Food and Beverages – Inventory Management (Research Paper Sample)

University Food and Beverages – Inventory Management By Student’s Name Date of Submission   Instructor Executive Summary Inventory management determines to a great extent the success of firms in the food and beverage industry. It is essential for organisations in the industry to implement inventory control mechanisms that reduce wastage in the inventory cycle. This paper examines the case of The Gold Coast Convention Centre to identify issues in its inventory cycle. The paper establishes that the firm has exorbitantly high cost of goods sold (COGS) for both food and beverage segments. The paper also discusses the inventory management and the stages in inventory cycle; purchasing, receiving, storage and production. Based on the analysis, the paper offers three recommendations that will help The Gold Coast Convention Centre reduce its COGS and increase customer satisfaction. The three recommendations include; implementation of proper controls, improvement of handling procedures, and training of its employees. Table of Contents TOC \o "1-3" \h \z \u Executive Summary PAGEREF _Toc449803554 \h 2 1Introduction PAGEREF _Toc449803555 \h 4 2The Gold Coast Conventional Centre –Key Issues PAGEREF _Toc449803556 \h 4 2.1High Cost of Goods Sold PAGEREF _Toc449803557 \h 4 2.1.1Possible Causes of high COGS PAGEREF _Toc449803558 \h 5 2.2Customer Complaints PAGEREF _Toc449803559 \h 6 3Inventory Management PAGEREF _Toc449803560 \h 7 3.1Purchasing PAGEREF _Toc449803561 \h 7 3.2Receiving PAGEREF _Toc449803562 \h 9 3.3Storage PAGEREF _Toc449803563 \h 10 3.4Production PAGEREF _Toc449803564 \h 11 4Conclusion PAGEREF _Toc449803565 \h 12 5Recommendations PAGEREF _Toc449803566 \h 12 5.1Implement Proper Portion Controls PAGEREF _Toc449803567 \h 12 5.2Improve handling of materials PAGEREF _Toc449803568 \h 13 5.3Train employees PAGEREF _Toc449803569 \h 13 Reference List PAGEREF _Toc449803570 \h 14 Introduction Inventory management forms a significant part of organisations in the food and beverage industry. Restaurants have to address several issues in the inventory cycle in order to compete favourably in the market. The Gold Coast Convention Centre is one of such companies that have to address inventory problems to compete well and boost its profitability. This paper seeks to address the key issues facing the company and then develop relevant recommendations. The paper further explores the inventory cycle for organisations in the food and beverage industry. These issues are addressed as they relate to the situation at The Gold Coast Convention Centre. The Gold Coast Conventional Centre –Key Issues High Cost of Goods Sold The food sales for company the amounted to $510,000 while the related cost of sales was $315,000. The COGS for food was thus approximately 62% of the sales. Beverages, on the other hand, had sales of $290,000, where the COGS represented close to 39$% ($112,000) of it. It is evident that the COGS for food and beverages are exorbitantly high. Given than COGS covers only the direct costs, when indirect costs are subtracted from the sales revenue, the result will be a huge loss for the company. According to Parpal (2015), the typical food cost for a restaurant should not exceed 31%. Therefore, the high COGS is one of the major issues that the company has to address. Possible Causes of high COGS The feedbacks by regular customers show inconsistency in the portion of food served to them. It is essential for the meal sizes to be consistent, not only for the benefit of the customer but also for the business. Food portions served should not under-fill or over-fill the plates. The inconsistency of food portion at The Gold Coast Convention Centre can be one of the causes of the high COGS. Over-filling the plates increases the costs of food while reducing on the sales. Another possible cause of the high COGS by the firm is the incorrect pricing of menu items. As a result, the company is receiving less money from the customers than forecasted. The pricing of the menu has to take into consideration direct costs, indirect costs, preparation and labour, overhead expenses, and volatile food costs (Dopson & Hayes, 2011). In order for sales to cover these costs, the menu items have to be priced accordingly. There are also other factors that determine the menu pricing; the competition, and the type of service. The pricing should also reflect the quality of food and service offered to the customer since pricing is a major consideration by customers when selecting restaurants. Another possible cause for the high COGS in the firm is improper handling of food. There is a high probability that the food is not handled properly by the employees of the restaurant. This is evidenced by the inconsistency in the meal sizes and customers getting ill. Such issues are likely to arise