Operations Management: An Integrated Approach, 5th Edition

INVENTORY IN SERVICE ORGANIZATIONS

When we compare service organizations with manufacturing organizations, a major difference is that manufacturers have tangible inventory while service providers typically do not. However, extensive tangible inventory is required in wholesale and retail services. How well this inventory is managed often determines whether a service provider is profitable. Consider the importance of inventory in the food service business, especially highly perishable food items. If a manager orders too much of an item, spoilage can occur; if not enough is ordered, customer orders can be lost. It is a constant struggle to order just the right amount of perishable items. Any inventory that perishes, is damaged, or is stolen prior to its actual sale is an inventory loss. In retailing, it is considered good performance when a company has an inventory loss of only 1 percent or less. Some companies face losses exceeding 3 percent of the value of their inventory. Since retailers deal with desirable consumer goods, it is critical for retailers to practice good inventory control and maintain accurate inventory records. To achieve good inventory control, retailers, wholesalers, and food service providers should do the following:

• Select, train, and discipline personnel. It is critical to select good, honest, reliable personnel because employees have direct access to desirable merchandise.
• Have tight control over incoming shipments. Many firms track incoming shipments through ...