Your Complete Guide To Restaurant Inventory Management - YouTube

It’s estimated that 4-10% of restaurant food is wasted before it is even served.

Sounds like poor inventory management to me.

Stick around to learn how to stop throwing your money away.

As a restaurant owner—especially in 2021—you need to be keenly aware of your food expenses

and inventory.

But you also need to manage large stores of goods and develop processes to track waste

so that your inventory and food costs are accurate.

What’s more, COVID-19 has thrown a wrench in almost every restaurant’s operations,

forcing them to re-learn how much to order.

With COVID, tracking inventory and being able to adapt on the fly has become that much more

crucial.

Whether you are new to running a restaurant or have reached a point where the inventory

processes you have are not working, this video is a great starting point to help you develop

or improve your restaurant inventory management.

But before we get started be sure to click the subscribe button so you can stay up to

date with all the new content that we publish on our channel every week.

Let’s get started with our first point, which is Why does it matter, anyway?

It’s a mystery.

But not much of one.

The answer is money.

The answer is usually money.

Here’s why:

When ingredients run out, money gets wasted.

That’s because when ingredients aren’t tracked:

Drinks are prepared inefficiently Food spoils

Your inventory is exposed to theft.

These little problems can grow into big, expensive ones, especially with razor thin margins to

begin with.

Four to ten percent of restaurant food is wasted before it’s served.

And food wasted is money wasted.

It’s also time wasted.

And you remember the transitive property of time, right?

A VERY BRIEF EFFECT: A ticking clock.

It’s money.

Time is money.

So when we’re talking time, we’re talking money.

The special kind that you can NEVER GET BACK.

EFFECT: The ticking clock again.

An automated inventory management system will save you all that time that you’d otherwise

spend on manual inventory counts, troubleshooting errors, and soothing cranky patrons.

So automate.

And don’t waste time.

Before we dive into how you can revamp your inventory practices, let’s start with some

basic terms.

Starting with the cost of goods sold.

That’s the cost of all ingredients used in a given time period.

The period is whatever you want to look at: a shift, a month, a year.

Whatever slice of the picture makes sense to you.

You determine it by calculating your beginning inventory plus your purchased inventory, and

subtracting your ending inventory.

The final figure is your cost of goods sold over that period.

In general, it shouldn’t be more than twenty to thirty percent of your sales.

Next up is a unit of measurement.

That’s the way that you measure the inventory of a particular item.

By dollar or by weight, for example.

Use whatever makes sense, but be consistent.

Sitting inventory.

That’s the amount of inventory you have in-house at any moment.

Measure these in dollars or by physical amounts, such as weight or volume.

Depletion

The amount of product used during a set time period.

Again, use dollar amounts or physical amounts.

Usage

That’s how much inventory you have, measured as a unit of time.

This one gets a little complicated.

Calculate sitting inventory divided by depletion to get your usage.

So if you have 10 pounds of butter sitting in your inventory,

and you deplete it by using 2 pounds per week, you have five weeks of usage.

Variance...This is theoretical usage minus actual usage.

So if you sold 50 dishes that each contained 1 egg, theoretically, you used 50 eggs.

But say you counted your eggs and found you actually used 55.

Your actual usage is 55 eggs, and your variance...

...is 50 eggs minus 55 eggs, or negative five

This term is used interchangeably with “variance,” and is used to describe food or liquor lost

to waste, spillage, theft, or anything else.

Areas of loss are the causes of restaurant inventory shrinkage.

There are a lot of causes, of course, but some common areas of loss are employee mistakes,

theft, inefficient food prep practices, accommodating customer requests, comped meals, spills, and

spoilage.

Par level is the minimum amount of a particular item you need to keep on hand.

It should reflect customer demand, and provide a safety cushion for unanticipated demand.

When inventory levels fall below par level, it’s time to restock.

First-in, first-out is the inventory valuation method used by most restaurants.

Using this method, restaurants use up the oldest items/ingredients in their inventory

first, and the newest ingredients last.

The remaining inventory value is based on the cost of goods when they were purchased.

OK, so with the basic terms out of the way, let’s talk about how to do inventory.

Here are five steps to follow to do it well.

Step 1: choose a cloud-based POS with inventory management.

That’s the first step to controlling your food and drink inventories.

Yes, your POS is important for credit card processing, but most modern POS systems collect

inventory data automatically.

That simplifies inventory management tasks, such as tracking raw ingredient levels and

telling you when to reorder.

Your restaurant POS system may have an optional inventory management module available for

an added fee each month, or it might integrate with third-party software.

Or both.

For example: Toast POS integrates with Bevager beverage

management software.

Upserve POS integrates with food inventory management software Orderly.

Revel Systems has advanced in-house raw ingredient management.

Clover integrates with brewery inventory software DigitalPour.

