Inventory Management and Operations Efficiency Essay

Background of the Study

In recent years, buffet restaurants are increasingly getting popular among other kinds. Buffets are effective for serving large numbers of people at once. Diners also see it as advantageous on their part because they get to have a great deal of choice and the ability to closely inspect food before selecting it. A more free form of buffet is called “eat all you can” wherein customers pay a fixed fee and then may help themselves to as much food as they wish to eat in a single meal. Therefore, customers have the privilege to eat to their heart’s content. However, on the part of the restaurant operators and managers, it is difficult to forecast how many people would come and how much one head could eat in a single meal. In case they run out of dishes, they must always be able to refill the buffet. After all, no one likes to get inside a restaurant that is not able to serve the customers well. It may affect customer retention, the level of customer satisfaction and may leave negative impressions on the restaurant’s efficiency. This means that the restaurant should have enough stocks to avoid running out of food to serve. This is now where the role of inventory management takes place.

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To ensure availability, an inventory system is adopted that provides the organizational structure and the operating policies for maintaining and controlling goods to be stocked. The system is responsible for ordering and receipt of goods; timing the order placement, keeping track of what has been ordered, and how much and from whom ordered. Regardless of the type of restaurant you operate, or whether the restaurant is in the start-up phase or has been operating for many years, adopting an inventory system is essential. Therefore managing inventory is very important in operating a restaurant.

In the provinces, there are quite a number of eat-all-you-can restaurants that one can find. But in Butuan City, among the most popular is Roldan’s Eat All You Can. It is such a popular place that even locals from the nearby provinces prefer to eat lunch there when they happen to be in the city. Every day they offer variety of foods- from appetizers to desserts which make it irresistible for the customers. On the other hand, in their daily operations they face problems with inventory management such as running out-of-stock and other stock-related problems.

The problem on inventory motivated the researchers to study about the inventory management and operations efficiency of Roldan’s Eat All You Can, Montilla Boulevard, Butuan City.

Review of Literature

The review of related literature is an essential part of the research. This section consists the ideas and studies and of various authors that will be of great help in the conceptualization of the research.

According to Jacobs (2008), an inventory system provides the organizational structure and the operating policies for maintaining and controlling goods to be stocked. The system is responsible for ordering and receipt of goods: timing the order placement and keeping track of what has been ordered, how much and from whom.

Restaurants guests are looking for value when they purchase menu items. In the same way, the restaurant manager is looking for value in the product purchase decisions he/she makes. Price is important but so are other components in the purchasing goal.

During the growth of a new venture the management of inventory is an important task. Too much inventory can be a drain on cash flow since manufacturing, transportation, and storage costs must be borne by the venture. On the other hand, too little inventory to meet customer demands can also cost the venture in lost sales, or it can create unhappy customers who may choose another firm if their needs are not met in a timely manner.

According to Ninemeier (2006), the typical restaurant requires several hundreds of food ingredients and, if alcoholic beverages are offered, many additional products must be purchased. Numerous decisions must be made to assure that the right products are purchased and are available when needed.

According to David Kurtz (2005), inventory control captures a large share of a logistics manager’s attention because companies need to maintain enough inventories to meet customer demand without incurring unneeded costs for carrying excess inventory. Some firms attempt to keep inventory levels under control by implementing just in-time (JIT) production.

The goal of purchasing is to receive the right quality of product at the right time in the right quantity from the right supplier at the right price. This goal is very easy to state but much difficult to attain.

Products needed for Saturday’s banquet must be available on a timely basis and for example, if they are received on the Monday before the event, they will not be fresh or, if they are received on the Monday after the event, they are of no use.

The standard recipe indicates products which are needed to help assure that the menu items which are served are of consistent quality and consistent cost. The concept of the right product in our purchasing goal relate to quality and quantity.

If an insufficient amount of product is purchased, stock-outs are likely to happen; guests will be disappointed if their favorite item is not available, and operations may not be disrupted if substitute items must be produced. By contrast, if an excessive quantity of product is purchased, excess funds are tied up in inventory, there is an increased chance of spoilage, pilferage may occur, and there may be insufficient storage space.

Restaurant managers in most areas have alternative sources of supply for most products. More than a product is purchased when a purchase agreement is made. Information and service are also very important, and some suppliers do a better job of providing this assistance than do others. A supplier offering a “good” price but does not deliver a product on time is not providing an advantage to the restaurant.