from employees’ inadequate training, poor cleanliness and sanitation standards, and not checking temperatures. It is also probable that high waste has resulted to the high COGS. According to Ojugo (2009), if the materials ordered do not translate to sales, COGS is likely to be high. The possible cause of the wastage is an incorrect ordering of the materials required in the production process. The wastage can also result from failure to check expiry dates and temperatures. Customer Complaints Customers form the main stakeholders of any business organisation. Their interests have to be a priority for the business. A restaurant, therefore, has to ensure that the interests of the customers are taken care of first ahead of those of other stakeholders (Friedman & Miles, 2006). However, this seems not to be the case with The Gold Coast Convention Centre. The firm has received several negative feedbacks through the General Manager that can but the operations of the business in jeopardy if not addressed immediately. Customers have complained about the company not being able to meet their expectations. The firm delivered different services from what the clients ordered. Customers have also complained about the inconsistency in the quality of food and presentation. While the portion of food can be big on one occasion, the next may be small. This inconsistency does not go well with the customers of the company. There are also complaints about customers being ill after attending conference meetings at the Gold Coast Convention Centre. These issues are likely to affect the future operations as the company is bound to lose customers if the issues are not addressed immediately. From the above-raised issues, it is deducible that there is a lack of proper controls by the management of the company. According to Cousins, et al. (2001), proper controls in the production process of the firm would ensure that there is food hygiene, proper storage, employees’ compliance with handling regulations, food is cooked to proper temperatures, and minimum wastage. Lack of proper controls has led customer complaints on various aspects of the operations of the firm. In addition, an inadequate control system has contributed to the high COGS for food and beverages. Inventory Management Inventory management is the controlling and overseeing of the ordering, storage, and the utilisation of the components used in the production process of the items that are going to be sold (Toomey, 2000). Inventory management also seeks to control the quantities of the finished products available for sale to customers. According to Mukherji (2006), the operations in a restaurant are interlinked, and therefore, each process has to be managed carefully to minimise waste. As such, the management of a restaurant seeks to ensure that the optimum inventory is maintained such that under and over inventory are avoided. The beverages, the food, the serving, and cleaning supplies present in a restaurant all form the inventory for the firm. An effective inventory management system ensures that the supplies are ordered at the right time, price, quantity, and from the right supplier (Davis, et al., 2013). The inventory cycle for restaurants typically has four stages; purchasing, receiving, storage, and production. Purchasing Purchasing refers to the search, selection, and acquisition of materials used in the production of items for sale (Garlough, 2011). The purchasing department of a restaurant has to research and find suppliers, obtain quotations, explore market prices, and negotiate with suppliers. According to Leugers (2013) as the personnel in the purchasing department coordinate the purchase of the materials required for the operations of the restaurant, it is essential that they maintain the required quality standards. They are required to develop purchase specifications where detailed descriptions of the desired weight, size, and quality are depicted (Brown, 2003). Creating the specification is a significant step in ensuring control in the purchasing of the materials. Therefore, the specification should clearly outline the required standards for each product to be purchased (Brown, 2003). The managers of the restaurant have to specify the requirements of the products prior to the search by the purchasing department. In addition, the specification should be able to guide the supplier and reduce delivery discrepancies (Feinstein & Stefanelli, 2010). Finally, the specification should be used to check the products during delivery. Supplier selection is one of the major activities of the purchasing department. The quality and safety of the materials used in the production are paramount for high-quality output (Feinstein & Stefanelli, 2010). When selecting the supplier for the products of the restaurant, various aspects are taken into consideration. The reputation of ...