Int. J.

Production Economics 80 (2002) 155167

Just-in-time: Implementation within the

hotel industrya case study
Gerald Lee Barlow
Canterbury Business School, University of Kent at Canterbury, Canterbury, UK

Abstract

This paper sets out to report on the potential value of Just-in-Time purchasing and inventory management within the
hotel industry. Specically, it outlines research carried out between 1998 and 1999 within two hotel groups, covering
three London hotels. The rst an international hotel organisation and the second, a family owned hotel company
operating in England and Kenya. It examines their current inventory and purchasing policies, how they manage and
maintain their inventory levels and what these policies mean, as far as the hotel operations are concerned.
r 2002 Elsevier Science B.V. All rights reserved.

Keywords: JIT; Inventory management; Hotel industry

Just-in-Time means many things to many people, but to many in the hospitality industry, it means little
more than an expression of gratitude for a much needed drink.

ment in Toyota Motor Co., to todays wide spread

1. Introduction
Just-in-Time (JIT) means different things to
different people. Some believe it to be an approach
to manufacturing production, control and pur-
chasing; to others it is a methodology to achieve
manufacturing excellence (Schonberger, 1986);
some businesses even view JIT as a winning
strategy in the highly competitive market place of
the 1990s (Schniederjans, 1992). As an operational
philosophy JIT has been developing extensively in
the manufacturing sectors, from its early develop-
E-mail address: g.l.barlow@ukc.ac.uk (G.L. Barlow).
0925-5273/02/$ - see front matter r 2002 Elsevier Science B.V. All rights reserved.
PII: S 0 9 2 5 - 5 2 7 3 ( 0 2 ) 0 0 3 1 5 - 8
employment. Alongside this has been ongoing
research relating to its usage, implementation,
benets and problems, the difference between
the Eastern and Western approach, and its
implementation and development. Within this
research, there have developed common elements
and similar or common denitions of a JIT
philosophy for manufacturing by Schonberger
(1982) and Hall (1983) to APICS (1992). However,
research based journals have been slow to
encourage the development of research into the
movement of JIT from the manufacturing
sector to the service industries. Similarly, the
development of denitions of the approach in
the service sector has produced little in academic
literature of Chase and Aquilano (1992), which
156 G.L. Barlow / Int. J. Production Economics 80 (2002) 155167
describe JIT as essentially a process-oriented
waste elimination philosophy, with both service
and manufacturing organisations employing pro-
cesses and systems to permit the provision/
production of products or services, the JIT
approach should be applicable to both sectors.
A review of the major relevant academic
research journals produced articles concentrating
mainly on the issues directly occurring in or
related to the manufacturing sectors. The only
area where the use, application or value of JIT in
the service sectors has been considered are the
applied journals, where articles discussing the
development of JIT in this area are emerging
(Feather and Cross, 1988; Harvey, 1989; Schnie-
derjans, 1989; Inman and Mehra, 1990), all refer to
areas in the ofce administration environment,
either introducing or developing stock control
elements from JIT. Berling and Geppi (1989),
Cassak (1988), Pettus (1990), Wagner (1990),
Inman and Mehra (1991), and Slack et al. (1995),
within the hospital sector, all mainly investigated
the use or potential use of JIT inventory manage-
ment approach. More recently, a wider spread of
issues relating to JIT research in service organisa-
tions has begun to be accepted and published, the
work at Wal-Mart (Stalk, 1992; Ballou, 1994;
Halverson, 1994), and the airline industry (Flint,
1993), were some of the rst examples, but still it is
limited, unlike the steady and up to date ow of
published research in the manufacturing sector.
The major work covered relating to JIT within the
service sector is that written regarding the Wal-
Mart and Proctor Gamble Quick Response
Programme, and the similar JIT programmes
Wal-Mart have developed to ensure their stores
are capable of holding items in stock, without
holding too much stock, with no stocks outs,
whilst ensuring a no over stocking policy (Ham-
mer and Champy, 1993; Hill, 2000; Markland
et al., 1995; Riggle, 1997; Schiller, 1989; Vonder-
embse and White, 1994). This approach to
inventory management has enabled Wal-Mart to
produce a better service, still at the lowest possible
price, whilst permitting Proctor and Gamble to
signicantly increase its business with Wal-Mart
(Schillar, 1989). These retail practices share
similarities with hotel operations in the nature of
the products purchased, however, Wal-Mart both
as a corporation and in the size of its individual
stores operation have considerable differences
to those found in the hotel sector. The stores
purchasing power is far greater, both in its
combined purchasing power and its individual
unit purchasing power, than either those of a
hotel group or a large individual hotel, within a
group. Secondly, the nature of investment is
completely different, in the supermarket the
investment is balanced between capital investment
in the buildings and the information systems,
EPOS and EDI for example, and its investment in
the operations inventory, layout and design
systems. However, in the hotels the investment is
