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How to Lower Your Restaurant Inventory without Software - YouTube
Channel: The Restaurant Boss
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hey everybody Ryan Graham venire author
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speaker chef restaurateur the founder of
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the restaurant boss calm as well as
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restaurant coaching Club calm and today
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I wanted to talk about inventory turns
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or just inventory in general actually
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this is going to be one of the easiest
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and say easy this is gonna be one of the
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fastest ways for you to lower your food
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cost and put cash into your pocket so
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let's get right into this and talk about
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inventory and what an inventory turn is
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well quickly when we talk about
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inventory there's a lot of confusion
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sometimes especially with cooks to
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owners owners I think have a better
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general grasp on how important it is to
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to keep a low inventory and what
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inventory means to your bottom line
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because you cannot pay bills with
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inventory when a bill shows up from one
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here vendors you can't trade them a box
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of steaks for it you have to write them
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a check you have to give them cash and
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when there's food sitting on your
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shelves that's cash that's not in your
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pocket so it's very important to keep
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inventory low and a lot of us are
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keeping track of our inventory we're
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doing weekly or monthly food costing
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some of us are just doing yearly food
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costing but either way we're keeping
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track of inventory but we don't really
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know what to do with that number we
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don't really know where that number
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should be how high it should be how low
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it should be and today I'm gonna show
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you exactly where that number should be
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but again let's get right into this so
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you cannot pay bills with inventory and
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like I said cook sometimes I have a hard
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time with this when they see a lot of
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food or when they over prep things they
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say oh well it's not gonna go bad what's
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the difference I go well you know you
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may have prepped something I don't know
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let's just say something that's non
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perishable like a jam or jelly let's say
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you may make two gallons of it and use
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all of this frozen fruit to make that
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the problem is is that now I'm stuck
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with two gallons of jelly let's say
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that's gonna last me a month they say oh
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well it's one less thing we have to do
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it's not going to go bad but on the
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other hand that's a month worth of
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dollars that you aren't going to get
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access to for a while so remember we
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cannot pay bills with inventory lower
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inventory means lower waste the less
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food there is on your shelves the less
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stuff can go bad
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the less stuff can get spilled
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contaminated just etc etc etc I always
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like to keep inventory tight I always
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find when I have a tighter inventory you
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just got less ways plus when a cook is
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going to grab let's say soy sauce when
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you've got a five-gallon bucket of soy
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sauce a little bit more here a little
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bit more there or they spill a little
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it's not that important but when you've
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only got two inches left or a couple of
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ounces left in that soy sauce bottle
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they're going to be much more careful
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about how much they give to customers
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how much they use in their recipes how
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much they waste etc so lower inventory
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lower waste lower inventory is less
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spoilage I think I already talked about
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that about things going bad sitting on
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your shelves you know a lot of times
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we'll order a box of lemons will save
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three or four percent which equals about
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I don't know a dollar or so on a box of
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lemons let's say but if there's a
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hundred lemons in that box and I'm
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saving five percent on the lemons if
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five lemons go bad because that box out
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on my shelf for three weeks I broke even
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if six lemons go bad I lost money so you
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know there's times when you want to
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order in bulk there's times when you
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don't so lower inventory lower spoilage
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lower inventory less theft sometimes you
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know we don't want to believe that theft
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happens in our restaurants but I always
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say unless you can prove that it's not
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happening you have to assume that it is
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so again with less inventory there's
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less theft it's more obvious to the
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naked eye when you walk in if you knew
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that there was only two steaks on the
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Shelf last night and then now there's
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only one that's gonna be quite obvious
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but when there's 70 or 80 steaks on a
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shelf it's a lot easier for one to go
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missing same thing with beer and such
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and then obviously just lower inventory
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lower food cost lower food cost means
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cash in your pocket so how are we gonna
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track and lower our inventory I'm gonna
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go over that here we're gonna talk about
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it by measuring how many times we turn
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inventory over per month or per period
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it depends how you're doing your
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accounting if you're doing it per month
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or per period but either way we're gonna
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measure how many times we actually turn
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that inventory and we're not talking
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about turning the inventory in actual
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bottles on and off the shelf because
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some of your stuff you're gonna go
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through on every one or two days let's
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say and some stuff will sit on your
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shelf for a couple of weeks some stuff
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will sit on your shelf for a couple of
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months so we're gonna measure it in
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dollars and what we call that is an
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inventory turn that's what we talked
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about earlier in the video an inventory
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turn in dollars not in actual product so
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let's get right into this so what is an
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inventory turn it's usage
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divided by your average inventory equals
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how many times you turned it so again
