restaurant-management | 14 mins read

Recipe for Success- 10 Inventory Management Strategies That Actually Work

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Debdutta Bhattacharjee

By Debdutta Bhattacharjee

What is Restaurant Inventory Management?

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A restaurant that aims to rake in big bucks by introducing big-ticket menu items and employing gifted cooks won't make much headway without putting its house in order first.

Without having a clear idea of what is being utilized, how much of it is being utilized, what has depleted and needs to be reordered, what attracts the greatest demand, what is sitting idle on the shelves, and what is getting wasted, no foodservice business will be able to streamline its operations. Inventory management is, therefore, extremely important and a restaurant's inventory management strategies have to be highly efficient.

What constitutes inventory management? It is essentially the process by which restaurants place orders for stocks, and maintain, use and sell them. It involves ways in which raw materials and finished goods are stored, processed, and handled.

Inventory management is a component of supply chain management that deals with the flow of goods from producers to warehouses, and then to retail outlets. It requires keeping an exact count of each product as it goes into and out of storage facilities or points of sale.

There are several types of inventory management systems to choose from, and selecting the correct one will ensure that the right products are delivered in the right amount and at the right time.

With the help of robust management techniques, restaurants can keep a track of trends and ensure that there is always enough inventory to fulfill customer orders and shortages are spotted early.

Inventory turnover, which shows the frequency of products sold over time, can be used to determine how effective an inventory management system is. An organization necessarily should not store more inventory than is possible for it to sell. When unsold inventory or dead stock starts to pile up, one can surmise that the inventory turnover is low. This is not an ideal situation for any organization.

How Does Inventory Management Impact a Business?

Inventory management ensures that there are never too few or too many items available on hand. This reduces wastage and stock-outs.

Understanding stock patterns lets business owners forecast inventory levels as well as have a clear knowledge of where products are stored in order to make better use of them. With a strong inventory management strategy in place, inventory expenses and dead stock can be reduced.

An effective management strategy makes sure that dollars are spent solely on items that are in high demand. This ensures a stable cash flow for the business.

In this connection, economic order quantity is an important element to consider. The economic order quantity is the ideal quantity of orders that a business must place so that inventory expenditure can be minimized. The company's holding expenses rise as the order quantity grows. If a company continues to place orders for maintaining a certain inventory level, it will incur significant ordering costs and require additional storage space.

One of the most serious issues for a company trying to manage inventory is the presence of large quantities of unsold stocks. It may also be possible that the business lacks enough inventory to meet customer demand.

Meticulous inventory and order management will not only help a restaurant be prepared for demand surges, it will also cut food wastage. When expected demand falls short of resource availability, restaurants routinely end up wasting food. Food wastage has both, financial and humanitarian ramifications.

As it is, about 28-35% of a restaurant's revenue is spent on food. By reducing food wastage and expenditure, discontinuing products that fail to appeal to the customer's palate, and focusing on menu items for which there is a strong demand, a restaurant can considerably increase its earnings.

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Why is Inventory Management Software the Best Way to Take Inventory?

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A robust inventory management system will provide important sales data that will help you better understand demand-supply dynamics. It also predicts sales trends, allowing a restaurant to make better strategic decisions. By calculating the inventory turnover rate, inventory management software helps downsize inventory held and reduces carrying costs.

For restaurateurs, inventory management and order management systems armed with batch-tracking tools make product traceability easier. They reveal which vendors will most benefit the business, and give restaurateurs additional bargaining leverage with suppliers.

Using software to track inventory in real time avoids embarrassing situations like the inability to serve a dish listed on the menu despite high demand, owing to ingredient shortage. Stock-outs will disappoint customers, impacting revenue and the restaurant's image.

Furthermore, at times, product recalls are unavoidable. For example, it's possible that an allergen may be present, rendering the food unsafe. Tracing affected products will take time and effort without effective batch tracking.

Cloud-based solutions ensure that stock counts are more accurate and easier than those done with rudimentary spreadsheets or by hand. Excel spreadsheets and Google Sheets are prone to human error, require a significant amount of energy and time to update and monitor, don't update in real time, and aren't quite scalable.

Unlike spreadsheets, that are stored on local computers, cloud-based systems live on the world wide web, and data is saved on third-party servers.

Manual stock tracking is error-prone. Using software to automate ordering, business owners can control their operations while saving time and effort.

