Managing a restaurant presents many challenges. One of the most important aspects is knowing how to track your inventory. As part of supply chain management, inventory management includes aspects such as control and monitoring of orders, stockpiling and control of the number of products to be sold and stored, the implementation of automated inventory management systems, and finally the ability to increase revenue.
As food ingredients and labor are generally your primary expense, it’s essential for businesses to have a process and policy in place to optimize restaurant inventory management. In this article, we explore useful restaurant inventory tips that will help you run a successful bar or restaurant.
What is the importance of taking inventory in a restaurant?
The main purpose of inventory management is to measure the number of items your restaurant uses over time, compare it to your sales, and look for the difference between production value and sales. Restaurant inventory management is important to keep your business in order and reduce food waste.
Tracking your kitchen inventory allows for more informed planning and decision-making. If you do not track inventory correctly, your forecast may be skewed, resulting in incorrect orders, which will cost you a lot of time, resources, and money.
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Even though some managers do not consider inventory management to be important, statistically, 16% of your food ends up in the trash. 75% of employees also report having stolen from their employers at a given time, which represents 7% of your income. Restaurants that regularly do inventories can increase their profits by 24% a year.
Inventory management plays a crucial role in all aspects of your restaurant business, from the supply orders you place to the orders your customers make. Spending time understanding how to do inventory and investing in inventory management software can make a huge difference for your business.
How do restaurants keep track of inventory?
Restaurants can keep track of their inventory either manually or by using inventory management software. The optimal solution might be a combination of both.
Manual tracking of inventory starts with the assessment of your restaurant’s current financial situation. Measuring the financial health of a restaurant business goes beyond simply knowing how much money is left in the bank account. This figure will not tell you how many products you have on hand or how much money they represent.
With an effective inventory, you will be able to easily calculate inventory items that are essential to the understanding of the financial health of your business. As an example, the cost of goods sold compared to income will provide you with a better idea of your profit margins.
Once that is done, you can move to assessing the expected use of the inventory: this is usually the same amount of items used in the pantry week by week. So, unless a special event occurs, you will need to determine why the number of supplies used in the pantry has changed significantly. By conducting regular restaurant inventory, you can:
- Immediately identify significant increases or decreases in food consumption.
- Increase the number of orders to avoid shortages.
- Decrease orders to avoid a surplus.
When it comes to using inventory management software in order to track your restaurant’s inventory, most successful restaurants implement a point of sale system (POS) at the check-out counter where customers pay for their orders using cash or credit cards. This system is particularly efficient and reliable as it allows real-time update of inventory with every purchase recorded since the point of sales system is directly linked to the inventory count.
How much food inventory should a restaurant carry?
A mismanagement of your inventory turnover can have dire consequences. Many restaurants either find themselves running out of food stock before the shift is over or ordering excess inventory which often leads to food ingredients being wasted or stored in the freezer for many months.
These situations can be avoided by carrying food inventory based on the data collected from inventory monitoring. An example of adequate inventory turnover can be:
- Food: 4-6 times per month (5-7 days’ product on hand)
- Liquor: Approximately once per month (varies among concept/sales mix)
- Bottled beer: 2-3 times per month
- Draft beer: 1-2 times per month (varies with the number on tap/concept)
- Wine: Approximately once per month (varies with the size of wine list/sales mix)
The cited example is not a rule, as every restaurant must adapt their inventory turnover frequency based on their inventory monitoring.
Top 6 inventory management tips for restaurants
While managing a restaurant’s inventory might seem like a burdensome task, some key restaurant inventory tips can help make this task easier, such as:
1. Efficient use of raw materials
One of the most important restaurant inventory tips is focusing on an efficient and effective use of food ingredients. In order to avoid wasting raw materials, especially food (which is not only detrimental to your profits but also the environment) make sure that each ingredient is fully used.