concentrated in the capital structure, the actual
hotel and its location, as well as the internal design
of equipment, with signicantly less invested in the
daily operations of the hotel, and very little in the
material inventory as a percentage of the hotels
capital investment.
This paper sets out to investigate the possibi-
lities of employing part of the JIT philosophy,
within the hotel industry. JIT is but a part of
the overall philosophy of total quality manage-
ment (TQM) (Oakland, 1995), which should
perhaps represent the overall mission statement
or strategy of the hotel industry. That is, the
customer is King or Queen, quality of product or
customer service is the ultimate goal, with the
added philosophy of get it right rst time, every
time. This is surely what most of the industrys
customers expect and what managers strive for.
Within the JIT philosophy, is the management
technique of JIT purchasing. It is this technique
that the paper sets out to explore with reference to
the hotel industry.
JIT purchasing suggests, the minimisation of the
stocks to zero, or as near to zero as possible, the
use of a regular daily deliveries and reliable local
suppliers. This is surely how the Grand Hotels
of a 100 or more years ago operated and created
their fame and fortune. They would have had daily
deliveries of fresh produce from local suppliers,
there would also have been no refrigeration,
and many products both food and other items
were perishable (even beer did not have a long
shelf life).
 G.L. Barlow / Int. J. Production Economics 80 (2002) 155167
For the purpose of this paper a case study
approach is used, based upon three distinctly
different hotels:
Hotel A: A central London 5 star deluxe hotel,
comprising 500 luxury bedrooms,
banqueting facilities for approxi-
mately 1000 people, 3 restaurants,
and 5 bars.
Hotel B: A central London 4 star hotel, com-
prising 200 bedrooms, banqueting and
conference facilities for up to 250
people, a restaurant, coffee shop and
cocktail bar.
Hotel C: A heathrow airport hotel, comprising
400 bedrooms, conference and ban-
queting facilities for up to 500 people,
a restaurant, coffee shop and two bars.
The sample hotels are representative of a multi-
national operator, a small international hotel
group, and a family owned group. They all have
similar purchasing requirements for their material
needs, but vastly differing requirements in respect
of quality, delivery frequency and volume. For the
purpose of this paper, the areas investigated are
restricted to those of, purchasing and inventory
management within the beverage division, gener-
ally the largest stock holding, within hotels, in
terms of volume and nancial investment.
The inventory gures were taken from the stock
records of each hotel, and the period selected was a
date which proved common to all the hotels. It
could be argued that selecting a single stock date
from the 12 or 13 dates annually used to take an
end of period stock control check is at the least
arbitrary and could in fact be unrepresentative of
the actual stock holding of all or one of the hotels,
in particular for an item of stock which is one of
the largest areas of purchasing and inventory, in
an industry known to have both seasonal and daily
uctuations in demand. Additionally, hotels are
known to have different customer segments with
varying patterns of demand, for example, Hotel A
has a very large banqueting and function business
which reaches its peaks in demand between late
October and early May each year, and caters for
banqueting style functions and business confer-
157
ences, where each segment will have differing
demand patterns. However, the month selected,
October, is one of the busiest months for all the
hotels in the sample, and when the monthly stock
values were compared with those of the past 12
months, the following variations were found.
Stock period variations from the month mean
average
Hotel A Maximum Minimum Range
+1.8% 4.2% 6%,
Hotel B Maximum Minimum Range
+2.3% 3.1% 5.4%,
Hotel C Maximum Minimum Range
+0.9% 1.8% 2.7%.
The limited range in the stock holding is an
indication of the way in which these hotels operate
their bars and cellar purchasing and stock control
systems. The main principles is the desire to ensure
that the do not have any stock outs. The basic
procedures followed in all the samples hotels was:
Stock held in the bar was based upon par stock,
items were sold daily, and stock ordered from the
hotels central store (cellar) were placed at the end
of a days business for delivery the next morning to
bring the stock level back up to par, irrespective of
demand patterns. The Central store operated a
minimum stock level style of stock ordering with
weekly orders placed to bring the level of stock
back to the norm, and secondly to take into
consideration known future increased demand, for
example, a function or banquet. The variation in
the stock holding on a monthly basis between the
chosen period and the rest of the year was not felt
to be in any way signicant, or to bring the work
into question.
1.1. The basic principles of a JIT inventory system
JIT Purchasing requires that goods are supplied
in small quantities, in exact amounts, at frequent
intervals and in perfect quality (Voss, 1989). This
helps create an environment for the provision of
cost effective products or services, in the right
quantity at the right place, at the right time, whilst
using a minimum amount of facilities, equipment,
materials and human resources (Voss, 1989). The
158 G.L. Barlow / Int. J. Production Economics 80 (2002) 155167

