BUS606: Operations and Supply Chain Management

There are a variety of factors that affect how much inventory should be kept on hand some of which were mentioned previously in the forecasting chapter. The menu, the frequency of deliveries and lead time needed from order to delivery, the amount of storage space, including cold storage, the location and size of the operation are all examples of factors to consider. Some smaller operations may need to carry higher inventory levels in order to reduce the number of deliveries so that each delivery is large enough to make it worthwhile for a supplier to run a truck to the operation or to avoid shipping costs

Some operations can operate with a "just in time" inventory – based on the working stock needed for the menu. Many operations will be graded on how much inventory they are carrying. Even though the inventory has value, tying up your money in inventory is not wise. It does not gain interest, as your money would if it were invested in other places. The quality of many products will degrade over time, and you may be forced to throw it away. Too much product can also lead to increased theft. Employees will be more tempted if they see that we are carrying an excess of something.