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Comparison of cooperative and noncooperative purchasing in school

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					  Cooperative Purchasing:
Joining Forces for Purchasing
        Effectiveness

          Karen Falder
           Beth Rice
West Kentucky Foodservice Coop

 Organized 1989
 Under existing West Kentucky
 Educational Cooperative
 12 original member districts
 Currently, 24 member districts
 Size - 11.8 million meals per year
   Smallest - 497 ME/day
   Largest - 8,861 ME/day
   6 members are under 1000 MEs/day
   5 members are over 5000 MEs/day
Cooperative history
 Line Item bids by district – 2 years
   Common bid document
   Each district issued individual bid for 90 days
 Bottomline
   Four categories
   Semi-annually
   12 districts
   Added milk & bread in 1997
 Bottom-line Reimbursable Cost -2001
   Categories, - Food & Supply, Milk, & Bread
   Currently, using an annual contract with 4
   extensions
Current contracts
 February 2007 food and supplies
   Annual contract with option to renew up to 4
   times
   500 case minimum usage
   Brands pre-approved by member directors
   $7.1 million bottom line total
   3 responsive bidders
 July 2007 Bread
   Only 1 responsive bidder
   On-line bidding service
   2 geographic regions
   $468,640 – bottomline total
 July 2005 Milk
   2 responsive bidders
Contract Strengths
 Prime Vendor
   1 delivery
   1 invoice
   1 vendor payment
 Pricing mechanism for non-bid items
   Consistent pricing on low volume items
   Ability add new menu items
 Cost Plus Fixed Fee
 Renewable – possible 5 year
   Long term vendor relationships
   Allows for commodity processing
   Allows for product enhancements
 Professional Development
District Requirements
 Member of umbrella organization
 Pay annual membership fee
   WKEC $150.00
   Bid Manager - $0.0008 per ME
 Contract compliance
 New product request
 Brand approval testing
Director Perception of Coop
Purchasing
 Not having to bid
   Saved staff time
   Reduces liability
   Reduces paperwork
 Increased competition
   Better Pricing
   Better Product Selection
 Increased customer service
 Improved product quality
 Increased marketplace presence
Purpose of Study
 Document school foodservice use of
   competitive bid purchasing practices
   cooperative purchasing agreements.
 Collect data regarding how the above
 practices affect
   food prices
   school foodservice director satisfaction.
Research Study

 Phase 1 – School foodservice director survey
   Population – school foodservice directors
      Accessible by electronic mail
      District size greater than 100 students
      Population identified by CNP cohort group
   Study Sample
      Random sample stratified by USDA region
      1630 school foodservice directors
Research Study – Phase 1

 Survey Instrument
   On-line electronic survey
     School foodservice director satisfaction
       – 17 items
       – 5 point Likert-like scale
     January 2006 cost of selected food items
       – 7 high volume
       – From one cooperative bid
     Cooperative purchasing information
       – Cooperative director contact information
       – Asked to rank order top 3 most important reasons for
         joining a cooperative
     School district demographics
Research Study- Phase 2
   Telephone Survey
   Study Sample
     purposeful convenience sample
     n=7 cooperative directors
     n=7 school foodservice directors not in a
     purchasing cooperative
   Survey instrument
     Contract documents
     Historical cost of items
Results – Phase 1

 Reasons for joining a cooperative
   Lower food cost
   Greater vendor competition
   Less paper work
   Save staff time
   Increase number of bidders
Results – Phase 1
  Competitive Bid Method
                  All         Cooperative    Noncooperative
              Respondents      Members         Members
Bid Method      n      %       n      %         n       %
Do not know    115     28.9   57    26.2       54        30.5
Line-item      114     28.7   57    26.2       57        32.2
Bottom-line     63     15.8   35    16.0       28        15.8
Firm price      53     13.3   31    14.2       22        12.4
Cost-plus-      53     13.3   38    17.4*      16         9.1
fixed fee
39 respondents gave multiple responses, 25 from cooperatives,
and 14 not from cooperatives
*p=<0.05
Results – Phase 1
     Cooperatives prices lower for some items a
                        All Respondents        Cooperative                  Noncooperative
                                               Members                        Members
Food item                    Mean                     Mean                      Mean
                       n     price     SD       n     price     SD      n       price    SD

Orange juice b        254       0.16    0.07    134     0.15*    0.05   120       0.17   0.09




Breakfast cereal b    245       0.23    0.07    128     0.22*    0.06   117       0.24   0.09




French fries c        215      16.12    5.97    118    15.22*    3.66    97      17.22   7.81
aMean prices in dollars, b Price is per serving, c Price is per 30-pound case
*p =<0.05

    Noncooperatives had no lower prices
Results – Phase 1
Satisfaction Survey
    Generally satisfied with current purchasing
    method
    Overall satisfaction mean=65.24±12.92
    Cooperative Members
       Frequency of delivery, mean=4.36* ± 0.63
       Brands bid by vendors, mean=4.08* ±0.71
       Administrative cost savings, mean = 3.99* ±0.78
    Noncooperative members
       Vendor responsiveness, mean = 4.25* ± 0.67
     *p=<0.05
Results – Phase 2
 Contract Document Comparison
   30 elements
   9 common to cooperatives and
   noncooperative
   Cooperative bids documents more
   comprehensive
Results – Phase 2

 Historical Cost Comparison
   No difference except for pizza.
   Cooperative % change in price was
   significantly lower for 2 items.
     Pizza, m= -4.35* ±10.73
     French fries, m= 1.48* ±4.33
   Cooperatives price less than PPI for all
   items. Noncooperatives were not lower.
Implication for Future Research
 Study how bid conditions and bidder
 requirements effect bid price
 USDA Commodity NOI effect competitive
 bidding
 Develop model to assist in selection of bid
 methods, and cooperative membership.
 Research should address what inputs are
 important such as district size, geographic
 location, number of active vendors,
 potential to attract additional vendors,
 number of items to bid.
 Other factors influencing bid pricing

				
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posted:3/14/2010
language:English
pages:18