Restaurant managers must implement systems to determine what to purchase, how much to purchase and when to purchase. Still according to Ninemeier and Hayes (2006), after products are purchased, they must be received. It is ironic that some restaurants implement many of the purchasing tactics but then fail to follow through when products are received. Purchasers are likely to pay for the quality of products which they ordered and are delivered. In spite of this, however, receiving procedures are lax in some properties and may involve little more than counting incoming packages and comparing that number to the quantity listed on the delivery invoice before it is signed. How much will the supplier charge the restaurant for its products?

The answer is determined at time of receiving. Unless there is a credit memo, the restaurant will be charged for the quantity of products noted on the delivery invoice. Also, unless an error is noted on the invoice, the unit cost will be that noted on the voice. Effective restaurant managers, therefore, assure that proper receiving practices are consistently used. In the receiving process, first, delivery invoice from the supplier should be compared to the restaurant’s copy of the purchase order. This will assure that the quantity and price of products agreed upon at time of purchasing were, in fact, incorporated into the delivery invoice. The second step in the receiving process involves confirming that the product quality is in concert with that required by the purchase specification.According to Feinstein (2005), the basic goal of storage management is to prevent loss of merchandise due to: (1) theft, (2) pilferage, and (3) spoilage.

Theft is premeditated burglary. It occurs when someone drives a truck up to the back door of an operation and steals all of the expensive foods, beverages, and equipment. Generally, storage facilities are not designed to prevent this. Management would need a citadel to eliminate theft by keeping honest employees honest. In some parts of the United States, and the rest of the world, theft is common. Thus, hospitality operators must see to it that storage facilities are designed so as to make theft more difficult, generally by some combination of clear visibility of general access storage located elsewhere. Locking storage areas when not in use and minimizing the number of persons who have access to the keys appear to be good practices.

Pilferage is a serious problem in the hospitality industry and centers on the employee who sneaks off with a bottle of mustard or a couple of ashtrays. Eating on the job is another form of pilferage, unless the owner-manager allows it. Shoplifting also falls in this category. Pilferage is sometimes referred to as “inventory shrinkage” or “skimming”. The estimated dollar losses resulting from pilferage vary considerably, but industry experts feel that approximately two to four percent of every sales dollar is lost to employee and customer dishonesty. Several potential ways to control pilferage exist, some of which we discuss. Unfortunately, in some cases, the cure may be more expensive than the disease.

Spoilage can be controlled a little more easily than neither theft nor pilferage. Generally, spoilage can be minimized by adhering to rigid sanitation practices, rotating the stocks so that old items are used first, and providing the proper environmental conditions for each time in storage.

Rigid sanitation is, in fact, a must in all storage facilities. This involves two quite different kinds of steps. First, products that might induce spoilage in others through migration of odors or chemicals must be separated properly. For example, fresh fish is not stored with butter and cleaning agents are segregated from food products. A second and more obvious sanitation activity involves keeping the storage facility clean, for instance, by mopping it daily.

The proper environmental conditions for storage seem easy enough to achieve. But the expense of providing for all the various temperature and humidity requirements for an entire spectrum of food products can be burdensome for small restaurants. Nonfood storage is a not so large problem, but a good deal of value space may be required.

Freezers; separate produce, dairy, and meat refrigerator; and separate dry storage areas for groceries, beverages, and cleaning supplies can all add up to a large investment. This can be so large, in fact, that small operations often try make do with outdated facilities, which can get them into trouble with the local health department.

The benefits of proper environmental conditions are definite but sometimes not readily apparent. The prevention of food-borne illness does not carry a price tag. Moreover, improper storage can cause a significant loss of nutritional value and taste. The value here is difficult to quantify. Lost nutrition does not necessarily concern restaurant customers, but school food service operations might consider this loss unacceptable. Fortunately, even though a hospitality operation msy maintain an old, erratic refrigerator, proper stock rotation and a reasonably quick stock turnover can minimize quality loss.

On Issuing, according to Mill (2007), for control purposes, it is advisable that as few people as possible have access to signing as someone in authority, and such signature is needed before food and beverage items can be released from storage. A system of inventory management helps ensure cost control. Such forms aid in inventory control and analyzing menu costs. The objective is to ensure that only authorized personnel are allowed to requisition food and beverage items.

