Modern Inventory Control Techniques

 

v Modern Inventory Control Techniques

1. Meaning of Inventory Control

Inventory Control refers to the systematic management of stock to ensure that the right quantity of materials is available at the right time, at the right cost, without over-stocking or stock-outs.

In the hospitality industry, inventory includes:

·         Food & beverages

·         Housekeeping supplies

·         Linen & uniforms

·         Maintenance materials

·         Guest amenities

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2. Objectives of Modern Inventory Control

·         Minimize cost of holding inventory

·         Avoid shortage and wastage

·         Improve cash flow

·         Ensure smooth operations

·         Maintain quality and freshness

·         Reduce theft and pilferage

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3. Need for Modern Techniques in Hospitality

·         High perishability of food items

·         Seasonal demand fluctuations

·         High operating costs

·         Limited storage space

·         Increased competition and guest expectations

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4. Modern Inventory Control Techniques

A. ABC Analysis (Always Better Control)

Concept

Inventory is classified according to value of items.

Category	Value	Control Level	Examples
A	High (70% value, 10% items)	Strict control	Imported liquor, meat
B	Medium	Moderate control	Spices, dairy
C	Low (10% value, 70% items)	Simple control	Salt, napkins

Advantages

·         Focuses on important items

·         Reduces management effort

·         Improves cost control

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B. VED Analysis (Vital–Essential–Desirable)

Concept

Classification based on criticality of items.

Category	Meaning	Example
Vital	Cannot operate without	Gas, cooking oil
Essential	Operations affected	Linen, detergents
Desirable	Optional	Decorative items

Used mainly in maintenance & engineering stores.

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C. EOQ (Economic Order Quantity)

Meaning

EOQ determines the ideal quantity to be ordered that minimizes total inventory cost.

Formula

EOQ = √(2AB / C)

Where:
A = Annual demand
B = Ordering cost
C = Carrying cost per unit

Benefits

·         Reduces ordering cost

·         Prevents over-stocking

·         Ensures smooth supply

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D. JIT (Just-In-Time)

Concept

Inventory is purchased only when required.

Application in Hotels

·         Fresh vegetables

·         Bakery items

·         Seafood

Advantages

·         Reduced storage cost

·         Fresh inventory

·         Less wastage

Limitations

·         Supplier dependency

·         Risk of shortages

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E. FIFO (First-In First-Out)

Concept

Oldest stock is used first.

Importance in Hospitality

·         Maintains freshness

·         Reduces spoilage

·         Prevents expired items

Used mainly in:

·         Food stores

·         Beverage stores

·         Housekeeping supplies

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F. LIFO (Last-In First-Out)

Recently purchased items are issued first.

⚠️ Rarely recommended in hospitality due to:

·         Risk of spoilage

·         Quality issues

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G. Perpetual Inventory System

Meaning

Continuous recording of stock movement.

Tools Used

·         Bin cards

·         Store ledger

·         Inventory software

Benefits

·         Real-time stock data

·         Detects theft

·         Accurate stock valuation

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H. Two-Bin System

Concept

Stock stored in two separate bins:

·         Bin 1: Working stock

·         Bin 2: Reserve stock

When Bin 1 is empty, reorder is placed.

Used for:

·         Cleaning materials

·         Low-value items

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I. Standardization & Codification

Standardization

Using uniform quality and size of materials.

Codification

Assigning codes/numbers to inventory items.

Benefits

·         Reduces confusion

·         Improves record keeping

·         Faster issue & control

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J. Automation & Inventory Software (Modern Trend)

Tools Used

·         POS systems

·         ERP software

·         Barcode scanning

·         RFID

Advantages

·         Accuracy

·         Reduced paperwork

·         Better reporting

·         Integration with purchasing & costing

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5. Advantages of Modern Inventory Control Techniques

·         Improved efficiency

·         Reduced wastage & pilferage

·         Better cost management

·         Smooth departmental operations

·         Increased profitability

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6. Limitations

·         Initial setup cost

·         Requires trained staff

·         Supplier reliability needed

·         Not all techniques suit every item

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7. Practical Application in Hotels

·         ABC for food & beverage

·         EOQ for grocery items

·         FIFO for perishables

·         JIT for fresh produce

·         Software for centralized control