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that's usage divided by average
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inventory I'm going to show you how to
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calculate all three of these numbers
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here so in order to calculate usage or
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what most of us know usage as is our
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cost of goods sold it's the same
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calculation it's beginning inventory
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plus purchases minus ending inventory
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equals your usage or your cost of goods
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sold so remember that's your beginning
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inventory plus your purchases minus your
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ending inventory equals your usage or
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your cost of goods sold so you might
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want to write this down you might want
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to take some notes or I'll leave this up
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for one more second here that's
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beginning inventory plus purchases minus
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ending inventory equals your usage or
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costs of goods sold ok so then to figure
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out average inventory that's a simple
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average calculation so beginning
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inventory plus your ending inventory
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divided by 2 so in most of your cases
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your beginning inventory is the ending
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inventory of the previous month or
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period so let's say we're doing this
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calculation for February your beginning
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inventory would be January's ending
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inventory and then obviously the ending
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inventory is February is ending
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inventory and then divided by 2 gives
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you your average inventory so now that
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we know how to calculate the usage or
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cost of goods sold and the average
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inventory we can figure out our turns
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now I'm going to show you a real world
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example here of a restaurant that I was
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consulting with last year so here we
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have the calculation again I wanted to
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show you in case you haven't had a
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chance to write it down yet and then
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here's a real-world example so this
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particular restaurant had a beginning
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inventory in this month of 34,000 202
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plus they purchased 33,000 3:24 and then
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they had an ending inventory of 34,000
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548 which gave them a
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of 32 9 7 8 now let's figure out their
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average inventory again we got both of
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these numbers from the previous slide
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the 34 to a 2 plus the 34 5 48 divided
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by 2 gives us the 34,000 375 which is
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the average inventory and then now we
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calculate that so the usage divided by
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average inventory is 0.95 now what that
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means is that this particular restaurant
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turned their inventory in dollars less
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than one time per month that means that
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they actually had more food on their
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shelves than they actually used in that
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period they had a little bit more food
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so in a perfect world which never exists
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in a theoretical world this restaurant
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could have not purchased one penny of
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food for the entire month and they would
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have still had food left over on their
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shelves at the end of the month now
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obviously we know that that's not
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realistic because certain things like
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produce and lettuces and things we're
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gonna go through quick other things like
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pastas and stuff we're not going to go
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through as fast so what is a number that
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is gonna work in your restaurant let me
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show you kind of industry averages or
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industry goals actually that we would
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should be shooting for so for food and
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remember you can do this calculation for
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food for beer for liquor for wine for
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anything that you keep track of in your
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restaurant so basically for food I like
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to set a goal of more than 4 inventory
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turns per month so that means that you
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only have enough food on your shelves at
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any given time for one week of service
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now again I shouldn't say food you only
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have enough dollars on your shelf for
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one week of service and I say four plus
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because depending on the kind of
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restaurant that you're operating you
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might want to turn this even faster if
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you're operating a quick service or a
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fast food restaurant that's high
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high-volume
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probably low storage space very small
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menu a very neat and tight and like I
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said small menu you're gonna probably
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shoot more for five or six turns per
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month and that's going to help you not
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only burn through food keep your keep
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your storage down keep the food cost low
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etc etc now
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this hotel was a pretty large property
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that had a very varied menu they had
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multiple dining outlets they had
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banquets and catering etc so they had to
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keep a pretty wide menu so for them we
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set a goal of about three to four but I
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like to just shoot for the goal of four
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it's easy to remember it's one term per
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week beer same thing depending on your
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volume three to four turns
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beer is perishable I again it's easy to
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steal it's easy to waste it's easy to
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give away so I like to keep that stuff
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moving pretty quickly liquor we all have
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that bottle of Galliano in the back of
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the bar that that just sits there for
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five or six years or ten or twelve years
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so liquor we keep that a little lower
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one to two turns again you're gonna have
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those bottles as high in Macallan's the
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Galliano some of those scotch and
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whiskey's that you're not going to go
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through as much but then in your well I
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mean you should be flying through the
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stuff and your well and your and your
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calls and stuff so keep liquor at about
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one to two again these are just averages
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more than anything I want you to just be
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kind of aware of what you should be
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shooting for and tracking and then wine
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anywhere around one I'm happy depending
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on your list if you've got a list where
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you've got older bottles more expensive
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you're aging your wine per se probably
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less than one maybe point three point
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four turns per month if you're a quick