Based on the study of Hayes (2006) there is a relationship between the quantity of food and beverage products produced and sold by the restaurant and the quantity of products removed from its storage areas. Some restaurants use an: open door approach to issuing: whenever someone needs something, they simply retrieve it. With this tactic, every employee is in charge of issuing.

According to Dittmer (1999) anyone who has patronized restaurants and other foodservice operations can recognize that a number of different types of service are available. Some aid of very high quality, some much less so. Fast food restaurants and cafeterias tend to provide comparatively little service beyond the basic fine restaurants offer extraordinary levels of service, with some appearing to have more staff than customers. In establishments offering extensive service, it is sometimes of very high quality- swift, unobtrusive, and approximating an art form. More than commonly, however, the service is likely to be different-slow, disorganized, intrusive- with the servers obviously untrained.

Each individual diner has a personal view, consciously or unconsciously, of the standards of service that he considers appropriate for any given occasion when a meal is consumed outside the home. Whenever possible, the customer will tend to select a restaurant offering a type and level of service that he finds appropriate to the occasion. If the individual’s time is strictly limited, he is likely to select a restaurant with limited service- one that allows a customer to eat within a limited time available. On the other hand, there are customers for whom time is of no concern. Sometimes they are celebrating some special occasion.

Managers who seek to optimize restaurant sales should be aware of the extent and quality of service that their customers want. With that in mind, they may find it comparatively easy to adjust some aspects of service in ways that will increase customer satisfaction.

According to Kurtus (2008), Restaurants are in the business of serving food to their customers. In other words, they are providing a product (food) and a service (waiting on the customer). The quality of the food and service is defined as meeting or exceeding the expectations of the customer as if promised by the restaurant. The food should be properly prepared and the service should be prompt and courteous. The benefit of quality food and service is that customers will come back and will recommend the restaurant to friends (http://www.school-for-champions.com/tqm/restaurantquality.htm).

According to Khan (2006), “the primary function of any type of foodservice operation is to convert raw food into cooked products”. Profits come from converting and serving the food as efficiently as possible. High quality dishes come from high quality ingredients. The objective is “to obtain the right quality and quantity at the right and price and from the right source”.

Food quality is more than just taste; it includes attributes such as texture, consistency, hold times, shelf life, and visual appeal. Restaurants need to guarantee food quality in every aspect of food preparation, from the moment the food is produce and delivered to the time it is stored, cooked and served(http://www.bukisa.com/articles/4355869how-important-is-restaurant-food-quality).

According to Dittmer (1999), quality is a term that conveys different meanings to different people. Those with particular refined tastes-people sometimes referred to as gourmets- are more likely to seek perfection in food and may be inclined to accept nothing less. For them, this may mean that the quality of restaurant food must meet long list criteria: all ingredients must be fresh rather than canned or frozen, soups must be prepared from freshly made stocks, vegetables must be cooked only just tender, and so on. Unless the food products offered in a particular restaurant meet their exacting quality standards, they will not patronize it.

There are some who appear to be completely different to all the quality standards for foodservice products that the majority insists on. For them, food is food- a necessity similar to fuel for an engine. They seem perfectly prepared to accept foodservice products of very low levels of quality – for patronizing restaurants do not appear to be related to product quality defined terms that the majority accepts. In any given population, various segments demand food products of various levels of quality such that they will appeal to large enough segment of the market to ensure the level of sales volume required for profitability.

According to Stefanelli (2005), maintaining quality is not quite the same as establishing the firm’s desired level of quality. Some buyers have comparatively little to say about the quality of products they must purchase. They do, however, have a major responsibility to make sure that, once set, the quality standards vary only within acceptable limits. For some products, such as liquor and soap, brand names assure uniform quality. Unfortunately, the quality of fresh foods can change drastically from day to day and from one supplier to the next. This situation can make it particularly difficult to maintain quality standards. In addition, occasional overbuying or a sudden breakdown in storage facilities, such as refrigeration facilities, can wreaker or bring havoc on quality standards.

Regardless of the associated difficulties, however, operators insist that their buyers maintain quality control.

Food quality in restaurants seems to be accepted as a fundamental component to satisfy restaurant customers; however, it has been often overlooked in restaurant service quality and satisfaction studies. Upon starting a restaurant business, one could have attended a seminar that discusses the importance of food quality in restaurants.

