Inventory Management - Essay Example

Download file to see previous pages A small pizza restaurant might face a number of issues with regard to inventory management. The most important is that pizza is a food item which is perishable along with its ingredients. Therefore, it is not possible to store these ingredients for a long time and must be ordered on a weekly or a monthly basis. Some ingredients even have a perishability of just one day. The owners of the small pizza restaurant should keep in mind the exact degree of perishability of the ingredients and then plan such an inventory level which reduces waste as much as possible. Higher waste would increase the costs of production of this business and might even affect the operations of this restaurant. Another issue is that, unlike other goods and services, food is consumed everyday and even more than once within a day. Therefore, if proper stock counting is not done then there might be a shortage of ingredients and this will directly have an impact on the sales of the restaurant as well as customer satisfaction. Food items are also prone to health and safety issues. The owners should make sure that the ingredients used in the pizzas are healthy and clean. The inventory being stored for the pizzas should be kept in a clean and safe place as well. For the above reasons, inventory management should be done in an efficient and effective manner.   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. A fixed order quantity system is one in which fixed quantity orders are placed with the suppliers over a period of time. Under this system, there is a reorder point and as soon as the reorder point is reached, the business places their fixed order with their suppliers (Fixed order approach, n.d.). A fixed period system, however, is one in which orders are placed periodically but the order size or quantity is different for each order. An important benefit of this system is that fluctuations in demand could be easily met through this system. For example, if, due to certain factors, the demand for a business increases then it can place orders of higher quantities as the order size is not fixed in this system. Another benefit with this system is that even if the orders are delayed, it would not have a large impact on the operations of the business as an ample amount of time is given for orders (Fixed period ordering system, n.d.). For the purchase of fresh dough from a bakery, the perishability of fresh dough should be kept in mind. Therefore, the restaurant has to order fresh dough everyday. The benefit of using a fixed order quantity against a fixed period system is that it does not require a regular periodic count and the business is aware of the amount of fresh dough available for a particular day. Another essential advantage is that the bakery will be aware of the order quantity required by the restaurant and therefore, there would be no delays on part of the bakery. A fixed period system also has a disadvantage as the usage of the inventories is not constant and this might even cause disruptions in the operations of the restaurant. Evaluate which approach is better and explain your rationale.  As far as a small pizza restaurant is concerned, the best approach is the fixed order quantity system. This is because a small pizza res ...Download file to see next pagesRead More