inventorymanagementandtypes(Fifo,lifo,pmp)

Inventory is a vital management tool for the proper functioning of any hotel business.

Its purpose is to provide the establishment with the necessary components, from bedding to drugstore products, allowing rigorous control of all items in order to replace them in a timely manner and detect those that have spoiled, expired or become obsolete.

Purpose, Advantages and Functions of Inventory

Performing periodic inventories offers numerous advantages: it allows each product to be classified in its category, keeps supply costs to a minimum, satisfies departmental demand and monitors product quality.

Its main function is to avoid irregularities, allow purchases in more economical batches and organize materials, especially perishable ones.

Despite its benefits, poor inventory management can lead to serious problems, such as excessive costs due to excess stock or customer dissatisfaction due to stockouts.

Types of Inventories and Their Classification

Inventories can be classified in various ways.

Depending on their periodicity, they can be intermittent (carried out several times a year), initial (when opening a store) or final (at the end of a period to assess stock).

From a logistics perspective, several types can be distinguished: cyclical inventories, so that the production system never stops; seasonal inventories, for items whose demand is temporary; safety inventories, to cover possible errors in estimating demand; and speculative inventories, which are generated by the anticipation of a price increase.

Stock Valuation Methods: FIFO, LIFO and PMP

When there are entries of the same product at different prices, it is necessary to use a method to value the exits from the warehouse.

The most common are:

• FIFO (First-In, First-Out): This method is based on the logic that the first merchandise that entered the warehouse should be the first to leave.

Its advantages are that it prevents the merchandise from becoming obsolete and ensures that the value of the final inventory reflects the most current market prices.

• LIFO (Last-In, First-Out): Unlike the previous method, this method values exits at the price of the last item purchased.

Its main advantage is that in periods of inflation it can reduce the tax burden, but it requires very detailed control for each product line.

• PMP (Weighted Average Price): This method values the output of merchandise according to the average of the purchase prices of all stock at that time, weighted by their quantities.

Each time a new purchase is made, this average price must be recalculated to apply it to future outputs.

Stock Management and Stockout Prevention

The set of items that a hotel has in its warehouse constitutes its stock. Inventory management is important to prevent stockouts due to a supplier delay or an unexpected increase in demand.

A distinction is made between optimal stock, which offers the best profitability, and minimum stock, which is the minimum quantity that should be available of an item and is calculated based on the consumption rate and the supplier's delivery time.

The worst-case scenario is a stockout, which occurs when there is demand for a product and there is not enough stock to meet it.

For example, a hotel may have 50 bathmats for 150 rooms, but if 70 suddenly break down in the laundry, this will cause an unexpected stockout that will affect service.

Summary

Inventory is a vital tool for providing the hotel with the necessary components. It is classified by its periodicity, such as ending inventory, or by its logistical purpose, such as seasonality.

Methods such as FIFO, which removes the oldest items, are used to value inventory. LIFO sells the most recently purchased stock, and PMP uses a weighted average price.

Stock management is important to avoid shortages in the event of unforeseen events. Optimal and minimum stock levels are defined to prevent stockouts.