Write an Introduction/Background: Describe the background of inventory controls, history, historical uses, companies that have found success, etc..

Subway Sandwich Shop Inventory

Subway Inventory

Sku Code

Items

Unit Cost

Annual Vol/Demand

Annual $

Annual %S's

Category

98473990

White Bread (Case)

$125

1300

$162,500

54.81%

A

3896792

Wheat Bread (Case)

$100

600

$60,000

20.24%

A

82.03%

90290809

Italian Bread (Case)

$90

230

$20,700

6.98%

A

1001001

Lettuce (Bag 10 LB)

$17

1198

$20,366

6.87%

B

97839290

Jalapeno Cheese (Case)

$105

98

$10,290

3.47%

B

1998383

Oil (5 Gallon)

$13

500

$6,500

2.19%

B

13.73%

2884979

Cucumbers (Bag 10 LB)

$18

198

$3,564

1.20%

B

3788903

Mayo (3 Gallon)

$15

235

$3,525

1.19%

C

1987849

Pickles (Bag 10 LB)

$17

175

$2,975

1.00%

C

2898470

Pepper (Gallon)

$12

215

$2,580

0.87%

C

4.23%

3891879

Salt (Gallon)

$10

220

$2,200

0.74%

C

1988802

Tomatoes (Bag 10 LB)

$17

75

$1,275

0.43%

C

$296,475

Inventory Control Method

The purpose of ABC analysis according to Quantitative Analysis for management (2015), is to divide all of a company's inventory items into three groups (group A, group B, and group C) based on the overall inventory items (Render, Stair Jr, Hanna, Hale (2015). The items are inventoried based off of their importance, whereby the most important, based off cost, making up to 70 to 80 percent of the company's monies, items are classed under group A. According to their different classifications or groups, items are subject to different control measures. Hence, "Class A inventory items require cautious inventory control because they represent a large percentage of the total dollar value of the inventory" (Rusanescu, 2014). This state requires certain demand forecasts and detailed record keeping. "Class C inventory items should receive a flexible control and Class B items should have a control effort that lies between A and C" (Rusanescu, 2014).

Seeing that corporations are trying to make profits and increase their cash flows; the ABC analysis helps to reduce procurement expenses or to add growth in cash flows through having the accurate number of items accessible for manufacture or otherwise direct to customer sales. For fast food industries, several methods can be utilized. However, exploring each method and how they can be beneficial to one's organization can be tested through business inventory analysis giving the best possible outcome. The ABS analysis chosen presents data to eliminate overstock of items, shows annual volumes by demand, and how much of the corporation's cash flow is directly tied to its products. Items in category A can be deemed critical items, which are groups of items, low shelf lives, and the foundations of the company. So, reorder points are set differently for these items than they would be for items in other groups.

Flowchart

Analysis Applied to Subway Inventory

While there is no perfect way to inventory every corporations inventory, as several different methods can be utilized depending on a company need, and their organizational structure. The method applied to Subway inventory is ABC show the bread items in category A. We all know Subway is not known just for the delicious cost-effective subs, but the bread is made fresh daily which lowers overall cost but requires more resources to ensure quality. These items are critical to the company and data shown in charts reveal a high demand, and annual cost amounting to over 82% of operational proceeds. Categories B and C, we can see that these items can be purchased in higher bulk, with longer shelf lives, and less annual cost to the organization. Interesting enough, attention can be taken to item number 4, the lettuce bag. The demand for lettuce is overall demanded more that items 2 and 3 but are less expensive. But, during the romaine lettuce crises, Subway removed all romaine lettuce from its inventory and switched to iceberg to satisfy its customers. Iceberg Lettuce was cheaper and more cost efficient, but not the quality the corporation's desires, and was switched back with little to no losses due to its high demand, and low shelf life. A recommendation would be to add meat products to their inventory to match up all produce across the spectrum and allows corporations to see where customer demands are so that better marketing and inventory ideas can be analyzed and analyst have as much data possible.