Most fast-food and restaurants claim to maintain a high degree of supervision in their food preparation process. Restaurants owners spend a lot of money to train their staff; they even have an excellent infrastructure that facilitates maintenance of cleanliness and hygiene. But despite all the rules and assurances, the complete safety of food bought from a restaurant is questionable.

With a structural equation modeling technique, overall food quality significantly affects customer satisfaction and behavioral intentions and also revealed that the relationship between food quality and customer behavioral intentions is mediated by satisfaction. Subsequent regression analyses demonstrated that taste and presentation were the two greatest contributors to customer satisfaction and behavioral intentions. Thus, managers should pay attention to the key food quality attributes that elicit customer satisfaction enhance return visits in the restaurant business.

Customers want to have exactly what they ordered, so food consistency is crucial to one’s business. Cooks should be able to cook the same dish and the same blend over and over. Otherwise, inconsistency of food will remove the customers’ interest from buying the best sellers over and over. It is a good move to conduct a training regarding ingredient proportions and standard preparation procedures. When a customer says that he or she has a food allergy, servers must pay close attention.

Also, knowledge on the food quality standards is important. As a restaurant owner, one should carefully monitor how food is being consumed in the restaurant and how they are being prepared. Otherwise, the food quality will diminish overtime, and it would definitely differ and taste and would involve sanitary and health issues(http://www.bukisa.com/articles/435869how-important-is-restaurant-food-quality.

Based on Mill’s study (2007), management is responsible for serving food that is nutritious, appeals to the senses, and is safe to eat. Sanitation refers to the hygienic measure for ensuring food safety and control of environmental factors that could arm human development, health or survival. According to the National Assessment Institute, a restaurant manager is responsible for identifying health hazards in the daily operation of the restaurant, develop and implement policies, procedures, and standards to prevent food borne illnesses, coordinate training, supervision, and direction of food handling and preparation while taking corrective action as required to protect the health of customers and employees and inspect the operation periodically to ensure that policies and procedures are being followed correctly.

Any sanitation slip up not only hastens spoilage but also increases the risk of customer or employee sickness. Some states and local municipalities have legislation that requires hospitality management personnel to successfully pass some sort of a sanitation course. There is also discussion suggesting that eventually all of the hospitality employees will have to pass some type of sanitation certification exam.

At fast food restaurants, kitchen workers are assigned a specific task which they have to perform throughout the day, because fast foods cater to hundreds of customers each hour the work volume is very high and workers get little or no time to clean their work area. Under a tremendous work load, workers usually do not find the time to implement their food safety training. So it may be concluded that despite all the quality assurances that the fast foods and other forms of food establishments offer eating out is not a safe thing to do.

Perishable items should be carefully maintained. Each product has a shelf life, and a good idea is always to cook first those that are longer in the fridge. It follows the queuing concept of what comes in first must first go out since food that are longer in the fridge might likely spoil and could affect every single ingredient that is inside your chiller(http://www.bukisa.com/articles/436859how-important-is-restaurant-food-quality#ixzz1Vo7zZHq00).

According to Stefanelli (2005), limiting prices a supervisor may suggest some flexible price limits for certain products, especially those products that represent the bulk of the purchasing dollar. And, for instance, if an item’s price rises above that limit, it may be time to reevaluate the item’s place in the operation.

It is no secret that good pricing practices are good for business. They increase customer satisfaction, increase profits and go a long way toward assuring compliance with the law. While satisfied customers generally mean repeat business, price errors that stem from haphazard or inefficient pricing practices can cost store’s money. For one thing, the dollar amount of undercharges often exceeds the dollar amount of the overcharges. For another, it is against the law to charge more than the advertised shelf price. Stores that do may be subject to civil and criminal fines (http://business.ftc.gov/documents/bus11-good-pricing-practices-scan-do).

According to Griffin (1999), restaurants normally have standard sales prices for the menu items they offer. The sales prices for menu items are usually established by restaurant owners or managers and are communicated to customers via printed menus or conspicuously posted signs. Because the sum of the prices paid by all customers for their menu selections is the total food revenue for a restaurant, it should be evident that these sales prices are critically important in determining the degree of profitability for any restaurant.

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