Analysis

Maintaining the inventory is extremely important for any DQ franchisee because the company relies on it. Each DQ has to make sure that all cold products are at the right temperature before accepting them from its suppliers. Likewise, the temperature of the freezers are checked regularly on a daily basis to make sure the inventory is at the right temperature to make sure it is edible for the customer to consume. The frozen goods are ordered from a local distributor to make sure they do not spoil from being in a truck for a very long time. Dairy Queen tries not to let its inventory go to waste and at the same time prevent low inventory.

Dairy Queen Corporation uses software that helps the franchises to manage the inventory levels and at the same time it checks and analyzes prices to make sure the franchises are not being overcharge.  Although, this software is very helpful for franchises, Mr. Condit prefers to manage the inventory with a spreadsheet on Microsoft Excel. When ordering products Mr. Condit checks the Dairy Queen’s inventory guide that is provided to all DQ franchises to make the order process easier. However Mr. Condit has the final say. In short, it all relies on Mr. Condit’s decision, if the product goes to waste or is not enough. In order to place an order the quantity is very important. DQ franchises have distributor suggested by the Company, DQ Co. and makes sure that these distributors offer fair prices and high quality. There is a minimum quantity that each distributor requires, the issue is that Mr. Condit orders the product really cautiously because he cannot waste product. For example, the minimum for distributor A is 22 and for distributor B is 23, but if Mr. Condit only needs 18 products from those distributors he cannot place the order. Mr. Condit needs to keep a low cost strategy, therefore, he cannot order 22 because the 4 products he does not need would go to waste and money would be waste. As said before, the inventory process takes about 1 hour for Mr. Condit who does it all the time. But what if for some reason Mr. Condit cannot do inventory, there has to be someone else capable of doing the inventory being that it is essential for the business profitability. Mr. Condit has people in mind to teach them the inventory process, one is his wife and the other person is a full-time employee. When receiving the product, first Mr. Condit has to make sure all the product ordered meet the temperature DQ requires, if not the products cannot be accepted being that the customers’ safety would be in risk. Also, the refrigerators have to meet the required temperature to guarantee the best quality.

In order to place any order Mr. Condit uses a spreadsheet that he has developed to keep a control over the inventory. This spreadsheet is pretty simple; on its top it shows the guide order, effective date, run date and number of pages. It includes a table that specifies time and quantity, number of the product, the description of it and the line number of the order.  This table helps Mr. Condit to know exactly when was the last time he ordered a product and also the quantity. 

The following is the table that he uses to make an order:

According to the owner, the ordering process only takes him 1 hour and 30 minutes to 2 hours every week. He explained that Saturday nights are when he organizes and checks everything that the store has, and then fill out the spreadsheet with the products needed. Mr. Condit also said that if a mistake is made in the order and inventory becomes low he can wind up spending a lot of time running around to different stores trying to fix this mistake.  

The following image is an example of order spreadsheet:

The most important aspect for DQ franchises to be successful depends on the managers that run the stores. They need to have the correct judgment when ordering the products. Ordering the products is a critical operation because if the manager orders the wrong amount for a product the store loses money. If not enough is ordered then the store can’t satisfy demand and if there is too much of a product then that might go to waste. Any mistakes when ordering products will waste time trying to solve the problem. Inspection is a crucial operation to make sure the inventory doesn’t go bad. Again, if there is something wrong with the product then that’s potential money being wasted. Managers need to make sure to regulate inventory and always keep track of the product’s temperature and the quantity to make sure if there is a need to order more of that product. Also, getting the best prices from the distributors to keep costs down. The key is to keep a balance of cost and quality while focusing more on achieving minimum cost.

As it can be seem Mr. Condit does not use any sophisticated software or method to manage his inventory. However, somehow he is using the Periodic Review System indicated in the book (Page 325) without even know it. First, Mr. Condit has established a routine, every Saturday he revises the inventory and sends the orders on Monday or Tuesday. For example, Mr. Condit revises the inventory for ice cream on Saturday night and there are only 20 gallons, he knows that the demand is 50 gallons, so by Monday he will make an order for 30 gallons. But, before he makes the order, he also has to make sure to meet the minimum purchase order require by the supplier.