Restaurant Inventory Management: Why It Matters

By
Nicole Georgiev
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For many people, having their own restaurant is considered to be a dream. However, the process of running and managing a successful restaurant isn’t just about creating amazing meals. It takes a lot of work and business acumen in order to succeed in the restaurant industry. While the meals are one part of the business, finances are the second part. Restaurant inventory management is a huge factor of it all. 

The inventory management process involves monitoring the food and beverage ingredients at your restaurant. It’s important to have the right amount of insight as far as what your restaurant has in stock in order to be more profitable. Ideally, successful restaurant inventory management practices can result in smarter ordering processes, less waste, reduced costs, and more. 

In this article, we’re going to explore why restaurant inventory management actually matters. Let’s start off by understanding what it really means and what restaurant inventory management software is.

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What Is Restaurant Inventory Management?

Restaurant inventory management is a process that restaurant owners and managers follow to monitor the supplies and ingredients on hand. It’s what helps restaurants be more economical when it comes to food and beverages, as well as supply orders. 

Having an effective inventory management process is essential for day-to-day restaurant operations and for long-term goals. Performing an inventory audit is time-consuming and challenging, but some parts of the process can be done automatically. The automatic processes are completed through inventory tracking platforms using point-of-sale or POS systems, such as a bar POS system

It’s important to ensure the accuracy of your inventory management practices. You can do this by comparing the inventory on the software platforms to what’s actually sitting on your shelf. This can account for waste, food spoilage, and more. 

Reasons Why Restaurant Inventory Management Matters

Tracking restaurant inventory is crucial for the day-to-day financial health of a food establishment and also for business strategy. When it comes to budget, food cost is one of the biggest challenges. With accurate inventory management, you can see the flow of your items and highlight the losses. 

Here are some reasons why restaurant inventory management matters: 

You Can Optimize Your Ordering

Restaurant inventory management allows businesses to get the data that it needs to optimize the ordering process and control food costs. By reducing restaurant monthly expenses, you can improve the cash flow of your company and increase profits. This can be calculated using a restaurant profit and loss statement.

Many restaurants use inventory management to forecast what products they need in order to meet demand. This tactic is called demand planning. Ordering can be optimized so that you’re ordering just enough and not too much which can reduce unnecessary food waste.

By using inventory management practices, restaurants can find the PAR level of products. This indicates an optimal level of inventory for specific items that should be on hand. The reorder point of inventory will also come in handy here.

Increase Profit Margins

Profit margins are very limited in the food industry which is why successful inventory management is crucial. Once you account for all ingredients, staff, venue, and daily business operations, you might only have a small profit margin. With one minor miss-calculation in pricing or problem in your inventory, you might impact a lot of your profit. Proper inventory management can help you ensure that you get the right amount of profit from each dish you serve. It can also help you calculate your break even point.

Reduce Food and Beverage Waste

In many cases, restaurants can be unpredictable. It can be easy for products to become unaccounted for without the use of proper inventory management processes. Shrinkage can be caused by product spoilage, theft, breakage, spillage, and also human error. 

With the use of strategic and effective inventory management processes, you can identify the areas that might have shrinkage. When you check your inventory data, you’ll also be able to locate exactly where you’re wasting stock. Additional actions can be implemented based on the data.

Improve Customer Satisfaction

Customers typically sit down at restaurants and expect to order their favorite dishes on the menu, including the restaurant QR code menu. If you can’t deliver what they want to expect due to product shortages, your customer satisfaction and customer loyalty will be affected. Restaurant inventory is what directly influences meeting revenue targets, profit goals, and customer expectations. With inventory management, you can maintain proper stock levels to fill orders and keep customers happy.

How to Effectively Keep Track of Restaurant Inventory

The traditional way of taking restaurant inventory involves hand-counting your products and items. However, this can cause problems since it’s not only labor-intensive but also time-consuming. With the traditional method, you also can’t track your inventory using real-time so the data will likely not reflect the actual inventory levels. 

Restaurant inventory software systems are programs that are designed to track and also control inventory levels. They can perform different restaurant inventory management tasks across multiple locations. 

With restaurant profit margins being slim, it’s important to control costs as much as possible. Since food costs are some of the biggest factors in terms of restaurant expenses, it’s crucial to have strict inventory control policies. Here are some ways to effectively keep track of your restaurant inventory:

Invest In the Right Software

Using software-based inventory control programs can help you keep track of the products that are coming in and out of your restaurant. Restaurant inventory management software, like BlueCart, you can automate your inventory calculations and preset orders once items reach PAR levels. Types of inventory calculations include the inventory turnover ratio using the inventory turnover formula, inventory shrinkage, and fill rate.

The SKU number on products is often used to manage inventory, even in restaurants. Reading SKU numbers and keeping track of inventory is a simple process with the use of inventory management software. Take your inventory management techniques one step further by conducting a SKU rationalization every 6 months or so. The process will help to streamline operations and reduce costs.

Come Up With Inventory Control Procedures

It’s important to have as few people as possible checking inventory, aside from the inventory control manager. This is how you can have control over your inventory and potential problems if they arise. Two is an ideal number. Having two sets of eyes on inventory can reduce the risk of missing items during inventory count, and it’s ideal for anti-loss measures. 

Keep Track of Inventory Records and Management

Restaurants should keep accurate inventory records and have at least one designated person who is responsible for managing inventory. Inventory should be taken daily or on a real-time basis, but at a minimum of a weekly basis. This can be done through ERP software which is why it's best to understand the benefits of ERP.

Track of Your Usage

Confirm your expected usage and look into significant inventory variances. This can be tracked by looking into the number of sold menu items each day and understanding what ingredients were used. Even though you’ll have an idea of what your inventory should look like at the end of the day, variances can be common. 

Variances can oftentimes be due to cancellations, food spoilage, employee training, and more. However, some variances can be a result of theft and these should be investigated.

Utilize Forecasting Tools

All-in-one restaurant inventory tracking software can typically integrate with POS systems. Restaurants can take advantage of these data-driven tools. This can result in suggestive ordering processes based on what items are left in inventory, sales, and inventory forecasting. This is how you can stay on top of when you should order items and in turn, reduce waste and save on food costs. 

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Conclusion

Restaurants should understand the relationship between POS systems and their inventory and how it can lead to better decision-making. This is especially true when it comes to food costs and improving profit margins. Looking into how to calculate ending inventory can also be helpful.

If you’re interested in easily managing your restaurant inventory, consider BlueCart, a digital storefront. Schedule a demo today to understand how BlueCart can help you and your restaurant!

Frequently Asked Questions About Restaurant Inventory Management

What Is Restaurant Inventory Management?

Restaurant inventory management is a process or procedure that is utilized to monitor the ingredients and supplies on hand. This is typically done in real-time, and it helps restaurants be more economical with food, beverages, and supply orders. 

Why Does Restaurant Inventory Management Matter?

Restaurant inventory management matters because you can: 

  • Optimize your ordering processes
  • Increase your restaurant’s profit margins
  • Reduce the amount of food and beverage waste
  • Improve customer satisfaction and loyalty

How Can You Keep Track of Restaurant Inventory?

You can keep track of your restaurant inventory by 

  • Investing in the right restaurant inventory tracking software
  • Coming up with solid inventory control procedures
  • Keeping track of restaurant inventory records and management
  • Tracking your inventory usage
  • Utilizing restaurant inventory forecasting tools
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