Inventory forecasting is an interesting method of predicting future supply usage based on previous data and a truly impressive way to make future business decisions. It offers not only future potential, but also insights into past usage that can inform you about your business’ habits, and whether those habits are putting the overall success of your restaurant at risk. In this way, inventory forecasting is a method wholly unrivaled by nearly any other, beaten only by the potential of inventory management apps and software systems, such as Zip Inventory, which makes these same kinds of projections much faster. Zip Inventory’s inventory management app and software is scalable so that it can be used at large establishments as well as successfully used as a small business inventory app.
Even when using ultraefficient inventory forecasting apps and software, inventory forecasting is not a method without any risk. To be fair, these may not necessarily be the kinds of risks that have the potential to end your business outright, the way risks associated with food safety might, but they are still worth discussion. The kinds of risk associated with inventory forecasting do hold the ability to shift the successful course your restaurant might be on, especially if taken to the extremes. Therefore, being aware of these risks and, when possible, taking measures to prevent them, is key.
This article aims to address the two biggest risks to successful inventory forecasting that you might encounter when managing your restaurant. In it, we will also address some ways that these risks can be hopefully avoided, or at the very least have their chances lessened. Our goal is to make you not only more comfortable with the idea of conducting inventory forecasting, but more confident in your ability to do so as seamlessly as possible, such that you succeed when you do.
Incorrectly assessing inventory is the biggest risk of being able to perform successful inventory forecasting; this makes plenty of sense, considering the entire basis of inventory forecasting relies on having correct inventory count numbers.
Inventory forecasting involves determining the average amount of a particular food item used during a specified time frame. To do this, look at the number of that item that you had when the order came in, and subtract from it the number left at the time that inventory is taken. The difference between the two numbers is the amount that was used. Based on this, you learn what you use, on average, during that time frame. If you get this number wrong, you could end up with anything from double the amount you need to a quarter of that amount.
So how are incorrect inventory counts avoided? One of the most sure-fire ways is to have two employees conduct an inventory count. This confirmation process helps to ensure that the inventory count numbers are correct, and isn’t nearly as time-consuming as the potential risk would be damaging. If by some chance, two employees do conduct this count and come back with different numbers, then you’ll know somewhere there is a discrepancy. You have a couple of options here, such as having a third employee do the count or having them both go back and count together. Whatever method you choose, it will go a long way in decreasing your risk for failed inventory forecasting.
Since inventory forecasting relies on the notion that every week, month, or unique time frame that you’re using for a reference is the “average,” any differences will immediately throw off your inventory count. These variances come, typically, in the form of weeks that are busier or slower than normal, since these have a direct impact on the rate at which food supplies in your restaurant are consumed. If you have an exceptionally busy week, you might find that you run out of a certain item faster than you’d expected to, and have to correct the issue as it arises. The same is true for slow weeks, where you will find that you end up with more extra food than you would typically have. Whichever of these occurs, the result is the same - your inventory counts will be different.
If you rely on the trends that previous inventory forecasting efforts have established, then by assuming these numbers are average, you can assume that the numbers are true for a majority of cases (by cases, we mean weeks, months, or whatever your ordering cycle is). As a result, you can assume that each new cycle will be average until given some indication that it won’t be. If you have a slow week and proceed to order significantly less in the following week, you may very well start that week slow and, come to the end of it, be extra busy, thus reestablishing your original average as the total that you went through that week. Is it slightly complicated? Absolutely, but these are the facts of trends and projections.
Here at Hubworks, we know that inventory forecasting is a complicated process, which is why, in an attempt to simplify it, we have included elements of inventory forecasting into our Zip Inventory inventory management app and software. With the Zip Inventory inventory app and software, small and large businesses can better manage their inventory counts and ordering processes all in one solution.
There you have it, what we consider to be the two biggest risks to effective inventory forecasting. As you can see, the first risk we discussed is one that can be preventable given the proper training and precautions. The second risk, by contrast, is not preventable, since you can’t force customers to eat at your restaurant and certainly wouldn’t want to turn them away on the off chance they want a menu item that you might be running low on. However, this risk is one that can be handled in a proper, effective, reactionary way. We hope that now you have a much more well-rounded understanding of inventory forecasting, and feel much better equipped to handle this fascinating industry technique in the future, such that you will be able to reap the benefits in your restaurant.
If you’re interested in learning more about forecasting software and the ways it can affect the inventory, sales, and labor scheduling of your business, check out our “7 Ways Forecasting and Workforce Planning Can Increase Your Profits” article which is also located on the Hubworks Blog. All of our Hubworks software products, including Zip Inventory and Zip Forecasting, can be seamlessly used together and compliment one another.