional information for products of the same description.
Other information such as brand name and code number, pack size, and label wording
can be added. Check annually to see if any data needs to be revised.
b. All products are prepared in typical school equipment and judged on appearance. If a
product is not appetizing in appearance the customers likely will not eat it.
c. The ultimate test of the product is the taste. However, the goal is whether the product
is acceptable–NOT whether one tastes BETTER than another.
5. At the conclusion of testing, notify bidders if any of their products failed.
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6. Accept alternate brand for testing. Specify the date of the second brand approval.
SHOW: Slide #44, Brand or Approved Equal
Brand or Approved Equal
7. Screen second group of brands8. Issue final draft of product/brand list9. Conduct final pre-bid conference
Brand decisions already made.10. Issue bid11. Open all bids in a public meeting12. Evaluate final bids13. Award bids to the successful bidder
7. Screen the second group of brands.
8. Prepare the final draft of the product or brand list with all pre-approved brands listed beside
the appropriate products. The distributors will mark the brand they are bidding when
completing the document.
9. Conduct the final pre-bid conference. All companies attend and confirm they have the
opportunity to participate in the process. If there is a problem, the steps of the process
impacting the company in question must be revisited and adjustments made. At this time
Brand decisions are already made!
10. Issue the final bid.
11. Open all bids in a public meeting. The bottom line extended total for each section is read
aloud, companies are thanked, assured of notice of results after 3 to 10 days, and dismissed.
12. Evaluate final bids.
13. Award to successful bidder.
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Testing Product
SHOW: Slide #45, Testing Product: Phase I
Testing Product: Phase I
• Purpose: choose which formula will be bid
• Products: from SAME manufacturer• Consider:Nutritional impactPriceTaste
SAY: In step 4, we referred to product testing. There are two phases for testing product. The
purpose of each is different and therefore the procedure is slightly different.
Phase I is when product formulas are established. Details that determine product descriptions are
identified, the effect that nutritional data has on meal nutritional analysis is considered, and a
decision is made as to whether or not the price of a particular formulation is acceptable.
Products of different formulations from the same manufacturer are compared at this step only.
ASK: What does the term formulation mean? (Allow someone to volunteer an answer.)
FEEDBACK: Formulations specify what ingredients are desired in the product. For example,
one school district may specify an all-beef frank. Another school district might prefer pork as
the predominant meat or a school district might specify beef and pork as predominant in the
ingredient list. Remember, the first item after the word “Ingredient” is the predominant by
weight of all ingredients listed.
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To compare the effect of nutritional impact on meals, enter the same menu on all days of the
week into a nutritional analysis computer program. Insert products of different formulations on
each menu. The daily nutritional analysis will indicate the effect of each product on the meal
analysis.
SHOW: Slide #46, Major Components of Chicken Patties or Nuggets
Major Components of Chicken Patties or Nuggets
Meat block:a. Breast, white or breast w/rib b. Chicken , natural proportionc. Dark meat
Egg: Dried whole egg Vegetable protein product (VPP):
a. Flourb. Concentratec. Isolate
UNIT V - Chapter 8 - 20
SAY: Look at the example of product formulation for chicken patties or nuggets shown on the
screen.
• The major ingredient is the “meat block” or the type of chicken meat in the product. Breast,
white meat, or breast with rib meat is more expensive than chicken, which is approximately
50-65% dark meat.
• Dried whole eggs and vegetable protein products or soy products can be added to lessen the
cost.
• Vegetable protein products (VPP) are flour, concentrate, or isolate. Flour is least costly, and
isolate is the most expensive form. Vegetable protein concentrate is about 70% vegetable
protein and is basically defatted flour without the water-soluble carbohydrates. An isolate is
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a highly refined or purified form of vegetable protein with a minimum protein content of
90% on a moisture-free basis.
SHOW: Slide #47, Testing Product: Phase II
Testing Product: Phase II
• Purpose: approve brands of the SAME formula
• Products: from DIFFERENT manufacturers• Consider:Nutritional comparabilityAppearanceTaste
SAY: Phase II is the testing procedure used after formulations have been established. • Products of the same formulation are tested from as many different manufacturers as
possible. The goal is to have as many brands as possible approved for each item to ensure
adequate competition. Pricing at this point should be similar–all bidders are on the same
level because they are all submitting similar products. Pricing is not an issue at this time.
• In this phase, the “paper screen” is completed to compare whether ingredients match the
description and to compare nutritional profiles. A maximum level of fat or sodium can be
decided; however, do not arbitrarily state a nutrient level because there may not be a product
available with the standard identified.
• As in Phase I, appearance and taste are considered during Phase II.
