While food costs can’t be eliminated — in the same way, you can’t fire your staff to eliminate payroll expenses— solid restaurant inventory management will prevent them from spiralling out of control.
After reading this guide you’ll have the tools you need to set up bulletproof protocols, keep track of F&B purchases, monitor stocklevels and outlet performance.
That means:
Instead, you can look forward to adding anywhere between 2 – 10% to your bottom line just by doing weekly inventory counts and fine-tuning your procurement (something Apicbase does automatically, shaving hours of work for your teams every week).
Sounds good?
In this article, we’ll cover:
Ready for those profit margins to start busting at the seams?
Grab a fork and let’s dig in.
Why restaurant inventory management is critical? Well, you could just as easily ask why are a map and a compass important to mountaineers?
Because, without those two things, they’d have no idea where they are. Or where they’re going. Getting from point A to point B would turn into a string of dangerous overhangs, impossibly steep canyon walls, and ankle-twisting footpaths.
As a restaurant operator, you have your own treacherous overhangs and brambled footpaths — overstocking, understocking, waste, and pilferage.
Your obstacle is everything that makes it harder for you to get where you want to be. And where you want to be is running a successful foodservice business in which you max out the profits without sacrificing quality or customer experience.
(If you want your mind blown: check the 12 Restaurant Inventory Statistics That Highlight Why Inventory Control = Business Success.)
You see, restaurant inventory management is not about just having the numbers — it’s about what you do with them.
Everything inventory-related — including the four major benefits I’ll talk about here — is in the service of one goal…
… making sure that your actual food cost doesn’t differ from your theoretical food cost.
A step-by-step guide for hospitality professionals to manage their Inventory.
How do you get there?
You get there by fine-tuning your F&B inventory control and management, and reaping these four benefits of an on-point, replicable procedures:
Recommended reading: The Ultimate Guide to F&B Purchasing for Multi-Outlet Restaurants
Whether you’re managing a single, high-end location, or a chain of hotel restaurants, it helps to remember that even the best restaurant inventory management practices are not infallible.
No matter how perfectly your numbers line up today, inventory is not a set-it-and-forget-it machine. A simple ingredient miscount (which happens way too often) is enough to throw off your calculations and forecasts unless caught and corrected in weekly inventory counts.
If you want to do inventory the right way, you need to organize, have a system in place, and periodically check, recheck, and tweak that system. By doing that, you will learn how to recognize and avoid these 5 most common restaurant inventory mistakes:
Stock guesstimates are first on this list for a reason — they’re the first trap busy operators fall into when they try to cut corners to save time.
Once you start down this road, it’s difficult to have even a semblance of control over your inventory, costing, and purchasing because you’re not working with real, factual data. What you are working with are approximations that get progressively more inaccurate as time passes. (Learn more about the link between inventory & procurement management in multi-site restaurants).
Before you know it, €5 in daily unaccounted waste turns into €50, expensive ingredients regularly go missing without you even noticing, and your food cost spirals out of control.
How do you insure against this?
It’s easy…
Once you’re working with the right numbers, everything inventory-related becomes easier — your ordering forecasts… your waste management… and your menu engineering.
Before you start working on your scalable inventory SOPs, make sure to go through this list of common restaurant inventory mistakes. Identifying the mistakes that you’re already doing will help you factor them into your inventory management battle plans.
Having robust inventory management protocols that are both scalable and accurate is crucial to keeping food costs down and your profit margin busting at the seams.
For most F&B businesses, building solid SOPs is a five-step process that draws on established restaurant inventory best practices:
Let’s run down the list.
We’ll start with stock-taking because everything inventory-related that comes after it depends on you working with the right fundamental numbers.
When taking stock, it’s best to follow a bulleted list of guidelines that outline the entire process from start to finish. Draw them up for your teams, and do occasional spot-checks on location to make sure they’re being followed.
Here’s an example (feel free to run with it word for word):
Free Stocktaking Spreadsheet: Restaurant Food Inventory Template
Once you start making changes to how inventory is done across your operation, expect a grumbly chorus of: “but we’ve always done it this way” and “this is just extra pointless work”.
Right on cue, the resistant-to-changes human nature emerges (and if there’s anyone resistant to changes, it’s chefs).
Be patient — don’t butt heads by implementing changes overnight or by executive decision.
Instead, form a small task force – pick one person from each location, if you’re managing several – and ask for their opinion on how to streamline inventory practices, manage waste, and reduce the average food cost.
Nine times out of ten, you’ll be treated to groundbreaking ideas from people who are in the thick of it every day. And, you’ll end up with a strong and vocal core of advocates and stakeholders who are going to go back and sell your ideas to the rest of your teams.
The most important point that you have to get across to your staff is the savings that come with effective inventory management. Just implementing weekly counts can add up to 10% to your bottom line every year. What does this mean for them?
Well, some of that money will definitely go towards salary raises, more comprehensive benefits, and better kitchen tools and equipment that increases work environment safety and prevents painful incidents that involve hot pans or blunt knives. A win-win for everyone.
As you roll out your revamped F&B inventory management procedures, make sure to:
HINT – You can ensure staff buy-in goes a lot smoother if your proposed changes result in less work, not more. People will object to full daily counts and manual input into spreadsheets — they will be far less resistant to working with restaurant inventory management software that depletes used ingredients automatically and provides actionable insight through an intuitive and easy-to-read interface.