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service or a family restaurant and you
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only have six or seven wines and they're
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not expensive and you're not aging them
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and you're not really keeping a list of
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inventory then you're probably going to
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blow through wine pretty quick you
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should be at about one to two just again
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depending so here are some ways that we
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can lower our inventory we want to start
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tracking it most of all we just we got a
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track at that old expression what we
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what we inspect we expect so make sure
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that you're at least tracking your
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inventory and if you're already doing a
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food caution you're ready taking
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inventory this is just one more step
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that you can add to get an idea of how
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quick you're turning it over and what it
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actually means a lot of us are taking
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our inventory but the only reason we're
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taking inventory is to have a P&L at the
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end of the month and for accounting but
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what does it mean that's where these
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turns really come into place another way
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is don't buy in bulk I already touched
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on that a little bit so I'm not going to
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go into that my general rule of thumb on
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buying on Bowl
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is what is your inventory turn goal and
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will you go through it within that
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period if your inventory turn goal is
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one a week only buy in bulk if you're
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gonna go through that product in a week
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if you're not gonna go through that
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product in a week don't buy it in bulk
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unless there is a giant insane cost
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savings but generally speaking the bulk
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cost savings aren't worth pulling the
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money out of your pocket and leaving it
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on your shelves eliminate blind ordering
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what I call blind ordering is when the
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chef or somebody instead of actually
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going through the restaurant and
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actually writing down what we have and
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what we need they just sort of sit in
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their office and take a list and a
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mental image of yeah we need a couple of
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these a couple of those I think I've got
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some of this on my shelf no blind order
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and whatsoever I want to see an order
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guide and I want to see your chef or
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your kitchen manager actually going or
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yourself actually going through and
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doing the ordering based on what is
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actually on the shelves schedule your
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orders so I don't like to just random
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ordering again when we set up our
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systems when we take away all that
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randomness we we systematize things a
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little better we set up systems and
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procedures and we have expectations and
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then we can plan on it we know when
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we're ordering cooks know when we're
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ordering everyone knows when the new
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deliveries are coming in so we can plan
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accordingly I don't like just okay well
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I guess we need some stuff so let's do
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an order today or I guess we need some
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stuff or we don't need anything we'll
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wait till tomorrow I set up my orders my
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big orders would always come in on
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Mondays and Thursdays Monday was a
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four-day period till Thursday and then
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Thursday I would get in I would do my
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order Thursday for Friday delivery which
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got me through Friday Saturday Sunday
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then I knew I had new stuff coming in
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Monday so I always did my big orders
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Sunday for Monday and Thursday for
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Friday again depending on your
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restaurant produce I would try to do
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produce three to four times a week
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sometimes five it just depends on your
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restaurant but I like to have set days
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where I do the ordering
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don't let vendors order for you this
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happens a lot in the bar don't ever let
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a vendor order for you I don't even want
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vendors stepping onto your property call
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them tell them what you need the only
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reason to vendors should come onto your
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properties if you're tasting something
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or if they're cleaning your lines or
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showing you a demo on some products but
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I don't want vendors coming in snooping
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around and drop
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hence in my ear of what I need to be
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buying what I don't need to be buying
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how much I should be buying etc etc they
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just I don't let them in I don't want
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them around and then don't always take
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that free bottle you guys know what I'm
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talking about if you buy a six-pack of
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Absolut you get the absolute iced tea
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for free or if you buy a six-pack of
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patron you get the patron EXO for free
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well this hotel that I was just talking
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about I walked into the back there was
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14 bottles of patron EXO it wasn't
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selling it wasn't on a menu anywhere
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they were just building it up plus they
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had about 38 bottles of regular patron
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and then when we went back and did the
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math they were only going through patron
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at about one bottle per week that's 38
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weeks of patron let alone all that other
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free stuff now I know it's free but the
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point is is again what is your goal if
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your goal is to turn inventory on liquor
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two times a month let's say two turns
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per month so every two weeks
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don't take that free bottle unless
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you're gonna go through the amount that
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you're ordering in those two-week
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periods so the free bottle isn't always
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free I hope this helped you guys a lot
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again this is Ryan grant from with the
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restaurant boss please go ahead and
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below this video whether you're watching
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it on YouTube whether you're watching it
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on my blog or whether it's embedded on
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someone else's website there's always a
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place for you to leave a question or a
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comment I check those on a daily basis
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and I'll be sure to get back to you
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again have a wonderful day I hope this
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helped and please reach out to me if you
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got any questions or comments
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