Inventory management is one of the touchstones of managing your restaurant, and represents a vital factor of your long-term success. Keeping track of the ingredients that enter and leave your restaurant helps you manage and optimize food costs. Simply put, you can’t run a successful restaurant without restaurant inventory management.
The tips and ideas below will show you the nuts and bolts of how to manage your restaurant’s inventory in a pain-free way.
What is restaurant inventory management?
Inventory management is the process of monitoring inventory levels available on hand to make sure your business can meet customer demand on a day-to-day basis. Inventory management consists of forecasting anticipated demand, accounting for seasonal fluctuations, performing regular inventory counts, and reordering supply when it is needed.
Restaurant inventory management can also help you optimize cost of goods sold (COGS) through a process known as menu engineering. This process can help determine your most profitable menu items at the intersection of high demand and low ingredient costs. At its core, restaurant inventory management can help you streamline and optimize your restaurant operations and make the most of your sitting inventory.
How much inventory do restaurants need?
Due to the perishable nature of their inventory, restaurants must carefully balance inventory supply and demand. Too much inventory can result in food waste and lost revenue, while too little inventory will result in the dreaded “86” of popular menu items (and customer dissatisfaction).
How much inventory you need depends on the specific type of food and beverage you sell in your restaurant. According to RestaurantOwner.com, the following are ideal inventory levels to keep on hand:
- Food: One week’s supply
- Draft beer: One to two weeks’ supply
- Bottled beer, liquor, and wine: One month’s supply
Put another way, perishable food items should be ordered approximately four to six times per month, kegs of draft beer should be ordered one to two times per month, and bottled alcohol should be ordered about once per month, depending on sales.
5 restaurant inventory management tips
1. Train someone to do inventory.
Managing restaurant inventory should be a one-person job. You want someone to be all ears on what’s happening with your inventory so they can catch mistakes before they happen and optimize inventory tracking based on reports and analytics.
Have a designated staff member for this task, and train them to understand how vital inventory tracking and savings are. By being focused on the task at hand and gaining experience with your particular inventory needs, they will develop creative solutions to complex problems.
Even with an inventory tool at your disposal, a team member should still keep a close eye on stock and reports.
2. Use the FIFO method.
The First In, First Out method is a popular way of keeping inventory while avoiding food spoilage. The principle is simple: The first ingredients to come in should be the first to go out.
Due to convenience and saving time, some employees might place newer ingredients at the front. Explain why that is counterproductive and train them to make room at the back for new stock. This will also help you keep track of inventory, as you will quickly notice ingredients that have expired and that need to be thrown out.
3. Monitor and minimize food waste.
Minimizing food waste isn’t just a matter of saving costs; it’s also a duty every restaurant owner has toward the environment. Become more environmentally friendly by creating a restaurant inventory list of ingredients and quantities, as well as a food waste list that accounts for ingredients you don’t use.
The difference will show you how to optimize your stock to avoid food waste. Another ingenious way of minimizing waste is coming up with new menu items that contain ingredients you have in excess. You can introduce them as limited-time items and brainstorm restaurant promotions for them so that you boost your sales while not wasting any food.
4. Analyze reports and adjust your strategy.
Your restaurant inventory software is wasted if you don’t also keep detailed reports and analyze them to see what you’re doing right and what you can improve. The first thing you should track is your daily sales because they are strongly connected to your inventory.
Keeping a close eye on your sales every day will help you act faster when anything changes, which, in turn, will help you adjust your inventory strategy.
Another thing to monitor is ingredients that you underutilize or overutilize so that you know what to order next. This insight can help you predict changes in your inventory long term.
Don’t forget to also track your theoretical food cost versus your actual food cost. If they differ widely, it’s clear that there’s an issue that you need to address.
5. Use a restaurant inventory management system.
The easiest way to keep track of restaurant inventory categories, and manage your restaurant’s stock without spending much time on the task, is to use quality restaurant inventory management software.
