Emerging Concepts

The Key to Restaurant Success: Strategic Inventory Management

Good inventory management is the meat and potatoes of a restaurant’s success. By controlling inventory, you’re reigning in food costs, reducing waste, and ensuring happy customers. There’s nothing worse than a guest making their way to your restaurant for their favorite signature dish, only to find you’ve run out of an ingredient, and they’ll have to select another item. Disappointment runs deep, and they start wondering about your competitor down the street and whether they might have a reasonable substitute.

Restaurant Owner reports that just 10 to 15 items account for almost 50 percent of sales in many restaurants. Knowing these key ingredients and ensuring you don’t run out will help maximize your profits.

Let’s explore other inventory tips the restaurant industry has embraced to reduce costs and ensure customer satisfaction. 

The Benefits of Strategic Restaurant Inventory Management

According to one study, operators who take inventory every week and calculate their cost of sales add 2 to 10 percent to their bottom line. By monitoring your food and beverage ingredients, you reduce waste, order smarter, reduce costs, and ensure strategic menu pricing. Other items that require inventory management include dry goods, cleaning supplies, and equipment and supplies.

That said, it’s a struggle for many operators. It’s time-consuming, and no matter your due diligence, it’s a fine line between too much inventory and not enough. 

Inventory Best Practices

  • Predicting Demand

A busy Friday night can leave you inventory-challenged for Saturday. Know what to expect by analyzing past data and historical sales trends and identifying future trends. Then, forecast sales for menu items. By understanding the popularity of certain items and how they fluctuate over time, you can ensure you have the inventory you need for each menu item without overstocking.

  • Taking Stock

Know what’s on hand by having a replicable stock-taking system in place. While jotting down numbers as you walk through the storeroom and refrigerator work, it’s incredibly time-consuming and cold. Good restaurant inventory management software can significantly impact the use of your staff’s time and ensure you keep updated regularly.

A good time for inventory count is Sunday or Monday, after a long and busy weekend. You’ll also want to look at your more expensive items, such as prime cuts and wine, almost daily. 

Knowing you have a strategic inventory management process in place, even if it’s using Excel sheets or the previously mentioned notebook, lets your staff know your monitoring. This one act can result in better portioning control, reducing waste, and limiting theft.

  • Understanding Inventory Calculations 

There are required calculations that give you a bird’s eye view of your operations and help you identify areas where you can reduce costs. For instance, the inventory turnover ratio determines how quickly you use the stock. This figure is calculated by dividing the cost of goods sold by the average inventory value during the same period. Ideally, you want to keep your inventory turnover less than seven days.

Par level is the minimum amount of inventory to keep on hand to meet your customers’ needs. Identifying this and sticking to it reduces waste and ensures happy customers. 

Theoretical vs. actual usage is the ideal usage based on recipes and sales figures versus the actual usage. While you’ll always find some variance due to incorrect portioning, spillage, and theft, you want to keep these two figures as close to each other as possible.

  • Record Food Waste

Whether throwing away food that’s gone bad or someone getting an order wrong, these add up and chip away at profits. If you’re not including these items in your inventory count, you’ll always be off and wonder why the difference when you do your stock count. 

Make sure to keep a running tally of these items and use it during your inventory count.

Creating an accurate inventory system is one of the most dreaded undertakings in the restaurant industry, yet it is also one of the most vital. Fortunately, today’s technology has made it much more manageable, doing much of the hard work for you. Today’s restaurant inventory management software makes the process easier by supplying an overview of historical sales and ordering data, easy access to calculations, and more. Just make sure it integrates with your POS.

One of your critical partnerships in this arena is your suppliers. Companies such as Consolidated Concepts, a division of EMERGING, help multi-unit restaurants reduce costs, improve quality, and streamline the supply chain through integrated programs that include leveraging their $10 billion in annual purchasing volume, and a data trail of ordering, inventory, recipe costing, accounting, and more. To learn more about optimizing your inventory and lowering your costs, contact EMERGING.  

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