Three

210 PART II • MANUFACTURING AND SERVICE FLOWS

I

CASE STUDIES

CASE 1: Inventory Problems at Three Spoons Market Randy is the owner of Three Spoons Market. Three Spoons is an upscale tapas restaurant in a town of about 200,000 peo- ple. According to both Yelp and Trip Advisory, it is the high- est-rated restaurant in town. Randy had been having trouble with inventory management (he runs out of some items while others go bad) and has brought you in as a consultant to help, due to your background in inventory management. The menu at the restaurant changes monthly, and there are daily specials.

Randy follows what other restaurant owners are doing to improve their bottom line-he reads trade publications and online blogs. He also tries to keep up with trends in other industries that may help him manage better. He recently read about the success small-job shops have had with managing inventory by classifying inventory as A, B, or C. As Randy thinks about his business, it is really a job shop, since food is prepared after the customer orders from the menu. The food is prepared to customer tastes and requirements. He is not exactly sure if an ABC inventory plan will work for his restaurant, but has hired you to provide a recommendation. All the ingredients used in the dishes are either dried or fresh. Nothing frozen or processed is put in the food. Customers can request alterations in menu items during ordering. A detail of the inventories at the restaurant are as follows:

• Condiments. Used for additional flavoring of foods at the table. Can be stored for long periods of time. There are five different condiments available, and multiple tables may need the same condiments at the same time. These items represent less than 0.5% of food costs.

• Spices and dried fruits. Used in most dishes, and can be stored for long periods of time without compromising the taste of the items. There are about 50 different spices and fruits that are stocked. Some can be substituted for others. These items represent less than 5% of the food costs for the various dishes.

• Oils. Used to prepare items and as an ingredient in some dishes. Have shelflives of one week to one month. There are 10 different oils that are stocked. Two or three can be substituted, but the others

have a unique taste. These items represent about 10-15% of the food costs and preparation costs of the various dishes.

• Fresh vegetables and herbs. Have a shelf life of two days to one week. These items are delivered in a truck that comes twice a week, but in some cases have to be ordered a week in advance. In an emergency, these items can be found at a local grocery store. These items represent between 10- 70% of the food costs of the various dishes, depending on if the dish contains meat.

• Fresh fruits. Have a shelf life of two to four days. These items are unique to the dishes on the menu. They are not usually found in a local grocery store, but in a pinch someone can drive an hour to a distributor to pick them up, if in stock. These items are delivered twice per week. They represent about 10% of the food costs.

• Meats. Have a shelf life of two to four days. These items are unique to the dishes on the menu. They are not usually found in the local grocery store.. but are available from a distributor, if in stock. These items are delivered twice a week. They represent up to 60% of the food costs.

• Dairy. Have a shelf life of one week. These items are usually delivered three times per week and can also be found locally at a grocery store. The items represent less than 5% of the costs of the food items.

DISCUSSION QUESTIONS

1. What are the advantages and disadvantages of having an ABC inventory plan at the restaurant?

2. What items would you classify in each category?

3. Are stockouts acceptable in this this type of business? Why, or why not?

4. Would the creation of more work-in-process or ? finished goods inventory be beneficial to the owner·

Why, or why not?

. d terial fot Note: Written by Jeffrey W. Fahrenwald, MBA, Rockford University, Rockford, IL. This case was prepared solely to prov1 e ma class discussion. The author does not intend to illustrate either effective or ineffective handling of a managerial situation.

CASE 2: Inventory Management at Protech Logistics Pat is the newly hired manager of warehouse operations for Protech Logistics, a distributor that sells MRO (mainte- nance, repair, and operating) items to various governmental and nongovernmental organizations throughout the United States. She has been asked by the president of Protech to do

The repo a study of various types of inventory systems. rrell should contain an evaluation of how Protec\c~ioJ1S ( manages its inventory, along with recommen a applicable) for improving the system.