5 Best Practices for Restaurant Inventory Management

When strategizing for your restaurant, you need to know what’s on hand to plan for the future. Restaurant inventory management is the process of analyzing your supply, economizing on what you’ve got, and using this data to make informed purchases. Effective inventory management is like a routine “vitals check” for your kitchen, and while some regard it as tedium, it helps save gobs of time, money, food, and energy on the bottom line. Here are our five best practices for inventory management and how to smoothly implement them in your restaurant.

1. Develop a System and Train All Your Staff

To ensure a restaurant process becomes evergreen in your operation, train all your staff on it. Yes, it’s unlikely you’ll need your entire team for every inventory check, but the idea is that if necessary, anyone could jump in to help. Specific inventory items will vary from restaurant to restaurant, but train your staff on these universal inventory management terms:

• Sitting inventory: This is the amount of product (or dollars’ worth) you currently have in-house. Whatever increments you use, be they measures or dollar amounts, ensure you’re consistent everywhere.
• Depletion: This is the amount of product (or dollars’ worth) you’ve used within a set window of time. Set your windows to daily, weekly, or monthly increments, and calculate using the sales data from your Point of Sale (POS) system.
• Usage: This is the amount of sitting inventory (or dollars’ worth)ƒ  divided by the average depletion within a set window. So, if you have 4 gallons of ketchup in your sitting inventory and your depletion rate is a gallon a week, the ketchup’s usage is four weeks.
• Variance: This is essentially the difference between your “theoretical usage” (usually calculated by your POS) and your actual usage. So, if you record beef usage at $100 in a week and your POS “predicted” $90, your variance is $90(theoretical) – $100(actual) =-$10 or -10%.
• Yield: This is the percentage of a product for which your sales accounted vs. the theoretical amount that the POS says should have been used. Calculate Yield by taking your theoretical usage and dividing it by the actual. In the last example: The theoretical usage is $90 and actual usage $100 or $90(theoretical) / $100(actual) = $0.90 or 90%

2. Safeguard from Mistakes 

Manually managing your restaurant’s inventory subjects you to human error. To cut down on mistakes, assign at least two different employees to run it. By doubling up, you put an extra set of eyes on things to check for anomalies and inconsistencies with one another. To help the process run smoothly, try and structure your inventory sheet to match your kitchen’s layout. In practice, organize it so that staff can move bin to bin, marking the items as they go. Finally, automated kitchen display systems can assist with many aspects of inventory management, like bin management, to monitor food usage and historical averages for accurate reporting.

3. Manage Inventory Regularly and Consistently

Taking inventory isn’t a chore, so don’t treat it like one! The data you collect from your inventory management efforts will determine your menu and, ultimately, your entire restaurant’s future strategy. It’s like peeking under the hood to check its levels. Try to be proactive and regular. Most importantly, don’t wait till you’ve almost run out to replenish a product. Always take your inventory around the same time of day and around the same time of the week. If you don’t, slight inconsistencies will throw it off between sessions. If you take inventory in the morning for one month, then the next month take it in the evening, you’ll find inconsistencies in data. Performing inventory at the same time week after week ensures your data is as accurate and reliable as possible. When possible, try to utilize the same staff or group of staff, to take inventory. In the big picture, you want all staff trained on it, but in execution, you’ll find the process runs swifter and with more accuracy when practiced staff members are doing it.

4. Enact a First In First Out (FIFO) Mentality

FIFO stands for “first in first out.” This pneumonic phrase suggests that you use the older food in your inventory first, ensuring nothing expires. These four letters make up the gold standard for all restaurant inventory management and ensure you’re economizing on your sitting inventory. To employ an effective FIFO strategy, label all your food with the date you received it and the date it expires. Use those foods that will expire soonest before the other foods and keep vigilance over what’s about to run out. Rember also that down the line, you may introduce or discontinue menu items. As these changes occur, you’ll want to update your processes.

5. Examine Losses from Every Angle

100% perfect food economy is challenging, but it’s still the metric for which to shoot. Inevitably, some food in your kitchen will spoil before it goes out, and there’s always variation across inventory figures. Still, understanding where these pain points originate is critical in helping to limit them. Losses are those deficiencies attributed to human error, i.e., the most significant variable in your restaurant. Restaurants overspend when more food is purchased than is being depleted within a window, and it spoils. Principles like FIFO and consistent inventory alleviate these issues by establishing a clear process that’s consistent and regular. Furthermore, it helps eliminate losses resulting from carelessness or overspending. One final factor to examine, unsavory as it may be, is employee theft. A shocking 75% of employees (regardless of industry) have admitted to stealing at least once from their employer. In the restaurant industry, employee theft accounts for $3 to $6 billion in losses every year. It is a factor and occurs in numerous ways, sometimes even unintentionally. The frenetic kitchen culture can foster self-imposed breaks, eating free food on the job, phony walkouts, and register skimming, resulting in a long list of secret nickel and dime losses that add up. You can’t eliminate all theft outright, but you can severely curb it by maintaining a fulfilling work environment where staff feel valued and understood. Furthermore, bringing the issue to light within your restaurant established a transparent atmosphere wherein people feel less incentive to steal.

Conclusion

How you manage restaurant inventory will affect every other process, from your menu content to the dollars in your bottom line. Follow these best practices for tip-top restaurant inventory management and keep an eye out for our upcoming article on how to structure a management worksheet. Subscribe to the blog for more interesting restaurant content!

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About the Author

Dylan Chadwick is a Content Marketing Specialist at QSR Automations. He graduated from Brigham Young University with an English degree and journalism focus. Nowadays, Dylan loves to listen to Mercyful Fate and nothing else.