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SCM Assignment

Problem solving case study of a randomn small restaurant

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14 views11 pages

SCM Assignment

Problem solving case study of a randomn small restaurant

Uploaded by

bt21mec068
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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SCM Assignment-1

Problem- Restaurant Inventory Management


Q.) Neighbourhood Shop which sell snacks, cold drinks and a
few other perishable products. But lately he has been running
out of supplies earlier than expected. The Shopkeeper wants to
find the reasons behind it and also looking for solution
Sol)
Introduction
In today's competitive food service industry, small local
vendors face issues and unique challenges in managing their
supply chain especially in balancing and product availability
with fluctuating demand. In this assignment, we are exploring a
case of small restaurant which es placed in a quite favourable
place but consistently running out of ingredients to make most
of their most selling snacks which is making them losing their
customers to nearby competitors and also hitting hard its
reputation. Due to such problems this assignment aims to apply
the basic concepts to develop solutions that address these
operational inefficiencies, enhance customer experience and
most important are feasible with maximized revenue. Through
a structured analysis, is we will obtain actionable strategies for
the restaurant to streamline their operation and better align
supply with demand, thereby improving both profitability &
Customer loyalty.

Problem Context and SC Concepts:

 Currently the Shop is a part of pull type of Supply chain


since we are only considering food items which are made
after the customer gives orders.
 It is not registered as a restaurant on any food delivery
app like Zomato and Swiggy. So, it is not a Complex SC.

 Since it is a small restaurant, its Internal customers are


same as owners and it does have only 4 workers.

 Since it is facing an inventory problem, problem could


have been monopoly of any one echelon or because of the
tier system in an echelon which allows him to dictate the
terms.

 The shopkeeper may try to go for outsourcing since in the


present SC horizontal addition can add fruitful results.

 The shopkeeper once of after finishing the problem of


inventory management might look for getting registered
on food delivery apps like Zomato, Swiggy etc. Though
then it would he in more dire need of outsourcing.

 It is a downstream SC towards customer only.


 It is a customer centric supply chain.

SC Architecture
There are total 4 echelons namely Suppliers (S1, S2, S3, and
S4), Distributers (D1, D2, D3, and D4), Retailer
(Shopkeeper/Neighbourhood shop) and Customers (C1, C2……
Cn) in Supply Chain Architecture.

There are 3 tiers in Suppliers namely S4 is Tier 2, S3 is Tier 1


and (S2, S1) as Tier 0. Distributers, Retailer and Customers
have only Tier 0.

S1 is the primary supplier with 70% of supplies while S2 is the


secondary supplier with 30% supplies.

In Distributors D1 is the primary distributor with 55% stake in


volume of ingredients while D2, D3, and D4 provide each have
the tag of secondary distributor with 15% of State in volume.

Physical parameter (distance in km) Adjacency Matrix


There could have been more customers (C1, C2…C100) but due
to space restriction it is limited to C3.

Since a few Dangling nodes (eigen values) of the adjacency


matrix is non-zero, there are self-serving / selfish nodes. At
those undesirable nodes, there lot of wastage.

We can identify S4 and D1 as problematic nodes with lot of time


and loss which could be an internal problem or logistics loss.
Grading Scale Triangle Matrix

AEIOUu scale has been used here to sort out which match
needs to be prioritized in order to overcome the problem of
inventory.

Time Management Matrix


Key Performance Index of Supply Chain: -

1) Stockout Rate - Frequency at which snacks run out before


sales period. It will be a good parameter to know about back-
order cost and also a good parameter to check customer
reaction

2) Fill sate or Customer Satisfaction- More the % of timely


delivery of stocks, more will be customer satisfaction but in our
problem shopkeeper unable to keep the business going at peak
time of sales period (usually late evening).

3) Inventory Turnover ratio - The rate at which inventory is used


up and replenished. Here the Inventory Turnover ratio is high, it
is not being replenished as fast as it should.
Inventory Turnover ratio = 9 for each month

4) Cost of goods sold (COGS)- It is a good parameter to


determine whether some value is added to chain or not.
5) Sales per hour- It is a significant parameter to find out
fashion cycle of different snacks offered by restaurant

#Parameters of SC to determine its current condition-


1)Integration- This SC should go for horizontal integration which
means it should outsource its ingredients and logistics because
it does not have the capacity and competency to follow vertical
integration. Outsourcing can help forming partnerships with
other nearby food stalls or shops to share resources like
ingredient procurement or delivery services. This could reduce
costs and collaborative agreements with other vendors could
also enable bulk purchasing.

