Executive Summary
In food and beverage operations, the inventory cycle plays an important role with introducing the financial rigors. The term “inventory cycle” comprises that different things of the organization are in different verticals. Inventory cycle is used by the managers to buy, store and sell the products and services for planning and managing the inventory levels efficiently. In this regard, the inventory cycle involves different processes namely purchasing, receiving, storing and production. In beverage operations, the managers have proper attention from purchasing to serving the products among the customers to eliminate the generating issues regarding services. Furthermore, the managers also use different inventory methods such as FIFO, LIFO, actual cost and weighted average for financial decisions.
Introduction
This report focuses on the different issues facing by F&B (food and beverage) managers in different events organized by Gold Coast Convention Centre. In this concern, this report outlines on evaluation of inventory cycle through purchasing, receiving, storing and production processes. The purchasing and receiving processes are used at the initial stage of inventory cycle to verify the quality, quantity and price of the beverage products. But, storing and production procedures are used at the ending of inventory cycle to get excellent results from the operational activities. In addition, the report determines the value and effectiveness of the inventory cycle for the beverage organizations.
Key issues faced by the organization
In an various events offered by Gold Coast Convention Centre, the F&B manager gets some negative feedbacks or issues from the customers regarding the quality and services. These issues are as below: 1. The manager found that there was inconsistency of food among the customers. Such as, the meal size of the food items were not as desired by the customers. In some cases, it was big and in some events, it was very small. This variance in the size of meal distressed to the customers and influenced the image of the organization negatively in great manner. 2. There was unavailability of food when ordered by the customers. It means that the serving services provided by the organization are not in systematic manner and unproductive. This issue is generated due to lack of food items. 3. Some customers are complaining that spoiled food has been served to them, which have resulted in people feeling unwell. Due to this negative feedback, some of the customer decided to deny for future services from this organization. In this way, to identify the reasons behind these issues are identified by evaluation of inventory cycle procedures, which is described as below:
Evaluation of inventory cycle procedures
In the food and beverage organizations, inventory cycle is a procedure through which the managers seek to understand beverage purchasing, receiving, storing and production. Most of the operations have numerous inventories to get productive results. These inventories contain alcoholic beverage, nonalcoholic beverage, food items, dishes and office supplies. An inventory cycle procedure for both amount and value of the products held in the businesses to satisfy the customer’s needs and organizational performance (Kounina et al., 2013). In this regard, the F&B managers should evaluate their inventory levels regularly to make different key decisions related to product quality, cost and price. In this way, Heizer and Barry (2013) suggested that the F&B managers must know the importance of the products that are involved in inventory. Apart from this, the physical inventory includes a breathing space to record the value of inventory products. The value of inventory of beverage products may be appeared in the different ways that are as below: FIFO (First in First Out): FIFO method assumes that the inventory products must be withdrawn in an order, where the oldest products are processed first. As a result the products that remained in storage place will be judged to be the most latest purchased items. Here, inventory value becomes the expenditure of the most recently purchased products (Parlar et al., 2011). LIFO (Last in First Out): LIFO method is reverse of FIFO method, in which the products that are purchased most recently will be withdrawn first. In this method, the inventory value will be characterized by unit cost of items that are longest in the inventory (Parlar et al., 2011). Actual cost: In this method, inventory valuation considers the real price compensated for each product. Here, inventory value is considered as sum of the real unit costs (Muller, 2011). Actual cost is calculated by calculation of all direct and indirect expenses. Weighted average: In this method, inventory valuation considers the measurement of each product acquired at different unit costs. The inventory value will be priced through average prices compensated for each items, and the average price will be calculated according to the quantity of products purchased at different prices. In this way, the different processes included in inventory cycle are as below: Purchasing: In beverage organizations, purchasing engages with the series of activities that begin from the supply of goods and ends after the goods are sold by the operations. It is the initial procedure, where beverage managers must decide what they require to procure, how much to procure and when to procure products. The purchasing