Stock Management for Food and Beverage Department; Case of Mcdonald s Company Limited Tanchanok PRASARNSUKLAP Introduction It is acceptable that Mcdonald s is one of the most successful restaurant businesses, a part of many aspects is managing stock. The company focused on building a guest loyalty and long term relationship to make repeat orders and to use a wide range of services offered so the company need to manage stock for always having sufficiency quantity to satisfy its guests simutaneeously with avoiding wate and damage and minimizing costs. Mcdonalds convinces having too high or too low stocks takes risk because high stocks represent money lying idle when it could be put to better use, whereas low stocks could result in not being able to meet orders and satisfy customers needs. Problems of low stock Problem of high stocks 1. It may be difficult to satisfy guests demands 1. There is an increased risk of a stock item becoming obsolete. 2. It can lead to a loss of business. 2. The risk of stock losses is increased. 3. It can lead to a loss of good will. 3. The costs of storage are high. 4. Ordering needs to be frequent and 4. Stocks can tie up a company s working handling costs are higher. capital. Stock Management System of Mcdonald s and benefits Centralized Stock Management System Applying Just in Time Method for planning and forecasting a likely demand of menu items Using First in First out (FIFO) basis, materials are used in the order they are received. Daily record opening and closing stocks of key food materials, while weekly record for all other materials Holding an extra quantity of stock to meet unexpected higher standard, base on re order point system. Benefits generated from centralized stock management system: Avoiding out of stock, the accurate level of stock is simply input currently onto the system. AS a result, customers can always get what they order Avoiding too much stock, stock can be reduced automatically at the end of a promotion Stock levels are always optimum to ensure sales and the freshest products. Cost Saving, results from less watte and passes on value for guests. Time Saving, as ordering is based on the level of current stocks which is already shown on the system.
Decision Analysis Regarding to the case study of Mcdonald s, there is the methods that can be used to solve the problem of stock shortage and refine the stock control system in food and beverages companies. The chosen following might proper for Swissotel Le Concorde. Stock Control System JustinTime (JIT): for perishable materials Just in Time is a system of purchase only enough materials each day to produce units as actual guests demand or, as simply, means that raw materials are received just in time to got into production, and units are completed just in time to be served to guests. The benefits of using just in time systems are: Cost Reduction, budget will not be tied up but can be used elsewhere Areas, previously used to store, can be used for other more. Higher quality of product, the used material is fresher resulting in less waste and greater customer satisfaction. Reorder point (ROP): non perishable materials The reorder point is the number of units to which the supply on hand should decrease before additional orders are placed. The factors determine the reorder point are average normal consumption includes possible increase usage during purchasing progress, and the time to process on order includes delay. This system is chosen for: Reducing the risk of stockout, which can possible cause customer dissatisfaction and lost sales. Using and saving stock system Formal issuing: for perishable and nonperishable materials Requisitions are playing an important role for issuing control, whenever a product is transferred from one area to another no matter from storage to kitchen, kitchen to kitchen, or kitchen to outlet so putting requisitions in writing provides existent documentation, therefore, greater control. Daily issues can help in terms of: Maintain accuracy establish usage rates. Maintain accuracy reorder points.
First In, First Out (FIFO): for perishable and non perishable materials First in first out system supposes to be followed after products are issued. This means the materials are used by ranking as order, on the other hand, the least perishables are used first and the most perishable are used last. Stock then will always fresh at all time. Heading on FIFO basis can take advantages of: Minimizes loss of product quality Minimizes possible spoilage and contamination Maintains product temperature Recommendations To clearly illustrate, as we can see from 14 days forecast on the date of 23 rd September, total number of guest expectation for lunch was 430 persons and one of the lists of hot dishes on that day was Pan fried John Dori with Black Olive and Garlic Butter so on date 22 nd, the chefs suppose to stock materials adequate for 430 persons with extra 50 persons of walkin guests which includes: Perishables Nonperishables with shorter shelf lives Nonperishables with slonger shelf lives Managing stocks of perishables: the Use of Justin Time (JIT) system I have chosen the system of just in time for solving the problem of stock miss planning which might lead to the negative impacts of wasting costs of production, and compensation to guests. Even the system was already proceeded, we still need to make some different by enforcing the system for more effectiveness. For the JIT on hand, from the above example, the chefs on duty will check and order those 3 items of perishables on 22 nd September, only 1 day before the actual day, which is quite tight. But for my new JIT, the chefs on duty have to check and place order on 21 st or 2 days before the actual day. Managing stock of nonperishables: the Use of ReOrder Point (ROP) system The reorder point system was chosen to solve the problem of uncertainty of the number of guests which risks to chefs on duty, they cannot fully making menu as original and cause to guests unsatisfaction. Again, even the system was already proceeded, we still need to make some different by enforcing the systems for more effectiveness. Par stock is taken to mean the maximum quantity of an item that should be on hand after received the latest order and according to the standard of the hotel, nonperishable materials with shorter shelf lives are normally kept per stock for 1 week and review every 3 days while the longer are normally kept for 1 month and review every 15 days.
