The problem facing Clifftop Bar and Grill
The current problem at Clifftop Bar and Grill concerns the issue of stock management. Stock or inventory management plays an important role in various sectors relating to manufacturing, retailing and food service industries. Clifftop Bar and Grill depends on the inputs and finished products so that it can manage to sustain its customers. The challenges as a result of stock management can have detrimental effect on the performance of the business (Wild 2017). Common issues in stock management are often associated to spoilage or theft. In this regard, the problem that is facing Clifftop Bar and Grill revolves around the loss of over 2000 dollars in missing items which implies that the issue facing the business is stock management problem that needs improvement to ensure that the inventory is kept safe.
Based on the state at Clifftop Bar and Grill, inventory management is paramount in order for the business to operate favorably as well as become sustainable. Moreover, there is a dire need for the business to know what items it needs to restock, purchase and at what price to sell them in order to make profit. These are some of the factors that contribute to the need for a reliable stock management system that is efficient. In essence, the nature of the business should determine the kind of stock management system that a business should implement (Morton, Cambiaghi and Radcliffe 2015). Small businesses often carry out stock management manually while large companies depend on software to manage inventory.
There are numerous benefits that can be reaped from a reliable stock management system. For instance, it helps to improve customers’ services by ensuring that customers get what they need as opposed to disappointing the customer and losing them to competition. Besides, keeping track of inventory helps the manager to know what to order before the stock runs out. Also, stock management is significant for Clifftop Bar and Grill for purposes of keeping track of sales and business performance which helps to facilitate decision making.
Several risks that are associated to inventory control and directly influences the profitability of a business. For a business like Clifftop Bar and Grill, most of its investments goes to inventory which is a crucial aspect of the business since the investment has to bring profits in order to continue operations. Among the actual and potential risks to stock management include theft, lost inventory, damage, life-cycle and shelf life (Solyal?, Cordeau and Laporte 2015).
Why inventory management is paramount for the business
Theft of inventory is an actual risk that is widely acknowledged by many organizations’ including multinationals. Most companies spend huge sums’ of cash to increase regulation and prevent theft of stock but the vice continues regardless of the initiatives put in place (Gallino, Moreno and Stamatopoulos 2016). Lost items in the inventory is likely to translate to less sales volume of a business thereby impacting its profitability.
Companies come up with numerous policies aimed at preventing loss of products and employing qualified personnel but loss of inventory continues to become a problem in many organizations’. Inventory is reflected in the financial statements of a company even though it is considered as a liability. Therefore, whenever inventory is lost, a company is forced to write off the inventory in their financial statements. However, since capital is equal to assets minus liability, a business equity is reduced whenever an inventory is lost and written off the books. (Solyal?, Cordeau and Laporte 2015).
Damage is a potential risk that is tied to inventory management and reflects on the profitability of a business. Most warehouses are known to pile up goods so as to reduce the space of storage. Often, inventory is damaged and can no longer be sold to the consumers. This implies that the products have to be disposed or sold at a lower price which ultimately influences the profitability position of a company.
All the products in the market go through various phases which include introduction, growth and maturity. These phases represent a products’ life cycle. As a result, a product that is way past its maturity is likely to become a high inventory risk to a business. Businesses are encouraged to produce goods that meet demand so as to minimize risk and increase their profitability (Gallino, Moreno and Stamatopoulos 2016).
The length of time a product stays in the shelf influences inventory risk of a business. Products that are highly perishable are considered to bare the highest inventory risk to any business. For instance, Clifftop Bar and Grill inventory that was missing included frozen meat and cheese. Such products are highly perishable if not stored properly. Spoiled inventory for any business will translate to reduced revenue.
Reducing internal threats to stock management can be a daunting task for any manager. For this reason, there are several methods that can be used to mitigate these risks. For example, there is need for a business to eliminate goods that have stayed in the inventory for a long time without any demand. This is crucial for any business to forecast demand of products and estimate future sales and growth of the business (Center, Alliance and Insurance 2016).
Benefits of a reliable stock management system
Consequently, a business should be able to forecast accurate demand and purchase patterns which is significant in improving strategic goals of a business through understanding their market and consumers. Other ways to mitigate these risks involves centralizing the inventory management and continuous analysis on ways to reduce the above risks (Feng et al 2014).
Clifftop Bar and Grill should adopt Sales and Inventory System, which is a product developed by Spark Global Tech. The purpose of this software is to keep track of deliveries, orders and sales. This software is primarily meant to reduce overstocking and outages. The software is programed to match a company’s inventory system and helps the manager to know when to order products. The software can also be used in tracking assets by utilizing barcode, radio frequency and other mechanism used in tracking. The software is also significant because it helps a company to attach prices to the services which reflects on the sales. Lastly, the system is used to identify products through barcodes which increases information awareness about a company’s inventory (Coelho and Laporte 2014).
Conclusion
Stock/inventory management is a prerequisite in most businesses because it directly influences the profitability of a company. Based on the nature of a business, inventory management policies and applications can be incorporated to reduce the risk associated to inventory management. This can be realized through understanding how a business operates from production to finished goods. Clifftop Bar and Grill should adopt software and security systems that assist the business to manage its inventory.
References List
Center, P., Alliance, A.M.A. and Insurance, A.M.A., 2016. Practice Management. Safety.
Coelho, L.C. and Laporte, G., (2014). Optimal joint replenishment, delivery and inventory management policies for perishable products. Computers & Operations Research, 47, pp.42-52.
Feng, M., Li, C., McVay, S.E. and Skaife, H., 2014. Does ineffective internal control over financial reporting affect a firm’s operations? Evidence from firms’ inventory management. The Accounting Review, 90(2), pp.529-557.
Gallino, S., Moreno, A. and Stamatopoulos, I., 2016. Channel integration, sales dispersion, and inventory management. Management Science, 63(9), pp.2813-2831.
Morton, J., Cambiaghi, R. and Radcliffe, N., 2015. Inventory management requires an end-to-end approach: our consulting team defines the key concepts of inventory management and elaborate on the decisions and cross-functional collaboration required to be more effective. Logistics management (Highlands Ranch, Colo.: 2002).
Solyal?, O., Cordeau, J.F. and Laporte, G., 2015. The impact of modeling on robust inventory management under demand uncertainty. Management Science, 62(4), pp.1188-1201.
Wild, T., (2017). Best practice in inventory management. Routledge.
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