Restaurant Inventory Management: All there is to know
- If you're running an eCommerce business, inventory management is important for several reasons.
- If you're looking for an easy way to take restaurant inventory, then check out these five steps.
- 1) Organize your kitchen cabinets.
- 3) Make sure you create a schedule and assemble a group of people who want to help you achieve
- 4) Create an inventory sheet.
- 5) Create your restaurant inventory usage/consumption spreadsheet.
- 6) Use your point-of-sale system to automate inventory management.
We're guessing you opened your restaurant because you wanted to serve delicious meals to great people.
Most likely, you opened your restaurant because you wanted an easy way to earn some extra income.
Managing your revenue begins with managing your inventories. Restaurant failures are usually due to mismanaged costs, and having an effective system for managing your inventories is one way to avoid these pitfalls.
With the rise in the national average for wages, your business costs need to be managed impeccably.
We understand that inventory control is tedious and boring. However, we can suggest the right tools and systems for taking away some of the burdens.
After reading this article, you'll learn how to manage your business using your staff, spreadsheets and technology in the best way possible. So when you're ready for an inventory, maybe it won't feel quite so scary.
You cannot manage your stock without good inventory management.
Improper inventory management may result in:
- Food waste
- Customer dissatisfaction
- Budget mismanagement
Between 4% and 10% percent of the foods served by restaurants and cafeterias are thrown away before they reach consumers' plates.
If you don't manage your inventory properly, you're likely to get bad service from your staff. Because nothing is worse than an unsatisfied food cravings due to an 86'd order. And if that single frustration becomes a second frustration, then a third … well, that unhappy guest might just leave your establishment altogether.
One study reports that companies lose billions of dollars each year due to poor employee performance.
According to statistics, 75%-85%, or even more than that, of all restaurant theft is done by staff members. It accounts for up to $6m in losses for US Restaurateurs and 4 percent of restaurant sales.
Liquors such as whiskey, vodka, rum, gin, etc., can be expensive. They're also prone to loss due to spills and waste.
It's time to start thinking about precise inventory management because your business' success depends on it.
Now, the question becomes: how do we manage our stock for restaurants?
These five simple tips will help you manage your inventory effectively.
If your stock room is a mess, you're setting yourself at risk for failing. A messy stock room leads to:
- Staff frustration
- Double counting
- Ordering extra items where there was no need for them – so, unnecessary expenses
Before taking inventory, tidy up your stockroom and get rid of any clutter. Here are some space organization tips to keep in mind:
- If your stockroom has too many items, buy more shelves so that you don't have to stack them on the floor.
- Sort foods into categories, so dairy with dairy products and meats with meats.
- Make sure that your dishwasher has clear labeling so that your staff doesn’t confuse one ingredient for another.
- If you label shelves, include arrows indicating which items are located on top versus bottom shelves.
- Make sure you assign an inventory number to each item. You can use this number to identify your items in a database or a piece of inventory management system, so that it's easy to search for them or move your inventory records.
We're sure these tips will help you out when it comes to counting your inventory. But don't worry if they seem too complicated for now. You'll get the hang of them soon enough.
You need to decide how frequently you want to do an inventory for each item. Some items may require daily inventories, while others might be okay doing them weekly.
Before placing any new order, check your inventory to avoid wasting money on things you already own.
Once you've created your schedule, choose two people who will always keep track of stock levels. These people should be the same ones responsible for taking incoming customer order requests. So that they're already familiarized with your ordering procedures.
Make sure to communicate to your team members that good inventory control is important because it helps improve your business' cash flow and financial situation.
As soon as you've put together your team, set up your first shipment for the same day at exactly the same time. Consistent scheduling helps ensure consistency in your data, which allows you to calculate accurate costs of goods sales (COGS) and manage your budget effectively.
Get Our Inventory Restaurant Template
Make your counting easier with our free restaurant menu template.
If you're going to be using a combination of software and a spread sheet to track your inventory, then here's how you can get started with a simple Excel document.
Your master stock sheet is essentially what your employees will use when taking physical stock. They'll enter the items they're selling into their POS system, which means you'll be able to track sales and analyze costs.
To create a template for your stock spreadsheet, follow these steps:
- Inventory ID
- Period (ex. week: November 19–26).
