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Inventory Management: Don't Leave Bread on the Table

Restaurant & Hospitality Insights

By Bob Gilbert .

Food inventory is the core component of your restaurant business, with inventory tracking used for food inventory loss prevention and to measure profitability. A little oversight can result in a drastic change for your business – you do not know what you could be earning if you are not sure what you are losing.

When tracking your inventory, you need to know exactly what supplies come into your restaurant, what goes out of your kitchen, and what is leftover in the back of the house. Without knowing these exact numbers, you will not be able to understand where your supply (and your money) is going.

You should be able to attribute every ounce of inventory to a price point and know what items have been depleted and why. Was something sold, spilled, or spoiled? Was something used to remedy a customer complaint or for staff meals? Not knowing what supplies have been wasted means you do not know exactly how much inventory has been unused, which means you cannot reliably calculate your true earnings for a shift, day, week, month, or year.

What should you know to track and manage your inventory?
  • Know the basics: You only need to have enough inventory to cover your sales, plus a little bit extra in case of an emergency. For most restaurants, this usually means about 5-7 days’ worth of inventory if you are receiving 1-2 deliveries per week. You should be selling your entire food inventory between 4 and 8 times each month. With the more recent supply chain issues, many operators have had to buy certain items in bulk to avoid inventory shortages. This strategy should be specific to non-perishable goods or items with a longer shelf life.
  • Know your sitting inventory: Once your inventory is counted by unit (item, crate, pounds, can, etc.), a price needs to be assigned to the units. Since prices can fluctuate, restaurants often use a weighted average method where the various per unit price inputs generate an average cost of each good to get to your total inventory balance at any given time.
  • Know your depletion: You might base your depletion on daily, weekly, or monthly sales and calculate this using the sales reporting data from your POS.
  • Know what you are using: Your usage is calculated by taking the dollars’ worth of inventory and dividing it by the average depletion in a given period. Put simply, if you have four gallons of olive oil and you plan to use a gallon per week, you have four weeks of usage.
    • Automated Inventory Management: The most accurate way to track your restaurant’s actual usage, and see how inventory moves through the restaurant, is through an automated inventory management system that is part of your POS system. Unfortunately, it is not available on all POS platforms. When considering the purchase of a POS, make sure inventory tracking is a feature. We often find that operators have access to technology like this but do not use it or do not use it properly. The initial set-up requires a recipe builder which can be time consuming and ever evolving.
    • Par Inventory Sheets: A par inventory sheet is a tool used to manage inventory by food type and/or food supplier, allowing you to set levels of how much of a certain item – the par level – they want in house. When it comes time for the next inventory order, managers use their restaurant's par inventory sheet to guide them on what and how much they should be ordering. This is based on their unused inventory, how fast previous inventory moved through the restaurant, and any special events they think may call for extra inventory. On the downside, only usage is considered – not cost and variance. This does not let you monitor things like theft or over-portioning.
    • Third party management: If inventory management and variance analysis is something that you do not think you can properly conduct internally, there are third party providers that can come in on a weekly basis to perform counts, conduct analysis, and document reports for you.
  • Know your sales: It is a best practice is to track restaurant sales every day. Doing this instead of weekly, bi-weekly, or monthly, allows you to track and respond to minute-by-minute changes in your restaurant, so you can make timely adjustments to your inventory planning and deliveries.
  • Make sure everyone knows: Inventory management is a team effort. Your managers should be sharing inventory reports whenever they clock out and alerting the team of any significant inventory issues. This responsibility also falls on your back of house staff who should be making notes about spillage, errors, and rotten food during their shifts

In the restaurant business, consistency is key. Proactive inventory management lets you stay on top of your inventory and enables you to replenish a product before you run out of it. Getting into the habit of taking daily inventory will make your inventory process easier in the long run – and make you and your business far more profitable.

Contact one of our Restaurant & Hospitality Practice professionals to see what other ways you can increase your profits.

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