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DO: (Activity) Taste Testing Product
Instructor’s Note: Purchase three frankfurter packages of different formulations. (Food safety
note: Heat frankfurters to an internal temperature of 165°F). Prepare for testing by cutting into
small tasting sizes, making sure that each participant will receive a sample of each of the three
formulations. Place on a small disposable plate with the samples marked A, B, and C. Provide
participants with toothpicks, paper plates, and napkin. Instruct the participants to taste each
sample and designate their preference A, B, or C. Record the results on flip chart paper and
then reveal the formulation, nutritional data, and price for each.)
SAY: Now that you have decided on your preference, I am going to survey the class to see
which one was the favorite. (Ask participants to reveal their choices; tally the results.)
SHOW: Slide #48, Taste Test Rules
Taste Test Rules
• Product delivered in full-case, sealed container
• Students rate product• Part of regular meal• Prepared in typical equipment• Test only one product per day• Allow NO company representatives• Do NOT disclose brand name
SAY: There are guidelines that the school district should follow when testing products. These
guidelines are listed in your workbook.
1. Ask for product in sealed cases. Do not accept products in anything other than the
manufacturer’s packing case.
2. Introduce the product as part of the regular meal and only test one product per day.
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3. Prepare items in typical school equipment. Test some product in a holding cabinet if the
school commonly holds the product before serving.
4. Do not allow company representatives to be present. They are sales oriented and will try to
persuade acceptance because that will generate dollars to their benefit.
5. Do not tell children the brand name; most are subject to some brand prejudice.
6. Have students judge the product–voting “Yes, it is OK” or “No, it is not OK.” The goal is
not which tastes best but if it is acceptable.
DO: (Optional Workbook Activity) Taste Testing Product
Purchase three frankfurter packages of different formulations. (Food safety note: Heat
frankfurters to an internal temperature of 165°F). Prepare for testing by cutting into small
tasting sizes, making sure that each participant will receive a sample of each of the three
formulations. Place on a small disposable plate with the samples marked A, B, and C.
Provide participants with toothpicks, paper plates, and napkin. Instruct the participants to
taste each sample and designate their preference A, B, or C. (Record the results on flip chart
paper and then reveal the formulation, nutritional data, and price for each.)
DO: (Workbook Activity) Brand Approval
SAY: Look in your workbook at the item description for Chicken Nuggets 1516 on the Sample
Draft Bid form and the four sample labels that have been submitted for approval. Complete the
paper screen by examining the ingredient information. Work as a group to discuss and determine
which of the four products meet the bid description. Each group will report. Be able to justify
your answers.
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Sample Draft Bid
Item Description Item Classification Bid Unit
Est. Units
1516 Chicken Nuggets; Br’d; white meat; NO VPP; w/dried egg; CN label verifies 2 oz M/MA; 3 oz min. wgt
Approved brand only (List Brands) svg 215,639
2200 Peaches, Cling U.S. Choice; packed in juice; 6/#10
Private Label cs 500
6340 Salt, iodized; 24/26 oz Distributor’s choice cs 25
Instructor’s Note: Allow 10 minutes for group reporting and discussion about Brand Approval
activity.
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LABEL #1
LABEL #2
BREADED WHITE FULLY COOKED HEAT AND SERVE INGREDIENTS.- White chicken, enriched wheat flour (niacin, reduced iron, thiamine mononitrate, riboflavin), water, dried whole eggs, enriched yel low corn flour (niacin, reduced iron, thiamine mononitrate, riboflavin), salt, sodium phosphate, soybean oil, modified food starch, spices, nonfat dry milk, leavening (sodium bicarbonate, sodium aluminum phosphate, sodium acid pyrophosphate), dextrose, enriched yellow corn meal (niacin, reduced iron, thiamine mononitrate, riboflavin), mono and diglycerides, dried whey, sugar, dried yeast, sodium alginate, natural flavor. Fried in vegetable oil.
HEATING INSTRUCTIONS: Deep Fat Conventional Convection Fry 350'F. Oven 400'F. Oven 375,F.
Frozen 3-3 1/2 min. 12-15 min. 8-1 0 min. Cooking recommendations should be used as a guide only - variations in time and temperature may be required for variations in quantities heated.
KEEP FROZEN
10821 NET WT. 11.25 LBS.
0306377 This 3 oz. fully cooked, breaded white chicken pattie provides 2.0 oz. equivalent meat/meat alternate and ¾ serving bread alternate for the Child Nutrition Meal Pattern Requirements. (Use of this logo and statement authorized by the Food and Nutrition Service. USDA 8194).
Fully Cooked, Grilled
Chicken Breast Filets With Rib Meat, Chunked and Formed INGREDIENTS: Boneless chicken breasts with rib meat, water, vegetable protein product (isolated soy protein, magnesium oxide, zinc oxide, niacinamide, ferrous sulfate, vitamin B12, copper gluconate, vitamin A palmitate, calcium pantothenate, pyridoxine hydrochloride, thiamine mononitrate, riboflavin), seasoning [tapioca starch, salt, grill flavor (maltodextrin, grill flavor (from partially hydrogenated soy and cottonseed oils), modified tapioca starch and com syrup solids), dextrose, sodium phosphate, autolyzed yeast extract, garlic powder, onion powder, tocopherols]. PREPARATION: Appliances vary, adjust accordingly. CONVECTION OVEN: 8 - 10 min. at 400'F from frozen. CONVENTIONAL OVEN: 12 - 14 min. at 400'F from frozen. MICROWAVE OVEN: Cover product. Heat on HIGH for 2 minutes 20 seconds to 2 minutes 30 seconds or until warm.
