Inventory

HOSP 4055 Hospitality Operations Analysis
Week 11 Case Study: Inventory Analysis
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 overarching goal of inventory management is to hold as little of it as possible while
preventing stock outs. Inventory represents an investment of the owners cash, and is
not generally the “highest and best use” for that cash. Consider it a “necessary evil”. In
addition to an inefficient use of cash, inventory represents opportunities for theft,
spoilage, and expiration. Every effort should be made to minimize the amount of
inventory held, regardless of what that inventory is.
There are analyticial tools to assist management in achieving the most efficient levels of
inventory managememt. These include monitoring changes in inventory values over
time, monitoring actual values against par values,and monitoring against established
benchmarks for turnover.
Inventory may be held for a variety of purposes. Food and Beverage inventories are
held for sale as are Retail inventories for operated retail outets. Supply inventories of
items such as china, glass, linen, terry, cleaning supplies, chemicals are also typical of
most hospitality operations.
The type of analysis that is most effective is dependent on the goals of the business and
the desired rate of inventory to be held.
Case:
You work for a multi-unit operator of high end branded Spas. All of the spas are located
within hotel resorts or country clubs. The spas all offer a suite of services including
massage, facails, body treatments such as salt glows and body wraps, manicures and
pedicures. Although the spas are spread across the country, they operate at similar
volumes. All are located in year-round destinations.
In addition to the supplies used in treatment, each of the spas has a retail area that sells
a variety of products, including those that are branded by your company and those of
other high end retail lines. All items, both supplies and retail inventory are purchased
via national purchasing agreements, so all of the spas benefit from the purchasing
volume of the entire company – specifically lower prices. This pricing advantage is an
important component of the overall profitability of the company.
The majority of the revenue (about 75%) and profit results from the spa services. The
remainder of revenue (25%) and profit is from the sale of retail items. The retail
management team is constantly working to achieve the right balance of guest choices
and inventory levels to maximize the profitability of the retail part of the spa operations.
You have been tasked with analyzing inventory performance for 10 of the spas and
reporting to senior corporate managent. In addition, you have asked to prepare 3
SMART goals that all of the Spas should implement to improve their inventory
performance.
As you consider your SMART goals,
• Your SMART goals must be based on the data you are anlalyzing.
• The M must be based on the data you are analyzing. Where are you now, what
is the goal. A number.
• The due date must be a calendar due date at a month end.
An Excel template with the inventory data necessary for you to complete your analysis
has been prepared for you. You will complete your analysis on this template, and then
include a summary table in the analysis memo you send to senior management.
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 Operations Analysis
Week 11: Inventory Analysis S24
The following data has been compiled for the 10 spas being analyzed. The company wants to analyize operating
Spa
Abreu
Azambuja
Alvarado
Almagro
Almasy
Andrade
Anza
Ataide
Auer
Ayllon
Actual
$
$
$
$
$
$
$
$
$
$
9,600
8,790
10,230
9,870
9,690
9,510
9,240
8,700
9,420
8,520
Unisex Robes
Par
$
$
$
$
$
$
$
$
$
$
8,900
8,900
8,900
8,900
8,900
8,900
8,900
8,900
8,900
8,900
Towels
Par
Actual
Variance
$
$
$
$
$
$
$
$
$
$
47,580
47,094
50,982
49,038
48,066
47,094
45,636
42,720
46,608
41,748
$
$
$
$
$
$
$
$
$
$
44,650
44,650
44,650
44,650
44,650
44,650
44,650
44,650
44,650
44,650
Variance
wants to analyize operating supplies against established par values, and retail items based on turnover.
Manicure/Pedicure Supplies
Actual
Par
Variance
$
$
$
$
$
$
$
$
$
$
3,854
3,813
4,140
3,977
3,895
3,813
3,691
3,446
3,772
3,930
$
$
$
$
$
$
$
$
$
$
3,400
3,400
3,400
3,400
3,400
3,400
3,400
3,400
3,400
3,400
Body Treatments
Actual
Par
Variance
$
$
$
$
$
$
$
$
$
$
5,465
5,402
5,906
5,654
5,528
5,402
5,213
5,465
5,339
5,582
$
$
$
$
$
$
$
$
$
$
4,650
4,650
4,650
4,650
4,650
4,650
4,650
4,650
4,650
4,650
Facial Treatments
Actual
$
$
$
$
$
$
$
$
$
$
7,001
6,369
7,492
7,212
7,071
6,931
6,720
7,001
6,861
7,141
Facial Treatments
Par
Variance
$
$
$
$
$
$
$
$
$
$
6,400
6,400
6,400
6,400
6,400
6,400
6,400
6,400
6,400
6,400
Massage Oils/Aromas
Actual
Par
Variance
$
$
$
$
$
$
$
$
$
$
3,000
2,970
2,910
2,985
3,015
2,910
2,880
2,925
2,895
2,850
$
$
$
$
$
$
$
$
$
$
2,900
2,900
2,900
2,900
2,900
2,900
2,900
2,900
2,900
2,900
HOSP 4055 Operations Analysis
Week 11: Inventory Analysis S24
The following data has been compiled for the 10 spas being analyzed. The company wants to analyize operating
Spa
Abreu
Azambuja
Alvarado
Almagro
Almasy
Andrade
Anza
Ataide
Auer
Ayllon
Actual
5.55
5.45
5.25
6.15
6.25
5.75
6.05
5.85
6.35
7.05
Skin Care
Benchmark
Variance
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
Note: Turnover Benchmarks are for Annual Turnover
Actual
3.15
3.05
2.85
5.05
4.05
3.55
3.85
4.15
4.35
6.55
Fragrances
Benchmark
6.25
6.25
6.25
6.25
6.25
6.25
6.25
6.25
6.25
6.25
Variance
y wants to analyize operating supplies against established par values, and retail items based on turnover.
Actual
9.15
10.35
11.55
12.05
13.55
15.05
11.55
11.75
12.05
14.05
Hair Care
Benchmark
12.5
12.5
12.5
12.5
12.5
12.5
12.5
12.5
12.5
12.5
Variance
Actual
10.55
11.05
11.55
12.05
12.55
9.35
8.65
14.55
12.05
16.05
Essential Oils
Benchmark
12.5
12.5
12.5
12.5
12.5
12.5
12.5
12.5
12.5
12.5
Salt Scrubs
Variance
Actual
2.05
2.55
2.25
2.35
2.85
3.25
2.45
4.15
2.75
3.55
Salt Scrubs
Benchmark
4.5
4.5
4.5
4.5
4.5
4.5
4.5
4.5
4.5
4.5
Variance
Actual
3.10
3.60
3.30
3.40
3.90
4.30
3.50
5.20
3.80
4.60
CBD Products
Benchmark Variance
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5