10 Inventory Management Best Practices- No.1User-friendly Software

A business employing user-friendly software is able to track stock levels and quickly look up product information using mobile devices. It also allows companies to examine historical sales trends and forecast which menu items are likely to sell rapidly or slowly. This will enable businesses to predict demand fluctuations and order stocks accordingly.

Since the stock-taking process is tedious and time-consuming, one needs to build systems that help information to be easily recorded.

The majority of inventory management software solutions include templates that are pre-installed for recording information. This reduces the amount of time spent on stock-taking. Furthermore, having inventory-tracking templates guarantees that employees won't overlook an ingredient. A smart technology is also one that can be integrated easily with an organization's existing management systems.

A Small Business may be able to handle inventory using manual means or basic spreadsheets, but as its size grows, it will need to devote more time to inventory management. Stock-taking is simplified by sophisticated, cloud-based software like Zip Inventory, which helps automate inventory management and provides users with real time access to a range of information. Zip Inventory can be downloaded from Hubworks, a specialty app store offering various restaurant management solutions.

Zip Inventory is so user-friendly that employees can take advantage of its voice search feature to count stocks just by saying the name of the product that has to be monitored.

No.2Set up the Right Team to Handle Your Inventory Management System

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Choose your most efficient employees and have them take inventory every time. This will help them become more proficient at the job, and allow them to complete the task faster.

Choosing different people to do the stock-take can lead to confusion. Constantly changing the roles and responsibilities of employees will prevent them from mastering the system. The process will then become inefficient and errors may creep in.

Also, the same set of individuals counting stocks will employ the same methods every time. This operational standardization will ensure that the stock counts are accurate.

To reduce the chance of theft, send the most trustworthy employees to count stocks. A small group of employees needs to be trained in inventory management so that they can take over even if certain members are unavailable.

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No.3Fix an Inventory Management Schedule

Regularly stock-takes are important, not just to keep track of stock levels, but to also understand how an ingredient contributes to an item's overall menu pricing. Using Zip Inventory software, varying count frequencies can be set.

You can do daily stock counts by documenting the initial and final inventory every day. This can help the restaurant keep track of the perishable foods it uses on a daily basis. Weekly stock-taking may be scheduled when the expiry timelines are longer.

Companies use cycle counting as a check and balance mechanism to ensure that physical stock counts are in sync with inventory records. This strategy entails doing a regular count and recording precise product adjustments.

Inventory audit plans are frequently prepared by Supply Chain and warehouse management professionals. The most effective inventory management strategies result in low rates of transaction error and excellent stock record accuracy without compelling employees to deviate from their primary responsibilities.

No.4Organize and Label Your Inventory Space

As it is, stock-taking is an extremely tedious job, and an organization would not want to make it even more difficult by keeping the inventory space disorganized.

An inventory space with supplies scattered around will be extremely difficult to manage. Messy storage spaces would not just mean stock-counting would take longer, but supplies would be overlooked if they were out of sight.

Have distinct shelves for different types of goods so that employees are able to quickly and easily locate what they need, and return products to their proper places when they are not in use.

It is also good practice to label shelves by category and prepare a list of all the items that are on them. This would save the organization a lot of effort and time.

No.5Avoid Overstocking of Raw Materials

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Having a balance between demand and supply constitutes a smart inventory management strategy. When there are too many items to count, inventory management gets difficult. On the other hand, too few stocks put a business at the risk of customer dissatisfaction. Larger enterprises, therefore, may find carrying safety stocks beneficial. A safety stock refers to additional amounts of a product that is maintained to avoid stock-outs.

If the restaurant storage areas and kitchens overflow with supplies, the kitchen staff may feel they have a free hand and start using ingredients in an unrestrained manner. This may lead to a negative variance in food costs, with actual costs outstripping expected costs.

Having manageable amounts of supplies guarantees that only fresh ingredients are used every time and it cuts the effort needed to keep perishable goods fresh. It also ensures that the storage area is tidy.

Another Hubworks product, Zip Ordering offers order cost information for each ingredient and puts inventory usage and order trends against the backdrop of actual costs incurred by the business. This helps in better order management and Inventory Optimization. Prediction of demand done with the help of a software solution like Zip Forecasting (also available on Hubworks) adds heft to inventory optimization efforts, and this ultimately helps a business avoid overstocking.

To make ordering as accurate as possible, Zip Ordering allows alert quantities to be set. These would prevent businesses from ordering more than what is required.