decision of the managers depends on the nature and characteristics of the targeted customers (Davis et al., 2013). Therefore, they must purchase that product, which may satisfy the needs of their customers. As well as, the managers should be concerned about the buying quantity to make beverage purchasing decisions. In most of the events, operations provide the same kind of products on usual basis, thus particular product requirements do not change hastily. But, the quantity of beverages needed may be changed because of dissimilar estimation of the number of consumers to be served. Therefore, the managers naturally utilize different procedures to decide purchase quantities of different products in different events. If, the beverage products are not purchased in right amount than there may be problems in the financial management as well as quality deterioration. For instance, extra time will be required to take delivery and store products. The insufficient procured quantities may also generate serious problems of unavailability of food items when ordered. It may do disappoint to the customers (Jerutokeitany and Richu, 2014). Therefore, it is primary activity of the managers to procure needed products and needed quantity to satisfy the customers. Receiving: In a beverage organization, it is good to build purchasing decisions at the time of purchasing products. The chief aim of receiving procedure is to make sure that deliveries received are exact to orders placed. In beverage organizations, the deliveries must be compared with beverage orders in regard to quality, quantity, and price of the products (Davis et al., 2013). The standards recognized for receiving are as below: 1. The quality of delivered products must be equivalent as the quality ordered. For all food items and dishes the managers would check that the delivered brand is equivalent as the brand ordered. For food items, confirmation may also require checking of packing date or vintage that is best approach of getting fresh food products (Davis et al., 2013). 2. The quantity of a delivered product must be equivalent to the ordered quantity. The verification of quantity generally entails examining bottles, to be sure that they have been sealed, filled. 3. The price printed on the invoice of each delivered product should be similar as the price listed when order placed. After recognizing the above standards, the delivery invoice should be marked that the delivered products have been accepted as order placed. Storing: Storing is established in the beverage organization after purchasing and receiving the beverage products. Just as purchasing and receiving involves more than calling and putting things, the storing also involves different activities in storeroom. Therefore, the managers must be apprehensive with appropriate storage and issuing practices of the beverage products because the financial goals of beverage operations are straightforwardly inflated by storage practices. If, the beverage and food products are stored appropriately than these stored products will be exercise properly to produce revenue. Conversely, if the purchased products are not appropriately stored than they can be damaged, broken or stolen. These outcomes may result in increased cost of the products (Rai and Singh, 2011). In this concern, the main objectives of storing that may be used in inventory cycle are as below: 1. To prevent from theft: It is obviously essential to set up a proper level of safety of the storage area. The storage area must be controlled by authorized individuals and step must be taken to security against unauthorized use of beverage products by those individuals who are permitted to access the storage area (Rai and Singh, 2011). If the appropriate steps are not taken than the beverage products may disappear that will influence the inventory cycle in negative manner. 2. To make sure convenience of products when needed: The storage facility should be organized fairly, so that all individual product and brand can be found rapidly. In a simple manner, the storage location of each item should be assigned by shelf or bin number in the beverage inventory (Ibegbulem and Okorie, 2015). 3. To sustain product quality: In beverage inventory cycle each product must be stored properly under conditions, in which the shelf life of the beverage products may be maximized. This objective requires taking into account significant elements such as humidity, temperature and the comportment in which products are stored. In this way, generally air-conditioned areas are used by the organizations to provide proper humidity and temperature (Ibegbulem and Okorie, 2015). Production: In food and beverage organizations, production is the process of moving beverage products from storage rooms to consumption and service areas. In this process, the accurate quantity of the items must be issued by the managers to meet estimated consumer demand. This procedure must be cautiously controlled by the managers to diminish misuse of the products. Moreover, F&B managers can match the generating issues in the products with the total of revenues they must generate. In this way, the managers may use the term COGS (cost of goods sold) to calculate the amount of a product that will be used to generate the revenue. It is an appropriate method for the beverage products because there are mixtures of situations in which the beverage goods are under gone but cannot be sold (Nurein and Din, 2015).
