Inventory Management

Inventory Management

Introduction

This paper intends to explore the inventory management of the small pizza restaurant. The main focus of this study is to identify n discuss the issues that pizza restaurant may face in inventory management. This paper shall further compare and contrast the benefits of using a fixed order quantity against using a fixed period system for fresh dough purchased from a bakery on contract and evaluates that which approach is better. In addition to this, this paper shall analyze that how the situation would differ for a chain of 25 pizza restaurants as compared to one small restaurant.

Discussion

Issues Small Pizza Restaurant Faces in Inventory Management

There are many firms who do not realize the importance of inventory management. The only thing they focus upon is on selling their goods. However, if a firm orders too much inventory, it may become either obsolete or it will not be able to cover the current cost. This mistake can occur of a firm does not keep a track record of its brining in the products and shipping them out (Schurlknight, n.d).

However a small pizza restaurant may have difficulties in keeping a tract of inventory and that how much quantity they would need since it all depends on the demand of the pizza. To have a accurate record of inventory firms are forced to have a laid down written policy, which shall explain a rule either to order a fix amount of inventory or to run a demand forecasting method with the help of highly trained professionals and then decide the inventory amount that needs to be ordered.

In terms of a pizza restaurant, inventory management can be a big issue. They strive very hard to manage their inventory than any other industry. The sole reason behind this is that the inventory items are perishable and if they are not handled carefully, it may cause illness to the consumers, which may consequently lead to effect the image and reputation of the food company (Gartenstein, n.d).

Compare and Contrast Fixed order quantity & Fixed Period System

Arrangement in which inventory level is continuously monitored and replenishment stock is ordered is fixed quantity whenever at-hand stock falls to the reorder point (businessdictionary.com). Fixed order quantity is most suitable for small business like a small pizza restaurant. The benefits of fixed order quantity method are as follows (Harbour, n.d);

Minimizes Storage and Holding Costs

Storing of inventory for long period may be too costly for a small business. The prime benefit of fixed order quantity is that is that customize number of units that is most economical is laid down. This model may recommend to buy a little large quantity in some order to avail the discount of buying in bulk. This way the overall cost may be minimized. In terms of small restaurant business, this method shall prove to be quite helpful. Since, the inventory is perishable so in order to avoid the rotting of inventory, buying fixed quantity is highly ...