Step 2: Choose and train your inventory team.

It’s important to have specific, well-trained team members responsible for taking inventory.

They need to understand your inventory-taking methods, and your POS.

You can train your entire staff, then rotate the inventory manager each week so that everyone

learns your inventory best practices, or you can make one person responsible for it.

However you do it, make sure there is accountability and consistency, so that if a mistake occurs,

you know what happened and can provide guidance on doing it correctly.

Step 3: Use the FIFO Method The first-in, first-out inventory method is

generally considered the best inventory method for restaurants.

That's because FIFO is considered very accurate when dealing with quick-turnover or perishable

items.

FIFO helps restaurants use ingredients before they go bad, saving you money.

Make sure to follow it.

Step 4: Be Consistent Consistency is key when it comes to managing

inventory and reducing shrinkage.

That means:

Using a consistent unit of measure for ingredients.

Using the same restaurant inventory categories for consistency when counting.

Using a consistent system for restaurant inventory control, such as First-in, First-out.

Maintaining a consistent schedule for taking inventory.

Having the same team members take inventory (or be consistent in how you rotate them)

Being consistent is the only way you will be able to generate the accurate inventory

reports you need to identify problem areas.

Step 5: Monitor Your Reports Speaking of reports, let’s talk about some

important inventory and POS reports to monitor.

They’ll be in in your POS reporting suite or your dedicated inventory software.

First up, the Inventory Value Report.

This helps you determine the exact value of your on-hand inventory.

Variance Report.

.

This report shows your variance - your actual usage against your theoretical usage.

Cost of Goods Sold Report.

Run this to see how much your raw ingredients actually cost.

Waste Tracking Reports.

These help you reduce shrinkage through theft, over-portioning, over-buying, and so on.

Comps & Voids Report:

See how comps and voids are affecting your inventory and your bottom line.

Once you get a handle on these reports, you can start to make decisions based on the inventory

data collected through your POS.

So, after all this talk of terms and reports and taking inventory, we come to an important

question: Can you actually automate your restaurant

inventory management?

The short answer is: not completely.

While there are many restaurant inventory tasks that can be automated with software,

some work still has to be done manually.

Example of automated tasks include using software that lets you enter inventory just by taking

a picture of an invoice, or beverage management software that ensures accurate pours.

But you can’t automate everything.

Shrinkage will happen.

Food will spoil and spill, and theft will create discrepancies.

You’ll need to keep an eye on your variance report to see what you’re losing, so you

can remedy the problems causing the discrepancies.

Next up: Inventory data.

Or in other words, 5 ways to use your inventory data to improve restaurant operations.

Good inventory practices lead to good data, and using that data effectively is key to

improving your restaurant inventory processes.

So how can you do that to make your restaurant run better?

Here are some ideas.

Recipe Costing.

Use your data to determine the true cost of each meal or drink.

Which recipes have the lowest and highest cost of goods sold?

What about profit margins?

Why do certain recipes cost more than you thought?

Once you know these things you can make better decisions and boost profits.

Menu Engineering.

Using your POS data, you can modify your menu based on your recipe costing and item performance.

Remove items with high costs of goods sold, or slow-selling items whose ingredients go

bad quickly.

Or add a menu item that incorporates your surplus ingredients.

Some software even automates this process for you by giving suggestions on how to change

up your menu.

Use your employee management data If you have a POS with integrated employee

management, you can use your employee reports to discover things like which servers issue

the most comps, which servers sell the most specials, or which employees are responsible

for the most inventory discrepancies.

Lower your cost of goods sold.

Once you know your cost of goods sold, you can probably figure out how to lower some

costs.

For example, you might substitute ingredients, or buy other ingredients in bulk.

What about using a different supplier?

Investigate your shrinkage Bartenders who drink on the job.

Servers who don’t enter orders properly.

Spoiled ingredients.

All of these things can account for loss and waste that affects your bottom line.

Your POS won’t necessarily tell you all these details, so you will have to investigate

discrepancies in your inventory reports to figure out what’s going on.

So, what’s the upshot of all this?

Better Restaurant Inventory Control Leads to a Better Restaurant

Your restaurant food inventory management can affect your business’s profitability

tremendously.

Whether you realize your inventory is out of control, or your restaurant’s inventory

management is going pretty well as far as you know, you can almost certainly benefit

from better food inventory controls.

Using software to reign in your inventory processes will not only help you save money,

but also time and stress.

It’s important to note that your inventory system might not be the only aspect of your

restaurant that needs modernizing.

This might be a good time to take a close look at other aspects of your restaurant setup

that could use a software or equipment update, like your kitchen printing setup.

That covers it for today’s video.

With this new info, you’ll be saving time and money in no time!

Does that even make sense?

Thank you for watching.

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and don’t forget to leave your comments in the comment section.

Till next time!