Alcohol and Diao Ho Chinese Restaurant - Case Study Example

Resource Report Alcohol and Restaurant Ken, Chan 100026742 6th June 2008 Executive Summary The operations of many restaurants have been based on the successful implementation of a supply control strategy that links the resource that is required to be managed in a best possible way. Liquor has been the main compliment service in restaurants all around the world and especially in the China Town of Adelaide. The place fosters a culture of Chinese eating in a traditional way and at many times, Chinese as well as other ethnic diners find it a musty to have their lunch and dinner with liquor. The report studies different strategies that are used in relation to the use of supply of liquor and applies it to a specific restaurant in the vicinity if Adelaide called Diao Ho. The supply of Alcohol for tis restaurant has been studied to explain the process and recommend changes that may be for the best business practice. Company Background Alcohol is an integral component of the meals served at the Diao Ho Chinese restaurant. The restaurant is based in Adelaide’s China town and serves a regular base of customers everyday. The restaurant serves lunch from 11:00 a.m. to 15:00 p.m. and have the tailored program of serving their customers with the traditional Yum Cha. However, in contrast to the lunch time, dinner is served between 17:00 and 23:00 hours and is a full set Chinese menu. The restaurant serves alcoholic drinks along with the meals and among all the types the many that are commonly consumed are wines, beers and hard drinks such as vodka and whiskey. Alcohol is currently not as the a major concentration of selling for the restaurant and is only served inside the restaurant when demanded by the customers. The consumption of Alcohol is therefore low and may give rise to a high inventory and stock that is retained in the warehouse of the restaurant. The possibility of moulding the operations of the Diao Ho to sell Alcohol for their customers in the vicinity of China Town. This may be a lucrative opportunity as the stock of Alcohol is already there with the restaurant and apart form some management and operations cost, the Diao Ho may not incur and additional cost and may be compensated by getting the benefit if cycling its inventory faster. Current Procedures The distribution of Alcohol is currently being tied up in two segments. One segment focuses on the selling of Beer and hard liquor while the other segment specialises in the selling of wine. The two segments have developed over time as the customers’ demand of the each is enough to give them appropriate business. The supplies of beer come from a small distributor that entertains its customers through a delivery service that is added to the cost of the purchase that a customer makes. This may be collectively infused with the operations of the restaurant as whenever there is a need of beer at the location, the restaurant just places an order and the consignment is delivered at the doorstep and convenience of the buyer. However, this convenience to the buyer comes in the form of an additional increase in cost and at many times it is relatively higher than local retailers of beer. Furthermore, the restrictions are that the delivery time is normally one day and that urgent orders may be entertained in one hour but the similar coast of the purchase may increase due to the extra effort the distributor does. The nature of the timings of the delivery depend upon the relationship of the distributor to the buyer which would determine the extra cost and the time taken for the delivery to the buyer. The quantities supplied are relatively small, where only one case of each brand of beer is ordered at the time when it is almost out of the stock. This practice is repeated in the similar fashion with the wines and the hard liquor as well. The supplies of wine come form different warehouses that have limited supplies in terms of the different brands of wines they keep in stock. Therefore the wine has to be sourced from many different warehouses and delivery takes about a weeks time. The wines that are sourced are varied in the quantities over twenty different brands of red wine and fifteen brands of white wine. All of these Alcoholic drinks are ordered at a minimum level by the Diao Ho because of insufficient space available at the restaurant and the inventory is kept maintained at the required level in relation to the delivery times. Literature/Best Practice The restaurant business has many intricate details to cover in the operations of food and entertainment. The operations cover a vast array of activities that are normally run around the relationships of wither purchasing form eth suppliers or selling to the customers. Almost all of the operations of a restaurant are linked to the two models of service that relate to selling or purchasing of consumable items (Gottorna, 2006). Of many successful practices in the development if the business model in the supplier relationship in the restaurant business, restaurants need to operate on the bare minimum inventory levels so that they can have a higher operating income to survive. Restaurants may not prefer or deem feasible to have very high stock levels in the ingredients or the supplements and compliments of food. This may not be desired as more money is required to maintain the higher stock level, the restaurant will be pinched in maintaining other operations and face higher inventory withholding cost (Hall et al, 2003). This higher inventory withholding cost may drain many of the profits and operating income of the restaurant and eventually lead to the closure of the business. Furthermore, apart form the inventory withholding cost, restaurants have tow main segments of areas in the form of the dining service rooms and the kitchen that does not leave much of a space for the inventory and stock to be kept for a longer time (Eastham et al, 2001). These two main factors collectively may be treated in the way that the best practice to have supplies come in would be to estimate on a historical projection the number of units of different liquor that is consumed in the restaurant. The restaurant may find it beneficial to order