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Click here to read the previous column in this series, about choosing suppliers.
Editor’s Note: This is the 16th edition of a regular column on www.elrestaurante.com. Pepe Stepensky, a veteran restaurateur and a long-time member of the el Restaurante Advisory Panel, is offering his advice to any el Restaurante reader with a question. When he does not have a specific question to answer, he will write about the steps to opening and running a restaurant. Click here to email him a question.
By Pepe Stepensky
In the fast-paced world of the restaurant industry, managing inventory often goes unnoticed, overshadowed by the focus on delivering excellent food and service. However, inventory management is the backbone of operational efficiency and profitability. It ensures that a restaurant maintains the right balance between having enough stock to meet customer demand and avoiding unnecessary expenses from overstock or waste.
This article explores the importance of conducting inventories in restaurants and provides an overview of different methods to manage them effectively.
Why is keeping inventory important?
1. Control Costs and Maximize Profits
With food costs representing a significant portion of a restaurant’s expenses, tracking inventory ensures that every dollar spent on ingredients translates into profit. Knowing how much stock you have prevents over-purchasing and highlights areas of inefficiency or loss.
2. Reduce Food Waste
Regular inventory checks prevent spoilage by ensuring older stock is used first, known as food rotation. Adopting practices like FIFO (First In, First Out) can drastically reduce waste, saving both money and environmental resources.
3. Ensure Consistency and Quality
Consistency is vital in the restaurant business. Accurate inventory tracking guarantees that essential ingredients are always available, ensuring the quality and consistency of your menu offerings.
4. Prevent Shortages
Running out of a key ingredient can result in dissatisfied customers and lost revenue. Proper inventory systems help you anticipate needs and reorder stock before it runs out.
5. Promote Staff Accountability
Regular inventories reduce the risk of theft and waste by creating a transparent system. Employees are more likely to handle supplies responsibly when they know inventory is being closely monitored. In my own experience, it’s better to ask different employees each month to do the inventory to assure is taken correctly and to the penny.
6. Support Financial Planning
Inventory data provides insights into Cost of Goods Sold (COGS), helping you measure profitability and plan budgets effectively. This is crucial for maintaining a healthy balance sheet.
Different Ways to Conduct Inventory:
Manual Inventory Counts
Process: Staff physically count all items and record them on paper or spreadsheets.
Pros: Cost-effective for small operations; hands-on.
Cons: Time-consuming and prone to errors.
Par-Level System
Process: Stock is reordered when it falls below a pre-set “par level.”
Pros: Simple and minimizes overstocking.
Cons: Requires careful monitoring of fluctuating demand.
Spreadsheet Tracking
Process: Inventories are managed using formulas to calculate totals and reorder points.
Pros: Easy to analyze trends; low-cost.
Cons: Still labor-intensive and prone to manual errors.
Point-of-Sale (POS) System Integration
Process: POS systems track sales and deduct inventory automatically.
Pros: Real-time data; reduces manual input.
Cons: Expensive to implement; requires training.
Inventory Management Software
Process: Advanced tools like Toast or MarketMan automate inventory tracking and integrate with other systems.
Pros: Detailed reporting; highly accurate.
Cons: Higher upfront and subscription costs.
Cycle Counts
Process: Inventory is divided into sections, and specific parts are counted regularly.
Pros: Less disruptive than full counts; saves time.
Cons: May not provide a full picture at any given moment.
If your inventories don’t seem to match your purchases, here’s an idea: Do a manual inventory every two months and compare it to the automated inventory coming from your POS system. The manual inventory may reveal theft or spoilage that does not show up in the automated inventory system.
Conclusion
Inventory management is more than just counting ingredients; it’s a strategic tool that can determine the success or failure of a restaurant. By controlling costs, reducing waste, maintaining consistency, and preventing shortages, effective inventory practices safeguard a restaurant’s reputation and profitability.
Click here to read the previous column in this series, about choosing suppliers.
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