Posted by Brady Thomason, NetSuite Solution Manager, Restaurant & Hospitality

Inventory is a primary expense at any restaurant, accounting for up to 35 percent of total costs. Therefore, to run the most efficient and profitable business, restaurant owners must be skilled at inventory management. But management of inventory remains a challenge across the United States, with some restaurants wasting up to 10 percent of all food purchased. A large portion of this waste is due to poor inventory control. To be a sound restaurant owner, you must understand the basics of inventory control. However, great managers also employ a variety of inventory management hacks, which allow them to squeeze more profit out of every dollar.

The Basics of Inventory Management

There are a few must-haves in any restaurant inventory system. The items listed below are fundamental aspects to include.

A Digital POS System – Gone are the days of handwritten ledgers for POS orders and tracking. Today’s restaurants need digital tracking methods. A digital POS simplifies order tracking, reduces errors and provides a range of data and charts to help operators located new efficiencies.

Utilize the First-In-First-Out (FIFO)
Method – FIFO method requires inventory to be lined by expiration date and in-times, so you utilize all inventory effectively and safely. FIFO helps you develop plans to use perishables so food doesn’t go to waste, better track inventory usage and adjust order quantities based on the restaurant needs.

Stay Away From Excess Inventory – Overstocking leads to many inventory issues like wasted products, cash flow issues and even health concerns. Always set limits on your storage facilities and keep only stock that is necessary between orders. It might take time to discover the optimal inventory between order periods, but the results will be well worth the effort.

Engage Your Entire Staff – Your entire staff needs to understand the importance of inventory control and the impact it has on profitability. A team with an eye toward inventory management can help address issues and produce the best results. Also, training multiple staff members on inventory systems allows for a second pair of eyes, as well as backup in case of any staffing issues.

Check For Losses – Inventory is an expensive restaurant asset that needs to be protected. It’s important to schedule regular inventory checks to be sure there is no missing product or losses. If you find inconsistencies in inventory quantities, do everything in your power to solve the problem moving forward.

Inventory Hacks to Increase Profits

Outside of the standard procedures, the best restaurant operators use inventory hacks to build more efficiencies and profit into inventory controls. The inventory hacks listed below will help take your inventory management process to a whole new level.

Do Price Comparisons – Managers in charge of inventory should regularly check the market for price comparisons. If you can decrease item costs without a reduction in quality, it may be time to switch suppliers.

Perform Item Checks – Compose daily checks on items that have the most shrinkage and determine what’s causing the issue. Typical problems are employee theft, over-prepping, over-portioning and over-ordering.

Cross-Utilize Ingredients – Cross-utilizing ingredients in several menu items throughout your menu will reduce inventory costs. A thoughtful menu plan can help streamline inventory needs.

Release Inactive Inventory – Get rid of any inventory you’re not using. As long as a product is sitting on your shelf, it costs you money. If you have inactive stock, sell, liquidate or give it away.

Protect Your Investment – Theft is an unfortunate reality in the restaurant business. Protect your assets by locking down inventory. Make it clear to all staff that theft is taken very seriously and develop an ethical company culture.

Rotate Inventory Managers – Change inventory managers over time. This method assures that multiple staff members are trained in tracking methods and helps keep employees honest.

Track Actual vs. Theoretical Inventory by Ingredient – This metric highlights the variance between theoretical inventory usage (based on menu item sales) and actual usage (including waste, over-portioning, etc.). Generally, the variance should be less than 1 percent. Tracking this variance by ingredient will reveal where you need to focus.

Set Inventory Goals – Goal setting is an essential aspect of any business, which also applies to inventory management. Setting monthly inventory-related goals such as food cost percent, actual vs. theoretical percent, and overall inventory value will align your team and lead to cost reductions.

Good Inventory Control = More Profits for Your Restaurant 

Following standard inventory controls and procedures is a must to maximize profits at restaurant locations. But the best operators go beyond the basics, pursuing new inventory hacks on a constant quest for greater efficiency.