KEEP FROZEN NET WT 13.5 LBS
0 00 25665 89413 8
P-986
PO BOX 5432, Homesville AL 45987
PO BOX 5432, Homesville AL 45987
Chicken Patties
CN
CN
CN CN
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LABEL #3
LABEL #4
Fully Cooked, Breaded
White Chicken Patties-CN Smoke Flavor Added INGREDIENTS: White chicken, water, dried whole egg, tapioca starch, salt and sodium phosphate. PREPARATION: Appliances vary, adjust accordingly. CONVECTION OVEN: 12 - 15 min. at 300'F from frozen. CONVENTIONAL OVEN: 15 - 18 min. at 300'F from frozen. COMMERCIAL MICFIOWAVE OVEN: Place frozen patties on microwaveable tray. Cover. Microwave for 1 min. 40 sec. - 2 min. 45 sec., turning once, until warm.
Distributed by Whip-O-Will Farms, Inc. PO Box Y2K Jackson, MS 39207
P-2368
0 00 25665 60150 8 NET WT 13.50 LBS
Chicken Patties-CN
Fully Cooked
INGREDIENTS: Chicken, water, salt, maltodextrin, sodium phosphates, natural flavor, dextrose, hydrolzyed soya protein and spice. PREPARATION: Appliances vary, adjust accordingly. CONVECTION OVEN: 7 ½ - 8 min. at 400°F from frozen. CONVENTIONAL OVEN: 4 ½ - 5 min. at 375°F from frozen. MICROWAVE OVEN: to serving temperature of 140°F.
P-345
Old South Grill
0 00 25685 50150 8
Distributed by Whip-O-Will Farms, Inc. PO Box Y2K Jackson, MS 39207
654782
One 3.10 oz. fully cooked chicken pattie provides 2.00 oz. equivalent meat/meat alternate for Child Nutrition Meal Pattern Requirements. (Use of this logo and statement authorized by the Food and Consumer Service, USDA 07M).
CN
CN
CN
CN
KEEP FROZEN NET WT 15.63 LBS.
123456
One 3.20 oz. fully cooked boneless chicken pattie provides 2.00 oz. equivalent meat/meat alternate for Child Nutrition Meal Pattern Requirements. (Use of this logo and statement authorized by the Food and Consumer Service, USDA 07M).
CN
CN
CN
CN
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SHOW: Slide #49, Final Bid
Final Bid
Item Description Item Classification Bid Unit
Est. Units
1516 Chicken Nuggets;Br’d; white meat; NO VPP;w/dried egg; CN label verifies 2 oz M/MA; 3 ozmin. weight
Whip-O-Will Farms 60150Est# P-246;
Variety 2543 Est# P-2543;Chickly Foods 10821 Est #
P-399;
svg 215,639
2200 Peaches, Cling U.S. Choice; packed injuice; 6/#10
Private Label cs 500
6340 Salt, Iodized; 24/26 oz Distributor’s choice cs 25
SAY: Look at the second column for brands that met the bid description and successfully passed
the paper screen, appearance screen, and the taste test. Bidders MUST select one of the pre-
approved brands when bidding.
Request for Proposal
SAY: A second type of formal bid identified earlier in the lesson is the Request for Proposal
(RFP).
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SHOW: Slide #50, Request for Proposal (RFP)
Request for Proposal (RFP)
• Allows evaluation of variables other than cost
• Cost should exceed 50% of total points
SAY: A Request for Proposal or RFP is a formal bid method that allows the school district to
include variables other than cost in the evaluation and award of the final bid. For example, when
purchasing items like large equipment or computers, the timely repair and availability of parts is
critical. RFPs are awarded on a point basis–100 points being the total any vendor can acquire.
The cost factor should always exceed 50% of the total points. The vendor with the lowest cost
receives the full points allowed for costs, and the other bidders receive a percentage of the total
points for cost.
The evaluation tool must always be included in the Instruction Section of the RFP. The vendor
needs to see all the criteria used to judge and award the contract.
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SHOW: Slide #51, RFP Evaluation
RFP Evaluation
Evaluator name
CRITERIAMAX. PTS ALLOWED
SCORE AWARDED
1. Bottom Line Figure 55
2. Service 20
3. Available technical support 10
4. Availability of parts 10
5. History of reliability 5
TOTAL 100
SAY: This is an example of a score sheet for an RFP for a piece of equipment. It is
recommended that the score for cost should be 50% of the total while other criteria being
evaluated may vary depending upon the area that is most critical.
