Business Plan
- Introduction
- This document is a report on Stock Management systems for a prime tourist destination restaurant called Frangipani Restaurant located in Byron. The restaurant will be opening its doors to its first customers in two months time and it is important for the management to have in place an efficient stock management system that supports its hospitality and recreational service provision. The report therefore highlights the internal and external documentation to be used in managing stock, appropriate stock levels to be maintained, potential security issues and how to manage them, stock taking exercises and adoption of a computerized stock management system. This report is indeed a summary of what Stock Control System will be like at Frangipani Restaurant once it opens its doors for business.
The staff authorized to access the content of this report are:
- Managing Director
- Manager in Charge of Restaurant
- Manager in Charge of Bar
- Manger in Charge of Stock
- Manger in Charge of Purchasing and Supplies
- Manager in Charge of Finance
- Executive Chief Chef
- Authorization
The restaurant Managing Director, Rael Tevy requested for this report in 1st March 2013 and it is due for presentation during the management meeting scheduled for 3rd June 2013 for discussion and approval.
- Aim of the report
The report is a summary of how stock will be managed at Frangipani Restaurant once it opens. The report shall be used as a basis of stock management policies and procedures as well as allocation of duties to various managers in regard to stock management. Further, the report will enable Frangipani Restaurant to establish efficient stock management systems that facilitates its core business activity.
- Scope of the report
This report will cover the following stock management aspects; documentation to be used in managing stock, appropriate stock levels to be maintained, potential security issues and how to manage them, stock taking exercises and adoption of a computerized stock management system.
- Source of Information
Primary information for this report was obtained through an interview with Frangipani Restaurant’s Managing Director with a view of getting first hand information about the restaurant and how it will be operating. Secondary sources on stock management were also referred to through a desk review so as to achieve comprehensives in the report.
- Limitations
The fact that Frangipani Restaurant is yet to start its operations was a limitation especially on the stock quantities set for various items both for the initial stocking and perhaps the initial re-order of stocks. This is because actual consumption rate can only be determined once the restaurant operates at least for a couple of weeks so as to determine consumption trends. To overcome this limitation, stock consumption data from restaurants of similar size operating within Byron were used to arrive at the figures provided in this report.
- Stock Documentation
- Forms to be used
Stock Management involves documentation which is often used as a means of communication, tracking movement of stock and as records for reference. The two major categories of documentation that Frangipani Restaurant is expected to use are as follows:
- Internal Documentation
These are documents that shall be filled for use within the restaurant itself such as;
- Serialized Stock Requisition Form-To request for supplies from the Store for use at the restaurant or bar.
- Serialized Purchase Requisition Form. To request for purchase of supplies to replenish stock from Suppliers through Purchasing and Supplies Department.
- Goods Rejected Note: To return issued but rejected items back to the Stores.
- Serialized Ledger cards: To record stock receipts and issues at the Stores.
- External Documentation
These are documents that will be used to communicate with the Suppliers or from the Suppliers to Frangipani Restaurant such as:
- Purchase Order: Issued by Purchasing and Supplies department as contract to the Supplier to deliver specified items at an agreed amount and quantities.
- Goods Returned Note: Issued by the Stores department to the supplier in the event of returning supplied items to the supplier.
- Invoice: Issued by the suppliers to the Finance department as a request for payment to supplied food or alcohol.
- Delivery Note: Issued by the supplier to the Stores department with description and quantities of items ordered and delivered by the supplier.
The above forms shall be transmitted through the automated stock management workflow module. Printed copies shall be done at the final stage of approval for record purposes.
- Order placement
Order placement at Frangipani Restaurant shall be classified into two categories to facilitate expeditious order placement and accountability. The two categories and those in charge of placing orders will be as follows.
- Food: The Executive Chief Chef will be authorized to assess, make and receive all orders under this category from the Stores department.
- Beverages: The Managers in Charge of the Restaurant and the Bar will be authorized to assess, make and receive all orders under this category from the Stores department. However, due to the unpredictable nature of consumptions at the bar, it may be necessary to give a provision for the bar attendant to make orders from the stores under special circumstance.
- Communication with suppliers
The Manager in Charge of Stocks shall be responsible in assessing food and beverage items that require replenishment or are out of stock. He shall then compile the various items into one requisition form, forward it to the Manager in Charge of Purchasing and Supplies to order for the items from the suppliers prior to the approval of the Managing Director.
This is an important control measure to ensure that there requisitioning for purchases is centralized and under the control of the Managing Director. Approval of any purchases by the Managing Director shall be subject to evidence provided for the current stock levels and out of stock items.
Communication with suppliers shall be through email or fax so as to expedite delivery and must be supported by a Purchase Order drawn by the Manager in Charge of Purchasing and Supplies and approved by the Managing Director.
