Blog Post / February 22, 2021 / Best Practices

6 Must-Know Best Practices for Restaurant Inventory Management

by Restaurant365

In the same way you have platforms like SevenRooms in place to support your restaurant’s front-of-house (FOH) operations, you also need systems in place to manage back-of-house (BOH) operations.

Restaurant inventory management is a critical BOH process for controlling food costs and ensuring smooth operations. Many restaurateurs still rely on inefficient, outdated methods for taking inventory, but there are restaurant management tools that can streamline and automate the process. The more efficient and accurate you are at managing your inventory, the more you can maximize your profit margins.

What is restaurant inventory management?

Restaurant inventory management is the practice of tracking the quantity of food ingredients (like produce, meats, and pantry items) and non-food supplies (trash bags, toilet paper, take-out containers, etc.) that are coming in and out of your restaurant. Inventory tracking traces what you receive from vendors, any product transferred between stores, and what is left over after sales.

Restaurant inventory management involves leveraging forecasting to prepare for your projected sales and ensure you are ordering the proper amount. It also involves examining the difference between what you should be using for inventory based on sales, versus what you are actually using in your kitchen (more on this below).

Why is restaurant inventory management important?

Restaurant inventory management is critical to help control food costs. If you over-order inventory, you run the risk of letting food waste on the shelf before you are able to use it. In addition, if you are under-ordering inventory, you may not be able to prepare your full menu and hit your sales goals.

Restaurant industry profit margins are notoriously tight. Strategic restaurant inventory management can help you make data-driven decisions about your inventory so that you can hit your target food cost goals.

Restaurant inventory best practices

Inventory management involves tracking many different moving pieces. It takes more than just counting your product levels to know how much stock to order. You also need to consider factors like the number of reservations and online orders, projected sales, and external factors like weather to determine demand.

When you successfully manage your restaurant’s inventory, you are better prepared to streamline operations and maximize profits. Here are six restaurant inventory best practices to adopt.

1. Make inventory management a regular part of someone’s job

To ensure that your restaurant inventory is completed thoroughly and accurately, assign inventory to one or two key staff members. Training your staff on the importance of inventory management can not only help your restaurant operations, but can also encourage your staff to be invested in controlling food costs.  

Accurate inventory starts with creating dedicated time for taking inventory. Your inventory after a busy Saturday night will look significantly different than your inventory on Tuesday morning after you receive your vendor orders.

To ensure you are generating comparable inventory numbers, schedule your staff to complete inventory counts on the same day, at the same time, every week. With consistency in your data, you are able to see patterns in your inventory and make better decisions.

2. Leverage tech to streamline inventory management

Because inventory is key for maintaining your profit margin, using the best restaurant management tools possible is a must for managing inventory. Pen and paper are inefficient and error-prone. You can easily lose your records and may not have them handy when you need them. When you use an all-in-one inventory management solution, not only can you access your inventory from anywhere, but multiple people from your team can access it at the same time. You can also look back at more records than you could if you had to flip through notebooks.

Inventory management software can also automate inventory tracking for you in real-time. When your inventory solution integrates with your POS, it can deduct ingredients from your stock when inputting orders. Consider upgrading from a manual method of taking inventory to a process that automates this tedious task and lets you see exactly what you have in stock in real-time.

3. Use inventory to understand your actual vs. theoretical food costs

To fully understand your inventory use, you should be looking at two different numbers: actual versus theoretical food costs.

Your theoretical food costs are what inventory you should have sitting on your shelf, based on the sales from your point of sale (POS) system. However, this number doesn't take into account areas of potential inventory loss (like mistakes in portioning, ingredient spoilage, or ordering errors).

Your actual inventory levels are the count of the inventory you physically have in the restaurant. The difference between these two numbers represents the inventory that isn't being accounted for in your sales and is instead being wasted. Using your inventory management system to examine this variance is an effective way to start optimizing your food costs.

4. Forecast with data to predict inventory needs

One of the biggest restaurant inventory management mistakes you can make is placing orders based on a hunch, rather than data. Use the tools at your disposal — like historical inventory records and upcoming reservations — to predict your inventory needs so that you know how much to order.

What’s more powerful than having one data point for your inventory? Having multiple data points. Make sure that your POS and restaurant inventory systems integrate. When these tools can share data, you are able to forecast your inventory needs more accurately and save time manually inputting data.

Your forecasting should take into account your historical sales data for comparable time periods, as well as information about upcoming reservations and local events. With data driving your inventory decisions, you are better able to keep a streamlined inventory.

5. Be as accurate as possible

Don’t cut corners while counting inventory. Record exactly how much you have of everything. While rounding up or down can seem inconsequential, these differences eventually add up to make a big difference.

You may think you have enough ingredients to make 40 of your chicken parmesan dishes a day, for example, but you may actually only have enough for 38. If you sell this menu item for $21, you're missing out on $42 in revenue each day on that one item. Over one month, this small error could add up to almost $1,300 in lost sales.

Some of your inventory processes, like counting the actual inventory levels in-store, will need to be done manually. However, to boost accuracy in your inventory, automate as much of the process as possible by using tools like automated vendor invoice imports. In addition, make it as easy as possible for your team to take inventory counts by using inventory apps available on mobile or tablet devices.

6. Include more than food in your inventory

Food ingredients for menu items shouldn’t be the only thing you count in your inventory. Don’t forget to include non-food items — like kitchen disinfectants, trash bags, toilet paper, or take-out containers — while taking stock. These supplies are critical to keeping your restaurant clean, your customer's content, and your takeout orders complete.

The bottom line: Good restaurant inventory management habits keep your business running smoothly

Many dining venues rely on outdated restaurant inventory systems for managing their supplies. However, with the restaurant industry facing thin profit margins, it’s crucial for restaurateurs to optimize all of their processes, including inventory management.

Review your inventory practices and identify inefficiencies. Then, use these tips to upgrade your routine and keep food costs low. Consider implementing inventory management software that integrates with your other systems for the most accurate forecasts.

About the Author

Restaurant365 is the industry’s leading all-in-one, cloud-based accounting, inventory, scheduling, payroll and HR solution developed specifically for restaurants. The R365 platform simplifies day-to-day management for restaurant operators, allowing them to control food costs and optimize labor costs. Integrations and open APIs enable Restaurant365 to connect with other systems including POS providers, vendors and banks. The result is accurate, timely reporting that provides a clear and complete view of their businesses.

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