Do you know the inventory definition? Controlling inventory is a huge part of restaurant management. When you conduct the restaurant inventory management process properly, you’ll have a smooth-running business. On the other hand, if you fail to do so, the financial impacts can be drastic.
Even the tiniest stock management mistake can cause unneeded food waste as well as food shortages. All of this impacts your food and beverage costs.
Food costs are one of the biggest risks in the food and beverage industry. Many businesses are constantly aiming to grow their revenues and improve profitability. While doing this, they should also be working towards reducing costs in order to maintain their success. This is possible through efficient inventory management techniques.
This guide will cover the need-to-knows of restaurant inventory management. You’ll get insight on how to properly manage inventory, what software tools you can use, and tips.
What Is Restaurant Inventory Management?
Restaurant inventory management refers to the process of tracking supplies and ingredients in a restaurant or food establishment. This process can help with food, beverage, and supply orders.
What Is Considered Inventory In a Restaurant?
In the restaurant industry, inventory is any food or beverage items that are required to provide services to customers. Restaurant inventory also includes ingredients, pans, pots, and cooking utensils.
Common examples of restaurant inventory products include:
- Liquor and beverages
- Dry goods (flour, rice, beans)
- Cooking equipment
How to Manage Inventory In Restaurants
Inventory can be managed in different ways depending on the size and type of restaurant you’re running. Below are some common ways to manage restaurant inventory:
Inventory Management Software
Restaurant inventory management software automates the process of keeping track of inventory, and it ensures accurate data and reports. Most software will connect to your sales system and inform you when you should replenish your items.
Par Inventory Sheets
Par level inventory refers to the minimum inventory requirement for items as indicated by restaurant owners or managers. With par inventory sheets, you can see the minimum inventory requirements and identify at which intervals inventory replenishment is needed.
Point of Sale (POS) Systems
Point of sale, or POS, systems help with inventory tracking, forecasting, order planning, and accounting. When you take inventory by hand, you can verify the information using your POS system.
Creating a List or Table of Items
This is a more “old school” inventory management technique, but it’s still used today. Make an inventory table complete with columns for your inventory items, each unit of measurement, current counts, unit prices, and each item’s total cost.
List all of your items in the rows and add the number of items by the respective unit of measurement. Then, record the price for each item in order to determine the cost.
Restaurant Inventory Management Software
The process of managing restaurant inventory can be quite simple with the help of restaurant inventory management software. This software allows restaurants to manage their inventory stock levels, import recipes, set menu costs through recipe costing, and keep track of purchase orders.
The most efficient inventory systems also sync to POS systems. This saves time when completing administrative duties, like calculating your reorder point
What Is Restaurant Inventory Management Software?
Restaurant inventory management software is a tool that simplifies inventory management processes for various food establishments. It helps restaurants keep track of their food inventories, identify when items need to be replenished, and allows for a smooth ordering process.
Below are two restaurant inventory management software systems that can work wonders when it comes to managing inventory:
BlueCart is known as an all-in-one order management platform and how we modernize the procurement process for all kinds of restaurants and suppliers. Using our platform can help you reduce errors and improve your bottom line.
Our platform is used by restaurant managers and chefs for inventory management, budgeting, ordering, and order check-in. Suppliers also use BlueCart to organize deliveries, process incoming orders, and ship packages.
BinWise is a beverage inventory management platform that helps businesses track their inventory online through POS. BinWise is perfect for both large and small restaurants that seek to use beverage management systems. Our platform helps with purchase orders, daily sales, and inventory management.
Benefits of Restaurant Inventory Management Software
With various restaurant inventory management software systems on the market, it’s tough to find the right one for your business. To help you in your search, here are some of the benefits and features you should look for when shopping:
Ease of Use
Taking inventory can be a long and difficult process. However, with an inventory management platform, you can take advantage of the ease of use. You’ll want to pick a tool that is simple and not confusing so you can maximize your productivity.
You can streamline your inventory management operations with various tools such as a POS system. This will allow you to automatically update your inventory stock levels based on what has been sold.
Bulk Inventory Upload
Most restaurants work with a lot of inventory. This means you’ll want to have the ability to bulk upload inventory. Food spoilage and other factors can also contribute to the need for ongoing inventory updates. Inventory updates will be necessary more often than not.
Reporting and Analytics
Comprehensive reporting and analytics are beneficial to have in your restaurant inventory management software. With cloud-based software, you can also access these reports away from your desk. These reports include profitability metrics, stock levels, sales performance, and more.
Reasons Why Restaurant Inventory Management Matters
Tracking restaurant inventory is important for the day-to-day financials of a restaurant, and it’s also crucial for business strategy. Food costs are one of the biggest budget-related challenges for any restaurant.
When you have efficient and accurate inventory management, you’ll be able to pinpoint your losses and see the flow of your stock items.
