Recommendations

Problems with quality go hand in hand with problems with their suppliers and distributors. The ice cream is inspected when the truck arrives before they accept delivery of it. While this ensures a quality product, it still is a loss of time and money if poor quality product arrives and you reject it, now you must wait for more products to arrive. Temperature is a big proponent of product quality and if there are any problems with their freezers this can cause a big problem. Another potential problem is with the Dairy Queen’s suppliers. The organization uses only two primary suppliers, while this is efficient now if there is ever a major problem at one of your suppliers the franchises could potentially lose half overnight. While DQ is required to have qualifying orders of a certain dollar amount by its suppliers, Mr. Condit does not have an EOQ or optimal order frequency, he orders periodically and it is potentially costing him a lot in wasted product.

Inventory management is done with a Periodic Review System. The inventory is checked multiple times a week, but there is no constraint on the lot size ordered. Forecasting is done with a mixture of help from DQ headquarters and previous sales numbers. All of this is done by hand with paper and pen. The obvious flaws in this system are caused by multiple factors. First, the employees are not trained on inventory at all; it is limited to the owner and a few times his wife. Second, using a pen and paper system leaves a lot of room for human error and uses a lot of time when several simple inventory software systems could save time and money. Third, this method of forecasting and guessing seems to end up with a sizeable amount of waste. Management’s main concern is to keep costs without sacrificing product quality. This can be achieved much easier with a software system that will keep track of all previous sales and usage levels, and help in determining a better EOQ and order frequency.

In order to improve the efficiency of the franchise, there are a few recommendations that Dairy Queen should consider and look further into with regards to inventory management. The first recommendation is dealing with promotional sales and how inventory should be managed around them. Dairy Queen runs approximately twenty national promotions a year, so it is difficult to keep track of the supply chain during these promotions. 
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Dairy Queen has thus introduced and implemented the iTradeNetwork’s inventory-management solution. This allows each franchises store’s supply chain to be able to track what product is going to International Dairy Queen’s distribution warehouses while also keeping tabs on how well the promotions are doing. The return on investment for Dairy Queen is seen in what the company saves in outdated inventory and improves the accuracy of their data.

For the Clark, New Jersey Dairy Queen, weather and climate comes into play with regards of inventory management. We learned from Mr. Condit that he forecasts his inventory based on seasonal decisions. Around this Dairy Queen, there is little competition to worry about, but it still exists. In order to remain their competitive advantage, Mr. Condit keeps his store open year round, while most of his competition closes for the winter season. Mr. Condit also closes his doors earlier in the winter. Therefore, with regards to economies of location, Mr. Condit should consider extending his hours to match what he has in the summer. The reason being is that, against popular belief, there is still a high demand for Dairy Queen ice cream in the winter and since he is one of the few stores open at this time, he should capitalize on this opportunity by letting people come in and experience his product and try to build a sufficient customer relationship with a lot more people by leaving his store open a few extra hours.

During operating hours, most of the products sold by this Dairy Queen are made after the customer has placed an order, but there are certain items made before the order is placed and displayed until it is eventually sold. An example of that would be the cakes. In order to save money, Mr. Condit has a few people trained to make the cakes while these employees also handle the counter work during the cake making process. Although this seems ideal, there is only one person making cakes at a time, so the process could take up to a few hours to meet the demand. An efficient way to improve the labor productivity economics is to have two people produce cakes at one time. This Dairy Queen houses two separate ice cream machines and has an ample amount of counter space, which means that the two employees would not be waiting for a machine to make the cake. Having a second person making cakes while allow the supply to meet the demand faster and then those employees can move onto something else once they finish the cakes.

A few other recommendations stem from what was mentioned in the problems portion of this section. The first one being that only two people are trained to manage the inventory, which could cause problems if they are both unable to do it. At least two employees should be trained to handle the inventory and learn about how to forecast in case their input is needed. The time it takes to train the employees will pay off in the long run because Mr. Condit would not have the constant burden of remembering inventory every time an order is needed. The second problem is that inventory is tracked and recorded in this store by use of pen and paper. The most convenient solution is to use technology like an inventory tracking software to keep records. Microsoft Excel is a good program for storing inventory information and the supplier’s website, where he places the order, might store his past history which Mr. Condit can use for future forecasting. This leads to the third problem of inefficient forecasting leading to excess inventory. Most of the items on hand in Dairy Queen are perishable so excess inventory is a bad thing to have. If too much is ordered, a lot will be wasted which will cost the company money. To help this, forecasting needs to be improved greatly by studying past sales figures, researching what Dairy Queen corporate suggests for that location, and by planning around the national promotions that Dairy Queen has.