SHOW: Slide #52, RFP Budget Evaluation
RFP Budget Evaluation
Maximum: 55 pointsTwo responses: $4,000 and $5,000$4,000 = 55 points$4,000 ÷ $5,000 = 80%80% of 55 points = 44 points$5,000 = 44 points
SAY: This slide shows how to determine the score when there are two vendors. For example,
assume the maximum points awarded for price is 55. The school district receives two responses,
one for $5,000 and the other for $4,000. The lowest price of $4,000 receives all 55 points. To
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determine the award points for the second response, divide the lowest price of $4,000 by the
second response price of $5,000 to get the percent, which in this case is 80 percent. Multiply
that percent by the total points to arrive at the number of points to award to the vendor. If there
is a third vendor, divide that response by the lowest price to determine the number of points to
award.
Direct to Manufacturer Bid
SHOW: Slide #53, Direct to Manufacturer
Direct to Manufacturer
• Sealed bids
• Line item for most products
• Firm price with petition for escalation/de-escalation
• Requires a bid for distribution
SAY: One other bidding method used occasionally is to bid directly with the manufacturer. A
direct-to-manufacturer bid is a formal sealed bid that consists of line items for the most part.
State agencies bidding for the entire state or very large districts can benefit from this type bid. To
be feasible, direct-to-manufacturer bidding must result in a large-volume contract. For example,
if a state or district decided to issue a direct bid to the manufacturer for chicken patties, they
would have to use 40,000 pounds of chicken patties once or twice a month for the company and
district to benefit. Bids require a firm price with the opportunity to petition for escalation/de-
escalation.
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When direct-to-manufacturer bidding is used, a second bid is required with local distributors for
the delivery of the product. The contract essentially tells the distributor the price they will pay
for the products and asks for a fee for the storage and delivery of the product.
Before considering this type of contract, the district should seek professional guidance.
Remember, the distributor is the customer of the manufacturer.
Objective 6: Identify the basic types of pricing mechanisms
SHOW: Slide #54, Objective 6
Objective 6
Identify the basic types of pricing mechanisms
SAY: The pricing system chosen by the school district establishes the degree of risk the vendor
must take when establishing a price. Our objective for this segment of the lesson is to identify
the three basic types of pricing mechanisms. These types are listed in your workbook with a
brief description.
DO: (Workbook) Pricing Mechanisms
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SHOW: Slide #55, Pricing Mechanisms
Pricing Mechanisms
1. Firm for duration of contract
2. Market–Escalation/Deescalation
3. Cost + Fixed Fee
Fee may not increase duration of contract including extension
Monitored based on Market
SAY: The school must identify the pricing method in the bid documents. If the school district
changes the pricing mechanism, they must issue a new bid. Let's look at the individual pricing
methods that can be used to obtain product prices.
1. A firm price for a specified period of time requires the bidder to keep the price constant
during the entire length of the contract. The longer a distributor must keep prices firm, the
greater its risk, so the initial price will most likely be higher. Most firms would like to
change their prices every 6 months, or better yet, every month.
2. The escalation/de-escalation contract pricing may fluctuate. The initial price is based on
market cost at the time of the bid and increased or decreased based on third-party market
reports. This is typical of a dairy bid. The price of milk may change monthly. There is a
formula for calculating milk prices based on the Milk Market Report. You can access the
U.S. Department of Agriculture’s (USDA) Agriculture Marketing Service, Market News at
the address provided or subscribe to the monthly market report.
Instructor’s Note: The address is http://www.ams.usda.gov/AMSv1.0/MARKETNEWS
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3. An alternate pricing mechanism is to use a contract which requests a figure for the cost of the
product plus a fixed fee for storage, delivery, labor, profit, and any other overhead. The fixed
fee may NOT be changed during the duration of the contact. School districts using this kind
of pricing also offer the bidder the opportunity to increase or decrease cost only once or twice
a year. Escalation/de-escalation requests are awarded based on third-party market
bulletins/reports. The amount of increase granted should be no more than the amount the
market increased from bid award to time of request. The contract may be extended upon
mutual agreement by the school district and the vendor. Third-party market reports should
be monitored on a regular basis.
Firm Price Bid and Final Cost + Fee Bid
SAY: View the examples of how a Firm Price Bid and Final Cost + Fee Bid might look on a
spreadsheet. The firm price bid includes the product description, the approved brands, bid unit,
bidder’s price, number of estimated units, and the extended cost for that item. The contract for
cost + fixed fee has the same information except it includes a separate location for the fixed fee
and the total for cost and fee.
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Instructor’s Note: The following forms are provided in the Participant’s Workbook. Check to
see that participants find the examples and follow along as you describe pricing methods.
