Inventory management involves overseeing the continuous flow of items into and out of a company’s current inventory. The supply chain’s health is dependent on inventory management. Chick-fil-A classifies its inventory by physical locations. In particular, the company classifies its inventory by storage areas as well as preparation areas. The most vital function of inventory management is inventory control (Tom, Jayakumar, & Sijo, 2013). There are different methods that businesses use in controlling their inventory. The inventory control method that Chick-fil-A makes use of is fixed period ordering system. As a matter of fact, the fixed period ordering system inventory control works best for the company given the characteristics of the fast food industry. Under this inventory control method, the orders are placed periodically. Besides, the quantity of the order is different each time when this inventory control method is used. Additionally, under the fixed period ordering control system, there is a fixed interval of time between each order that is placed. Every Chick-fil-A’s store follows similar principles and guidelines in reordering the inventory although the orders are not similar for each location.
There are some benefits that Chick-fil-A gets from using a fixed period ordering system method of inventory control. First of all, the use of this inventory control method helps Chick-fil-A manage its inventory effectively. In essence, this method of inventory control helps the company continuously check the inventory against the predetermined reorder levels. Additionally, a fixed period ordering system helps Chick-fil-A deal with the large fluctuations in demand effectively. A fixed period ordering system also helps the company significantly reduce the inventory volume. As a result, this facilitates the improvement in inventory management. The other benefit of the use of a fixed period ordering system by Chick-fil-A is the reduction in the ordering costs. In fact, the company can decrease the ordering costs significantly through combining orders. Moreover, the fixed period ordering system method of inventory control presents Chick-fil-A with the opportunities of exploiting quantity discounts from its suppliers.
Chick-fil-A tracks its inventory through two main methods, namely, the truck ordering and end of month inventory methods. The use of FIFO inventory valuation method also helps the Chick-fil-A track its inventory. The company aims at avoiding the wastage of inventory through these methods. It does truck inventory several times a week. Skilled teams order and take the count on the inventory. In an attempt to get the store inventory order correct, Chick-fil-A’s managers utilize software and spreadsheets. They compute the inventory that the company needs after inspecting the available stock. They then order the needed inventory for the company. Among Chick-fil-A’s leading suppliers include MBM Corporation and Alliant Food distributors.
In an attempt to avoid the wastage of time, the trucks used in supplying the inventory are loaded in reverse order. These trucks are compartmentalized and refrigerated to prevent wastage. Additionally, these trucks usually cover long distances and make several stops. Chick-fil-A expects its suppliers and vendors to adhere to ethical and legal requirements. The company has a right to terminate its business relations with the vendors and vendors whose business practices are unethical or unlawful (Chick-fil-A, Inc. (2016). Customers can order Chick-fil-A’s products such as chicken breasts, chicken strips, deserts, and chicken nuggets online. The company also has mobile food trucks where the customers can order the products they need. The end of month inventory at Chick-fil-A is done by trained personnel. They track down the inventory comprehensively so as to determine the amount of inventory, which is left in the stores.
The inventory valuation method that Chick-fil-A uses is FIFO (first in, first out) method. The FIFO inventory valuation method considers that the initial inventory to be purchased is the first to be retailed (Gheorghe & Nicolae, 2012). In particular, the company uses this method to calculate the cost of the ending inventory as well as the costs of finished goods it sells. Ideally, this inventory valuation method helps Chick-fil-A Company reduce the obsolete inventory. The company utilizes the inventory it had received earlier first before utilizing the new inventory, thus, preventing the obsolete inventory. Additionally, the FIFO inventory valuation method helps Chick-fil-A continuously have an up-to-date reflection of the present market prices for the materials. As a result, its balance sheet shows the present market prices. Furthermore, the use of FIFO method of inventory valuation decreases Chick-fil-A’s inflationary impact. Gheorghe & Nicolae (2012) claim that FIFO is simple to calculate. Thus, this method simplifies Chick-fil-A’s inventory valuation process.
Chick-fil-A’s inventory management practices are effective. The fixed period ordering system inventory control method and FIFO inventory valuation method works best for the company. The inventory managers of this company successfully prevent the inventory from declining to the levels, which can put the company’s operations in danger. Besides, they effectively prevent the inventory from increasing beyond the acceptable levels. Ideally, the managers succeed in preventing the decrease and increase in inventory because they review the inventory periodically and make sure that the stock balances are always correct. Besides, they have a good grasp of the different types of inventory. As a result, they create exceptional inventory stocking parameters.
References
Chick-fil-A, Inc. (2016). Supply Chain Transparency. Retrieved from http://www.chick-fil-a.com/Legal/Supply-Chain
Gheorghe, S., & Nicolae, B. P. (2012). Accounting Treatments Used In Stocks Valuation. Annals-Economy Series, 4, 230-235.
Tom Jose, V., Jayakumar, A., & Sijo, M. T (2013). Analysis of Inventory Control Techniques. A Comparative Study. International Journal of Scientific and Research Publications, 523.
