Inventory management 101: A case study of a couple’s lunch habits.

August 4, 2012

The big idea: How can executives (or any of us, for that matter) use what we know about inventory management to make better choices about personal consumption — and improve our lives by working toward new goals with the money saved?

Brian and his wife, Tonya, plan to pack their lunch from home for a year to finance a dream vacation in Rome and improve their overall nutrition. They consider the cost of holding inventory (spoiled food, overflowing freezer) alongside the cost of obtaining it (gas money and time to go to the store) and the cost of not having it when it’s needed (no packed lunch, must make plans to buy.) They decide on their goals, their risk tolerance for lunch material stock-out and the review-and-reorder process that will keep them sufficiently supplied.

The scenario: To start, Brian and Tonya categorize their reasons for buying lunch (convenience, taste/freshness, variety, business/networking) and evaluate realistic minimum requirements for lunches out. They set a target (four lunches packed a week) and aim to reduce convenience-driven restaurant visits. They also determine that taste, freshness and variety are significant behavioral drivers, and that they’ll have to be creative to find ways to keep appetizing food in the house: fresh bread, in-season veggies and sandwich fixings, as well as organic microwave lunches for those out-the-door mornings that can’t be avoided.

The couple explores alternative ways of maintaining their inventory of healthy, mouth-watering, long-shelf-life lunch fixings. They determine the amount of “safety stock” in lunch fixings that they think they’ll need. If they order too soon, they’ll have too much food to store and use before it loses its freshness — but if they order too late they’ll run out, and risk not making it to Rome.

Second, they decide on a review and reorder system. Continuous review systems require that the user monitor inventory at all times and reorder when the supply reaches a certain point (i.e., the desired level of safety stock.) At first, Brian thinks this option would work for refilling their stock of microwave lunches. Instead of their current customary habit of buying five or six at a time, and refilling the freezer when they’re out, he suggests that they double that to 10 or 12. When there are four left, this triggers a trip to the grocery store.

Ultimately, however, the Venutis choose a periodic review system — which means that they check their inventory of several “categories” of ingredients at fixed intervals (i.e., weekly or bi-weekly) and order only at that time. They identify the categories of fruit, vegetables, bread, sandwich fillings and condiments, and plan to rotate items in each category with a focus on in-season and sale items.

The resolution: Brian and Tonya have a nighttime routine of packing the next day’s lunch together after dinner, which they’ve discovered has the added benefit of allowing them to effectively make use of their evening leftovers — and of course, they do so while chatting about their romantic getaway to Rome.

The lesson: Inventory should be measured and managed with awareness and purpose. Our stockpiles of ingredients and finished goods, therefore, should serve a purpose relative to a set of commonly held values and goals. Then, our “stuff,” and the money and effort we expend in buying, storing and using it, can work for us and support our efforts to build toward whatever better future we imagine. The act of paying attention is limitless in its possibilities.

Weiss is a professor at the University of Virginia Darden School of Business, and Goldberg, his co-author, is a strategy consultant and management educator.

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