EBK OPERATIONS MANAGEMENT
14th Edition
ISBN: 9781260718447
Author: Stevenson
Publisher: MCG COURSE
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Chapter 12, Problem 3.1CQ
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 managers in determining on-hand inventory and gauging how well the restaurant is controlling food costs. The fiscal week for Farmers 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 inventory 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 determine a total food cost. The manager compares this cost with the benchmark cost to see how well the restaurant has been managing 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 system she is using at her restaurant. Kristin has been using her intuition 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 average
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 talking 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.
Describe the importance of inventory management as it relates to the Farmers Restaurant.
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Chapter 12 Solutions
EBK OPERATIONS MANAGEMENT
Ch. 12.3 - Prob. 1RQCh. 12 - What are the primary reasons for holding...Ch. 12 - What are the requirements for effective inventory...Ch. 12 - Briefly describe each of the costs associated with...Ch. 12 - What potential benefits and risks do RFID tags...Ch. 12 - Prob. 5DRQCh. 12 - Prob. 6DRQCh. 12 - a. List the major assumptions of the EOQ model. b....Ch. 12 - Explain briefly how a higher carrying cost can...Ch. 12 - What is safety stock, and what is its purpose?
Ch. 12 - Prob. 10DRQCh. 12 - What is meant by the term service level? Generally...Ch. 12 - Describe briefly the A-B-C approach to inventory...Ch. 12 - The purchasing agent for a company that assembles...Ch. 12 - Explain how a decrease in setup time can lead to a...Ch. 12 - What is the single-period model, and under what...Ch. 12 - Can the optimal stocking level in the...Ch. 12 - Prob. 17DRQCh. 12 - What trade-offs are involved in each of these...Ch. 12 - Who needs to be involved in inventory decisions...Ch. 12 - How has technology aided inventory management? How...Ch. 12 - To be competitive, many fast-food chains began to...Ch. 12 - As a supermarket manager, how would you go about...Ch. 12 - Sam is at the post office to mail a package. After...Ch. 12 - Give two examples of unethical conduct involving...Ch. 12 - Prob. 1PCh. 12 - a. The following table contains figures on the...Ch. 12 - A bakery buys flours in 25-pound bags. The bakery...Ch. 12 - A large law firm uses an average of 40 boxes of...Ch. 12 - Garden Variety Flower Shop uses 750 clay pots a...Ch. 12 - A produce distributor uses 800 packing crates a...Ch. 12 - A manager receives a forecast for next year....Ch. 12 - A food processor uses approximately 27,000 glass...Ch. 12 - The Friendly Sausage Factory (FSF) can produce hot...Ch. 12 - A chemical firm produces sodium bisulfate in...Ch. 12 - A company is about to begin production of a new...Ch. 12 - Prob. 12PCh. 12 - A mail-order house uses 18,000 boxes a year....Ch. 12 - A jewelry firm buys semiprecious stones to make...Ch. 12 - A manufacturer of exercise equipment purchases the...Ch. 12 - A company will begin stocking remote control...Ch. 12 - A manager just received a new price list from a...Ch. 12 - A newspaper publisher uses roughly 800 feet of...Ch. 12 - Given this information: Expected demand during...Ch. 12 - Given this information: Lead-time demand = 600...Ch. 12 - Demand for walnut fudge ice cream at the Sweet...Ch. 12 - The injection molding department of a company uses...Ch. 12 - A company uses 85 circuit boards a day in a...Ch. 12 - One item a computer store sells is supplied by a...Ch. 12 - The manager of a car wash received a revised price...Ch. 12 - A small copy center uses five 500-sheet boxes of...Ch. 12 - Ned's Natural Foods sells unshelled peanuts by the...Ch. 12 - Regional Supermarket is open 360 days per year....Ch. 12 - A service station uses 1,200 cases of oil a year....Ch. 12 - Caring Hospital's dispensary reorders doses of a...Ch. 12 - A drugstore uses fixed-order cycles for many of...Ch. 12 - Prob. 32PCh. 12 - Prob. 33PCh. 12 - Demand for jelly doughnuts on Saturdays at Don's...Ch. 12 - A public utility intends to buy a turbine as part...Ch. 12 - Skinner's Fish Market buys fresh Boston bluefish...Ch. 12 - A small grocery store sells fresh produce, which...Ch. 12 - Demand for devil's food whipped-cream layer cake...Ch. 12 - Prob. 39PCh. 12 - Demand for rug-cleaning machines at Clyde's...Ch. 12 - A manager is going to purchase new processing...Ch. 12 - A Las Vegas supermarket bakery must decide how...Ch. 12 - Offwego Airlines has a daily flight from Chicago...Ch. 12 - UPD Manufacturing produces a range of health care...Ch. 12 - Prob. 1.2CQCh. 12 - Prob. 2.1CQCh. 12 - SARAH LUBBERS AND CHRIS RUSCHE, GRAND VALLEY STATE...Ch. 12 - SARAH LUBBERS AND CHRIS RUSCHE, GRAND VALLEY STATE...Ch. 12 - Prob. 3.3CQCh. 12 - SARAH LUBBERS AND CHRIS RUSCHE, GRAND VALLEY STATE...Ch. 12 - Prob. 3.5CQCh. 12 - Prob. 1OTQCh. 12 - Prob. 2OTQCh. 12 - Prob. 3OTQCh. 12 - Prob. 4OTQ
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