Restaurant Inventory Management : The 8 Tips You Need To Know About
- April 3, 2023
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Jean-Philippe Serhal
Jean-Philippe Serhal
Restaurant inventory management is the practice of tracking and regulating a restaurant’s food and beverage inventories. It entails keeping track of the restaurant’s inventory of goods, suppliers, and equipment and ensuring that inventory levels are sufficient to fulfill demand while minimizing waste and loss.
However, keeping a food inventory up to date can be challenging due to lack of time, ensuring accuracy, and requiring organization and attention to detail. Developing good habits and using tools can help make the task manageable, save time, and reduce waste in the long run, which is why, in this article, we’ll discuss what restaurant inventory management is, why it’s useful, and some tips and best practices to help you keep your food and beverage inventory accurate, efficient, and reliable.
1. What Is Restaurant Inventory Management ?
Restaurant inventory management is the process of keeping track of the food and supplies that a restaurant business has on hand. It involves making sure that you have enough ingredients to make your dishes, but not so much that you end up wasting food and money. To do this, you need to monitor inventory levels, order products when you need them, and rotate items to ensure freshness. By managing your inventory effectively, you can reduce waste, lower costs, and provide better service to your customers. It’s an essential part of running a successful food business!
- Some of the metrics an inventory helps you track include :
- Actual stock : What you currently have on hand.
- Purchasing habits and trends : what do you buy, from who, and at what cost.
- Stock turnover : how much stock goes in and out.
- Variance : the difference between the actual and theoretical stock.
- Menu performance : how your items perform, and how profitable they are.
Being aware of these metrics helps you understand the gap between your theoretical and actual stock, address it, and ultimately reduce your costs.
2. Restaurant Inventory Keywords & KPIs You Should Know
COGS (cost of goods sold)
The cost of the food and supplies used to make the dishes sold in the restaurant.
Let’s say a restaurant sells pizzas.
At the start of the period, the restaurant has 20,000 AED worth of pizza ingredients in its inventory. During the period, the restaurant purchases an additional 16,000 AED worth of pizza ingredients. At the end of the period, the restaurant has 22,000 AED worth of pizza ingredients still in stock.
To calculate the COGS for the pizzas sold during the period, we need to subtract the ending inventory value from the sum of the beginning inventory and purchases, as follows:
Beginning inventory: 20,000 AED
Purchases: 16,000 AED
Ending inventory: 22,000 AED
Total COGS = Beginning inventory + Purchases – Ending inventory Total COGS
= 20,000 AED + 16,000 AED – 22,000 AED
Total COGS = 14,000 AED
So, for this period, the restaurant’s COGS for its pizzas was 14,000 AED.
This calculation helps the restaurant to determine the true cost of producing its products and can be used to calculate gross profit margins. By comparing the COGS to the price of the pizzas sold, the restaurant can determine whether it is pricing its pizzas appropriately to cover its costs and make a profit.
Count sheet
FIFO (first-in, first-out)
A method of inventory management in which the oldest items are used first, ensuring that inventory is rotated and that items do not expire before they are used.
Food Cost Percentage
Want to learn more about How To Calculate Food Cost Percentages ? Read our in-depth guide covering all your need to know to operate at an optimal level.
Inventory Count
Inventory Turnover
Inventory turnover is a financial ratio that measures how many times a company sells and replaces its inventory in a given period. It is calculated by dividing the cost of goods sold (COGS) by the average inventory value during that same period.
Here’s how to calculate inventory turnover :
To calculate the average inventory, add the beginning inventory and ending inventory for the period and divide by 2.
Here is an example:
Suppose a company has a COGS of 500,000 AED for the year, and its beginning inventory is 50,000 AED and ending inventory is 70,000 AED. The average inventory value for the year would be (50,000 + 70,000) / 2 = 60,000 AED
Inventory Turnover = 500,000 AED / 60,000 AED Inventory Turnover = 8.33
Therefore, the inventory turnover for the year is 8.33. This means that the company sold and replaced its inventory 8.33 times during the year.
LIFO (Last In, First Out)
A method of inventory management where the most recent items received are used or sold first.
Markup
Non-perishable
Par level
The minimum and maximum amount of inventory for each item that should be maintained to ensure that there is always enough stock on hand without overstocking.
Purchase order
A document used to request and authorize the purchase of new inventory items.
Reorder point
The minimum amount of an item that a restaurant needs to have on hand before placing a new order.
Safety stock
Safety stock is the extra inventory that is kept on hand to ensure that there is always enough inventory to meet demand, even during unexpected spikes.
Shrinkage
Losses of inventory due to theft, spoilage, or other reasons.
Spoilage
Food or supplies that have gone bad or cannot be used due to damage or expiration.
Stockout
A stockout occurs when inventory levels for a particular item are depleted, and there is no stock on hand to meet demand.