- What kind of food would you like?
- Food item, to be classified under its respective food category
- Measurement unit (ex. pound, ounce)
- One unit of measure costs $1.00 per unit.
- Number in stock: the current quantity of each item available at your restaurant
- Inventory Value = Unit Price x Quantity in Stock
- Total inventory value: all inventory value line items, added together
Using an item ID will help you avoid reporting weak items because of inconsistencies in their names. For example, if you purchase two kinds of beef, they might be called "beef" and "steak", but you could use separate IDs for them.
Be sure to specify which variation you're ordering so that your inventory team knows exactly what they need to stock. You don't want them to accidentally put an extra bottle of one flavor into another section of your store.
Unit of measure
Each product has its own measurement system, so don't expect them to be measured the same way. If you're ordering hamburger meat by the pound, include "pound" under your measurement.
When buying something, always be sure to buy it by the unit of measurement in which it comes packaged. For example, you aren't buying napkin boxes by the number of napkin boxes, but instead by boxes of napkin boxes.
If you're establishing your own price point, you need to determine the current prices of your products. You'll want to keep track of changes in these prices so you can adjust them in your master inventory spreadsheet.
Quantity in stock
You need to take into account the quantity that has been sold when calculating your inventory level. For example, if you had an order for 100 boxes of napkins at $5 each, and you ended up selling 98 boxes, then you would have 2 left (98 - 50).
To calculate your cost per item, multiply your price per piece times the number of pieces in stock. So if you sell one dozen cookies at $1.50 apiece, then your cost per cookie would be $15.00. If you had 10 bags of chips priced at $2.25 apiece, then your cost of chips would be $22.50.
When you take stock of your restaurant's current menu items and ingredients, you'll be able to better understand which items need to be ordered from suppliers and which ones you already have enough of. You can then begin using technology to help you manage your menus and recipes so you know exactly what you need to order each week and how much it will cost.
You can use your stock usage spreadsheet to figure out how much food you're throwing away, how often you use each ingredient, and how much you spend on ingredients overall.
If you keep an eye on your daily sales figures, you'll know exactly when you need to order new supplies and when you've run out of something. You'll also be able to predict future demand for certain items so you can plan accordingly.
Here's what you need to track in your consumption spreadsheet:
- Cost per ingredient unit
- Amount used
- Total cost
- Starting stock
- Ending stock
- Daily consumption rate
- Waste quantity
- Waste cost
- Total adjustment quantity
When you start keeping track of your daily calorie intake, you'll be able calculate the exact number of servings needed for every single meal.
Your reordering points tell you when you need to place an order for more of a particular product. They're not pulled out of thin air; instead, they're calculated using a formula.
Demand for lead times plus safety stocks equals reorder levels.
You can calculate your lead time demand by using this formula:
Lead times multiplied by average daily sales amounts equals lead times demanded.
You need to know how long it usually take for your products to arrive at your store. If you're using a 3rd party fulfillment service, they may be able to give you this info. Otherwise, you can use Google Analytics to figure out when your visitors come from. Then, multiply your daily consumption rate by your total costs.
You can easily calculate your average daily sales using your point-of-sale system.
Use this formula to figure out how much safety stock you need for your business.
(Maximum daily use x maximum duration in days) - (average daily use x average duration in days)
And that's how you calculate your reorder point.
Once you've reached your reordering point, your reordering quantities are the amounts of products you buy to feel confident with your current stock positions. You should plug these numbers into your master spreadsheet so your warehouse team knows how much to order when items reach their reorders levels.
For some restaurant owners, all of this info is empowering.
It's not for everyone.
Inventory management software through your point-of-sale system should be able to handle most of these nitty-grit details for you.
Do you need to stop using spreadsheets altogether?
It's not necessary for your spreadsheets to be perfect for them to help you manage inventory.
Your spreadsheet is just another tool for manipulating your data.
Business owners who want to be successful understand that they need data to run their business efficiently. So if you're thinking of buying a point of sale system for your restaurant, then consider one that tracks inventory.
Keeping an accurate count of your restaurant's stock is one of the most important things you need to know if you want your business to succeed.
Be as meticulous as you need to be about your inventory; after all, it could determine whether you stay afloat or go under.
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