JIT Purchasing philosophy has been dened as (f) smoothly timed order release,
maintaining just enough material in just the right (g) involvement in design specication,
place at just the right time to make just the right (h) prompt payment.
amount of product. Or, more concisely as the exact
adjustment of product to quality and time held
(Lyson, 1990). 1.2. The benefits of JIT
JIT purchasing is an important element of JIT
Management, and it is effective for the following The potential benets of JIT to an organisation
reasons: and its purchasing function in particular, have
been summarised by Schonberger and Ansari
1. controlling the inventory system,
(1984) as:
2. reducing buffer inventory,
3. reducing space needed or used,
(A) Parts costs Low scrap costs; low inven-
4. reducing material handling,
tory carrying cost.
5. reducing waste materials.
(B) Quality Fast detection and correc-
For JIT to work, two things must happen: tion of unsatisfactory qual-
ity and ultimate improved
(a) all parts, or orders must arrive when and quality in purchased goods.
where they are needed, in the exact quantity (C) Design Fast response to engineer-
that is needed. ing/operational change re-
(b) all parts, or orders delivered, must be usable. quirements.
(D) Administration Fewer suppliers, minimal
Where these conditions are not achieved, JIT efciency expenditure and order re-
may easily become Just-too-Late. lease work, simplied com-
In achieving these requirements, purchasing has munication and receiving
the following responsibilities: activities.
The emphasis should be on performance rather (E) Productivity Reduced re-works, reduced
than design specication. Less restrictive specica- inspections, reduced parts
tions enable suppliers to be cost effective by being related delays.
innovative with regards to the quality/function (F) Capital require- Reduced inventories of pur-
aspects of supplies. In JIT purchasing, value ments chased parts, raw materials,
analysis is an integral part of the system and work-in progress, and n-
should include supplier liaison: ished goods.
1. to ensure that they understand completely the Not all of these benets will be applicable to all
necessity of maintaining a consistent lead time industries or areas where JIT purchasing is or can
and high level of quality, be applied.
2. to investigate possible or potential suppliers
within a reasonable proximity to the users
locality, to help increase the certainty of 2. How does this apply to and what effect would it
delivery lead time and on time delivery, have on the hotel industry?
3. to establish long-term relationships with a view to
meeting the suppliers expectations in respect of: JIT purchasing is, as stated earlier, an important
element in JIT management, which in turn is
(a) continuity of custom, accredited as an important element of the Japanese
(b) a fair price and prot margin, developed TQM. It is effective because it:
(c) procedures and price adjustments,
(d) minimising order changes, 1. reduces buffer stocks,
(e) rm and reasonably stable specications, 2. controls the inventory system,
 G.L. Barlow / Int. J. Production Economics 80 (2002) 155167 159

3. reduces space needed, So do these apply to the hotel sector?

4. reduces material handling,
5. reduces waste materials. 1. Controlling the inventory system, and
2. Reducing buffer stocks.

