Question

SARAH LUBBERS AND CHRIS RUSCHE, GRAND VALLEY
STATE UNIVERSITY
Farmers Restaurant is a full service restaurant offering a variety
of breakfast, lunch, and dinner items. Currently, Kristin Davis is
the general manager for the Farmers Restaurant located in the
Grand Rapids/ Wyoming metro area of Michigan. Since becoming
manager, Kristin has faced some difficulties with ordering the
right amounts of food items for the restaurant. Because of this,
there are some weeks the restaurant has a surplus of menu items
that are no longer fresh, and must be discarded. At other times,
the restaurant has experienced shortages of some items. The
fact that inventory accounts for an average cost of 26 percent
of the restaurant’s total revenues underscores the importance
of managing inventory. Kristin would like to find a way to ensure
that she is maintaining the proper amount of inventory. Customer
counts at Kristin’s restaurant have been declining recently, so
one of Kristin’s greatest focuses is to keep current customers and
attract new customers. She believes that a key aspect of this is
having all of the items on the menu in stock.
The restaurant industry is competitive. In the Grand Rapids/
Wyoming metro area alone there are over 1,600 restaurants.
Some of Farmers Restaurant’s most serious competitors are IHOP,
Applebee’s, and Big Boy, all of which are located within 20 miles
of the Farmers Restaurant, so customers have many alternatives
from which to choose.
Online inventory systems are used to assist restaurant man-
agers in determining on-hand inventory and gauging how well
the restaurant is controlling food costs. The fiscal week for Farm-
ers Restaurant starts on Thursday and ends on Wednesday of the
following week. Each Wednesday, the manager physically counts
the inventory on hand and enters the data into the online inven-
tory system. The computer software system then compares the
on-hand inventory for that week, the amount of food ordered,
and the inventory on hand for the end of the previous week with
the sales for the current week. By doing so, it is able to deter-
mine a total food cost. The manager compares this cost with the
benchmark cost to see how well the restaurant has been man-
aging its inventory. This is one of the most important numbers
to managers at the Farmers Restaurant because it accounts for
approximately 30 percent of total costs in terms of a store’s cost
structure.
The computer software system also compares the total cost of
food on hand with the total amount of sales for that week and
computes a percentage of on-hand inventories. As a guideline, the
company has set a standard of having between 29 and 36 percent
for its on-hand inventory level. The company feels that this level of
inventory is an appropriate average to ensure quality food that is
fresh and within expiration. Lastly, it is better to keep the inventory
at a minimum level to ensure the accuracy and ease of inventory
counts.
The Farmers Restaurant Kristin manages has been running
above average in terms of food costs. For this reason, her boss
has become concerned with the performance of the ordering sys-
tem she is using at her restaurant. Kristin has been using her intu-
itition to decide how much product to order despite the fact that
the product order sheets provide a moving average usage of each
product. Kristin bases her inventory management on her intuition
because she does not understand how to utilize the moving aver-
age forecasting technique when placing orders. An additional
complication with ordering inventory is that each item is packed in
multiple quantities, so she cannot order the exact amount that she
needs. Her boss requested that she create a more accurate way
of ordering food and to report back to him in one month. Kristin is
worried that if she cuts inventory levels too low she will run out of
products, which may result in a decrease in customer counts.
After Kristin met with her boss, she began to think about what
changes she could make. She knows that inventory has been a
weak point for her, but she remembers one of her employees talk-
ing about inventory management from one of his college courses.
Kristin decides to ask the employee if he would be willing to help
her try and come up with a better way for her to order products.
Kristin tells him how the ordering system works, shows him the
ordering form, and relates the given information.
Suppose you have been asked to work with Kristin to improve
inventory ordering.

Questions
1. Describe the importance of inventory management as it
relates to the Farmers Restaurant.

2. What ordering system would be best for this situation?

3. Given the following information, provide an example of how
much of Farmers Sausage Gravy Mix should be ordered. You are
doing the order for Thursday. Also, Kristin would like a service
level of 95 percent, and you have found that there is a standard
deviation of 3.5 units per week, and a moving average weekly
demand of 35 servings. The gravy mix comes in packs of two
servings. There are currently three packs in inventory.

4. Given the above information and an on-hand inventory of
12, determine the risk of stock out at the end of initial lead
time and at the end of the second lead time. The lead time is
2 days and orders are placed once a week.

5. The supplier Kristin uses is located in Ohio. Why might Kristin
consider dealing with a nearby supplier instead of the one
in Ohio? What reasons might there be for not switching
suppliers?

Answer 1

Answer:-

1)

Inventories are key bit of business. They are basic for exercises, just as add to purchaser dedication. The stock organization can help diner manager to streamline mentioning, booking and any method regarding the stock at the measurement which is consistent for the business. In case of Farmers Restaurant the stock organization is essential especially Kristin, the executive or the business itself has various contenders in this way with authentic stock organization they won't lost any solicitations and they will have a consistent stock that could remain mindful of the solicitations of customers until the point that new demands would show up.

Kristin may use evident data concerning orders required with guaging of offers to reduce the cost of solicitations.

2)

Here significant thing is that there's need of a such a framework, that if another request sitting tight for affirmation, the client gets a warning about the request procedure.

Furthermore, if eatery is out of fixings and can't acknowledge a prepaid request, the staff ought to have the option to dismiss the request and give back the cash in a split second without calling the client.

In Breadcrumb framework, clients can dole out tables to various zones and get a perspective on what's going on at each table. Servers can course things, include modifiers, alter menus and fire orders with one tap while adding notes to watches that are seen by the front-and back-of-house.

