The reality of operating a food service business rarely affords owners and managers much time to relax, and one of the biggest time sinks is inventory management. It's expensive to start out, and for small to medium businesses, it's also where the bulk of their capital has been invested. Unless you're smart and careful, that cost can be amplified by any number of issues when you or your staff doesn’t know the best practices for inventory control.
Between inventory counts, handling the math of those counts, compiling final reports, and then setting up orders, you'll often spend days closed up in an office crunching numbers and scratching your head. If your inventory system is flawed, you might be stuck at your desk for weeks trying to unravel the mystery of where counts went wrong and why you ended up with three times the fresh tortillas you should have and half the eggs you expected. No matter how you look at it, you're going to need to spend more money to fix the problem before you can truly make any profits. With all your capital already tied up in the wrong type of inventory management, what are you supposed to do?
We call this the Great Inventory Conundrum. To make money, you have to spend money—but where does that money come from? If your inventory control isn't spot-on, you'll burn through even your emergency fund before you see any profits hit your bank account. But all is not lost Even if your inventory control isn't on par right now, we've got you covered. We have compiled a list of the best practices for inventory control that all restaurants should know. These tips are designed to streamline your inventory management, help your counts go smoother, reduce mistakes, and improve profits—all while making some simple adjustments to how you already handle your stock. If your inventory is currently a mess, it's not too late to get a handle on it.
Pen and paper inventory is a thing of the past using inventory apps Before we get into the list of best practices for inventory control that will help your restaurant thrive, it's important to know what things not to do. If you read this short list and think these situations sound crazy, good It means you're already on your way to using the best practices for optimum inventory control. If, however, these situations sound familiar to you, it's not too late to stop, take a step back, and correct these bad habits. If you have done the things on this “don’t” list, don't feel too bad - nearly 43 of small businesses make one or more of the following detrimental mistakes.
1. Don't use pen and paper to track inventory
This is an outdated and heavily flawed method of inventory control. Thirty years ago, it was all restaurant owners had. It worked only because there were no other options. With today's technology, pen and paper inventory sheets look more like ancient abacus math than anything a modern restaurant should be using. There's a much better way to approach inventory management, and it's a lot easier to switch than you may think. Not convinced this is an issue? It's a fact that bored or stressed out employees often make mistakes counting or doing mental math after a long day, and even if your staff has done a perfect job with the count and the math, paper inventory sheets can become damaged, destroyed or misplaced. Mistakes and damaged sheets mean more manpower and more money will end up going into fixing the counts and redoing the missing sheets. If you can avoid these problems, that's money in your pocket. Ditch the antiques and step into the future. With our best practices for inventory control, these problems will simply vanish.
2. Don't completely skip tracking inventory
Skipping inventory counts all together may have worked for the little Mom and Pop diner down the street from where you grew up, but they probably only needed a dozen or so customers a day to stay in business. Times have changed, and ignoring your stock isn't on the list of best practices for inventory control. If you want your restaurant to make it in today's competitive food service business, you're going to have to step up your game. If you can't pull up an exact count of every item in your store at the press of a button or swipe of your finger, you're on the losing team. Maybe that sounds harsh, but the truth is indisputable here. Not tracking your inventory is just as bad as not locking your doors at the end of the night or not putting your money in a secured bank account. How can you serve your customers if you don't even know how much of their favorite foods are in your freezers right now? And what about the overstocking problem? If you don't track your inventory properly, you could end up with a surplus that you'll never be able to sell. That means wasted storage area, spoilage, and extra disposal costs. No matter how you look at it, skipping inventory counts all together leads to massive costs in labor and services.
3.Don't ignore inventory errors, even if they seem small
Believe it or not, many small to medium businesses will ignore what they consider to be a minor count or insignificant math error. Whether your count is off by one or one hundred, it's a mistake, and it needs your immediate attention. Ignoring a miscount just because you think one number won't matter, or you can't be bothered with a tiny mistake during your dinner rush, is a grave mistake that will likely come back to hurt your bank account. It could be too much of an item that will eventually spoil, or not enough of a popular item that will upset customers when they can't order it—either way; you're losing money. We know that fixing errors is no fun, and as we've mentioned, it takes time and money to fix mistakes, but what if we told you there's a simple way to avoid errors in the first place? I hope we have your attention now.
Now that you know the three worst items on our "don't" list, it's time to get to the good stuff. What can you do to get a handle on your inventory management without spending a fortune or causing a huge investment of time and effort to change everything? It's a lot simpler than it may sound.
1. Switch to real-time inventory management
Many restaurants use periodic reviews of their stock to try and update their numbers and predict trends. While this was a passable system in the past, it's not the best route for small to medium businesses. There's just too much lag between your count and your opportunities to fix issues efficiently— this almost always results in a scramble to correct mistakes and recoup lost revenue. The solution is switching to real-time inventory control.