- Weekly Stock ordering
Weekly stock ordering shall still be under the two categories mentioned early in this report (Food and Beverages) and shall be ordered as follows:
- Food
- Vegetables and fruits: these being frequently required items, delivery will be done every morning from Monday to Sunday because they are perishable. Orders to suppliers will be placed every day evening through email or fax for quantities to be required the following day based on the closing stock for that particular day.
- Sea Food: The procedure above shall be applicable when ordering these items.
- Meat and Poultry: Orders for these items will be made once a week, on Monday and Thursday respectively so as to be received on Wednesday for meat and Friday for Poultry. Depending on the booking for a particular weekend, there will be room to make an order for meat and poultry on Friday to take care of any shortage that may arise due to more bookings over the weekend.
- Dry store and dairy products: Depending on the rate of consumption, orders for these items shall be placed on Tuesday and Friday so as to be delivered on Wednesday and Saturday respectively.
- Beverages: orders for beverages will be placed once a week, on Fridays and deliveries for the same shall be made on Sunday.
- Suppliers to be used
Suppliers for various items shall be as follows:
- Food
P& K Foods
Rael and Nick Groceries
Brisband Wholesale Foods
- Beverages and Alcohol
Level 20
Bidrest Wines and Spirits
- Stationeries and office supplies
Global Wide General Supplies
- List of Suppliers and their contacts
The list of suppliers and their contacts is as follows:
- Suppliers for food
P&K Foods
122,Abboth Road,
Hallam
Victoria, 3904
Rael and Nick Groceries
142 Abboth Road,
Hallam,
Victoria, 3707
Brisband Whole Sale Foods,
Tel.1300 293 669
- Suppliers for Beverages and Alcohol
Level 20
67 York Street.
Tel.61 2 9020 2100
Bidrest Wines and Spirits
68 York Street
Tel.61 2 9640 1020
- Suppliers for Stationeries, Toiletries and related items
Global Wide General Supplies
22 York Street
Tel.61 2 22 461 1700
- Stock to be ordered
A list of stock items to be ordered is as follows:
- Tins of Tomato Puree
- Fresh prawns
- Boxes of salad leaves
- Cartons of Corona Beer
- Bottles of Bailey
- Stock Level Maintenance
- Recommendations on ideal Stock Levels
Calculating of the required right stock levels may not be possible right now since we don’t know the consumption rate given that the restaurant is yet to start its operations. However, data from restaurants of similar class offering similar services to the targeted customers may be of help is making estimates for the required stock levels during the first few months of opening. However, after some time like three months or so, the Manager in charge of Stock should be able to have reliable estimates of the ideal stock levels to be kept based on the consumption patterns and frequent checks on stock ordered.
Guided by the simple method of; Reorder point = Lead time x Usage, the Stock manager will achieve some significant accuracy in determining the correct stock levels for each stock item.
- How much stock to be ordered
Just like the stock levels, it will be difficult to estimate the quantities of stock to be ordered. However, based on data collected from three restaurants of similar class, the following estimates were arrived at for a few common items:
- Tins of Tomato puree per stock = 7days x 30 tins a day = 210 tins of tomato puree
- Fresh prawns par stock = 3days (weekends) x 25 Kgs of prawns a day = 75 kgs of prawns on weekends and an average of 25-30 kgs on weekdays.
- Boxes of salad leaves per stock = 3 days (weekends) x 15 boxes a day = 45 boxes for weekend and an average of 15-20 boxes during the week.
- Cartons of Corona beer per stock =7days x 5 cartons = 35 cartons of corona.
- Bottles of Baileys par stock = 7 days x 1 bottle a day = 7 bottles of Baileys
- Frequency of ordering
- Orders for non perishable food items shall be placed once a week.
- Orders for perishable items shall be placed 5 times a week with a provision for large orders on Fridays so as to take care of high consumptions expected over the weekends.
- Orders for alcohol stock shall be placed once a week.
- Back up Procedures to avoid stock outs
Stock outs are likely to happen due to ether communication breakdown between the restaurant and the suppliers, suppliers not being able to deliver in good time or an under estimation of orders in case of more bookings made over a short notice. Stock out of any item will impact negatively on the image of the restaurant to its customers and there is need to have strategies of addressing this scenario should it happen. This will include actual purchases from the market at a slightly high cost by the Chief Chef for food items. In case of bar stocks, a similar approach of physical ordering will be done by the Manager in Charge of the bar from Dan Murphy’s. it is important however, for the restaurant to have alternative suppliers to facilitate orders in the event that the major suppliers are not able to deliver due to unforeseen circumstances on their end.