Firm Price
Local Board 100 Central Avenue Anywhere, USA 00000 Extended total: $0.00 Item Description Approved Brands Bid Unit Unit Cost Est. Units Extended
Cost 1516 Chicken Nuggets; BR’D; white meat; No VPP; w/ dried egg; CN label verifies 2 oz. M/MA; 3 oz/min
Whip-O-Will Farms 60150 Est # P-246 Variety 2541 Est # P-2543 Chickly Foods 10821 Est # P-399
svg .0000 99,665 0.00
Final Cost + Fee Bid
Local Board 100 Central Avenue Anywhere, USA 00000 Extended total: $0.00 Item Description
Approved Brands
Bid Unit
Unit Cost
Unit Fee
Unit Cost + Fee
Est. Units
Extended Costs
1516 Chicken Nuggets; BR’D; white meat; NO VPP; w/dried egg; CN label verifies 2 oz. M/MA; 3 oz/min. serving
Whip-O-Will Farms 60150 Est # P-246 Variety 2541 Est # P-703 Chickly Foods 10821 Est # P-399
svg .0000 .0000 .0000 99,665 0.00
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Objective 7: Describe how to develop a critical path plan for procurement
SHOW: Slide #56, Objective 7
Objective 7
Describe how to develop a critical path plan for procurement
SAY: Each time the school district requests prices, regardless of the method used, the school
nutrition director should develop a critical path plan. Our next objective is to know how to
develop a critical path plan for procurement.
SHOW: Slide #57, To Develop a Critical Path
To Develop a Critical Path
• Determine delivery time• Complete time needed for each task• Start with delivery date & work back to
beginning date• Minimum of 36 weeks required
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SAY: The critical path is an individual district plan that is based on when and how your district
operates. It includes a schedule of dates that will assure the bid is completed in time for delivery
of the first order of food.
Start the critical path by determining the first delivery date for opening of school. Determine the
tasks that must be completed in the purchasing process and the amount of time needed for each.
Starting with the delivery date, work backwards to determine when each step must be completed.
A minimum of 36 weeks is usually required to complete the entire procedure. This type of
planning can help the district nutrition director document the purchasing process and keeps the
process organized so that the nutrition staff always know what to do and when to do it.
An example of tasks to include in a critical path is provided in your workbook. This is an
example ONLY. Some school districts may add other tasks and the complexity will be
determined by the district bid method and products being bid. It is important to allow at least 4
weeks between bid issue and bid award and 3 to 4 weeks from bid award to delivery.
DO: (Workbook Activity) Critical Path for Procurement
Tasks Date
Develop the product list………………………………………………… _______________
Estimate quantities……………………………………………………… _______________
Conduct pre-bid conference…………………………………………….. _______________
Revise document and product list……………………………………..... _______________
Issue price requests……………………………………………………… _______________
Public opening of bids …………….…………………………………… _______________
Complete bid evaluation………………………………………………… _______________
Deadline to give superintendent……………………………………….. _______________
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Approval………………………………………………………………… _______________
Notify vendor of bid award…………………………………………….. _______________
First delivery……………………………………………………………. _______________
SHOW: Slide #58, Evaluation/Re-evaluation
Evaluation/Re-evaluation
SAY: As we wrap up the section on procurement, remember, it is important to constantly review
the bid. Check each year to be sure the approved brands are still in production. Nothing exposes
lack of attention to the bidding process as quickly as out-of-date brands.
Objective 8: State the basics of receiving and inventory management
SHOW: Slide #59, Objective 8
Objective 8
State the basics of receiving and inventory management
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SAY: Our last objective for this lesson is to state the basics of receiving and inventory
management and how they relate to an effective procurement system. An inventory management
system encompasses all aspects of managing a company’s inventories: purchasing, shipping,
receiving, tracking, warehousing, storage, turnover, and reordering. It is an important part of
directing school nutrition programs because food and supplies inventories represent operating
funds that are committed and cannot be used elsewhere.
SHOW: Slide #60, Receiving is…
Receiving is . . .
. . . the critical link in procurement and food quality
Receiving products is absolutely the critical link in the procurement process because it impacts
protection of food quality and assuring that the bid contract is being followed. If school nutrition
directors do not take the time to train receiving staff, all efforts of assembling and producing the
bid are in vain.
A bid with perfect descriptions and accurate estimates is worthless if receiving personnel allow
the wrong products to come in the back door. All the efforts in selecting and testing quality
products are for naught if distributors are permitted to substitute inferior product. If the product
is handled improperly in delivery so that the quality is compromised, all the hours spent in brand
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approval for a quality product are wasted. Food quality problems are quite often caused by
breakdowns in receiving procedures.
SHOW: Slide #61, Personnel Training
Personnel Training
• Inspecting deliveries using district receiving procedures
• Taking food temperatures• Reading food labels• Following district clerical
procedures• Reporting product quality problems
Chapter 13: Receiving and Storage 61
SAY: Efficient receiving relies on correct personnel training. The receiving personnel must be
trained to take food temperatures, recognize labels to ensure approved brands are delivered,
follow district receiving procedures for verifying product delivery, and use district clerical
procedures for reporting problems.
