A key part of restaurant management is inventory control. Proper food inventory management keeps service running smoothly, but a failure to do so can impact financials. One small stock management error can lead to food shortages, unnecessary food waste and inaccurate forecasting. All of which impacts food and beverage cost control for your food and beverage business. FoodPrint reports that up to 10 percent of the food inventory a restaurant purchases is wasted, meaning that 10 percent of their food cost will not generate revenue.
You know the cost of everything that comes out of your kitchen. But, do you know where you’re losing money? Detailed Usage, Loss, and Sales Performance reports tell you what’s sitting on the shelves and where you’re losing money.
The biggest risk for the food & beverage industry is rising wages and food costs. If you’re not constantly working to improve profitability and grow your revenue, the costs will take over. It’s imperative that you’re consistently and actively reducing costs to maintain your current level of success. How can you do this? Improving efficiencies
In this article, you’ll learn the basics of restaurant food inventory management: what it is, what terms you’re likely to encounter, tips for keeping track of inventory and the tools you can use to do it.
- What is food inventory management?
- Important restaurant inventory terminology
- Tips for taking restaurant food inventory
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What is food inventory management?
Food inventory management is a way of tracking what and how much inventory your restaurant is carrying at all times. Equipped with that information, restaurants can improve their inventory purchasing (i.e.; not buying too much or too little), minimize inventory lost due to theft, spoilage or waste and maximize profitability.
Restaurateurs with a firm grasp of inventory management know the following at any given time:
- What inventory you’ve purchased and what amount
- The quantity of inventory used each day
- The amount of leftover inventory at the end of each day
The benefits of inventory management
Using a stock control system helps enhance business practices within quick-service restaurants, catering companies and any other type of food and beverage business. As mentioned previously, an inventory tracking system helps food and beverage businesses effectively manage waste, increase productivity and control cash flow.
It’s common practice in many industries to keep a close eye on manufacturing costs as well as the overall market value of products. Yet some food and beverage businesses don’t subject their menu to the same level of scrutiny. Maintaining an efficient stock control system can help you offset overhead costs, adjust menu pricing and devise a plan for portion control.
When your business implements a proper control system, you’ll find that you’re in a better position to make business decisions. For example, you may discover that certain menu items have lower profit margins than expected. In this example, when items go unsold, you burn even more money, negatively impacting cash flow. Armed with this information, you can make changes that recover lost profits and guard against similar pitfalls in the future.
Food inventory for loss prevention
Keeping track of usage, dollar value and overall inventory levels is essential for restaurants to understand where the money they invest in food inventory goes. Equipped with that information, restaurants can improve their Cost of Goods Sold (CoGS) and maximize profits on each sale.
Not only that, but understanding how the inventory you buy relates to sales helps pinpoint inventory that’s lost for any of the following reasons:
- Employee mistakes
- Staff meals
- Comping disgruntled customers
Preventing food waste
Adopting a food inventory management system can help you maintain your profit margins. Along with labor costs, replenishing your inventory is the most significant expense your business faces. By implementing a stock control system, you can reduce how much food your business wastes. Food waste is a massive problem throughout the United States with an estimated 30-40 percent of the supply ending up in the trash. With the right technology, businesses both big and small can help minimize their contribution to waste.
The ideal first step is to work out how much food you’re wasting unnecessarily. There are situations where food waste is unavoidable, for example, if the customer doesn’t like the dish and sends it back to the kitchen. However, things such as cooking errors, preparation waste and spillages are avoidable. With the right training and equipment, staff can become more mindful of food waste and how to minimize it.
If you’re concerned about how much food is going to waste, conduct an audit to determine where that waste is coming from. For the best results, do this when your restaurant is busy, but your kitchen is not operating at maximum output. While you want the audit to produce effective results, you don’t want to degrade the quality of your service by causing unnecessary delays.
Here are five of the most-common sources of food waste and practical steps for preventing it at your restaurant.
Over-ordering product happens for a number of different reasons. The most common reason? An inefficient or improperly managed inventory system, which can easily lead to chefs ordering more product than actually necessary. Performing and tracking inventory regularly will keep food waste down and save you money on ordering food that you just don’t actually need.
Even if you aren’t over-ordering product, you run the risk of spoilage. If you don’t carefully inspect the food coming in, you might accept product that is already turning bad. Make sure to clearly label all incoming product with best-by dates. Labeling enables you to install the first-in, first-out (FIFO) storage method to reduce the amount of spoiled food you keep on hand.
Another common source of food waste is overestimating sales for a dish. Chefs often will prep and cook too much food to avoid 86’s. But, this leads directly to higher food waste. Tracking sales gives you a chance to periodically review your menu, create more efficient batching levels, and even eliminate dishes that aren’t moving fast enough. Try planning your staff meal around your extra ingredients to save the sunk costs of prep work.
A server forgets to add the allergy note for a dish including nuts. A line cook misread a ticket and prepared the wrong dish. Misfires can kill your bottom line. Proper training and active management can prevent these types of mishaps from happening during a shift.
Poor portion control
Do you throw away bags of untouched food every night? This could be a sign that your portions are off. Effective portion control means you can stretch your food budget further without sacrificing quality. Standardizing your measurements for each dish can prevent too much food reaching the trash when a guest doesn’t feel like packing leftovers.
It’s impossible to control food waste completely. That doesn’t mean you can’t drastically reduce the amount of waste you produce by taking a few simple precautions. This keeps money in your pocket, food out of the trash, and makes your kitchen better, too.