For example, the QuickBooks inventory management system is a tool that lets you to track your inventory in real time, with quantities being updated automatically. The tool also alerts you when it’s time to reorder ingredients, so you don’t have to worry about that. You get insights into best-selling items, total sales, and taxes.
Among the highlights of this tool, you will find:
- Integrations with point of sale (POS) and accounting software
- Contractor management
- Income and expenses tracking
- Receipt organization
- Profitability tracking
- Purchase order generation
Performing restaurant inventory check: A step-by-step guide
While your restaurant POS system can help you keep track of inventory, manual checks should be performed on at least a weekly basis. Here is a sample guide to performing your weekly check. However, bear in mind that this may not fit your restaurant’s unique needs.
Step 1: Create an inventory sheet template
On a new spreadsheet, create five columns labeled for items (for example, calamari), unit of measure (for example, pounds), amount, unit price, and total cost of inventory on hand.
Step 2: Train an employee to perform inventory
Identify an employee at each of your locations (likely the shift manager) to perform a weekly inventory audit. Physically walk them through the process.
Step 3: Select a day to perform an inventory audit
Identify one or two days per week, such as Sunday and Wednesday, to conduct inventory checks.
Step 4: Review inventory levels with manager
After inventory has been checked, review this information with the shift manager. Select which items need to be reordered to meet demand. This is also a great time to discuss sales figures and tweaks that can be made to optimize menu profitability.
Step 5: Check manual inventory against POS system
To help reduce employee theft or simple errors, make sure to check the manual inventory reports against expected inventory levels based on sales figures in your POS system. Rectify any differences in your inventory management system.
The benefits of a restaurant inventory management software
- Cuts costs. Perhaps the most relevant benefit of inventory management for restaurants is its ability to lower food costs. Until you try a restaurant inventory management system, you won’t know the amount of money you waste on lost inventory that’s caused by human errors. Automating inventory is the future of restaurant management.
- Reduces time waste. When you’re a restaurant owner or manager, the last thing you want is to waste time taking inventory by hand. A restaurant inventory tool will place this information right at your fingertips, so all you need to do is check it.
- Provides real-time insight. No more running to the back to write down inventory that you’ve used after a customer ordered a meal. A restaurant inventory management system will do that for you, without you having to lift a finger. If you have multiple restaurant locations, it can also track this number across all sites.
- Keeps track of recipe costs. Keeping track of your recipes and restaurant menu items can help you calculate food costs and increase your profits. With an overview of all recipe ingredients, you can adjust your recipes and menu items to maximize efficiency, cut costs, eliminate items that don’t sell, and replace them with more profitable ones.
- Provides purchase orders. What happens when your stock is low on a specific ingredient? Repurchasing it manually is a waste of time. If you use an automated tool, the purchase orders will be generated automatically. Pending your approval, they can just be sent to vendors.
- Allows for menu engineering. As mentioned earlier, inventory management can help identify your most profitable menu items. Each menu item can be placed into a grid with COGS along the x-axis and customer demand along the y-axis. Ideally, most of your menu items should be found in the upper left quarter of the chart (high demand, low cost).
- Reduce employee theft. Carefully tracking inventory and sales figures can help identify one of the most common types of loss in the restaurant industry: employee theft. This theft can come in the form of voiding checks in the POS system, taking food, and many other ways that can be identified with discrepancies in your inventory management system.
Taking your restaurant to the next level
Restaurant inventory management is not something you can choose to do as a restaurant owner, but something you have to do to succeed. Luckily, technology has made restaurant owners’ lives easier, especially during the pandemic. Tools such as online ordering systems and restaurant inventory management systems are helping restaurants maximize profits more easily.
Without spending a fortune, you can use an inventory tool to take the weight off your shoulders and focus on more important things, such as making customers happy. Give restaurant inventory management a go by applying the tips and tricks above, and you’ll improve your restaurant operations in no time.