DO: (Workbook Activity) Receiving
SAY: I want you to take a few minutes to complete an activity that will help you identify and
implement standard receiving procedures.
Instructions: First, review the Standard Receiving Procedure and then complete the Checklist
for Product Receiving. Are these procedures in place in your district and do employees
consistently adhere to them? Check any problem areas and use the checklist as a guide for
improvement when you return to your district.
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A Standard Receiving Procedure
STEP 1: The receiving area is ready and organized to receive food and supplies and a trained
designated individual is available to check in the order. Pen and receiving ticket or market order are available at the receiving area.
STEP 2: When the truck arrives, expect the truck driver to knock at the locked outside entry at
the time designated. Note whether the driver is clean and in an appropriate uniform and whether the interior of the delivery truck is clean. The truck driver should present a copy of the invoice to be reviewed.
STEP 3: As the truck driver prepares to off-load food and supplies, the employee should inspect food deliveries immediately and thoroughly.
• Look for substitutions of “outs” (shortages) listed • Check labels, as appropriate, to determine delivery of approved brands • Be familiar with the order in which the food items appear on the invoice (for
example; dry, refrigerated, frozen items grouped together) and how the invoice is totaled. Follow your organization’s policy regarding whether to verify pricing.
STEP 4: Check in all food by category, starting with refrigerated and frozen items and ending with dry goods. Receiving personnel must follow district clerical procedures.
a. Inspect frozen products for signs of being thawed and refrozen (ice crystals). b. Visually inspect all items and look for signs of contamination or container
damage. c. Check the quality and the pulp temperature of fresh-cut produce. Insert the
thermometer between the produce bags; the temperature should be between 350 F and 400 F.
d. Check the temperature of milk. It should be below 400 F with no evidence of freezing because it does not retain texture once frozen. For every 5-degree increase in temperature above 400 F, the shelf life of milk and the quality are reduced by 50 percent. Milk should have no signs of spoilage such as putrid odor, off flavor, or a curdled consistency.
e. Count cases/boxes–note shortages invoiced but not delivered. f. Note any substitutions and determine if substitutions are acceptable. g. For appropriate products, check expiration dates and use-by dates. h. Check the product code number against the market order or receiving ticket. i. Have the driver mark shortages, damages, etc. on invoice. j. Remove any loose staples or fasteners to prevent cuts during storage.
STEP 5: Reject unacceptable goods and note on the invoice. Compare the market order with
the invoice to be sure that what was ordered was received, nothing left off or added. Report all product problems to the site manager using district procedures.
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STEP 6: Sign the invoice after all the above steps have been completed and issues resolved. STEP 7: Using a permanent marker or stamp, write the receiving date on all appropriate food items.
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Checklist for Product Receiving
Directions: Use the checklist to evaluate the receiving procedures in your district. OK Improve 1. One or more employees have been trained in the receiving procedure. □ □ 2. A list of product descriptions of product is available in the receiving area. □ □ 3. Trained receiving personnel recognize potential food safety problems. □ □ 4. Trained receiving personnel can recognize the quality of products based on the product descriptions. □ □ 5. Receiving personnel have been trained to recognize substitute items not specified on the market order or bid list. □ □ 6. Employees who are assigned receiving duties are scheduled time to perform the duties (daily work schedule). □ □ 7. A special area is designated for receiving. □ □ 8. The outside entry to the kitchen is kept locked. □ □ 9. The market order is available and used to check incoming deliveries. □ □ 10. All incoming products are appropriately inspected (visually inspected, counted, temperatures taken when appropriate), and the products are verified before the delivery invoice is signed. □ □ 11. A procedure is in place for reporting delivery problems. □ □ 12. Delivery shortages are noted on invoice and sent to district office. □ □ 13. Incoming products are dated to promote product rotation (FIFO). □ □ 14. Products are stored promptly after delivery (frozen food first, then refrigerated, then other). □ □
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SAY: How many of you are implementing all of the 14 procedures on the checklist? If so, you
are to be commended. If you need to improve any of the procedures, keep the checklist for
further reference.
SHOW: Slide #62, Storage Guidelines
Storage Guidelines
• Use FIFO• Store in original packaging• Separate raw from cooked or ready-to-eat foods• Store min. of 6” off floor and away from wall• Keep areas clean and dry• Inspect and treat regularly for pests• Use clean equipment to transport• Store in appropriate area.
Chapter 13: Receiving and Storage 62
SAY: Storage is important to the overall operation of a school nutrition program because it links
receiving and production. Storage for food, paper goods, cleaning supplies, and chemicals must
be organized in a logical, consistent manner so they can be located easily for issuing and
counting during inventory. Again, training personnel is the key to storeroom control. Several
storage principles should be included when training personnel.