Table 1 The current systems in the sample units are all

Total beverage stock holding as at 23.10.1998
similar. The hotels hold a buffer stock, a stock in
Unit Total stock As a % of Stock holding the outlets, plus work-in-progress (work-in-pro-
held (d) beverage in days gress being the opened items, bottle and beer kegs,
annual sales
etc.) (see Table 1).
Total stock Employment of JIT purchasing and inventory
Hotel A 245,989 8.25 86 would result in the hotels no longer needing the
Hotel B 18,087 10.05 99 cellar stock, or the majority of this safety stock.
Hotel C 25,649 7.25 74
The current levels of stock in both the cellar and
Total stock held In main bar the outlets can be seen in Table 1. An example of
Hotel A 92,665 3.74 36 the possible savings can be seen in Table 2. This
Hotel B 8003 4.14 52 study shows the stocks held by Hotel A on 23
Hotel C 13,223 3.08 32 October 1998, and a suggested par or ideal stock

Table 2
Case study 1: The effect of JIT purchasing on the stock at Hotel A

(Under a traditional approach; Stocks as at 23.10.1998)

Outlets Actual Under JIT conditions

Total stock currently Stock days Par stocks (d) Stock days (at
held (d) outlets use)

Cellar 153,324 53 0 0
Cocktail bar 2374 15 2044 18
Roof top bar 16,789 22 12,214 16
Coffee shop 2355 14 1954 12
Room service 4663 30 2736 18
Banqueting 23,276 27 5122 8
Mini-Bars 28,198 145 28,198 145
Basement restaurant 15,010 30 9805 19

Total 245,989 86 62,073 22

Formula for calculating stock days: stock in outlet/average daily cost of sales

Resulting in saving Stock cost value (d) Days (against overall

of: stock holding)

Cellar 153,324 53
Cocktail bar 330 0
Roof top bar 4575 2
Coffee shop 401 0
Room service 1927 1
Banqueting 18,154 6
Mini-Bars 0 0
Basement restaurant 5205 2

Total 183,916 64
160 G.L. Barlow / Int. J. Production Economics 80 (2002) 155167

level for each outlet, which could result in a
reduction in stock holding of d183,916. The
difference between the current cost of the stock
held, and the cost of the proposed stock holding
under a JIT system, a considerable saving (74.44%)
(par stock is the optimum level of stock held
in an outlet, not the minimum level of stock
needed).
3. Reduction in space needed
The information in Table 2 highlights the
nancial savings available through JIT inventory
management. A cellar stock will no longer be
needed, thus resulting in a reduction in the space
needed or used. This space saving can also have
possible nancial benets as seen in Table 3 within
Hotel C.
4. Reduction in material handling
Table 4 indicates the time and staff levels
involved in material handling at Hotel B and
suggests potential savings available by employing
JIT purchasing techniques.
The savings will come from the reduced labour
costs of the basement porters, the back doorman,
and cellar staff, for example. In Table 4, it is
possible that the implementation would eliminate
the need for a cellarman, and if JIT were applied
throughout the hotel, then it would remove the
need for a storeman/cellarman, whilst reducing the
work of the basement porter and for a back
doorman, goods in or goods receiving clerk.
5. Reducing waste materials
In theory liquor stocks are unlikely to have any
waste, or any chance of waste, whichever purchas-
ing system is employed. However, if JIT purchas-
ing was employed it would make the central stores,
back door storage areas, and the need to store
stock obsolete thus reducing the amount of people
involved in handling stock. This would also reduce
the risk of either damage, breakage or pilferage,
and indirectly result in a possible reduction in
waste materials, which has been as high as 4%
within the sample group in specic periods.
2.1. The rationale behind carrying inventory
Material inventories are those which support the
companys processes, be it manufacturing or a
service based company, as in the case of the hotel
cocktail bar. In the case of the hotel bar, the
material inventories are the liquor stocks, either in
the bar, its own store or the central hotel cellar.
Coyle et al. (1992) identify six reasons for carrying
inventory:
1. purchasing economies,
2. transportation savings,
3. safety stock,
4. speculative purchases,
5. seasonal supply,
6. maintenance of the supply source.