Integration is done using Work Breakdown Structure (WBS) in


which an activity is broken down through WBS and it improves
and optimize each step that it combines(integrates).

2) Agileness - SC is currently not agile but with a demand


forecasting system which is based on a real time sales data, it
can be improved.
3) Profitability- Losing Customer at peak sales period makes
business less profitable but that can be solved using inventory
management and waste reduction.

 Inventory management can be solved to a good extent


wing. Just in Time (JIT) Strategy which allows vendor to
order what's only needed and reduce holding cost for
perishable ingredients.

 Implementing lean manufacturing principles to minimize


overproduction and reduce ingredient waste.
4)Backup- Backup in SC is not good enough. More supplies
diversification with minimum dangling notes are req. to
improve SC efficiency.

A small buffer stock of key ingredients should be present


especially of those dishes of higher demand. It can be achieved
by storing non- perishable items.

Outsourcing of non-core tasks such as ingredient preparation


from raw ingredient which reduces overburdening of vendor.

Total cost = Fixed cost + Variable cost

Fixed Cost = Cost of Labour + Rent for Shop + Investment in


Equipment

Variable Cost = Electricity bill + Cost for Advertisements + Cost


of raw materials
In the present SC, ATP is good since vendor has good reputation
but more the back order cost increases, more it will hit ATP.

Product life Cycle with graph Fashion Cycle.

SWOT Analysis: -
Strengths:
1. Customer Loyalty and Taste:
o The vendor's rolls are popular because of their taste
and affordability, attracting a loyal customer base.
This strength provides a foundation to build on, as
returning customers can provide consistent demand
if the stock is available.
2. Convenient Location:
o Being close to the customers’ homes, the shop
benefits from foot traffic and convenience, which
gives it a competitive edge over other food vendors
in the area.

Weaknesses:
1. Inventory Management:
o Inefficient inventory control leads to either stockouts
or excess ingredients going to waste. This is
exacerbated by limited storage capacity and the
perishable nature of ingredients.
2. Lack of Supplier Coordination:
o The vendor may lack strong relationships with
suppliers, leading to inconsistent deliveries or an
inability to quickly replenish ingredients. This lack of
coordination adds vulnerability to the supply chain.

Opportunities:
1. Outsourcing Non-core Activities:
o Outsourcing some aspects of the supply chain, like
ingredient preparation (e.g., pre-cut vegetables or
marinated meats), could free up time and allow the
vendor to focus more on production during peak
hours.

Threats:
1. Competition:
o Competing vendors offer similar products at
comparable prices. As seen in the scenario, if the
vendor runs out of rolls, customers easily switch to a
competitor, even if the quality isn't as good. Frequent
stockouts risk losing customers to competitors
permanently.
2. Supplier Reliability:
o The vendor is vulnerable to supply chain disruptions
if suppliers are inconsistent or unreliable. Late
deliveries or shortages of key ingredients (e.g., bread
or meat) could lead to production halts and customer
dissatisfaction.
3. Customer Expectations and BOC:
o The repeated stockouts could damage customer trust
and satisfaction, especially if customers have to seek
alternatives. Poor reviews and negative word-of-
mouth could hurt the business over time.

This SC comes under the category of Build to Order (BTO)


Characteristics of a Build-to-Order (BTO) System:
1. Customization:
o BTO allows for customization of products based on
customer preferences, often with limited inventory
held in stock. For example, the vendor can prepare
rolls with specific ingredients or modifications
according to the customer’s request (e.g., more
sauce, different fillings), making each roll "built to
order."
o
2. Flexibility:
o BTO systems provide flexibility in production,
allowing businesses to adjust production quantities
quickly based on real-time demand. The vendor could
produce more or fewer rolls depending on the time of
day or order volume, reflecting the adaptability
inherent in BTO models.

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