On account of the available ROP, the chefs on duty will check and order those items of nonperishables on 21 st September, 2 days before the actual day. However, my ROP system will add a safety cushion of 2 days so the chefs on duty suppose to check and place order on 19 th September or 4 days before the actual day. To calculate the appropriate level for reordering stock materials, as the above example, the hotel must considerate these relevant factors a) Average monthly consumption, established over a 3 to 6 months period b) Time to process on order c) Time between the placing of an order and the receiving of the goods in the hotel d) Add a safety cushion of 2 days Stock security for perishable and nonperishables: The Use of formal issuing system The formal issuing system has been chosen for solving the problem of internal transfer without permission which might bring to inaccuracy of usage rates in each kitchen and difficult to calculate the reorder points. Similar to JIT and ROP, the system was already proceeded but each chef trend to ignore the procedure due to the unawareness of the following results and unforeseen the future advantage. Moreover, they think it will be waiting time using these systems In order to let them work consistency and understand the importance of the system, we have to guide and acknowledge every chef to strictly follow the processes as habits and make these proficient system demonstrate their most effectiveness. For formal issuing of Swissotel Le Concorde, there is an internal transfer form which needs to be completed in order to correctly calculate the budgets of each kitchen. The unit where issues materials must submit the internal transfer form to the unit where the materials come from, no matter how big or small amount of the quantity, right away after received materials or at least within that day. Stock security for perishables and nonperishables : the Use of First In, First Out (FIFO) system The First In, First Out (FIFO) system is chosen for solving the problem of deterioration because missstoring or missusing in strict order which might bring to higher spoilage and higher cost of production. Likewise to formal issuing, the system was already proceeded but each chef tend to ignore so the leaders of each kitchen will be trained by systematically and can share this knowledge to colleagues and subordinate in order to prove the advantages of using systems. In addition to FIFO system, chefs have to highlight or label the expiry date on each item, right away after received and before store on shelves or keep refrigerate. The former items must be taken out of shelves, replaced by the latest ones, and out the former ones at the front lines of shelves.
Conclusion of decision analysis After following the systems of JIT, ROP, formal issuing, and FIFO, it clearly observed that the extent of the problem to each subcategory would be inhabited. Chefs on duty could ensure stock materials they ordered will be delivered in expected time for adequate serving to entire guests (benefits from ROP). The materials themselves could be checked using elsewhere and calculated accuracy usage rates of each kitchen (benefits from formal issuing). Guests then could get what they are expected and with its freshest (benefits from JIT). Furthermore, an error from chefs on duty was being kept in minimum level, they worked much functionally, and could make use of each material for its utmost utility which brought to the results of less water. As you can see, these systems could solve the problem of stock shortage of Swissohotel Le Concorde, the hotel could always provide sufficient products to meet its thoroughly guests which made them utmost satisfied. The hotel therefore benefits from cost reduction, organized work flow in the kitchen, guests satisfaction and brand loyalty. References Paul R. Ditter and J. Desmond Keefe III, Principles of food, beverage, and labor cost controls, ninth edition The Orientation Professional Thai Chef Programme, Cost Control: the establishment of reordering stock levels (minimum and maximum), 2009 Mcdonald s case study: Managing stock to meet customer needs, http://www.thetimes100.co.uk/downloads/mcdonald/mcdonalds_12_full.pdf Operations: Stock ontrol, http://www.thetimes100.co.uk/theory/index.php, Business Studies theory/studentand Teacher resources Food manufacture: Just In Time http://www.foodmanufacture.co.uk/news/fullstory.php/aid/3839/justin_time.html Inventory management system: Basic inventory decision and EOQ. http://www.marcbowles.com/courses/adv_dip/module4/module4/m4three1.htm Develop and evaluate supply change management systemsadvanced diploma in logistics and management Stock Control and Inventory: Stock Control Methods, http://www.businesslink.gouv.uk/bdotg/action/layer?topicid=1074039371, Business linkpractical advice for business