Table 3
Case study 2: Storage space cost at Hotel C

Current space costs

The hotel has a variety of storage areas connected to each outlet, plus a central cellar, where the majority of its stock is stored. The
cellar stocks as at 03.11.1998 had a total value of d13,223 which represented 51.56% of the total liquor stock held in the hotel at that
date
The square footage and general shape of the central cellar is similar to that of the hotels accounts and control audit department,
although sited in different areas of the hotel
The area currently occupied by this department is in the ground oor bedroom area, and could easily be converted into two bedrooms.
Similarly the central cellar area, could easily be converted into a new accounts/audit ofce. Neither have an outside view

The financial results would be

The average room rate achieved at Hotel C. since the current owners took over the property is d57.45, and the average room occupancy
over the same period is 62.8%. The annual benets to the hotel by this action would be in the region of d26,337.37 p.a.
2 rooms  365  d57.45  62.8%=d26,377.37
No. of rooms  no. of days  occupancy %  average room rate
This plus a saving on capital investment in stock could be some of the possible benets from JIT purchasing being successfully
introduced at this hotel
 G.L. Barlow / Int. J. Production Economics 80 (2002) 155167 161

Table 4
Case study 3 the delivery process at Hotel B

The hotel places an order for alcohol, say for wine with company Z Ltd., which delivers the wine to the back door/delivery area of the
hotel. The delivery is checked by the back doorman/goods receiving clerk. The delivery note is signed and the wine is left. The wine is
then delivered to the cellar, where it is re-checked, stored and entered into the stores ledger system. The wine is then requisitioned and
delivered to one of the outlets, say the cocktail bar. The bar checks the delivery, and either stores it in its own store, or possibly puts it
into the visible bar stock, i.e. on the shelves. It is then entered into the bar stock records. The cellar stock records are also updated.
Eventually the cellar stocks will reduce to a level requiring re-ordering of this particular wine. There is therefore little direct relationship
between the bar or outlet selling the stock item to a customer, and the cellar staffs re-ordering process

The paper work involved in this transaction is The staff involved

(1) Order (1) Deliveryman of company to hotel,
(2) Delivery note (2) Back doorman/goods receiving clerk
(3) Goods received note (3) Basement porter (goods from back door to cellar)
(4) Invoice (4) Cellarman/stores personnel
(5) Bar requisition note to cellar (5) Barman
(6) Delivery note cellar to bar
(7) Cellar stores record
(8) Bar stock records

Alternative under JIT purchasing

Wine is ordered from a local supplier via fax each night, (as currently happens, manually to the central cellar), and delivered daily to
the hotel, directly to the bar. The bar staff receive and put into stock. They update the EPOS system with the new stock items. At the
end of the evening work the bar personnel re-order, via fax the next days deliveries
Paperwork involved
(A) Order faxed
(B) Delivery note
(C) Weekly invoice

Staff involved
(A) Bar personnel
(B) Delivery person at suppliers

Under the JIT purchasing approach this would lead to the following benefits:
(a) Quicker demand driven order system
(b) Reduction in paper production and internal audit work
(c) Reduction in record keeping
(d) Reduction in time spent on monthly stock taking
(e) Removal of need for internal deliveries and staff involved
(f) No more internal inbound delivery audits
(g) Release of staff currently employed in the internal liquor stores to other jobs
(h) No increase at all in the work carried out by the individual bar and restaurant outlets
(I) Reduced risk of stock loss, error or pilferage