Tip - A real-time inventory management system will alert you to low stock, unexpected lags in usage, slow sales of specific items, and even send you error reports if a problem is detected. Real-time inventory management is top on our list for best practices for inventory control as you will always know exactly what's in stock and if any problems arise. Knowing as soon as you're low on a product or as soon as a count comes back wrong means you can take immediate action to solve the issue, rather than waiting days or weeks, when it's already too late, and you've lost money. Real-time inventory solutions range from complex software and specialized devices to the newest and most flexible apps used with lightweight mobile devices. The newer, lighter, and user-friendly options are also the most cost effective.
2. Create an intuitive category system
Inventory control is not just about what foods you have in stock. To truly streamline your inventory control, you need to think bigger and widen your view. Everything that you paid for is part of your inventory. That means furniture, cleaning supplies, utensils, etc. While this is a common practice—counting everything on inventory day—a big mistake is keeping it all on one page or in one catch-all group. Best practices inventory control means breaking your restaurant's stock and "stuff" down into intuitive categories. Go beyond "food" and "non-food," and think of logical categories that will help purchase orders in the future. You probably don't order your furniture polish from the same place you order your milk, for example, so why would you keep those items on the same inventory list? With frozen foods, pantry goods, cleaning supplies for the back, cleaning supplies for the front, office supplies, and more you need to logically categorize inventory.
Tip - Separate, categorize and manage these lists, so ordering is a breeze later on. We can't give you specific category names since these will depend on a lot of factors we can't possibly know about your store, but it shouldn't be too hard to figure out what works best for you. Our best suggestion here is to think about how a grocery store is set up. Everything has a place; you just need to give it a name. In addition to making ordering easier, having multiple lists helps make reports easier to create and trends much easier to track.
3. Manage inventory with a keen eye
When it comes to inventory management, non-food retail stores have it easier than food service businesses do, simply because they can order and hold more stock without the risk of spoilage. Food services need to find a balance between not enough stock to meet customer demand and too much stock that risks loss due to spoilage. There are no hard and fast numbers that we can offer here—your sweet spot is going to depend on your particular business, your location, your sales history, and your storage facilities. We can, however, offer these suggestions.
Tip - Successful restaurants keep their stock relatively low, order frequently, and stay in the loop with frequent and accurate inventory counts. In addition to a big reduction in spoilage and the costs associated with disposal, keeping a lower inventory also means you save space on storage. For frozen or refrigerated foods, it also helps keep air in your walk-ins circulating properly, which lowers your power bill and extends the life of your equipment. Amazing what the right inventory control can affect, isn't it? You can use your real-time inventory control system mentioned in tip number one to compile reports, track trends, and predict future needs, which saves a lot of cash down the line.
4. Make quality control everyone's responsibility
Food services are used to staying up on quality control for their foods, but a successful restaurant will take this one step farther. Our fourth tip for best practices in inventory control comes in the form of training and teamwork. Instead of keeping one person in charge of quality control, or just one section of your staff trained to do so, make quality control everyone's responsibility. That means temperature checks, equipment inspections, and cleaning routines that focus on efficiency, thoroughness and keeping an eye on your inventory every single day. Perhaps this sounds excessive, but imagine if you only did each of these things once a week.
Tip - Imagine quality control did their job on Thursday and found no issues, but on Friday your freezer springs a tiny leak in the farthest corner. If nobody else is checking, by Saturday night, you could lose everything in the freezer. Not only will that destroy your weekend sales and chew through your emergency fund replacing the food and repairing the equipment, but you've also caused your staff extra stress. Your employees will all feel responsible or worry that they'll get fired over this and your customers will begin to doubt your brand. Daily checks don't seem as excessive now, do they? Get those QC duties onto your employees’ task checklists and adjust as needed to maximize the results.
5. Enlist the help of apps and mobile devices for optimum inventory management
Chances are good you're reading this article on a mobile device right now. Advances in technology have put affordable, compact, and powerful computers into the hands of everyone from grade school kids to the elderly - all in the form of smartphones, tablets, and laptop computers. App development has reached the point where you can find an app for just about anything. Using these devices, and their multitude of applications has become part of daily life for most people, so it stands to reason that developer would also apply these features to businesses, too.
Tip - The food service industry benefits from technology by enlisting the help of inventory control apps and mobile devices that connect wirelessly to the cloud, allowing managers and employees to share real-time data to improve efficiency and save money. With devices similar to the smart phones and tablets your employees probably use every day, it's simple to teach them to use mobile inventory control systems. They'll feel familiar and user-friendly—a far cry from the clunky inventory sheets and logbooks of days gone by.
Best practices for inventory control include the use of software that streamlines other parts of a business, too, not just the inventory itself. That includes task lists, food safety apps, employee records, and a large number of other apps to help get tedious jobs done faster, more accurately, and with lower cost. It can seem daunting when you first switch over to our best practices for inventory control, but once you see these tips in action and get your hands on the right apps, inventory control will no longer be a time and money drain on your business. Check out Hubworks' business management software and applications to increase your sales and control costs.