Inventories - Your Allies or Adversaries?

Are you holding what you sell or selling what you hold?

By S. Lakshmi Narasimhan Founder, Ignite Insight LLC | February 01, 2015

You go to a restaurant in a hotel or even a free standing one and order your favorite dish from the a la carte menu. The waiter who takes your order comes back and tells you that the item is not available or worse, sold out. Have you ever wondered how this could happen? Normally, this process works with clockwork precision. What went wrong this time?

Not surprisingly, this is due to poor management of inventories.

Inventories are food, beverage and other supply items, which are kept in stock in big quantities to ensure that they are available for sale in the restaurants and other sale outlets. Food and Beverage items are normally held as inventories for sales while supplies are held for consumption. So, you could say that inventories are for sale and consumption.

Role of Inventories

What role do inventories play in a hotel or restaurant operation? Inventories virtually ensure that the hotel is always fed with a continuous supply of materials both for sale and consumption. Items of sale impact revenues and items of consumption impact expenses. In a way, inventories regulate both revenues and expenses.

One of the most important decisions to be taken in a restaurant operation is the level of inventories that must be held at any point of time. In order to know accurately this optimum level of holding inventories, it is critical to understand the pattern of sales and consumption in the past. In inventory management terminology, this is known as "par stock". A par is a quantity measure that determines the optimum level of inventories that must be held at any one time.

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