2.2. How these reasons apply in the sample hotels
2.1.1. Purchasing economies
One reason put forward for accumulating a
material inventory is that the company may be
able to achieve purchasing economies of scale.
This was a major reason given by one of the
sample units in the study. Either the hotel or its
head ofce purchasing department felt that there
were economies of scale to be gained by the hotel
from buying in bulk or larger lot sizes. For
example, Hotel A in August planned and ordered
75% of their next banqueting seasons wines, for
delivery in September 1997. This was duly placed,
and the stock delivered, thus resulting in a huge
volume of stock of wine in the hotels central
162 G.L. Barlow / Int. J. Production Economics 80 (2002) 155167
cellars. (Wine in the central cellar at the stock take
on 23 October 1998 was valued at d108,157 and
was equivalent to 69 days stock to the whole hotel,
whilst almost 30% of the original 75% was still
to be delivered as a staged delivery had been
arranged.)
2.1.2. Transportation costs
A company supplying the goods, may pass the
transport costs on to the purchaser. Thus the costs
per unit purchased are likely to be greater for low
volumes of trafc. This is seldom noticed in the
hotel industry as most or all purchase prices
include transportation cost. However, one sector
of the supply chain is affected, that is where the
supplier stipulates the number of deliveries he is
prepared to make per period (be it a week or a
month). This is most common in two particular
areas in the liquor supply chain (a) soft drinks,
notably Schweppes, and (b) beer delivery, notably
the larger breweries, e.g. Whitbreads, Courage,
etc. This type of problem leads to an increase of
actual stock needed, and also overstocking as
explained later.
In the case of supplies like liquor to hotels, the
suppliers can and do generally uses small vehicles
for local deliveries in large city locations like
London, to ensure delivery access, and use a
cluster of customer bases for delivery to ensure full
loads, the efcient use of their vehicles and the
benets of cost effectiveness.
2.1.3. Safety stock
Stock is held in case of emergencies. For
example, in case of a strike, or bad weather
conditions, or in case we dont get our weekly
delivery. When interviewing both the hotels bar
staff, and food and beverage management, this
was the most common reason given for hold stocks
Just-in-case a customer requests it. Just-in-case we
have a sudden rush. Just-in-case we run out. Just-in-
case the company fails to deliver, Just-in-case there
is a national shortage, just-in-case, etc.
Perhaps the expression that best explained the
approach to inventory management as experienced
in each of the units, is Just-in-case purchasing
management.
2.1.4. Speculative purchasing
Speculative purchasing or hedging against fu-
ture price increases, strikes and changes in political
policies, taxes, rises in ination, uctuation in
foreign currency and interest rates, were once
common, and in areas of high ination (Turkey for
example, in Europe) are understandable reasons
for buying excess stock. However, in the hotel
industry in London in 1998, or 1999? It was
surprising to nd two out of the three hotels in the
sample employing or maintaining this as a
justication for some of their high-stock levels.
In one case, it was as a short-term measures
caused by a potential delivery problem and a
threat of a possible price rise if the industrial
action took place and became a long-term
problem. In the event, the dispute was settled
and there was no industrial action. In the second
case the situation developed because of a ru-
moured tax change in the 1997 budget, which
never materialised, and which even if they had,
would have simply resulted in any increase being
passed on to the customer and the increase blamed
on the tax changes. Therefore, in the event of the
tax increase, their action was to permit the hotel to
making a windfall prot! In reality, there was no
tax increase and as a result the stock levels
increased with no nancial benet.
2.1.5. Seasonal supply
This seems to be of very low priority in the
beverage sector, with possible exceptions of long
hot periods, which cause major increases in the
sales of soft drinks, coca cola, etc. If such climatic
inuences were predicted, the possibility of in-
creasing stocks to cover could be argued, but
equally, if the forecasting was accurate in advance,
the manufacturer would increase production to
cover, and the need to stock pile would not exist.
However, one of the sample hotels did see a need
to increase stock levels for this reason. Hotel A,
the largest of the units, and the hotel with the
largest Banqueting business arranged in August
1997 to purchase 75% of its expected wine
consumption for the next banqueting season (9
months), and to have 75% of the expected demand
delivered in September and October, and the
balance by early December. The hotel achieved
 G.L. Barlow / Int. J. Production Economics 80 (2002) 155167 163