the estimated liquor quantity with a small deviance than to stock every possible type of liquor and get its cash flows down because of inventory maintenance (Gottorna, 2006). Another way that can make efficient sourcing is to establish a long term relationship with the suppliers and to be able to get goods from them on the prices that are very competitive. The suppliers should be taken into a contract where the restaurant may negotiate the price and the type of the service with the supplier where a monthly quantity is promised to be purchased form the supplier on a daily basis and on a specific price. These type of contracts may also be made on a longer terms in relation to time and may incline the supplier to commit to a consistent supply of liquor and wines to the restaurant and maintain a consistent price over the time (Hall et al, 2003). Many management techniques have been postulated to get the products directly form the source. The liquor may be contracted directly from the company that sells liquor and many of these forms of contracts may also benefit the commercial buyers in the terms that apart from getting a very competitive price, the restaurant may also get benefits in term of credit terms, development of the restaurant by the company, sponsorship of many internal developments in making the environment better and doing frequent events (Hall et al, 2003). In all cases it will be a good technique to estimate a precise quantity of each type of liquor that is consumed in terms of quantity and the brand and then order it accordingly to get the best possible price. The restaurant may not found it feasible to have many suppliers as the quantities are not that big and increasing the suppliers would only lead to higher prices in this case. Keeping a single supplier would be another better practice as the smaller quantity may enable to get a better service from one supplier than having more (Eastham et al, 2001). Application of Literature to Practice The options of sourcing are influenced by several diverse factors that relate to the nature of business. The size if the business plays a key role in the formulation of a supply strategy as it gives the control over the supplier and the power to negotiate the terms of the business owner over those of the supplier. The position of the supplier is weakened in this fashion and the buyer gains an upper edge to mould the operations and set terms that are lucrative to the business. The total number of suppliers that are available in the region are of also key importance. As the suppliers increase in numbers in the region, the more competitive and flexible the supply market will be and the buyer will be able to have choice. This choice will enable the buyer to get the supplier of choice, which suits the perceived price and service for the buyer. The number of suppliers will also determine the acceptability of doing good business with the small businesses. Suppliers will be made to give importance to these small businesses and give them premium service. The nature of suppliers will be tailored to accommodate again the terms of the buyer and can be used to get more appropriate price and terms of delivery that is required. Another practice in the getting the supply of liquor and wines may be influenced by a direct relationship with the manufacturer. The practice entails that all commissions and costs of the middlemen may be cut out by taking supplies directly form the source and the cheap price will result in higher profits and a lower cost. This form of supply relationship may be used to gain an edge and a better control over the inventory management. Sourcing options may also be extended to internally take responsibility and to source the liquor by an employee of the company directly rather than to depend on a middleman to cater for the supplies. This sourcing option will make a direct link of the business to the source and may make the possibilities of getting price cut backs and deals that the middleman usually enjoys to be gained by the business. Recommendations Diao Ho in China Town may be restricted to a small number of customers in the operating hours but it may adapt a more efficient supply operation to gain benefits. Primarily, the business may be able to link itself to one supplier and order all the alcohol from it on a daily basis. At this level, it may also seem very competent to go in a contract with a supplier and establish a consistent price over a specified time and quantity and instead of gaining from a price benefit in terms on buying large quantities at once, it may gain by promising a large quantity and then buying it on a daily basis. However, it may also be of benefit that since the operations of the restaurant are not all through the day, the time in which the restaurant is closed may be used to develop supplies. The staff that si free in this time may be used to get the needed supplies of liquor directly from the source and may not incur an additional cost in doing so. The restaurant should try to establish a direct relationship with the manufacturer and get the liquor directly as it will enable it top get the direct deals that the liquor manufacturer may have. This supply strategy may be effective for the Chinese restaurant as the manufacturer may be interested in promoting its brand in the China town and may be interested din the restaurant to formulate a co-branding purpose. This direct relationship will also be beneficial if the restaurant can maintain a proper stock and then distribute alcohol and sell it directly to the customers in times when the restaurant is not operative. This will enhance the exposure of the restaurant and make more profits as the closed service place may be used to stock the liquor while it is being dispatched to other consumers or businesses. References Gattorna, J. 2006. Living Supply Chains: How to Mobilize the Enterprise Around Delivering What Your Customers Want. Financial Times /PrenticeHall Hall, C. M. et al. 2003. Food Tourism Around The World: Development, Management and Markets. Butterworth-Heinemann. Eastham, J. et al. 2001. Food Supply Chain Management: issues for the hospitality and retail sectors. 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