- List of Strategies to assist Stock control
Stock control is an important aspect since the restaurant will be required to ensure that stock levels are kept at minimum levels but adequate to meet the customer needs and at a low cost. To achieve this, the following strategies have been proposed for consideration and implementation:
- Centralization of Stock management: The Manager in charge of stock will be responsible for receiving and ensuring save custody of all purchased stock. Before accepting the delivered stock, the manager will be required to verify that they are of good quality and the correct quantities.
- The Stock Manager will also be required to ensure that items are stored in appropriate manner to avoid any wastage or spillage. This will require providing the required temperatures, labeling stock accurately and placing them in their rightful locations within the store.
- Since the firm will adopt a perpetual inventory management approach, it is advisable to use first in first out method of stock management. This will ensure that earlier stock items are issued first to avoid cases of items overstaying in the shelves and even expiring.
- Security Issues
Security of stock items will be key in this restaurant because of the financial implication it may present to the firm in case of a loss. The following proposed measures will enable the restaurant achieve security of its stock items from the time they are purchased to the time of consumption or sell to customers.
- Insurance cover: it will be important to consider having an insurance cover for items stock against fire and even theft.
- Installation of CCTV camera is the stores. This will provide surveillance and address the risk of pilferage.
- Installation of fire fighting appliances and smoke detectors as a measure to prevent fire related losses.
- Investing in storage equipment like shelves, deep freezers and refrigerators for storage of perishable items.
- Ensuring that the doors and keys of storage area are secure at all times.
- Training of staff in charge of stock management will be key in ensuring that they are able to make good use of the Inventory management system.
- The restaurant will also consider hiring at least two security staff to be in charge of stock.
- Inventory Management System
Frangipani Restaurant intends to install a computerized inventory management system. This integrated software will automate the procedures of stock management from stock requisitioning to stock issuing and reflection of the stock balances at any given point in time. Given that the stock management approach adopted shall be perpetual inventory management, the system will play an important role in stock management. The systems should be upgraded over a period of time so as to link the restaurant’s stores department with its major suppliers for expeditious order placement through Electronic Data Interchange for instance.
- Stock Taking
- Storage Procedures
The following will form part of the storage procedures to be considered;
- Ensuring that store rooms are well arranged for easy of accessibility, adequately ventilated and kept clean.
- Regular inspection of stock with a view to report on cases of loss, damages or deterioration.
- Frequent examination of door locks and window fastenings to ensure they are secure.
- Application of good storage and preservation techniques.
- Ensuring that issues are made from old consignment before recent consignment.
- Display of notices prohibiting smoking within the store rooms should be prominent.
- Who should carry out stock take
The manager in charge of stock should be in charge of stock taking exercise and in so doing provide guidance during stock taking and prepare relevant stock taking reports as required by the managing director or other line managers.
- When Stock Taking can be carried
The will be three different forms of stock taking depending on the purpose.
- Instant stock taking. This will be done when purchasing a particular item that is urgently required or out of stock.
- Weekly stock taking. This will be done so as to have data on the weekly consumption of those items ordered once a week.
- Annual stock taking: This will be done at the close of financial year so as to provide information required to compile end year books of accounts.
- How stock takes should be carried
- For the instant stock taking, verification will only be done on available stock balance for the item under consideration.
- Weekly stock takes will also target those items whose orders are placed weekly so as to determine the available balances and address and discrepancies. The firm may also chose to do a weekly stock take for those items considered to be expensive and easy to pilferage.
- Finally, the annual stock take which covers the entire list of stock items will entail a physical check of all items in the stock list while comparing the same with the stock balances as per the stock management system so as to determine if there are any discrepancies. Those undertaking the exercise will be required to prepare a report indicating any surpluses or deficiencies and reasons for this as given by the person in charge of the stocks. The report should also have the value of both deficiencies and surpluses.
- Importance of accuracy in Stock takes
Accuracy in stock taking is important because of the following reasons:
- Identification of stock deficiencies and surpluses so as to make informed decisions when placing purchasing orders to avoid overstocking or under stocking.
- Identification of loss of stock and verifying accountability in stock received and issued from the store rooms.
- Determining the profits made by providing data on purchase prices and consumption of various items.
- Uses of Stock take Results
Stock taking results will be used as follows:
- Determining the stock levels to be maintained for each stock item.
- Identifying pilferages and putting up measures to prevent them.
- Ensure accountability in stock management operations.
- Determining the net worth of the business at the end of the financial year since stock is a current asset item.
- Conclusion
The report has provided a summary of procedures; strategies and security measures that can enable the firm manage its stock efficiently once it starts its operation. Through continuous improvement in its operations, training of staff on good stock management practices and sharing of relevant information will enable the restaurant achieve efficiency in its stock management so as to meet its customer needs. Challenges are likely to arise but with an open mind and being proactive in identifying potential challenges, the restaurant will no doubt sustain its profitability and growth.
References
Bose, C. D. (2002). Principles of Management and Adminstration. New Delhi.