a 7.5% average increase in their discount for this to deliver, Just-in-case the supplier has a strike or
order, and a 60 day deferred payment, (which they goes out of business. Just-in-case we have a rush of
already tended to take anyway). This does not give customers. It is this approach that has resulted in
much, if any, savings on simple nancial grounds, the three hotels having stock levels ranging from
if the cost of borrowing or the potential loss in
interest is taken into account. The rate of interest
charged in November 1997 was around 911%, Table 5
and the potential interest rate available from Total current stock holding
investments was 48%. This ignores any other Items Hotel A (d) Hotel B (d) Hotel C (d)
problems or costs, such as increased insurance
Spirits 54,738 6385 8531
cover, extra storage space, extra staff to deal with Fortied wines 13,260 427 329
the initial volume on delivery, etc. Wines 157,269 8311 9612
Beers 5330 1500 3467
2.1.6. Maintenance of supply source Minerals 15,392 1464 3710
This is the nal reason for holding inventory
Total Stock 245,989 18,087 25,649
and one which is often applied where large
manufacturers use small suppliers to manufacture Total stock held in stock days
a small but important part of an entire assembly. Spirits 80 n/a 144
Companies may nd it necessary to continue Fortied wines 138 n/a 80
buying stock in order to maintain the supply Wines 96 n/a 58
Beers 30 n/a 55
chain with these small suppliers. This did not
Minerals 35 n/a 54
feature as a reason with the hotels in this case, or
any others hotels, I have had contact with. Total stock 86 98 69
The question of why inventory is needed may
Formula used: stock/average daily cost of sales.
seem trivial, but it is perhaps a necessary starting
point. In many organisations inventory is kept to
protect the supply productiondistribution chain Table 6
from demand uctuations. Adequate inventory Current stock holding in the hotel central cellars (Buffer stocks)
insulates one part of the supply production- as at 23 October 1998
distribution chain from the next, thus allowing Items Hotel A (d) Hotel B (d) Hotel C (d)
each to work independently. JIT has in many ways
Spirits 27,149 3050 2040
started to break down this approach, and created a
Fortied wines 9908 176 209
more integrated process, thereby eliminating much Wines 108,157 4624 7394
of the long held reasoning behind the argument for Beers 2511 1170 1987
holding stock. A traditional reason given for Minerals 5599 1064 796
holding stock is set out by Farsad and LeBruto
Total Stock 153,324 10,084 12,426
(1993) in a measured approach to food-inventory
management. In which they state a correct Total stock held in stock days
inventory helps meet the expected customer Spirits 37 n/a 35
demand (distribution) establishes a smoother Fortied wines 99 n/a 50
production process (production), and occasionally Wines 69 n/a 46
Beers 14 n/a 22
acts as a hedge against unexpected price increases
Minerals 17 n/a 13
or product shortages (supply). In discussions
with managers and staff in the sample hotels, this Total Stock 53 71 33
was one of the major arguments against JIT
Formula used: stock/average daily cost of sales.
purchasing, and in support of the old system. In Under a JIT approach all these stock items would be no longer
that, inventory is needed Just-in-case a customer be required therefore representing a direct nancial saving.
requests that brand, Just-in-case the supplier fails n/a=hotels sales data not available in a suitable format.
164 G.L. Barlow / Int. J. Production Economics 80 (2002) 155167
69 Days at Hotel C to 98 days at Hotel B, which
is in reality Just-Too-Much. Tables 5 and 6
indicate the actual cost of stocks held in each
hotel in total and the buffer stocks held in their
central stores.
3. What benets are available to the hotels from
JIT purchasing?
The major advantage recognised by Ansari and
Modarress (1990) are:
1. Improvement in product quality,
2. Ease of communications,
3. Reduction in lead time, storage levels, stock/
inventory, space and materials handling.
3.1. Will the hotel also benefit in these areas?
3.1.1. Improvement in product quality
The incoming inventory is, in most cases not
going to change, since most of the beverage
items are of a set quality, e.g. a Bottle of Gordons
gin, or a pint of Courage Beer are the same
whichever system is used to buy it. But the aim is
to ensure the standard and quality of product
and service, thereby improving the quality of the
overall service. The major principles being:
treating suppliers as partners, not adversaries,
trusting the supplier and giving the staff the
authority to do their job. By this method you give
the staff authority to do their work, and complete
ownership over it and its problems. The worker
shares authority in the control of product quality,
making quality everybodys responsibility and
maintaining a 100% quality product policy. In
this case the quality will not drop, and the staff
motivation is likely to increase due to the
empowerment and so the service quality may well
rise.
Ansari suggests nine points for quality control
and customer services (Ansari and Modarress,
1990):
1. controlling initial ow of new products, or new
information and feedback for product perfec-
tion,
2. determining the adequacy of instruction book-
lets and manuals, e.g. cocktail recipes, EPOS
manuals,
3. visiting users, and answering technological
questions,
4. checking the efciency of the system to perform
immediately when service or parts are delivered,
5. checking the efciency of periodic product
inspection,
6. monitoring the degree of customer satisfaction,
7. determining and or predicting areas of basic
consumer discontent,
8. collecting and analysing information about
defective or returned items,
9. utilizing customer information for future pro-
duct design and quality.
Not all these points can be applied easily within
the hotel industry, but they can be adapted to the
specic requirements of the service nature of the
industry.
3.1.2. Ease of communication
A single source of supply will help create less or
fewer communication problems. For example, the
current system involves the outlet ordering from
the cellar, and receiving a daily delivery. The cellar
orders weekly (approx.) after receiving managerial
approval, the goods are then received by the
backdoor/goods-in, and then re-delivered to the
cellar.
3.3.3. Reduction in lead time, storage levels, stock/
inventory, space and material handling
Throughout this paper, potential savings in
these areas have been indicated, and are shown
in Tables 24. Table 7 highlights the potential
savings from inventory costs, in each of the sample
hotels if JIT purchasing was implemented. The
potential overall savings of Hotel C are indicated
in Table 8.
These involve savings on inventory, space,
stock losses, etc. but do not include savings
available from nancial saving, interest, etc.,
or savings available from a reduction in labour
costs.
All these benets can be measured objectively,
but in addition to these there are a number of
 G.L. Barlow / Int. J. Production Economics 80 (2002) 155167 165

