A Guide To Restaurant Inventory Management

Good food inventory management plays a key role in a restaurant’s success. The lack of it will cause excessive food wastage or lead to food shortages due to inaccurate forecasting. As an owner, you don’t want your restaurant to be in either of these situations.

Inventory management requires time and effort, which is why it’s often overlooked. This has led to a stark increase in food wastage in the restaurant industry. US restaurants alone create 22-33 billion pounds of food waste annually, and 4-10% of all restaurant purchases end up being pre-consumer waste i.e. wastage that occurs in the kitchen. Not only does this lead to misuse of an important resource, but also significantly affects a restaurant’s revenue. As the numbers show, proper restaurant inventory management can no longer be ignored.

What is restaurant inventory management?

Let’s begin with the basics, what exactly is inventory management in a restaurant? Simply put, it’s a process of tracking how much of each food item is in stock at all times.

It helps you be always aware of the supplies that come into your restaurant, go out of your kitchen, and the stock that’s left behind.

It ensures all the food, beverage, and other goods you purchase are managed properly, accounted for, and are performing the job of generating sales and ultimately providing bottom-line profits.

Restaurant inventory management is one of the five key parts of the overall information management system at any restaurant together with purchasing, receiving, storing, and issuing (authorized transfer of food products to the production departments).

Each of these elements requires attention to detail. It’s important to have dedicated, well-trained staff for every task in the overall information management system of a restaurant. to ensure that the margin of error is minimized. If one or two people are burdened with handling the entire system, there are bound to be errors that will significantly impact your restaurant’s revenue.

Importance of restaurant inventory management

What a lot of restaurateurs don’t realize is that their inventory = their money. With every morsel of wasted food, you’re losing dollars from your pocket.

Think about this:

You do a great job purchasing. You competitively bid on your stock and get the best products at the best price.
You have a structured receiving policy. You count, weigh, and measure so that all ordered products are received at the correct prices. You are receiving exactly what you specified and all weights and counts are accurate on the invoice. All your invoices are signed by your staff.
Your storerooms, coolers, and freezers are highly organized and properly secured.
You issue products to the proper areas using a requisition system

But what if a big chunk of milk ends up getting spoiled because you’re over-ordering, or your fruits and vegetables are not lasting long enough because of an issue with the storage system?

All your efforts in the first four elements will be squandered. Your inventory would be somehow shrinking for apparently no reason.

If you count your inventory regularly, comparing it to your item sales from your POS system you can find the culprit behind the wastage so that you can take action to minimize it.

Of course, there are always incidents that are out of the restaurant’s control, like unhappy customers or burned food. Barring those, it’s important to keep track of the other factors to maintain a good inventory management strategy.

If you don’t know what’s being used and what’s being wasted, how will you know your actual profit? Even if your entire purchasing system is top-notch, a lack of good inventory management can turn all your effort in vain.

Poor restaurant inventory management also results in poor customer service. You never want to tell a guest that you’re out of a regular menu item because someone didn’t know you were running low or that you ran out. And if it happens once, it will most likely happen again.

Soon your guests will stop frequenting your restaurant because your establishment is not consistent. There’s nothing worse than a guest having their mind set on something, or coming to your restaurant for a specific dish, only to be told, “Sorry, we ran out.”

Sensitive inventory management

One very important part of inventory management is managing food items that are known as ‘sensitive’ because they have a high cost, high demand, and a fluctuating price. . These include center of the plate ingredients like proteins and expensive specialty items like exclusive wines, high-end vegetables like truffles, etc. . Because the bulk of your food cost is dedicated to these products, not tracking their inventory properly can dwindle your profit very quickly.

How to conduct sensitive inventory management

Dedicate and train an employee for the task
Determine your inventory’s sensitive items
Create a sensitive inventory management sheet, or download our free template below
Fill out details including day, date, time, and employee name
Check inventory and fill details for each ingredient - volume received today, end of the day count in every storage unit, items transferred to other parts of the kitchen, and end of the day total to find out how much stock is available
Next, check your POS system for the number of product sales and compare it with the end of the day stock to find discrepancies
In case of discrepancy, discuss with the staff to find out where items were wasted

7 Tips for Managing Inventory at your Restaurant

Understand the terminology

Before you begin, take the time to learn about the different aspects of inventory management to ensure that everything is being taken into account.

Sitting inventory refers to the amount of product available for use. This can be measured in terms of physical volume or money, depending on the restaurant. Make sure to use the same unit of measure across all products.
Variance refers to the cost for unaccounted inventory, ie. the difference between the actual product cost and the usage amount cost. For instance, if your inventory shows that 250$ worth of potatoes were used yesterday, but your POS reflects only 240$ worth of potatoes sold, the variance will be 10$ or 4%.
Depletion refers to the amount of product used in a particular time period. This can be calculated for a week, bi-weekly, or monthly based on your restaurant
Usage refers to the amount of time your sitting inventory should last. Usage can be calculated by dividing the sitting inventory by average depletion
Waste refers to the amount of product that is not used due to over-ordering, spoiled food, improper preparation, and other reasons.

Find your restaurant's inventory needs

In order to create a successful inventory management strategy, it’s important to understand the needs of your restaurant. How many products are required in your kitchen? How much of each product is needed on a daily basis? How many sensitive items are part of your inventory? Analyze your restaurant’s POS data, speak to your kitchen staff, and observe operations for a good period of time to know exactly what your restaurant’s requirements are.

Create a plan

Build a clear inventory management process by defining the following aspects:

Inventory Frequency. Ideally, inventory should be taken at least once a week, and for your highest cost items (sensitive items), on a daily basis.
- Inventory Timing. Inventories should be taken, if possible, on the same day and at the same time and conducted when the restaurant is closed when there is no inventory movement.
Inventory Organization. To make your inventory process smoother and simpler, ensure that your inventory sheets are set up in the same way that your shelves are stocked. Your inventory sheet should have
- a) the item name
- b) how the item is counted
- c) Item Quantity
- d) Item par (how many of the items you should have on hand)
- e) unit price
- f) total item value.
- It is also helpful to label all the areas of your storerooms, where possible, with each item that should be stored in that location. This way all your items are stored in the correct place when put away after deliveries, easily located when needed, and when it’s time to count.
Inventory Team. Often those charged with taking inventory dread the process because it’s tedious, disorganized, and performed at the end of a long day. It’s always easier when you have a team to take your inventory; one or two people to do the counting and one or two people to record the numbers on your inventory sheets. At a minimum, it is best to have one person counting and one person writing.

Train your staff

Designate a team of employees towards inventory management at your restaurant and make sure they’re the only ones responsible for doing it. When the process is repeated by the same employees, it makes it more streamlined and easier to identify any issues. Make sure you train them well to minimize errors and have high inventory accuracy.

Use the First-In-First-Out (FIFO) method

As per the FIFO technique, the item that comes in first should go out first. This ensures that older products are not pushed back and ignored when a new shipment comes in. Label all your products with the date of arrival and create a storage system that streamlines the entire process for your employees.

Create a schedule and follow it

Consistency is the most important factor for accurately understanding your restaurant’s inventory needs. Create an achievable schedule for inventory management and stick to it consistently. This will help you identify patterns and optimize the process to minimize wastage.

Take action

Just recording inventory isn’t enough, it’s important to regularly analyze results and take action when needed. If you notice an increase in food wastage, find the root cause for it and make changes accordingly. Consider all the different factors responsible for the wastage and correct them before it has a negative impact on your business.