Restaurant Inventory Management Tips To Enhance Your Business Performance

We can’t stress it enough: restaurant inventory management done right is the key to optimizing your day-to-day operations and getting a better grip on your bottom line.

In short, inventory management refers to a series of concurring practices that regulate your stock – both perishables and non-perishable items in your restaurant’s storage. Using the proper inventory management methods is the key to preventing food waste (financial loss) and measuring your business profit at any given time.

If you’re still using spreadsheets to keep track of your restaurant’s inventory, this blog is for you. We’ve gathered 5 essential tips to help you turn outdated inventory management practices into precise business tools.

Core Functions of Restaurant Inventory Management

• Continuously monitor and manage your restaurant’s food stock (in real-time, if you use an automated inventory management system).
• Save money and improve the cash flow by showing which items to purchase (and in what amount).
• Prevent loss and reduce food waste in your restaurant (also helping you estimate unavoidable loss more accurately).
• Discover poor processes which slow down your restaurant’s operations.

Restaurant Inventory Management 101

First things first, though. Keeping track of your inventory means that you know precise information on the supplies entering your storage, exiting your kitchen, or remaining out of use (leftover or unconsumed stock).
Now, let’s take a look at a restaurant inventory management formula built on two simple values:

• Sitting Inventory, which refers to in-house items that are waiting to be used. For restaurants, accurately knowing these items’ types and due dates is particularly important since most are perishables!
• Stock Depletion, on the other hand, denotes the products sold over a given period. You can instantly assess this type of information using sales reports from your POS.

These two values help you determine how quickly you use up a particular item or ingredient. To calculate usage rates, divide the amount found in your sitting inventory by the item’s average depletion.

Here’s a quick example. Say you currently have 6 ketchup bottles in stock. Each week, you use up around 2 on average, which means you have 3 weeks of usage left: 6 bottles (sitting inventory) divided by 2 (depletion) equals 3 weeks. Keeping a close eye on these usage rates means you place better orders. In other words, you avoid excessive food loss or the prospect of completely running out of some essential ingredient.

Specific methods and systems have been developed to help you keep track of these aspects. We’ve picked out four essential tips to take you on the path of better restaurant inventory management.

4 Tips for Better Restaurant Inventory Management

Quick Start: Par Inventory Sheets

Par Inventory Sheets (or Stock Sheets) are a well-known method of restaurant inventory tracking. First, you must set a “par level” for each item or ingredient in your restaurant’s inventory – a number denoting how much is required in stock (perhaps for an entire week). This includes your regular stock usage, as well as an extra amount for emergency situations.

Check out this simple formula: stock used during a week + safety net = par level. Now, to know how much to order, just subtract the among you in-house from the par level. For instance, if your weekly par level for rice is 60 pounds and you already have 25 in stock, you must order 35 pounds of rice. Easy-peasy.

For more info on setting up your par sheets and using them to determine food orders, check out this blog by On the Line.

Turn to Automated Methods for Accurate Inventory Management

While the par sheets method works quite well, manually keeping track of these values isn’t time effective, nor is it entirely accurate. Nowadays, it’s much better to link your inventory data to your POS system, which can track the depletion of each ingredient in your restaurant in real-time.

Therefore, choose a POS system with integrated inventory management features (fully integrated POS). Such software should feature real-time inventory information, sales reports, and data analytics. We advise that you carefully compare potential POS vendors before you make your final choice.

Measure your Restaurant’s Inventory Turnover Rate

Inventory turnover is an accounting tool measuring how many times you’re selling and replacing your inventory within a specific timeframe. If the ITR is too low, your actual sales do not justify your current stock, leading to unused ingredients or food waste in the case of perishable items.

The ITR formula goes like this: divide your restaurant’s net sales by the average cost of the inventory on hand. For instance: your beginning inventory for the month is worth $35,000. When the month ends, you have $25,000 in stock. Your total sales (also called COGS) were $175,000. Therefore, your inventory turnover is $175,000 / ($35,000+$25,000 / 2), so 5.8 – almost once per week, which is considered quite good in the restaurant industry.

Abide by the FIFO Method

FIFO stands for “first-in, first-out,” meaning the oldest products in your stock must be used before new arrivals. Thus, regulating your inventory using this method is less about data analysis or good industry software and more about hands-on organizing your physical storage. But that’s why it’s so essential to restaurant inventory management!

A lot of sensitive ingredients with precise expiry dates must be examined and catered to. In short, FIFO states that you must rotate all items in your stock to ensure that older purchases are always found at the front of the shelf or fridge. In addition, keeping a particularly close eye on perishables is the key to limiting food waste. This means you must conduct proper training for all staff involved with restaurant stock and storage. And while this seems difficult and time-consuming, the benefits to your inventory health are significant.

Last Notes

By and large, adopting proper inventory management practices helps any restaurant manager keep stock under control, save up money, reduce food waste, and improve outdated processes.

Here’s a final takeaway: remember to find a good combination of physical storage strategies and automated industry software. That is to say, you must supervise both the actual items in your inventory and the valuable data they can generate for your business.