No.6Track Wastage

Efficient inventory management helps reduce food wastage. According to an RTS report, the US throws away the highest amount of food in the entire world- approximately 40 million tonnes every year. This amounts to 30-40% of the total food supply in the country. Food wastage can have a significant impact on a restaurant's bottom-line.

Since restaurants want fresh items to keep food quality high, and ensure food safety, it's critical to use supplies before they expire. This can be achieved by using items with the earliest expiry dates first. This will save wastage and eliminate errors caused by employees mistakenly using expired material.

One of the most common inventory management systems is the Just-in-Time or JIT strategy. This technique seeks to move stocks just in time for use to the manufacturing floor, thereby reducing wastage and increasing productivity. The purpose of the JIT system is to provide the exact amounts needed to complete production.

Generally speaking, 20% of the stock levels are responsible for 80% of the profits of a business. The handling of these products must, therefore, take precedence. With the help of Zip Inventory, businesses can access variance reports that show wastage costs for each ingredient.

No.7Document Recipes

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It can be difficult for restaurants with several locations to maintain consistent food taste and quality. Even if the restaurant works out of the same central kitchen, multiple outlets cannot deliver the same taste to their customers.

To ensure consistency in food quality and taste, recipes need to be documented to the last detail. This will ensure that when chefs from an outlet request supplies from the central kitchen, exact amounts can be sent over.

This reduces food wastage because the proportion of ingredients needed for each dish is well-documented. With the help of Zip Inventory, recipes can be standardized so that a menu item tastes the same no matter who prepares it.

No.8Integrate Your Inventory Management System With Your POS

Whatever software a business employs to automate restaurant operations, employees should manually record live inventory counts.

However, combining inventory management software with a Point of Sale (POS) system like Hubworks' Plum POS can be extremely beneficial. Smart POS systems update inventory as products are received and sold, and send alerts when stocks run low.

A cloud-based POS aids in the analysis of consumer ordering patterns and in the identification of the most and least popular menu items. This lets business owners make better decisions about inventory purchases.

A modern POS system helps in Inventory Control , ensuring that a business maintains adequate stock levels in order to meet consumer demand quickly, while keeping stock-holding expenditures minimal.

No.9Automate Reordering When Inventory Levels are Low

Knowing the time to place orders for more goods is crucial for any business. If you order while there is still a lot of inventory left, you would end up with excess inventory and higher holding costs. Also, if you place orders after stocks run out, you would have to wait till new stocks arrive. The longer it takes the vendor to deliver orders, the more sales opportunities you'd miss.

Therefore, it is essential to set a reorder point, which will let you know when supplies need to be replenished. As mentioned before, a smart POS system is able to alert users when inventory depletes.

Automated inventory management systems enable replenishment of supplies by producing purchase orders whenever stock levels reach a minimum threshold.

Such an automated system ensures that processes can be streamlined and time saved. For instance, if the supply of an item is low and is approaching the reorder point, the automated software for Inventory Management would send out notifications and can even place orders itself.

No.10Use Your Inventory Management Software to Forecast Demand

A business owner must track, evaluate, and comprehend which products are sold daily and in what amounts, and try to spot sales patterns. It's also important to find solutions to deal with actual and expected mismatches around stock utilization.

For example, let's say that every month a restaurant purchases saffron, expecting to use it by the month-end. However, analysis of inventory reports from the past three months shows that saffron doesn't have a lot of takers and is consumed infrequently. Now, saffron is an expensive spice and if the demand forecast for it is grim, it makes no sense to continue using the spice.

Similarly, when there are big events coming up, demand is likely to rise. Harsh weather conditions, on the other hand, may cause demand to fall sharply. Inventory and order management systems need to be adjusted accordingly.

In this regard, it would be worthwhile to integrate inventory and order management systems with demand/sales forecasting solutions. Zip Forecasting, which is available on Hubworks, provides a high degree of Forecast Accuracy , and with merely a few clicks, accurate sales estimates can be generated.

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"Our customer's trust is what keeps us in business. They expect fresh tasting food with no threat of ill-born diseases. Zip HACCP keeps us compliant with HACCP and FDA regulations through its integrated temperature solutions, food safety assurance, and end-to-end task reporting. We also use Zip Inventory to save time on inventory counts and have much-needed predictability to our ordering process. The Hubworks business management apps are perfect for our restaurants."


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