Here are the details on why restaurant inventory management matters:
Optimize Your Ordering Process
Businesses can get all the data they need to optimize their ordering processes with restaurant inventory management. This also helps them control their food costs. Inventory management can reduce business costs while improving cash flows and increasing profits.
Some restaurants utilize inventory management to forecast when their items need to be ordered to meet demand. Ordering processes can be optimized enough to ensure in-stock items, but not too much which prevents unnecessary food waste.
Profit margins are limited in the food business and that’s why efficient inventory management is important. The smallest miscalculation when it comes to pricing or problems in your inventory can cause a significant impact on your profit.
Enhance Customer Satisfaction
When a customer comes into a restaurant, they often want to order their favorite dishes from the menu. If the restaurant can’t deliver what is expected as a result of product shortages, customer satisfaction is impacted.
Reduce Food and Beverage Waste
Restaurant activity is unpredictable. That means it’s easy for products to be unaccounted for if there is no inventory management process. This can cause shrinkage through stock spoilage, breakage, spillage, theft, and human error.
About 4-10% of food is wasted before it reaches the consumer at restaurants. This is due to restaurants ordering too much food which ends up spoiling before it can be utilized. This loss can be minimized through proper restaurant inventory management.
With a thorough inventory management process, restaurants can pinpoint the areas that might have shrinkage. Restaurant owners and managers will also be able to see if and where they’re wasting stock.
Tips for Proper Restaurant Inventory Management
To have properly managed restaurant inventory, it’s wise to leverage some or all of the following tips during the process:
Investing in Inventory Management Software
Restaurant inventory management software is a crucial tool that can help simplify the inventory process. BlueCart is a leading platform that syncs with POS systems to streamline processes and allow you to better serve your customers.
Use a POS System
A POS system can be integrated with your restaurant inventory management system to get instant stock updates. Once a sale has been made through your POS system, the items that have been sold will reflect in your inventory management software.
Plan and Organize
Planning and organizing your inventory management process is crucial. Every product should have a set storage location that the staff knows and can get to. You can improve your organizational approach by labeling and dividing inventory strategically, too.
Monitor Your Inventory Stock
Keep an eye on your inventory stock to know when items are low or need replenishing. When you’re aware of the items that get used daily, you can get into the habit of making purchases only when you need to. You can also avoid ordering items that are still in stock.
Use Forecasting Tools
Restaurants can identify certain trends and respond to them with forecasting tools. This process uses past data to predict trends in food, expenses, and labor. These tools can be used to uncover seasonal forecasting trends and increase business growth.
What Is Restaurant Inventory Turnover Ratio?
The restaurant inventory turnover ratio is the number of times a restaurant sells out of stock or inventory in a given time. A low inventory turnover ratio means that the restaurant has low sales or too much inventory. However, a high inventory turnover ratio means either strong sales or poor inventory buying strategies.
When restaurants utilize efficient inventory management practices, they have a productive allocation of their inventory. They also have lower food waste on average.
Why Is Restaurant Turnover Rate Important?
Restaurant turnover rate is important because establishments use it to optimize their inventory volumes and base their stock on consumer demand. This also helps with operational efficiency and profitability.
A good inventory turnover rate is crucial for a restaurant or food business. In general, a high inventory ratio is preferred to a low one, but that does not always mean it’s good. The inventory turnover can also reflect the business's liquidity.
The liquidity of a business can show a business’s ability to maintain cash on hand or in their bank account. A high turnover rate can mean high liquidity since the company receives money from customers on a frequent basis. On the other hand, a low turnover rate might mean the company has high carrying costs.
Some businesses that have high turnover rates can also generate cash quickly. A company’s sales should match its inventories because creditors and banks use inventory as loan collateral.
Inventory turnover can lead to increased profitability which is essential for hitting your monthly inventory KPI goals. This is because inventory turnover drives profit.
Make Better Informed Decisions
Understanding inventory turnover can help restaurant owners and managers make smarter and better decisions when it comes to their business. This is because you’ll be aware of the inventory items you have in stock and what needs to be replenished.
You’ll also have an idea of what products aren’t performing well. You can then decide whether you want to change that offering or discount it.
How to Calculate The Restaurant Inventory Turnover Rate
The restaurant inventory turnover rate is calculated by dividing the COGS by the average inventory over a given period.
Average inventory is calculated by adding the beginning and ending inventory and dividing by two. It’s used in this calculation because restaurants typically have fluctuating sales during different times of the year. Causes include holidays, peak seasons, and more.
Inventory Turnover Formula
If you’re still asking yourself “How do I calculate inventory turnover?” Use the inventory turnover formula and steps below:
- (Starting Inventory + Ending Inventory) / 2 = Average Inventory
- Cost of Goods Sold (COGS) / Average Inventory = Inventory Turnover Ratio
Consistency is crucial during the inventory management process. With a solid and efficient restaurant inventory management platform, you can simplify your process and ensure the consistency of your stock.
The right software will save time and it can also prevent errors which will likely result in increased profitability and long-term business growth.