Discussion on the suggested improvements
In beverage organizations, the managers should implement the inventory cycle in a successful manner. Here, receiving and storing procedures may be the reason of food unavailability and spoiled food in the events. The F&B managers of the organization have not checked properly the quality and brand of the products received. There may be difference between the quality of ordered products and received products. As well as, in the storing process the temperature and humidity may be insignificant that spoiled the beverage products (Chang et al., 2014). In addition, the FIFO method will protect the beverage products to be spoiled. Through this method fresh products will be used regularly and will be served in quick manner to satisfy the customers. Moreover, if the managers follow purchasing and receiving procedures in beverage operation, than they can eliminate the financial discrepancy in the inventory management and produce an effective inventory cycle. In this way, the managers may use COGS method to decide the price of the services. In this way, COGS for Goals Coast Convention Centre is calculated as below: Percentage of cost of food sales = (315000/510000)*100 = 61.76% Percentage of cost of beverage sales = (112000/290000)*100 = 38.62% From the above calculations it is observed that cost of goods sold is much higher. Reason of increased cost may be disorganized purchasing, receiving and storing procedure. In this way, it is observed that inventory cycle involves two objectives i.e. service objectives and cost objectives. It is also observed that if the managers have attention on purchasing process than, they will get fresh and branded products from the suppliers at the placed rate of order. As well as, it will be good for the managers to make purchasing decisions when the beverage products are purchased. Through the appropriate receiving procedure the managers will be unable to ensure that the products are delivered as order was placed. Here, the managers verify quality, quantity and price of the beverage products to produce an effective inventory cycle. Furthermore, at storing procedure the managers must be attentive for the protection of beverage products. The managers should implement a system in which the beverage products may be stored in the storerooms efficiently (Hamelin et al., 2012). In addition, the managers make efforts to protect the stored area from the deception and theft to get actual results from the received products. According to Manfredi and Vignali (2015), the managers can maintain the security in two ways. First way is to allocate the responsibilities of security to an individual person. Literally, this type of responsibilities keeps watch over all the beverage items. In many beverage organizations, it is observed that they assigned a particular steward in storage facilities and maintain the stock of the beverage products. Normally, steward permitted person by authorized managers in the storage facilities. As well as, the second way of maintaining security is to maintain the beverage storage facilities protected and give the responsibility of issuing to a particular person, who will be responsible for all beverage products in inventory cycle. But another provision can be made to issue the required beverages in the absence of this responsible person. For instance, process can be recognized by a manager who can access to the beverage storage facilities.
Feasibility of the recommendation
The above suggestions and recommendation have three types of feasibility for the beverage organizations that are discussed as below: Economic feasibility: In an organization, if the estimated profits are equal or above the expected costs than the organizational activities can be judged as economically feasible. Through the inventory cycle procedures, the managers can analysis the cost and benefit to get economic feasibility. This analysis may be used to evaluate the efficiency of the proposed methods. In addition, the beverage organizations may get cost-benefit analysis through managing proper purchasing and receiving procedure (Stratton et al., 2011). As the name suggested, inventory cycle is an analysis of expenditures in the organization and profits delivered out of the operations. Hence, the managers should make efforts to generate economic feasibility in the organizations by implementing different procedures of inventory cycle at different stages. Operational Feasibility: The operational feasibility is mostly concerned with the operational issues such as whether the system will be employed, if it is implemented and developed and whether there will be conflict from the customers that will affect to the probable benefits. The beverage managers may be capable to provide the desired services and products to the customers through this cycle. As well as the F&B managers can analyze that how the management is supporting to the event and are the customers are pleased with the services of the organization (Verghese et al., 2012). Therefore, it is recommended that the management of the beverage organizations should implement their receiving and storing procedures to obtain the operational feasibility. Legal feasibility: The legal feasibility is concerned with liability, contracts, violations and legal frameworks with the suppliers of the products. In inventory cycle, this framework is utilized at the primary stage of inventory cycle. Therefore, the beverage managers are recommended to implement an effective inventory cycle for legal formalities. Conclusion
From the above discussion it can be concluded that the inventory cycle is an effective tool for the organizations, which may be used by the management department in operational activities. As well as it can be concluded that FIFO method is an effective method for beverage operations that can improve the services of the organization among customers.