How to manage inventory in a restaurant

Inventory management is a critical part of running a successful restaurant. While restaurants typically carry large inventories of food products, they also must stock supplies like paper towels, napkins, condiments, cleaning supplies, and much more. These items are used daily and replenished periodically throughout the day.

Restaurants also have to manage their supply chain efficiently, so that they can provide fresh food to customers quickly. They must make sure that they have enough product to meet demand but not too much, as this can lead to overstocking and higher prices. In this article, we discuss some of the key aspects of managing inventory. 

What is inventory management?

Inventory management is the process of planning and controlling inventory in order to maximize profitability, while minimizing loss due to theft, damage, spoilage, obsolescence, and unsold items.

How often you need to perform inventory checks depends on the business you run. For example, restaurant owners should check stock at the end of every week, as fresh ingredients spoil fast. On the other hand, retail business owners can afford to get away with less frequent inventory management. 

Why should restaurants care about inventory management?

Poor inventory management not only leads to food waste, it can also lead to loss, which can be extremely detrimental to any business in the overcrowded restaurant industry. In addition, it helps ensure that you are not overstocked or under stocked with products. It also helps reduce waste and costs associated with carrying excess stock.

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Benefits of an inventory management system for restaurant owners 

Saves money 

The number one benefit of an inventory management system for a restaurant business is the money it saves you. Food costs are the most significant component of a restaurant’s costs, which is why it is essential to keep them down. Thanks to restaurant inventory management software, you can get real-time updates on how well stocked your establishment is. This way, you only spend money on things you need. 

Reduces waste 

Food waste is one of the biggest problems in the restaurant industry. Approximately 4 to 10 % of all restaurant food is wasted, which means that up to 10 % of all the food you purchase doesn’t even make it onto a plate. Not only does this have a negative effect on the environment, it can also have a negative effect on your bottom line. 

When you waste food, you waste money. There is no point spending money on buying food you are just going to throw away. Thanks to restaurant inventory software, you are able to keep on top of what food you need and what you don’t need. As a result, you only stock up on ingredients that will make it to your menu and avoid buying items that will end up in the garbage bin. 

Better understanding of expenditure 

One of the best features of a proper inventory management system is data analytics. Inventory apps provide you with personalized reports on your expenditure as well as your sales, which enables you to make informed decisions on how to adjust your menu pricing. 

With the cost of living increasing, food is becoming more and more expensive, and many restaurants fail to take into account these rising costs. Restaurant owners who have an inventory management system are notified in real-time when discrepancies or changes in profit arise. 

How restaurant inventory affects net profit

Restaurant inventory affects net profit in various ways. If you miscalculate your inventory needs, you increase your outgoing costs while failing to increase your incoming gains, thereby causing an overall decline in net profit. 

Inventory is also technically considered a business asset, because it was paid for with the earnings your business made. It therefore has the potential to make you more money. You should account for it in your overall estimation of your profit. This is especially true for nonperishable items that you are unlikely to have to throw away and will use for future dishes and, by extension, towards future earnings. 

Restaurant inventory management best practices

1. Use an inventory management app 

The number one thing you can do to make keeping track of inventory easier is to invest in a comprehensive inventory management app. Gone are the days when you had to hire an employee just to keep track of your stock with an old-fashioned inventory sheet.

Now, you can use an app like RapidBar to deal with inventory management. You can integrate it with your POS system so that inventory levels are automatically revised in real-time. This can help you save up to 80% more time. In addition, with intelligent order creations, you can place orders with your suppliers more easily than before. It’s the best way to reduce the time you spend on inventory management. 

2. Stay organized 

Staying organized is key to successful inventory control. If you arrange your inventory logically, it will be easiest to keep track of what you have and what you need to stock up on.   You can start by creating a storage system and using it to organize your stock. For example, you could store your alcohol reserves in one corner and your tinned foods in another. You could also group your fresh produce together. To have a clearer idea of where each of these is stocked, you could create labels and assign space for individual storage compartments.

3. Train employees

Employees are at the heart of every restaurant’s business operations. Without them, your company would go bust. However, untrained employees can be a liability. Which is why you need to make sure that each member of your staff understands his or her duties. This is especially true of those who are responsible for managing and organizing inventory. After all, lost or pilfered stock translates into loss of revenue. 

The best way to achieve this is to properly train your employees. You can start by setting clear expectations and by informing each employee of his or her responsibilities with regard to inventory management and usage. Better still, you could invest in a real-time inventory management app and train each employee to use it. 

4. Leverage data

There is no point in collecting data if you aren’t going to use it in the future. The data you collect regarding inventory, including ingredient usage, daily sales, and expenditure will help you make informed decisions going forward. You need to constantly review your data records to assess whether or not your current operations are working. If they aren’t efficient, take a closer look at the data you’ve gathered and determine what needs to be changed in order to maximize profits. 

Restaurant inventory management KPIs

There are several key performance indicators that you should analyze in order to determine the success of your inventory management strategy.. Here are a few: 

• Inventory turnover ratio
• Holding costs
• Lead time 
• Rate of return
• Backorder rate
• Revenue per unit
• Cost per unit
• Perfect order rate
• Etc.

How to pick the right inventory management system for your restaurant

The right inventory management system for your restaurant is one that is closely attuned to its style of functioning. In most cases, the best solution is to digitize your operations through an inventory management software. This will help you cut down on the time required for processes such as inventory checks. In addition, by digitizing your inventory management operations, you can get real-time updates. These will help ensure that you always stay on top of your inventory requirements.

You should also choose a system that enables you to communicate with vendors and suppliers. The best systems allow you to easily set up links with your existing partners. Therefore, when stock is running low, you will be notified and can instantly send off an order to your supplier. 

Finally, you should look for a system that allows you to establish communication channels between all your restaurant locations. This can help you reduce food waste and improve your profit margins. When inventory management systems are linked, you can observe your stock levels at each location, and redistribute your inventory based on needs. 

Optimize inventory management 

Inventory management is essential to the success of any restaurant. With such relentless competition in an overpopulated market, you need to do everything you can in order to make sure that your business is run effectively and that your profits are maximized. The best way to do this is to invest in software to optimize inventory management.

Rapid Bar has developed a comprehensive restaurant and bar inventory management app that allows you to easily keep track of your stock. Our app enables you to go completely paperless, thereby making record keeping simpler. Moreover, our system integrates with different POS systems, provides real-time updates on your inventory levels and helps you stay in close contact with suppliers, so that you can restock at the touch of a button.

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