Important restaurant inventory terminology
There are a few terms that anyone with aspirations of mastering restaurant food inventory needs to be familiar with:
- Sitting inventory
Sitting inventory refers to the amount of inventory (or the dollar value of inventory) a restaurant is carrying in-house. When tracking sitting inventory, be sure to choose one unit of measure (dollar value or physical amount) and stick to it.
Depletion refers to the amount of inventory used over a specific period of time (either expressed in dollar value or physical amount). You can calculate depletion using your POS system’s sales reporting data either on a daily, weekly or monthly basis.
Usage is the amount of sitting inventory (expressed in dollar value) divided by average depletion over a period of time.
For example, if you have 70 pounds of ground beef and you plan on using 10 pounds per day, you have seven days of usage.
Variance is the difference between your product’s cost and the usage amount’s cost.
Let’s say you used $500 worth of beer over the course of a week, but your POS system is reporting that you only sold for $450 worth. Your variance would be -$50, meaning that $50 worth of beer is unaccounted for.
Tips for taking restaurant food inventory
Now that you’re familiar with some fundamental restaurant inventory management concepts and terms, let’s move onto tips for taking accurately and consistently taking restaurant food inventory.
When should you count your stock items?
The most critical aspect of managing stock items in a food and beverage business is consistency. Running a food and beverage business involves handling a variety of perishable goods. Because of this, you’ll want to take stock daily to ensure that you’re minimizing food waste and aren’t selling expired items.
One essential stocktaking rule is ensuring you do it at the same time every day. It’s best practice to take inventory after your doors close or before you open. Whatever you decide, make sure you’re consistent to avoid fluctuations in reporting. While this is not always possible, adhering to it as strictly as possible can help you get the most accurate numbers related to your stock levels.
You should also avoid taking inventory while deliveries are being made since this can lead to double-counting items. If possible, make sure the staff members you assign to manage your stock are consistent as well. This will not only speed up the process but it makes it easier to spot anomalies and reduce errors.
Organize your food storage
The secret to faster inventory counts? It’s pretty simple: keep your product storage areas organized. But, keeping things organized is easier said than done, especially for large, diverse food and beverage programs.
If your stockroom is disorganized, stock taking is an uphill battle. The likelihood of double miscounting and either over or under-ordering, as a result, is higher than if the stockroom were organized.
Here are some tips for keeping your stockroom, pantry and walk-in freezer organized year-round:
- Group items by food category
- Label your shelves
Assign a stock-taking team
When it comes to counting inventory, consistency is key. Choose a few people on your team to always be in charge of stock-taking. Those same people should also be in charge of receiving orders and updating inventory records.
Once you’ve established a team, you should also create an inventory counting schedule. Assure that your team counts inventory at the same time, on the same days. We recommend counting inventory at the beginning and end of each day.
Create an inventory consumption sheet
The concept behind an inventory consumption spreadsheet is to track how much of an item you use per day, how much you’re wasting and how much you’re spending on inventory.
By tracking inventory consumption on a daily basis, you can better understand how inventory comes in and goes out of your restaurant and can reorder inventory with greater precision.
While each restaurant’s inventory consumption sheet will vary depending on what it sells, these are a few things to consider including:
- Ingredient name
- Unit of measure
- Amount used
- Cost per ingredient unit
- Total cost
- Beginning inventory
- Ending inventory
- Daily consumption rate
- Waste quantity
- Waste cost
Teach your staff how to take inventory
This is especially true for restaurants with multiple locations, but inventory management can’t be just one person’s responsibility. Managers, shift leaders and other staff need to all know how to count inventory so that, in the event that someone on the stock-taking team cannot, stock is still counted.
Front of house and back of house staff can also contribute to inventory management. For instance, if something is spilled or is spoiled, they should notify someone immediately so that it’s accounted for in the inventory consumption sheet.
Track your sales every day
By monitoring sales and inventory levels every day, restaurants are in a better position to respond to changes in real-time. For instance, if you sold much more of a menu item than expected and are running low on ingredients, you can order them to support demand without having to remove it from your menu in the interim.
Keep extra supplies
For ingredients that your restaurant uses fast, it may be a good idea to always keep some “just in case” inventory.
For instance, if you’re a local burger shop, it may be wise to keep extra inventory of fries to fulfill an unexpected influx of customers. Just make sure that you’re keeping track of your extra inventory’s freshness and swapping it out as necessary. To avoid wasting it, consider using unused extra inventory for staff meals.
Use the right restaurant tech
It goes without saying, but tracking inventory and sales can be prohibitively time-consuming without the right tools. With Lightspeed, restaurateurs can easily dig into daily, weekly, monthly and yearly sales reports and manage their inventory. For even more in-depth inventory management capabilities, you can install nifty integrations like the following:
Forecasting demand can sometimes feel like magical guesswork, but getting it right will lead to less wasted food and less wasted cash. That’s why using technology to get it right is a must.
While there are benefits to each of the above platforms and we recommend researching which is the best fit for your needs, Tenzo uses AI and your past sales patterns to accurately forecast your sales, helping restaurateurs accurately predict sales, predict what inventory they need without over-stocking. This means you can use dynamic par levels to order in your stock, keeping you on top of your inventory in the most economical and least wasteful way.
Take initiative with your restaurant’s inventory management
Inventory management is probably one of the least exciting parts of managing a restaurant, yet it’s likely one of the most important if you want your business to be financially healthy.
It’s time to get serious about your inventory management. Track it diligently and assure that every penny you spend can be attributed to sales. Talk to one of our experts to find out how Lightspeed can help!