Reorder Points

In this case study you are presented with background information for a restaurant for which you have been tasked with establishing the reorder points for china, glass, silver, and linen items.

Using the information provided, you will calculate the reorder points. Separately, you will prepare a memo to the managers of the restaurant describing the concept and process.

HOSP 4055 Hospitality Operations Analysis
Week 10 Case Study: Reorder Points
Background:
The ability to effectively manage inventory is critical to the success of a business, and a
core management analytical task. The item specification, vendor qualification,
establishment of Par inventory levels and reorder points are all important to this effort.
The overall objective of this is to minimize the amount of inventory while at the same
time not running out of anything. All of this in the context of undertain, uncontrollable
demand.
This case focuses on the development of reorder points.
In order to properly calculate reorder points there are three important pieces of data
that must be analyized. The first is the consumption of the item(s) based on volume.
The second is the establishment of a safety stock that is designed to prevent stock outs
in the event of a delay in delivery over a few days. Finally, to determine the economic
order quantity that will minimize the shipping cost of the item when ordered.
The formula for the reorder point is
• Consumption during the lead time plus
• Safety Stock.
The reorder quantity is based on the Economic Order Quantity (EOQ). You would order
products based on the EOQ needed to cover the required order. So, for example, if your
reorder point was 1,200 units, and the EOQ was 800, you would order 1,600 units (2 X
the EOQ).
The goal is for the order to arrive just as the inventory hits the safety stock level, but
does not breach it.
Case:
You have been tasked to create reorder points for 10 different inventory items for a
restaurant operation. The restaurant has historical consumption data, and has already
qualified and identified a vendor for each of these items. Each vendor has committed to
a specific number of days between the time an order is placed and the time the order is
delivered (the “lead time”). The economic order quantity has been quantified by the
vendor and confirmed by the restaurant General Manager. This information has been
placed into the attached Excel spreadsheet.
The restaurant has a fixed number of seats, and enjoys a consistent year round volume
of business.
Mangement is satisfied with the in-service and in storage par inventories and wth the
safety stock. They do continue to attempt to reduce consumption, particularly of non
breakable items. The consumption rate being used for this exercise is the average over
the past 6 months.
You must calculate the reorder point for each inventory item and present it in a table
format (copy/paste from Excel). You must then explain the concept/process to the
other mangers in the restaurant so they each understand it and could execute a reorder
for any of the items, or change the reorder point based on a change in volume or the
rate of consumption.
Submit:
Submit the Excel template, completed for the calculation of the reorder points.
Submit the Word document.
This assignment is worth 100 points.
HOSP 4055
Week 10: Reorder Points S24
The followng information has been compiled for you. Using it, you need to calculate the correct reorder point fo
Available Seats
Average Daily Covers Per Available Seat
Average Daily Covers
Item Description
Forks
Knives
Spoons
Soup Spools
Tea Spoons
Water/Beverage Glasses
Coffee Cups
Salad Plates
Soup Cups
Soup Bowls
Entrée Plates
Napkins
350
1.9
In Service Par In Storage Par
3.0
3.0
3.0
1.0
1.0
4.0
2.0
2.0
0.5
0.5
3.0
6.0
1.0
1.0
1.0
0.5
0.3
3.0
1.0
0.5
0.3
0.3
1.0
2.0
Consumption
per Cover
Delivery
Lead Time
0.035
0.025
0.045
0.015
0.010
0.065
0.035
0.030
0.030
0.020
0.035
0.035
21
30
30
45
45
15
15
45
45
45
45
15
Notes:
1. As a reminder, 1 Par is the amount of an item required to set every seat one time.
2. Typically, the In Service inventory is 1 Par is on the table, 1 par is in service areas waiting to reset the table, and
ulate the correct reorder point for each item.
Consumption
during Lead Safety Stock
Time
250
250
250
125
125
500
250
125
125
125
250
250
Reorder
Point
Reorder
EOQ
700
700
1,000
400
300
1,200
600
800
800
600
1,100
800
as waiting to reset the table, and 1 Par is beng washed. The number of pars required will vary by item.