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What is it meant by inventory management? Inventory management answers the
question of how much inventory is needed to buffer against the fluctuations in forecast,
customer demands and supplies delivers (Viale, 1996). In the world of food inventory
management is also looking at what that food cost is, the quality of that food, and how
to reduce waste.
Why do we manage the inventory? At Herschend Family Entertainment the food
division does an inventory every four weeks. The goal is to reconcile potential conflicts
in a timely matter. These conflicts can include:
Maximizing Customer Service
Maximizing Efficiency of Purchasing and Production
Minimizing Inventory Investment
A Closer Look at the Four Objectives of Inventory Management
Objective 1 – Maximizing Customer Service
Herschend Family Entertainment is committed for more than half a century to Creating
Memories Worth Repeating ®; we work daily to create wholesome, immersive
entertainment experiences with soul and depth. Experiences for every generation of
your family, sometimes lighthearted, and always distinctive, our award-winning theme
parks, entertainment and attractions aim to inspire happiness and family bonding
(Herschend Family Entertainment - About, 2014).
With this corporation motto you will see that customer service is our number one
objective. Shops have to order supplies daily. When they make their orders they need
to take in affect the weather, projected attendance, number employees to use, type of
festival going on, what is going on in the local communities and their budgets. This is a
lot of information. The more accurate the forecasting, the less inventory is needed to
meet customer service demands. By carrying less inventory, the equipment needed to
store the food will be reduced thus reducing inventory cost.
Objective 2 – Maximizing the Efficiency of Purchasing and Production
The shop general gets orders daily, otherwise known as Just-In-Time deliveries. The
Just-In-Time strategy approach to inventory and product handling, companies can often
cut cost significantly. Inventory costs contribute heavily to the company expenses. By
minimizing the amount of inventory you hold, you save space, free up cash resources,
and reduce the waste from obsolescence (Just In Time, 2014).
However, there are times when buying product in bulk and storing until needed is a cost
savings and should be looked at by management as an alternative to just-in-time
strategy. Our corporation food division at 26 locations in ten states increases our buying
power and should be taken average whenever possible (Herschend Family
Entertainment - About, 2014). This buying power can be used to gain bid pricing for all
locations thus locking in pricing for products for twelve months, thus avoiding price
Objective 3 – Minimizing Inventory Investment
Inventories tie up cash that the company could use elsewhere in the business. Excess
inventory can create a negative cash flow, something that must be avoided. This is why
the financial people work to keep inventories as low as possible (Viale, 1996). By using
Just-In-Time strategy on most products bought in the food shops can achieve the
financial draw of not tying up cash reserves.
Example: There are 27 food shops at Silver Dollar City of those shops there are seven
shops that sell french fries. Let’s say that tomorrow the forecast for attendance will say
each of those shops will need four cases of French fries at a cost of $20 per case.
This example shows by all the shops not ordering to forecast the park has used an extra
$300 in inventory cost. Shop 2019 under ordered and may run into a shortage thus will
not meet customer expectations. Shops 2014, 2023, and 2034 all over ordered and will
need extra space to keep the inventory, could lose product due to freezer overloaded,
and/or have an extra cost to return to supplier. You may say it is not that much of a
cost. However, if all the shops did that with several different products you can see the
cost grow rapidly.