"Inventory" to many business owners is one of the more visible and tangible aspects of doing business. Raw materials, goods in process and finished goods all represent various forms of inventory. Each type represents money tied up until the inventory leaves the company as purchased products. Likewise, merchandise stocks in a retail store contribute to profits only when their sale puts money into the cash register. In a literal sense, inventory refers to stocks of anything necessary to do business. These stocks represent a large portion of the business investment and must be well managed in order to maximize profits. In fact, many small and large businesses cannot absorb the types of losses arising from poor inventory management. Unless inventories are controlled, they are unreliable, inefficient and costly. Inventory management is an important part of a business because inventories are usually the largest expense incurred from business operations. Most companies will use an inventory management system that will track and maintain the inventory required to meet customer demand. Most systems used by companies are linked to the management or accounting information system, increasing the effectiveness of their operations Inventory management is managing the parts or stocks of materials in any form and stabilizing the flow of materials considering the variability in demand. It is very important that the inventory plans are structured in such a way that they accommodate variability in demand especially when the company deals with multiple products.
Farmers’ restaurant is a full service restaurant offering variety of breakfast, lunch, and dinner items. The restaurant industry is competitive having over 1600 restaurants in the Grand rapid/Wyoming metro area alone. Its competitors are located within 20 miles of the farmers restaurant. Kristen Davis is the general manager for the farmers restaurant located in grand metro area of Michigan. Kristen has been facing some difficulties with ordering the right amount of food items for the restaurant since she became the manager. Customer counts at Kristin’s restaurant has been declining recently, this which makes Kristen’s greatest focus is to keep current customers and attract new customers. Kristen has been using her intuition to decide how much product to order despite the fact that the product order sheets provides a moving average usage of each product. She bases her inventory on intuitions because she does not understand how to utilize the moving average forecasting techniques when placing orders which is making their food cost run above the normal average. The purpose of this case study is to describe the importance of inventory management as regards to farmers’ restaurants, decide the best system for the situation Kristen faces and assess the supplier Kristen uses with regards to her inventory problems.
2.0.1 Kristen Davis the manager of farmers restaurant has faced some difficulties with ordering the right amount of food items for the restaurant as a result of these there are some weeks the restaurant has a surplus of menu items that are no longer fresh and must be discarded and they experience shortage at other times.
2.0.2 Inventory accounts for 26% of restaurants total revenue.
2.0.3 Customer counts at kristins restaurant has been declining recently this which make s Kristens greatest focuses are to keep current customers and attract new ones.
2.0.4 The restaurant industry is competitive having over 1600 restaurants in metro area.
2.0.5 Kristin makes use of online inventory system to determine on-hand inventory and gauge how well the restaurant is controlling food cost.
2.0.6 Their fiscal week starts on Thursday and ends on Wednesday of the next week and on the last day managers physically counts the inventory on hand and enters the data into the online inventory system.