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. FoodPrint reports that up to 10% of the food inventory a restaurant purchases is wasted, meaning that 10% of their food cost will not generate revenue.
Having tight control over the food inventory helps restaurants maximize the ROI of the ingredients and produce they purchase. In an industry where costs are high and profit margins are notoriously low, every little bit counts.
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
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
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.
Organize your food storage
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.