How to Manage Bar Inventory

By
Tamia Tutson
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If you're in the bar industry, then you already know that the most important task–and the most tedious–is taking physical counts of inventory. As such, it's vital to your success as a business that you learn the best inventory management techniques.

For many, the inventory process takes up most of the day, and sometimes even the night. However, it's not a task that can be neglected. Without proper inventory tracking your business profits take a hit. 

While popular bin management software like BinWise can certainly help, it's never a bad idea to learn the basics yourself. As with any job, having deep foundational knowledge puts you in a position to make better purchasing decisions. 

Whether you're just starting a bar, or have been in the industry a while and are ready to increase restaurant profits, there's still a lot you can learn. 

Manage Bar Inventory

What Is Bar Inventory Management?

The inventory definition is quite simple. It refers to a complete list of items such as property, goods in stock, or the contents of a building. Inventory management techniques help identify what and how much stock to order at a given time.

Inventory management tracks inventory from the time of purchase to the final sale of goods. Overall, inventory management is there to ensure that you have enough stock to fulfill customer orders. 

After a product sells, that inventory then becomes revenue. So technically, inventory that does not sell ends up as lost revenue and reduced cash flow. 

The best way to measure whether your inventory process works is by using the inventory turnover formula. Inventory turnover shows a business how much stock is sold during a certain time period.

If you have a poor inventory turnover ratio, it can lead to deadstock. If you’re wondering "what is deadstock," the answer is simple. It simply refers to brand new items that didn't get sold. 

How to Calculate Bar Inventory Usage

To find out your bar inventory usage over a set period of time, you'll need to have a couple pieces of information: 

  1. Your inventory at the beginning of the time period
  2. Your inventory at the end of the time period 
  3. How much inventory you receive during the time period

Using those pieces of information, you'll be able to use the bar inventory formula to determine your usage.

Usage = Starting Inventory + Liquor Purchased - Ending Inventory

Once you calculate your usage with this formula, you'll now have insightful information at hand to help you better manage your bar or restaurant. 

Why Is Bar Inventory Management Important? 

Inventory management in general is important to any company's success. With inventory management, you always know when you have too much or too little of one product. When you have too little inventory, your bar misses out on profitability.

On the other hand, too much inventory increases your carrying cost and creates a need for more warehousing storage space. More than this, excessive inventory creates unnecessary waste. 

What are Some of the Best Ways to Improve Your Inventory Process?

  • Take stock before your bar opens or after it closes. Remember that it's best practice to take stock at the same time of day so you don’t run into counting errors.. The best bar owners follow a strict inventory schedule in order to get accurate representations of their inventory. This way, they always know how inventory fluctuates on a daily, weekly, and monthly basis. 
  • Calculate your bar inventory usage by using the inventory formula above. Then compile the numbers into an inventory spreadsheet. It'll help you identify common trends and assist you with purchasing your inventory stock. 
  • Set up stock shortage alerts in your restaurant inventory software. This way you can optimize purchase patterns and minimize costs. Inventory turnover depends on demand, so it's important to make sure you have at least the minimum stock amount. 
  • Get your staff involved in learning mandatory inventory processing. You can create an inventory management team; this way they're able to check each other and your warehouse inventory management software to prevent errors.
  • Finally, look for ways to integrate popular materials into popular drinks. This is a great way to make use of materials that might otherwise go to waste. Moreover, it'll lower the number of items on your inventory list. 

What are the Benefits of Having a Successful Inventory Management System?

If the above information has you prepared for more, here are five added benefits of an effective inventory management system when you open a bar

Reduce Drink Shortages

Believe it or not, customers remember their experiences at bars. So, they'll remember if you don't have their favorite or signature call drinks.

Knowingly, it's more important than you might think to keep your bar stocked at all times. With inventory management, you can manage your business more effectively than ever before. 

Optimize Order Size and Purchase Frequency

Did you know that you can order products before they run out? Ordering supplies in bulk is the best way to minimize the frequency of purchasing as well as shipping costs. 

Avoid Rush Orders

Due to the size and weight of alcohol, making rush orders comes at a very high cost. Inventory management techniques help to reduce the need for emergency rush orders--thus saving you money. 

Reduce Overall Bar Waste

Bars suffer from theft more often than you might think. This theft also comes in the form of spilled drinks, the occasional free drink, and those who love to dine and dash. As a result, bar owners fail to realize exactly how much they waste. With inventory management, you'll be able to instill preventative measures. 

Increase Profits

Finally, regularly tracking inventory will keep track of high demand products. So you'll know what to order and how much to order. In addition, you can begin to competitively price your drinks based on their popularity. 

Inventory Management Techniques and Terms That can Help You

When you’re just starting out as a bar or restaurant owner, you’re going to hear lots of restaurant terms and phrases you may be unfamiliar with. So, we’ve compiled a shortlist of the most common terms you’ll hear when you start a business. 

  • ABC Analysis: In materials management, ABC analysis is an inventory categorization technique. ABC analysis divides an inventory into three categories: "A items" with very tight control and accurate records; "B items" with less tightly controlled and good records; and "C items" with the simplest controls possible and minimal records. Another benefit of ABC analysis is that it tracks which items are most profitable, therefore making kitting easier. 
  • Batch Tracking: Batch tracking is a system that groups and monitors sets of stock that share similar properties. By using batch picking, or tracking, you're able to track item expirations and trace the item back to the batch it belongs to.  
  • Bulk Shipments: Bulk shipping has to do with the transportation of goods in large quantities. These goods are normally loaded directly into a transportation vehicle. 
  • Consignment: Consignment is a process where goods are sold through third-party vendors like online stores or thrift stores.  
  • Cross-Docking: Cross-docking is the practice of unloading materials from the manufacturer to the customer with little or no storage in between.
  • Dropshipping: Dropshipping is a form of business where sellers accept orders but do not keep the sold goods in stock. 
  • Just-In-Time Inventory (JIT): JIT is a form of inventory management that requires working closely with suppliers so that raw materials arrive as production is scheduled to begin, but no sooner. The goal is to have the minimum amount of inventory on hand to meet demand.
Manage Bar Inventory

Frequently Asked Questions About Managing Your Bar Inventory

How Often Should a Bar Take Inventory?

It's best practice for bars to take inventory every two weeks. On top of this, it's ideal to make a weekly inventory schedule in order to maximize the benefits you get from inventory software. 

Why Is Keeping Bar Inventory Important?

Taking inventory is important because it helps you keep track of what products are selling, which ones aren't, and what products are popular. If you don't take inventory you'll never have an accurate count of the products you need and don't need. 

How Does a Bar Inventory Management System Work?

Fundamentally, taking bar inventory is the process of counting everything you have in stock twice. Then you use those numbers to calculate how much product you used during that time, which is your inventory usage. 

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