As a restaurant operator, food is your life. It is a passion, obsession, and one of the most significant determinants of your business’s success and growth and your team’s well-being. With rising wholesale prices and inflation coupled with a shortage of knowledgeable, dedicated staff, food inventory management is more important than ever. Effective food inventory management helps restaurant owners and groups provide excellent food and experiences that lead to more profit and growth.
What does food inventory mean?
Food inventory management is the process of monitoring and perfecting the purchase, storage, use, and sale of the primarily perishable ingredients that are the basis for everything a restaurant does. Menu engineering and food costing are critical parts of that workflow so organizations can manage through any situation and produce consistently growing margins and profits. The right food inventory management process ensures your restaurant always has the right amount of ingredients on hand, so your team always has everything it needs to produce those iconic dishes.
Why is inventory management important in the food and restaurant industry?
The right food inventory management strategies, tactics, and tools can improve the operations and performance of individual restaurant locations and large restaurant groups. The ultimate benefits are rising margins and profits and improving guest experiences that help your business to earn more, pay more, and grow more. Below are just a few of the benefits:
- Prevent food loss through waste, spoilage, theft, over-ordering, or misfiring
- Establish and perfect portion control
- Lower Cost of Goods Sold
- Ensure accurate supplier prices
- Eliminate costly manual inventory errors
- Save time by automating manual food inventory management tasks
For more great tips check out other blogs:
- Four Restaurant Inventory Management Tips and Best Practices
- Restaurant Inventory Spreadsheet to Get Started with Inventory Management
Common food inventory management terms
As is the case in every walk of life, restaurants have their own vocabulary. Those below are just as important as fire, behind, on the fly, and 86’d to help your operation run at peak performance every shift.
The stock, measured in dollars, weight, volume, quantity, etc., of what’s available in your kitchen. It’s important to decide which unit of measurement you plan to use to quantify sitting inventory and to stick with it to ensure consistent, reliable metrics.
An inventory method that counts what’s in your dry storage, walk-ins, freezers, low boys, and everywhere else and matches it against your food inventory management system. This can be done manually, but growth-minded operators are quickly shifting to all-in-one Restaurant Enterprise Management platforms that enable digital inventory counts on mobile devices with data immediately fed into a cloud-based system. You can improve accuracy by arranging shelves and other storage facilities to match the order of ingredients on your inventory lists.
How much inventory your kitchen uses over a particular period, whether a single shift or a month. This should be provided by a point-of-sale (POS) system, which ideally integrates with an end-to-end restaurant management platform that can quickly offer cost analysis data.
A predictive metric for determining how much of a particular ingredient you’ll need based on historical depletion. Let’s say you have 100 pounds of a custom ground beef blend for your famous smash burgers in the walk-in. You sell 50 burgers a day, each with two, two-ounce patties, making your depletion 12.5 pounds of meat a day. That means you have enough ground beef on hand for eight days.
Cost of Goods Sold
Cost of Goods Sold (CoGS)—also known as your food cost—represents the total cost of all food and beverage ingredients used in your restaurant over a certain period. CoGS covers all the ingredient costs related to your sales, but it doesn’t include types of one-time, non-inventory costs, such as equipment repairs or new dining room decor. Here’s a quick formula
Starting Inventory in dollars + Additional Purchases – Ending Inventory = COGS
The useable amount of an ingredient left after cleaning or trimming. It could refer to what’s left after cleaning up a quarter primal, or how much fruit remains after cutting up a pineapple. Yield is most often expressed as a percentage.
Actual vs. Theoretical
Often abbreviated as AvT, this requires restaurant operators to embrace integrated restaurant technology and its ability to gather, manipulate, and convey data in a way that isn’t possible using pen and paper or generic software or solutions. In restaurant inventory and operations, theoretical refers to how much product you should’ve used based on preset recipes. Actual is how much the kitchen used.
Variance is the difference between actual and theoretical inventory levels. It could be in dollars, percentages, or physical amounts. Variance is how you identify where your profits might be leaking, and your high-performing stores or team members reside, who can serve as mentors to the rest of your organization.
How do you track food inventory?
Here’s where the rubber hits the road, or better yet, where the steak hits the grill. The key to effective food inventory management to track your food inventory and associated costs is to develop a detailed strategy, the specific tactics it includes, and ensure consistency. Taking inventory is essentially coming up with a data set, and your data will only be as reliable as the system and the individuals that created it. Additionally, it’s important to remember that data is merely a real-time snapshot. Your full count from last month and your flash count of your 20 most-used items from last week aren’t going to work for this week. Below are several critical best practices for tracking food inventory and setting all of your locations and your overall business up for reliable growth.
Train your team
As an operator or owner, it’s unlikely that you will take every inventory count. Just as it takes a well-oiled machine of a team to put out dozens, possibly hundreds, of perfect plates each shift, inventory is all about teamwork. Be sure to train every team member in every facet of inventory, including sheet-to-shelf, the system you use for inventory, and units of measurement. Alongside inventory is the importance of tracking waste. Incentivize your team to keep waste logs and track when misfiring, poor portioning, overage, or spoilage occurs. Preach the importance of avoiding and tracking waste on the performance of the business. Consider incentives for team members who track the most waste or those who reduce waste by the largest margin.
Organize your space
If you’re taking sheet-to-shelf inventory, your shelves must match your sheets (or screens, better yet). Not only will organization lead to more accurate inventory and a greater ability to control margins and boost profits, but it will also improve your overall team performance and guest satisfaction.
Take inventory often
Set up a recurring schedule for inventory at the same time and day each month. Avoid counting when the restaurant is amid a rush or deliveries, which could lead to double counting. Also, consider flash counts of your top 10 or top 20 ingredients, which can often account for as much as 80% of your costs.
Improve, improve, improve
Once you get started, you’ll often find gaps in the process. If your team is trained and engaged, they can help ensure suppliers’ deliveries match orders in quantity and price, practice First In, First Out (FIFO) to help cut down unnecessary waste and adjust how they take inventory to produce better results.
Track daily sales reports
It’s easy to get overwhelmed by everything that happens in a restaurant daily, but checking your key metrics isn’t something to let slide. Doing so will help you spot trends or problems as they arise and give you a better feel for the ebbs and flows of the kitchen and its vast inventory. The combination of sales metrics, precise inventory data, and automated analyses gives corporate-level operators and store-level managers the ability to confidently make small changes that yield big results.
Today’s restaurants face complex challenges that require modern solutions. While businesses in other industries spend as much as 8% of their gross annual revenues on technology, the restaurant industry hovers somewhere between one and 2%. Given the profound, fast changes across the business, restaurants can’t rely on old practices to prevail in the face of new challenges and opportunities.
Food inventory management is only one example. By leveraging an integrated, all-in-one Restaurant Enterprise Management platform, operators, managers, and their teams can conduct inventory counts faster and more often, producing better data that provide actionable insights into where problems are arising, and challenges are hiding. In doing so, restaurants will access inventory metrics that were once nearly impossible to produce manually or with generic accounting solutions alongside the data-backed confidence to make small or large adjustments to all aspects of the operations in pursuit of better guest experiences, profits, and growth.