Variance
Inventory variance is the difference between actual and expected inventory levels. It can affect profitability, food quality, and customer satisfaction. By analyzing variances, restaurants can identify the root causes of discrepancies and take actions to reduce them.
Vendor
A supplier that provides the restaurant with inventory items.
3. The Benefits Of A Well-Managed Restaurant Inventory
Here’s a more in depth look on how an accurate inventory will help you decrease food cost, loss, and wastage, increase profits, and keep your customers satisfied :
Reduced food waste: Food wastage occurs for several reasons : staff meals, a dropped plate, and food that has gone passed its expiry date… are amongst the most common examples. It is often difficult for a member of staff to accurately register this event in their existing system, usually because there is friction in the user experience, or sometimes simply because they were not taught to do so. A modern inventory system would enable you to register events effortlessly, would help you keep track of your existing stock, and help you track and address wastage. Having an inventory on hand also mean keeping track of what needs to be used up soon and prioritize those items before they go bad. You can plan your meals based on the ingredients you already have, which can help you avoid buying more food than you need.
Cost control: keeping track of your inventory helps you understand your purchasing habits, the prices you pay for your items, and the price evolution of those items over time. This enables you to not only extract insights on your procurement operations, but also helps you negotiate better deals with your suppliers. Understanding your Cost of Goods Sold (CoGS) helps you monitor the profitability of the dishes you’re selling. It is not uncommon for items that were once profitable to suddenly become unprofitable due to turbulence in the supply chain. Keep in mind that food costs generally account for approximately 30% of the total costs of a restaurant. This increases when food is spoiled.
All in all, monitoring your costs helps you understand how they vary over time, take back control over them, and reduce them.
Increased efficiency: A well-oiled food inventory can streamline restaurant operations and reduce the time and resources required to manage inventory, freeing up staff to focus on other important tasks. Automation is one of the key benefits in helping you save time and money. A modern inventory system that was built for a friction-free experience should act as an invisible team player, thus helping your team on what matters most : keeping operations efficient, your kitchen well-run, and your customers satisfied.
Improved planning and forecasting: With a clear understanding of inventory usage and trends, restaurants can better plan and forecast their inventory needs, which helps to avoid shortages and delays. Indeed, shortages (or missing ingredients which then halt the sale of a dish) are terrible for business. Similarly, having too much of something means they’ll end up in the trash, and that’s money lost.
So, there you have it! By having a well-managed food inventory, restaurants can reduce waste, control costs, increase efficiency, improve planning, and enhance customer satisfaction.
4. 8 Best Practices To Follow To Run An Efficient Restaurant Inventory
1. Set par levels
Par levels are the minimum and maximum inventory levels for each item that should be maintained. By setting these levels, restaurants can ensure that they always have enough stock on hand without overstocking. This helps to prevent stockouts and overordering, which can both be costly.
2. Use technology
There are many inventory management software and tools available that can automate inventory tracking and reduce errors. By using technology, restaurants can save time and reduce the risk of human error, which can help to improve accuracy and reduce waste.
3. Conduct regular inventory counts
Regular inventory counts are essential for ensuring that restaurants are aware of their current inventory levels and can adjust accordingly. By performing regular counts, restaurants can identify discrepancies and address issues promptly, helping to prevent stockouts and overordering.
4. Rotate inventory
The FIFO method involves rotating inventory so that older items are used before newer ones. This helps to minimize waste by ensuring that items are used before they expire. This method is particularly important for perishable items such as produce, dairy, and meats.
5. Train staff
Inventory management is a team effort, and all staff members should be trained on best practices. By educating staff on inventory management practices, restaurants can ensure that everyone is on the same page and that accurate inventory tracking is a priority.
6. Monitor waste
Tracking and monitoring food waste is an essential component of inventory management. By identifying areas of waste, restaurants can adjust their inventory management processes to minimize waste and reduce costs.
7. Analyze inventory data
By analyzing inventory data, restaurants can identify trends and make informed decisions about ordering and usage. This helps to prevent overordering and underordering, ensuring that restaurants always have enough stock on hand.
8. Work with suppliers
Strong relationships with suppliers are essential for ensuring timely and accurate deliveries. By negotiating favorable pricing and terms with suppliers, restaurants can reduce costs and improve their inventory management processes.
5. About Supy
Supy is the all-in-one back of house management platform designed to help owners eliminate guesswork from their restaurant operations, reduce their costs, and boost profitability. Built to be accurate and easy to use, Supy provides a suite of intuitive products that help you maintain a reliable, data-driven inventory in order to make data-driven, profit-making decisions at all times.
Whether you’re starting your own business or are looking for a solution that will integrate with your existing system, Supy can help.
This is Supy.
The 6-in-1 restaurant inventory software designed to eliminate guesswork from restaurant operations using data and automation.
