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Cooperative Purchasing: Joining Forces for Purchasing Effectiveness

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

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Cooperative Purchasing: Joining Forces for Purchasing Effectiveness

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  1. Cooperative Purchasing:Joining Forces for Purchasing Effectiveness Karen Falder Beth Rice

  2. 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

  3. 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

  4. 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 • 2 geographic regions • $1.4 million bottomline total

  5. 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 • Consolidated Usage Reporting • Dedicated Customer Service • Outage/Shortage Protection • Safety and Sanitation Compliance

  6. 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

  7. 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

  8. 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.

  9. 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

  10. 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

  11. 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

  12. Results – Phase 1 • Reasons for joining a cooperative • Lower food cost • Greater vendor competition • Less paper work • Save staff time • Increase number of bidders

  13. Results – Phase 1 • Competitive Bid Method

  14. Results – Phase 1 • Cooperatives prices lower for some items a

  15. 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

  16. Results – Phase 2 • Contract Document Comparison • 30 elements • 9 common to cooperatives and noncooperative • Cooperative bids documents more comprehensive

  17. 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.

  18. 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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