PROGRESS REPORT

Volume 1, Issue 1

PROGRESS
REPORT

Inventory

The Lifeblood of a
Company

April 6, 2014

PING POND DIM SUM

A Pong Pong restaurant is a

modern take on a very ancient
Chinese tradition of Dim Sum
baskets and dishes of little sweet
and savory snacks, usually
steamed, baked, griddled, and
fried. The restaurants concept of
China with a twist has been
welcomed by many, but has also
faced criticism from the Chinese
and American population.
In an effort to progressively
evolve themselves, Ping Pong has
since last year launched menu
changes quarterly instead of semiannually. Consequently, this move
has highlighted the ineffectiveness
of the Chef Tech inventory system
currently in use, resulting in
negative correlations between
revenues and weekly sales target.
I propose Ping Pong perform a
system analysis in order to see if
the Chef Tech system possesses
the qualified features necessary to
manage inventory effectively. If
the results are favorable then

IN THIS ISSUE

Topic Description
By Shaneik Williams

additional steps should be taken

by management to compliment the
system and additional training
should be utilized. However, if the
results of the analysis are
unfavorable, the system should be
replaced with the Wild River
Restaurant Professional POS
Software, a system designed to
work with the MICROS system
that is currently installed and in
use by host, servers and
management.

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Academic Research
Its More than Just a Game: The Effect of Core and
Supplementary Services on Customer Loyalty
The Role of Technology in Restaurant Revenue
Management.
Focus on Finance: Aiming for Restaurant Success
Page

were asked to answer two key

questions:
How likely are you to renew
their tickets for next year?

purchase decisions, many of

which are out of service providers
control. These include

How satisfied are you with the

list of services outlined?
In an effort to understand the
balance between

Non Academic Research

Maximizing Profitability through Inventory
Management
The 4 essential elements inventory

Academic Research
core and supplementary services,
What effect does a restaurants
primary services have on
customer loyalty?
Ques. #1

The 2015 Cornell Hospitality

Report, "It's More than Just a
Game: The Effect of Core and

the researchers used several

theoretical models. The first is a
molecular model, which places
core services in the center and
draws connecting lines to potential
supplementary services. The
second is a flower model which
places core services in the middle

Supplementary Services on
Customer Loyalty," used data
collected from 7,091 customer
surveys to analyze the relationship
between core services(the game/
event),supplementary services
(valet parking, food and drink,
restrooms) and customer's repeatpurchase decisions. Event patrons

and surrounds them with

supplementary petals. One
potential danger of this framework
is that firms might pursue
supplementary services to the
detriment of their core business.

What are the connections

between proper inventory
management and profits?

the food," the lead statement from

"Focus on Finance: Aiming for
Restaurant Success," written by
Cornell University professors
Susskind and Spies, immediately
captures their audiences attention.
By extension, they also mentioned
supplementary elements crucial to

Ques. #2

"We all know that the most

important thing about a restaurant
the thing that stands out and
shapes a guest's experienceis

performance (which team or

athlete won), the weather,
demographic background, and
how exciting was the event among
others. The outcome? Core
services represent the driver of
business success and the basis for
many customer decisions. The
study demonstrated that core
services remain the most
important element in predicting
repeat customers. This core
service the event itself had a
critical impact on the ticket
renewal decision, as it seemed to

mark a turning point for

customers. This demonstrates the
importance of services firms
focusing on their core services
above all else.

In addition, the authors point out a

few factors that influence repeatthe guest's restaurant experience,
including staff, service, location,
ambience and decor, menu, and
overall execution.
However, it can be noted that an
existence of weakness in these
areas are not always detrimental.

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Moreover, what a restaurant

cannot survive is failure of
financial management, including
focusing on revenue, profit,
expenses, debt, and appropriate
staffing levels. The study focuses
on a connection between the
elements of foodservice
management, the income
statement, and balance sheet along
with the many operational
elements that go into them.

ACADEMIC RESEARCH CONTINUED

FAST FACTS

180 Billion
U. S. table service restaurants revenue per
year.

3.6 9.0 Billion

Overall revenue increase of a 2-5%

What role does technology play

in Restaurant Revenue
Management? What are the
limitations?
Ques. #3

"By subdividing a meal into its

component sections," Cornell
University Professor Kimes,
thinks managers can determine
which systems to apply at a
particular stage for the purpose of
providing the greatest revenue
benefit for a particular restaurant.
In Role of Technology in
Restaurant Revenue
Management," Kimes's
acknowledged technology systems
can support restaurant managers
efforts to improve sales and profits
through revenue management,
however a financial analysis must
be conducted beforehand to
determine whether the
technologys cost will be more
than offset by revenue
improvements.

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Non Academic Research

In fact, "U.S table service
restaurants account for
approximately $180 billion per
year in revenue," the National
Restaurant Association reported in
2006. If these table service
restaurants can achieve the 2 to 5
percent revenue improvement
typically associated with the
adoption of revenue management,
overall revenue could increase by

$3.6 billion to $9.0 billion per

year. The article focuses on how
restaurants can apply technology
to the dining experience and
achieve both increased profits and
customer satisfaction. The benefits
of using technology for both
customers and restaurants are
outlined as well as an overview of
issues that must be addressed for
successful application of

How to increase revenue

through inventory
management?

indicators need to be calculated

specifically inventory turnover
and customer service levels. The
lower the profit margins are, the
higher the inventory turns should
be, and vice versa. "If a durable
goods distributor has gross
margins on sales of 20 to 30
percent, the inventory should turn
approximately six times.