Cafés can set access levels for supervisor endorsement for any progressions to checks and set robotized tip levels.

Another can be Deli POS System which bolsters different units to expand the progression of accounts. Requests can be taken at one framework and a work request being sent to the store line where it very well may be filled and introduced to the client.

Improves inventory management, a pivotal part of a bustling store. Supports various installment choices, improves staff management, and streamlines finance and bookkeeping strategies.

This will definitely help the eatery in streamline its inventory.

3)

Let us characterize Protection Period , P as Order recurrence period + Lead time

Along these lines,

P = 7 days ( since request is set once in seven days) + 2 Lead time = 9 days

Standard deviation of week after week request ( 7 days) = 3.5 units every week

Subsequently, Standard deviation of interest during Protection period

= Standard deviation of week by week request x Square root ( Protection period/week)

= 3.5 x Square root ( 9/7)

= 3.5 x 1.1338

= 3.9683

Mean day by day request = Mean week by week request/7 = 35/7 = 5

Administration level of 95 % implies instock likelihood of 0.95 %

Relating Z esteem for In stock likelihood of 0.95

= NORMSINV ( 0.95) = 1.6448

Thusly .

Security stock = Z esteem x Standard deviation of interest during assurance period

= 1.6448 x 3.9683

= 6.5270 ( 7 adjusted to next higher entire number)

Amount to be requested each week = Daily mean interest x 7 days = 5 x 7 = 35

In this manner,

Amount to be typically there after lead time has slipped endless supply of a request

= Quantity to be requested each week + Safety stock

= 35 + 7

= 42

Anyway , close by inventory = 12

Subsequently,

Amount ought to be there after finish of first lead time

= Quantity to be regularly there after lead time has endless supply of request + 12 (i.e close by inventory)

= 35 + 12

= 47

After 1 st lead time request amount for second lead time must be balanced for abundance stock over security stock prerequisite. In this way , overabundance stock = 12 – wellbeing tock of 7 = 5 numbers

In this manner request amount will diminish to that degree ( i.e by 5 numbers)

Amount ought to be there after second lead time

= ( 35 – 5) + Safety supply of 7

= 30 + 7 = 37

4)

Let us characterize Protection Period, P as Order recurrence period + Lead time

Along these lines,

P = 7 days (since request is set once in seven days) + 2 Lead time = multi day

Standard deviation of week after week request (7 days) = 3.5 units every week

Thus, Standard deviation of interest during Protection period

= Standard deviation of week after week request x Square root (Protection period/week)

= 3.5 x Square root (9/7)

= 3.5 x 1.1338

= 3.9683

Mean day by day request = Mean week by week request/7 = 35/7 = 5

Administration level of 95 % implies instock likelihood of 0.95 %

Relating Z esteem for In stock likelihood of 0.95

= NORMSINV (0.95) = 1.6448

Consequently.

Security stock = Z esteem x Standard deviation of interest during assurance period

= 1.6448 x 3.9683

= 6.5270 (7 adjusted to next higher entire number)

Amount to be requested each week = Daily mean interest x 7 days = 5 x 7 = 35

In this way,

Amount to be typically there after lead time has slipped endless supply of a request

= Quantity to be requested each week + Safety stock

= 35 + 7

= 42

Nonetheless, close by inventory = 12

Hence,

Amount ought to be there after finish of first lead time

= Quantity to be ordinarily there after lead time has slipped endless supply of request + 12 (i.e close by inventory)

= 35 + 12

= 47

After 1 st lead time request amount for second lead time must be balanced for overabundance stock over wellbeing stock necessity. In this manner , abundance stock = 12 – wellbeing tock of 7 = 5 numbers

In this manner request amount will decrease to that degree ( i.e by 5 numbers)

Amount ought to be there after second lead time

= ( 35 – 5) + Safety load of 7

= 30 + 7 = 37

Given the numbers above, there is extremely little possibility that they will have restricted stock out before the following request shows up. With the likelihood of 95% they will probably not have a stock lack.

5)

There are various reasons that Kristin may need to consider changing to a close by supplier. Lead Time Improvement: Particularly changing to a local supplier will redesign movement lead times. In utilizing one that isa scarcely any states away, it takes any progressively stretched out among mentioning and movement time. While utilizing a localsupplier, they can hold to a lesser degree a stock because of the way where that the turn time willprobably be through and through shorter. Supplier Interaction: in the improbable occasion that it is in a similar city, Kristin may even be fit visit the retailer and getitems very close. It goes in basically more prominent direction and dynamically right measures whenutilizing a retailer that is various states away.

Publicizing Locally: One other potential bit of leeway of utilizing a local retailer is the capacity to communicate that you purchaselocal. Advancing secretly sourced thing cases to various individuals that they are helping theirlocal collect one a bigger number of courses than one. New Food: Purchasing neighborhood additionally could mean inside and out fresher sustenances.

This will take intoconsideration sustenances to remain on the racks longer without them going past their end date.Purchasing fresher sustenances is one way that burger joints can give them increasingly unmistakable flexibility in ordering,without need to organize more sustenance and discarding it since it slipped by.

Progressively reasonable thing and Excess Variety: It might notwithstanding be increasingly moderate given thing and time to utilize the supplier in Ohio.Sometimes obtaining from a close by retailer can be super costly. One other factor that may play into Kristin getting from the retailer in Ohio is an immediate consequence of the capacity to get an item.Local retailers may have a littler blend of things. This would shield a burger joint from havingthe capacity to set up express dinners.

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