• The FIFO method (First In, First Out) is the most basic principle of food storage
organization. It means that the stock should be dated at the time of receipt and oldest stock
should be used first.
• Store food in original packaging.
• Separate raw from cooked or ready-to-eat foods.
• Store products a minimum of 6 inches off floor and away from wall.
• Keep storage areas dry and clean.
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• Inspect and treat regularly for pests.
• Use clean equipment for transporting food to kitchen.
SHOW: Slide #63, Inventory and Cost Control
Inventory and Cost Control
• Inventory is a major component of cost control
• JIT (Just-in-Time) deliveries
• Limit days food supplies are in inventory
• Excess inventory = $ tied up
Chapter 4: The Product Movement Process 63
SAY: Using proper inventorying procedures is critical to controlling costs in the school nutrition
programs. Extra food in inventory ties up organization funds. However, unlike money in the
bank, the inventory of food and supplies does not earn interest.
• School nutrition programs should limit the amount of inventory.
• The amount of inventory needed in a school nutrition program is affected by the frequency of
food deliveries. If possible, school districts should receive Just-in-Time (JIT) food
deliveries.
• The maximum stock or inventory level should be the number of operating days between
deliveries plus 1 or 2 days. For example, school nutrition programs that serve 5 days each
week and receive deliveries once a week should have no more than 7 days of inventory at
one time.
• We need to remember that excess inventory equals money that cannot be used.
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SHOW: Slide #64, Seven-Day Inventory
Seven-Day Inventory
Formula:
Chapter 4: The Product Movement Process 64
_____Annual $ for food______Number of serving days in year X 7 ( )
SAY: A formula for establishing a dollar amount for a 7-day inventory is shown on the screen.
This allows for a 5 days week plus 2 days. Divide the annual expenditure for food per school
site by the serving days in the school year and multiply by 7. By using this formula, the school
nutrition director can judge whether or not a school is “hoarding” excessive inventory of food
products.
SHOW: Slide #65, Standard Stock
Standard Stock
1. Determine number of cases neededa. Previous year’s invoicesb. Delivery frequency
2. Change with seasonal foods3. Add 50% to base amount4. Develop pre-printed order form
Chapter 4: The Product Movement Process 65
SAY: One technique for inventory control is to establish a standard stock level for items that are
used repeatedly such as portion-packed catsup. Use the steps shown on the screen to establish
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standard stock. The procedures are also listed for your convenience should you decide to
implement them in your district.
• Determine the number of cases to maintain as a standard by reviewing previous years’
invoices and delivery frequency.
• Consider seasonal foods. For example, foods used more frequently during holidays would
not remain constant for the entire year.
• Once a pattern becomes apparent, add 50% to the base amount to arrive at the standard stock
level for the item. For example, if it is established that 6 cases of individual low-fat salad
dressing is the base amount, add 50% of the base amount or 3 to 6 for a standard stock level
of 9 cases.
• Develop a pre-printed order form to ensure efficient use of personnel time.
SHOW: Slide #66, Standard Stock Order Form
Standard Stock Order Form
Chapter 4: The Product Movement Process 66
Product Product #Current
InventoryStanding
OrderAdjusted
OrderIndividual
catsup 100445 2 cases 10 cases
Individual mustard 100569 ½ case 3 cases
Individual mayonnaise 100720 ½ case 1 case
Dill pickle 208965 1 - 5 gallon 1 - 5 gallon
8 cases
none
SAY: Look at the example on the screen. If there are 2 cases of individual catsup in inventory
and the standard stock is 10 cases, the order is adjusted to order only 8 cases. If there were 8
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cases in stock, the order would be adjusted to 2 cases. Look at mustard. Since the standard stock
for individual mustard is 3 cases and there is only 1/2 case in stock, the full standard stock of 3
cases should be ordered.
Inventory management is a key factor in the successful operation of school nutrition programs.
Directors must ask themselves one question to determine if their systems are successful: Is there
adequate stock for production needs, and at the same time are inventory costs minimized?
SHOW: Slide #67, Cooperatives
Cooperatives
33,000
4,000
6,000
23,000
SAY: A word about cooperatives before we end the session, forming a purchasing cooperative of
school districts is one way to get better pricing and to pool the expertise of school nutrition
directors. Because of the increased volume purchased, cooperatives are attractive customers.
Together several districts have more bargaining power and more buying power. If you are
interested in becoming part of a cooperative, you might want to contact your state agency for
advice.
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Follow-up Suggestions
1. Review your food descriptions to determine if you have items that are outdated or no longer
used.
2. If you do not have a critical path defined, develop one that gives you plenty of time to
incorporate the procedures of effective purchasing. If you already have a critical path,
review and modify if needed.
3. Provide a training session to all receiving personnel to emphasize the importance of their role
in the purchasing cycle.
4. If you are not following procurement procedures outlined in this lesson, plan to implement
change. You may need to take one step at a time, but the important thing is to commit to the
change and proceed.