Ques. #2A

What would you say is the No. 1

cause of bankruptcy in most
businesses today? This question
received much attention in
"Maximizing Profitability through
Inventory Management," posed by
Carl Skeet, a partner at Reynolds,
Bone & Griesbeck PLC, a
certified public accounting firm in
Memphis, Tennessee. The answer,
is not the result of lack of sales,
not overpaid executives, not
overstaffed operations, but
mismanaged assets.
The article outlines the
characteristics of a company that
is generally acknowledged to have
an excellent inventory system.
These include a clearly defined
stockroom, stockroom security,
proper receipts, and reconciled
transactions among others. By
extension, in order to effectively
manage inventory, one must have
correct up-to-date information.
Properly managing inventory
requires a system that will provide
reliable data. Once this is in place
the necessary key performance

If the gross margins approximate

15 percent, eight to 10 turns
should be achieved. If margins are
somewhere near 40 percent, then
inventory can turn only four times
and a nice profit can still be
achieved," illustrated by Gordon
Graham, the "dean" of inventory
experts in the distribution industry.
In addition, customer service
levels should be measured and
monitored regularly, preferably on
a weekly basis.

technology to the dining

experience.

management. In fact, there is more

to inventory control than simply
buying new products. You have to
know what to buy, when to buy it
and how much to buy. You also
need to track your inventory -whether manually or by computer
-- and use that knowledge to hone
your purchasing process.
Understanding and managing your
inventory is one of the most
critical factors in business success.
Maintaining enough inventory is
no exception, your business's basic
stock should provide a reasonable
assortment of products to cover
normal sales demands. Basic stock
should be calculated factoring in
lead time as insufficient inventory
results in lost sales and costly,
time-consuming back orders.

What are the key elements of an

inventory system?
Ques. #4

Management education expert

Ashok Rao believes that
companies can increase their
profitability 20 to 50 percent or
more through careful inventory

Excess Inventory, however, should

be avoided. To control
inventory effectively, prioritize
your inventory needs. The ABC
approach is advised to keep items
at more manageable levels. Often,
as much as 80 percent of a

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company's revenues come from

only 20 percent of the products.
Companies that respect this "8020 rule" concentrate their efforts
on that key 20 percent of items.
Once you understand which items
are most important, you'll be able
to balance needs with costs,
carrying only as much as you need
of a given item. A good inventory
tracking system will tell you what
merchandise is in stock, what is on
order, when it will arrive and what
you've sold. Features to consider
in a POS system includes, ease of
use, pricing, sales tracking options
among others.

first-time customers tend to focus

only on core service satisfaction in
their decision making on
returning. Thus, firms must first
focus on their core services and
then augment them appropriately
with supplementary services.

Interestingly, the essence of "Its

More than Just a Game: The
Effect of Core and Supplementary
Services on Customer Loyalty" is
that the goal of all service
providers are cementing customer
loyalty and encouraging future
purchases. This is done by
providing their customers with a
comprehensive experience. In
most services, we can identify
core aspects (e.g., good food at a
restaurant) and supplementary
aspects (e.g., staff, service,
ambiance and dcor). Customers
identify service providers by their
core services and they make most
purchasing decisions based on
these core services. It can be
noted, however, that providers
often pursue supplementary
services to the detriment of their
core business.

Interesting &
Disappointing
The study confirmed that
satisfaction with both core and
supplementary services are
important for loyal customers, but

The "Focus on Finance: Aiming

for Restaurant Success," confirms
what we should all know; the most
important thing about a restaurant
the thing that stands out and
shapes a guest's experienceis
the food. Not only that, but there
are also supplementary aspects
that are deemed crucial to the
guest comprehensive experience.
Interesting enough, a restaurants
can survive weaknesses in all
those areas and still remain in
business.
Perhaps the main argument that
sparked my interest was data
illustrated in "The Role of
Technology in Restaurant
Revenue Management," Kimes
reports that revenue management,
even with decades of
implementation in the airline,

hotel, and rental car industries, it

has only gained attention in the
restaurant industry in the past ten
years.
In the U.S, where table service
restaurants account for
approximately $180 billion per

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year in revenue, implementation

could result in a 2 to 5 percent
revenue improvement. The upshot
of

all this is that, overall revenue

could increase by $3.6 billion to
$9.0 billion per year.
References

Dixon, M., Rush, R., Verma. R., Walsman, M. (2014). Its More than Just a Game: The Effect of Core
and Supplementary Services on Customer Loyalty. Cornell Hospitality Report, 14 (23) 1-16.
Hagg, C. J. (2011). Maximizing Profitability through Inventory Management. Tennessee Society of
Certified Accountants. Retrieved from
http://www.tscpa.com/content/publicinfo/SBarticles/Maximizing_Profitability_Inventory.aspx
Kimes, S.E. (2008). The Role of Technology in Restaurant Revenue Management. Cornell Hospitality
Quarterly, 49(3), 297-309.
Susskind, A. M., & Spies, R. (2011). Focus on finance: Aiming for restaurant success. Retrieved from
Cornell University, SHA School site: http://scholarship.sha.cornell.edu/articles/342
Entrepreneur (2013). The 4 Essential Elements Inventory. Retrieved from
http://www.entrepreneur.com/article/225905