You now have a stock-taking procedure in place, and your teams are committed to managing inventory the right way.
That ‘right way’ hinges on recording all inventory movements correctly.
What do we mean by inventory movements?
Inventory actions are all actions that alter the stocklevels of your F&B. They are either counted in or out of your opening stock count so that, at the end of the day, you’re left with the correct closing count.
Inventory actions include:
Why is tracking all inventory actions in a restaurant important?
Well, it’s the only way that you’ll be able to hone in on the causes for variance between your actual and ideal food cost (and close the gap).
Most of the time, what your PoS system records (for example, one pasta Bolognese or one chicken tikka masala) is all menu-level — this data tells you what you’ve sold but it doesn’t tell you how much stock was created-in, out, or wasted in the process of preparing a dish.
However, if you can keep on top of all your inventory actions (ideally with dedicated software that automatically makes inventory count adjustments based on menu items sold), half of your inventory control work is done.
Once you get this granular with your data, it’s easy to figure out if your food cost variance problem lies in excessive waste, over-plating, or theft, and to take necessary action to close the gap between ideal and actual variance.
Unless you’re pulling your food cost variance insights from dedicated inventory management software, aiming for real-time data and 100% accuracy is a tall order.
After all, you’d have to update all your stock numbers daily AND run back-to-back calculations and analysis… not easy when you’re wrestling with cluttered spreadsheets.
But, that doesn’t mean that you can’t check the health of your inventory on a weekly basis. What you need are two handy restaurant inventory metrics that will tell you if you’re on track or serve as an inventory management red flag:
The industry average when it comes to inventory turnover rate is between 4 and 8. Anything below that means you’re overstocking (and dealing with a lot of waste), and anything above that means you’re likely frequently running out of menu items (and dealing with unsatisfied customers).
If your ITR is too low for your specific type of business, run the day’s sales in inventory. A high DSI number (higher than 10) is a final confirmation of overstocking, which means you need to get to work on identifying surplus ingredients.
Once you have your culprits, tweak your procurement practices and order lists, get down to those optimal on-par levels and stay vigilant so that overstocking doesn’t occur again. It will only lead to wasting and a higher food cost.
Now that you’re working with accurate numbers and you’ve registered all your inventory actions correctly, knowing what to look for can be tricky.
High food cost variance is an immediate red flag, of course — if you’re constantly going over your projected percentages, you need to find the holes immediately and plug them. Otherwise, you’ll struggle to hit your yearly goals and grow your business.
However, food cost variance is not the only thing you should be looking at.
You’re going to have to whip up your calculator (or brush up on your Excel skills), and dive deep into the data — knowing things like average sitting inventory, optimal ingredient par levels CoGS, inventory turnover ratio (ITR), and day’s sales in inventory (DSI) will allow you to fine-tune your procurement processes and eke out an additional percentage point or two in profits.
Let’s take a quick look at a couple of scenarios that might be occurring across your operation.
Keep Tabs on Stock Without Daily Counts: Get Restaurant Inventory Management Software
These (and similar insights) will allow you to make consistent improvements that help with keeping costs down and customers happy. By taking the time to calculate and uncover them (or using restaurant inventory management software to look them up in seconds), you’ll be able to improve your procurement, get the data you need for profit-boosting menu engineering, and finally start managing your restaurant’s food waste.
On-point, robust inventory management standard operating procedures help you keep track of your F&B stock, no matter how many outlets you run. It also provides an audit trail so you can track down errors, and a boatload of data to gather insights from.
But, for most foodservice businesses, simply having SOPs in place will not cut it.
If you run a single-location, fast-casual diner, you can (probably) get away with pen and paper, spreadsheets, and PoS-generated data.
But you’ll still have a lot of work to do to dig out actionable insights.
Everybody else – multi-outlets, hotel chains, and large-scale caterers – needs to go beyond procedures and start thinking about software.
By using a dedicated restaurant inventory management software, you’ll reap the benefits of:
With software, your teams will work together, using the same (accurate) data to make significant, sometimes business-transforming decisions.
And, it goes without saying that it will be easier for you to keep track of everything without having to dig through spreadsheets, email threads, or WhatsApp messages. You can’t get to that place by using spreadsheets and pulling data from your PoS because those tools were not built for that.
Here’s the deal — I know that restaurant inventory management is not sexy.
And it’s okay if you’re not psyched about it… the only people I know who are itching to talk about the intricacies of stock-taking or the value of the inventory turnover ratio calculation all work on the same floor here at the Apicbase office.
And that’s where you got lucky.
Instead of complex, spreadsheet-based restaurant inventory management — or worse yet, playing it by the ear — you get to take advantage of our unique maths and stats geekiness, and just move everything inventory-related to Apicbase.
You’ll get…
…. and all of us here will get a warm, fuzzy feeling inside knowing that we’re empowering another restaurant business to bring their A-game to the table every day (okay, and some of your money too, but that’s peanuts compared to what you’ll be saving).
How does that sound?
If you’re tickled by the prospect of saving money without compromising on quality or customer experience, get in touch with us. Schedule a 30-minute demo (you pick the date and the time), and we’ll teach you how to make F&B inventory management sexy… fun… easier, faster and scalable.
In less than 30 minutes, you’ll discover how restaurant inventory management software adds to your bottom-line and boosts your business margins.
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