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Key Terms
Term Definition
Approved brands A system of determining acceptable quality prior to issuing a bid
Bid conference A meeting with potential vendors prior to requesting prices on a list of products
Bid document A written formal request for prices
Critical path plan The term used in manufacturing and construction industries to time the movement of supplies
Ethics A principle of right or good conduct; the rules or standards governing the conduct of the members of a profession
Market analysis An evaluation to determine the vendors in a specific market who can successfully service an account
Procurement The purchasing of goods and services using a multi-step process which involves distinct phases of planning, writing specifications, advertising the procurement, awarding a contract, and managing the contract
Product description A description that is limited to those characteristics that are essential for communication with the supplier and can be measured at the point of receipt
Purchase system The overall process used to purchase products within regulation
Receiving The process of evaluating for accuracy, accepting, and taking possession of an item that has been purchased
School district profile
A written description that communicates to vendors how a school district purchases. It contains statistics about the district, request for prices, facts about how products are screened, sales call policy, and any special requirements
Specification A statement that stipulates the complete and detailed definition of product requirements
Vendor evaluation
A review of the operating procedures of potential vendors to include product line, physical facilities, delivery equipment, financial history, service levels, accounting practices, and performance at bid conferences
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Supplemental Resources
National Food Service Management Institute. (2008). Equipment purchasing and facility design
for school nutrition programs. University, MS: Author
National Food Service Management Institute. (2010). Orientation to child nutrition management
seminar participant workbook. University, MS: Author
U. S. Department of Agriculture, Agricultural Marketing Service. (2009). Market News.
Available at http://www.ams.usda.gov/AMSv1.0/MARKETNEWS
U.S. Department of Agriculture, Food and Nutrition Service, with the National Food Service
Management Institute. (2002). First choice: A purchasing systems manual for school
food service (2nd ed). University, MS: National Food Service Management Institute.
U.S. Department of Agriculture, Nutrition and Technical Services Division, with the National
Food Service Management Institute. (1996). Choice plus: A reference guide for foods
and ingredients. University, MS: National Food Service Management Institute.
U. S. Department of Agriculture, Food Safety and Inspection Service. (2007). Ham and food
safety. Available at http://www.fsis.usda.gov/pdf/ham_and_food_safety.pdf
U.S. Department of Agriculture, Food and Nutrition Service, with the National Food Service
Management Institute. (2003). Choice plus: Food safety supplement. University, MS:
National Food Service Management Institute.
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References
Martin, J., & Oakley, C. B. (Eds.).(2008). Managing child nutrition programs: Leadership for
excellence (2nd ed.). Sudbury, MA.: Jones and Bartlett Publishing.
National Food Service Management Institute. (2008). Equipment purchasing and facility design
for school nutrition programs. University, MS: Author.
U. S. Department of Agriculture, Food and Safety Inspection Service. (2007). Fact sheet: Ham
and food safety. Retrieved from http://www.fsis.usda.gov/factsheets/ham/index.asp
U.S. Department of Agriculture, Food and Nutrition Service, with the National Food Service
Management Institute. (2002). First choice: A purchasing systems manual for school
food service (2nd ed.). University, MS: National Food Service Management Institute.
U.S. Department of Agriculture, Food and Nutrition Service, with the National Food Service
Management Institute. (2003). Choice plus: A reference guide for foods and ingredients.
University, MS: National Food Service Management Institute.
U.S. Department of Agriculture, Food and Nutrition Service, with the National Food Service
Management Institute. (in press). State agency guidance on procurement, Topic 1:
general procurement requirements and responsibilities. Retrieved from
http://www.nfsmi.org/Templates/TemplateDefault.aspx?qs=cElEPTEzNSZpc01ncj1
U.S. Department of Commerce, Seafood Inspection Services. Seafood inspection program.
Retrieved from http://www.seafood.nmfs.noaa.gov/
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Pretest/Posttest Multiple Choice Questions (Answers)
1. The company that purchases the product from the manufacturers and sells and delivers to the customer is the
a. Broker b. Buying Group c. Distributor d. Grower
2. The government agency that prohibits manufacturers from misbranding food or allowing adulterated foods is the
a. FDA b. USDA c. U.S. Department of Commerce d. U.S. Customs Service
3. Conditions for noncompetitive negotiation requires a. It must be USDA authorized b. One vendor may be used in case of emergency as defined by USDA c. The product being purchased must be a “one source” item and documented as
such d. All of the above
4. Products identified on the bid with the manufacturer’s name, code number, and establishment number are called
a. Distributor’s Choice b. Manufacturer’s Brands c. Pre-Approved Brands d. Private Label
5. Once the base number of cases to maintain in inventory is established, add _____to that base for a standard stock level.
a. 10% b. 25% c. 50% d. 75%
Answers: 1 (c), 2 (a), 3 (d), 4 (b), 5 (c)