Table 7
Potential savings available from JIT purchasing

Hotel A

Outlets Current stock Stock days Proposed stockholding under JIT Stock days Financial saving (d)

Cellar 153,324 53 0 0 153,324

Outlets 92,665 115 60,273 22 32,392

Total 245,989 86 60,273 22 185,716

Hotel B
Outlets Current stock Stock days Proposed stock Stock days Financial saving

Cellar 10,084 71 0 0 10,084

Outlets 8003 126 6550 36 1327

Total 18,087 98 6550 36 11,411

Hotel C
Cellar 12,426 84 0 0 12,426
Outlets 13,223 61 11,903 34 1320

Total 25,649 74 11,903 34 13,746

Table 8 areas which I feel could be applicable and suit the

Area of potential savings at Hotel C hotel industry:
Areas Potential savings d

Inventory Reduction in capital costs 13,746

(25,64911,903)
Space Saving available from (Table
3) better use of this area
Time Time saving in the purchasing
work
Stock losses Breakage, pilferage taken at
1.5% per month of total stock
Price Bought about by better
improvements working
Relationship with suppliers
Administration Reduction in admin. costs
cost As telephone cost, by use of,
off peak time, and fax
Less additional costs
Price increases Caused by increases due to
delivery frequency
Minimum potential annual saving
less easily measurable benets. Ansari and
Modarress (1990) in JIT purchasing describe these
as intangible benets. The following are those
* improved product quality,
* improved productivity,
26,337 * improved relationship with suppliers,
* increased opportunities for contact with the
customers,
* reduced need for inspection of incoming deliv-
1571 eries,
* improved competitive position,
? * reduction in purchasing paperwork.
? It is not possible to quantify all the potential
savings available through the adoption of JIT
purchasing practices. There are so many areas of
purchasing, so many different items to be ac-
? quired, and in most cases hotels hold stocks
ranging from beverages, and food, to silverware,
and toilet paper, from drinks coasters and hotel
41,654 brochures, to guests soaps and detergents. How-
ever throughout this paper one product, beverages
has been used, to indicate ways in which JIT
purchasing could possibly start to make a con-
tribution to a better, more effective purchasing
and inventory management system.
166 G.L. Barlow / Int. J. Production Economics 80 (2002) 155167
4. Conclusions and suggestions for future research
A literature review of JIT research reveals a lack
of output in the service sector as a whole, and the
need for further work into the value of JIT
purchasing and inventory management within the
service industries. The results and problems related
to the implementation of this approach need to be
compared with the results prior to JIT systems and
after the system has been implemented and given
time to become embedded within the operating
systems. Within the hotel sector, research into the
problems resulting from the emphasis placed by
many hotel companies on the importance of short
term results, such as return on capital employed
(ROCE) and operating prot margins, could be
enlightening. Particularly with many of the bene-
ts of JIT being more long-term and related to
investment and operational savings as far as
reductions in time, space, usage of labour and
under utilisation of capital, not areas, which will
show an immediate effect on the hotels bottom
line prots.
In conclusion, is JIT purchasing worth the
potential problems to justify implementa-
tion? With the potential savings seen in Table 8
for Hotel C: approximately d41,654 from only
one product, and a potential capital saving
from purely a reduction in liquor stock levels
of d185,716 in Table 7, there seems to be little
doubt that it is a system worthy of further
investigation. Therefore YES! JIT purchasing
and inventory with such positive potential results
in such an important area has great potential and
any hotel should seriously consider adopting JIT
purchasing.
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