This can be done by:
- Using a nominal stock approach for all inventory items (food ingredients, drinks, etc.): With adequate planning and anticipation, you can keep your stock at a minimum. Not only will this allow you to reduce costs but also ensure that old stock is never wasted or lost. This will also allow you to free space in your storage room, providing you with the flexibility to replenish your food stock whenever there is a need for that (for example, during a special season or a holiday where the demand for food is higher).
- Leveraging special season offers and promotions: the use of promotions and special season offers allows you to attract more customers and therefore increase your sales and profits but especially make efficient use of your stock, hence making it easier to avoid food wastage and maintain control over your restaurant’s inventory.
- Establishing an ingredients replenishment system: being short of ingredients is a messy situation that no restaurant manager wants to be in. This can be avoided by either establishing a manual system where you will be replenishing your food stock whenever a minimal threshold is reached or by using dedicated software that will notify you whenever an ingredient’s stock is at a minimum level.
- Using the First in, First out (FIFO) system: The FIFO method is based on the principle that the assets produced or purchased first are the first to be taken out of stock again, either used in full, sold, or discarded. In other words, this method considers that the restaurant disposes of the assets acquired first.
- Making sure that your restaurant uses all of the available ingredients: an adequate sense of anticipation and planning is required in order to assess which ingredients are actually useful. This can be achieved by a thorough analysis to determine which menu items are the most and least ordered. Such data collection and analysis must ideally be done multiple times a year, as consumer habits tend to change.
2. Inventory monitoring
When it comes to managing a restaurant’s inventory, the most important step is inventory monitoring. You may have competent and skilled staff, a loyal customer base, stellar menus with tasty food, however, if your inventory monitoring is inefficient, your overall profit is most likely to be negatively affected. As such, a thorough and periodic inventory monitoring is necessary.
While effective monitoring can be achieved through a manual inventory management system, the most optimal inventory monitoring requires the use of inventory management software. As mentioned earlier, the most effective inventory management software integrates with your restaurant’s POS system.
3. Managing perishable ingredients
What distinguishes restaurant inventory management from the inventory management of other businesses is shelf-life management, as every food ingredient in your inventory has an expiration date. The First in, First out system (FIFO system) allows for streamlined management of your perishable ingredients.
4. Train your employees and assign specific roles
Without ample staff training, your restaurant will experience inefficient inventory management despite implementing the aforementioned restaurant inventory tips.
You can start by training an employee or a team of employees (depending on the size of your restaurants and how many orders you get every day) on effective inventory management. This includes appropriate technological training on how to use inventory management software.
Once that is done, you can move to assigning specific roles to each member of your inventory management team. Roles can be assigned according to specific tasks that will be carried by each employee. For instance, the reception of orders, the organization of the inventory room, the counting of stocks, indexation of prices, keeping track of financial reports, etc.
5. Make good use of analytics, reports, and data
Nowadays, data-driven decision making is at the heart of each and every successful business. Restaurants are no exception to this. An inventory management system provides you with real-time reporting and analytics features.
This is vital to your planning, as it will help you determine how many food ingredients you need to order, therefore avoiding the risk of not being able to offer some menus or conversely having too much stock. Additionally, the reports and data will help you determine a profitable business model, as profit reports make it easier for you to forecast inventory trends of ingredients and menu items that are the most consumed and therefore profitable.
6. Invest in an inventory management system
All in all, an inventory management system helps a restaurant:
- Streamline inventory management processes.
- Minimize human error.
- Prevent and/or minimize food waste.
- Provide food stock updates in real-time.
- Automatically update inventory.
- Reduce the number of staff employees required to track and manage inventory.
Need help to keep track of food inventory?
Rapid Bar App is an easy to use application that reduces inventory time by 50%. You can create complex recipes, simplify the purchasing process, calculate and control your food and drink costs, access data anywhere and improve collaboration with your coworkers.
Save time and increase profits with these features:
- POS integration
- Fast inventory counts
- Actionable metrics