Store control functions

Storeroom staff should always check the level of inventory and make sure that a minimum level of inventory to continue operations is maintained. Also, storeroom staff should check slow moving items and take proper action to improve the situation if any. A perpetual inventory record to reflect the latest issuance and receipt of goods should be maintained.

I- Issuance of inventory

Issuing operations include various procedures like accepting requisition forms, retrieving goods from the shelf, issuing them, and updating the perpetual inventory records. Therefore, when requesting inventory items, the departments should carefully consider per item the frequency of requisition (on daily or weekly basis) and request goods using accurate projections.

By determining which items are necessary on a daily and weekly basis and planning the requisitions accordingly, frequent visits to the storeroom will be eliminated and operations and procedures will be simplified.

By implementing issuing procedures and defining normal issuing hours as described above, issuing operations will be minimized and extra time for cleaning the inventory areas and taking care of administrative matters could be allocated.

II- Inventory control

Once placed inside the storeroom, items are under the full control and responsibility of storeroom staff. All movements of stored items in/out the storage areas must therefore be documented and traceable.

A computerized permanent inventory system and/or manual stock cards system should be in place where the date received, quantity, and unit price of items received will be recorded. Similarly, the stock requisition form is used to post the above information regarding issued inventory.

It is necessary to maintain a minimum level of inventory at all times for items that are issued regularly. This minimum level of inventory called par stock level is generally determined based on the volume issued for a given period, but should be flexible to deal with projected demand. Factors that are used to determine par stock include the following:

- Actual consumption of goods over a fixed period of time in the past

- Expected demand for the concerned period (special circumstances, seasonal fluctuations of demand, etc…)

- Purchasing lead time

- Amount of purchases

- Maximum period that goods can be stored

- Storage space.

III- Method of physical inventory stock take

Inventory taking is performed to satisfy accounting and management requirements for inventories. Inventory management should be performed in accordance with the Perpetual Inventory Method: receiving, issuance, and balance are recorded each time goods are moved; thus the amount of issuance during any given month and the ending balance are calculated and recorded on the books. However, the book balance based on the record of receipts and issuance does not necessarily agree with the actual inventory; therefore, it is necessary to take a physical inventory count and adjust any differences on the books. Differences should be investigated and the results should help improve inventory management.

Physical inventory counts should be taken not only for those items stored in the storerooms but also for those that are issued from the storerooms but not used yet (for example, beverage in the bars), except for items issued to kitchen for which the “zero-inventory” rule applies.

Physical inventory counts should be performed at least once a month, at month-end. For fixed assets and operating equipments (glassware, silverware and chinaware), inventory should be performed on half-yearly basis.

IV- Inventory Valuation Method

The inventory valuation method should be either on a first-in first-out basis or moving average method as a rule. Under the first-in first-out method, it is assumed that older goods are issued first. The moving average method uses the weighted average unit cost for inventory valuation which is calculated every time an item is received.