restaurant inventory management software | 14 mins read

Restaurant Inventory Management Software- What it is and Why You Need it

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Debdutta Bhattacharjee

By Debdutta Bhattacharjee

What is Restaurant Inventory Management?

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Inventory management refers to the activity of ordering products, receiving and storing them, making use of them, and finally, selling them to the customers. A restaurant can accomplish the critical task of inventory management with the help of a fully automatic restaurant inventory management software, or by using basic computer-based spreadsheets, or even the old-fashioned way of simply counting stocks by hand and recording them using pen and paper.

Inventory management is part of managing supply chains, or taking care of the flow of goods from the manufacturer, to the warehouse, to the point of sale.

Inventory management is crucial to a company's performance because it guarantees there are neither too few nor too many products in stock. This way, the company does not have to deal with stock-outs and wastage of resources can be prevented.

Understanding stock patterns enables an entrepreneur to predict stock levels as well as pinpoint places where products are stocked, allowing him/her to use them in a more effective way. Since it is possible to accomplish order management from anywhere, the business owner can look to keep no more than a modest quantity of product stocks at each site. This trims the cost of inventory and decreases the amount of unsold material that could turn obsolete.

Inventory management that is efficient and effective sees to it that high-demand items are prioritized. It ensures that the company can sustain a consistent cash flow.

A restaurant owner can get actionable insights on food trends by closely studying the reports generated by the restaurant POS system, and from reliable food news websites.

Inventory turnover, which shows the frequency of products sold over time, can be used to determine how effective an organization's inventory management is. The organization would not want to be stuck with dead stock or unsold inventory that may soon become useless.

Drawbacks of a Manual Food Inventory System

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Manual inventory management involves corresponding with vendors over the phone and through emails, counting the stocks received and the stocks on the shelves by hand, and noting them down using pen and paper. The same primitive process may be used to update inventory counts as the products are sold.

This is an extremely inefficient process of inventory tracking and inventory management, especially when cutting-edge technology is available today to automate the entire exercise.

To err is human and manual methods carry the risk of human error, inadvertently making their way into stock-taking. Having to manage numerous phone calls, emails, and reams of paper carrying a maze of numbers can befuddle anybody, and stocks would either be underestimated, overestimated, or the business owner may completely lose track of what is being bought, sold, or lost due to pilferage, spoilage, or pest infestation. Manual inventory management is a lot of hard work, but not necessarily smart work.

Plus, it may not be possible for business owners to complete the entire stock count themselves. They have to rely on restaurant staff, and the more the number of individuals involved, greater the chances of erroneous stock counts.

An incorrect stock count will have deleterious effects on the business, making it focus on issues that are not really pain points, while ignoring areas of real potential threat.

Another drawback of manual inventory management is that it takes up a lot of time and effort. Inventory management is a tedious back office process, but no organization can sidestep it, and when an inventory management software is ready to do the entire job, that too more accurately and speedily, allocating inventory management to employees is a wasteful exercise.

The vital human resources of the organization can instead be deployed for other tasks that need attention, such as interacting with customers, giving them a personalized and engaging experience, while the restaurant management software operates in the background without a fuss.

An alternative to the fully manual method of counting stocks involves using simple spreadsheets like Excel spreadsheets and Google Sheets. This method uses a semblance of technology, but it is rudimentary at best and still involves a considerable degree of human intervention.

These spreadsheets are without a doubt easy to use and cheap, and therefore, well suited for small businesses that do not have complicated requirements, need rapid stock-taking solutions, and often operate on a shoestring budget.

However, for larger organizations, inventory management has to be done on a more sophisticated platform. Spreadsheet technologies are prone to mistakes and require a significant amount of effort and time to be updated and audited. They do not update in real time, have limited capabilities, and are difficult to scale.

Cloud based inventory management software solves most of these problems. Unlike spreadsheets, which are saved on local computers, smart inventory management solutions reside on third party servers and are hosted on the worldwide web.

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Advantages of Inventory Software

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1. Trim food cost and food waste- In order to be profitable, a restaurant should not let its food costs be more than 35% of its revenue. However, food wastage is a big problem with restaurants in the U.S. The amount of food wasted in American restaurants is around 30 billion pounds every year.

This means that businesses are wasting money on food that they do not need, as well as on logistical arrangements to store and stock that food.

Added to that are the immense humanitarian implications of such wastage. A proper inventory management system will prevent restaurant owners from making unnecessary purchases that are likely to go to waste.

Business intelligence data from sales records and consumer demand trends will reveal which items have few takers and spoil sitting idle on the shelves.

To cut the cost of goods sold, restaurants should ration food items wherever possible, conserve food supplies, and tighten vendor management to get the best deal. Optimal restaurant inventory management and supply chain management will also narrow the gap between the expected and actual use of food.

2. Enhance business profitability- A restaurant can significantly increase profits by reducing food waste and expenses, striking off items that are unsuccessful from the menu list, and focusing on popular menu offerings.

3. Improve vendor management- A stock and order management system with batch-tracking tools improves product traceability for restaurant owners. It shows which vendors offer the biggest benefits for the business and need to be cultivated, and which suppliers need to be replaced even if they have been long-term partners. With strong inventory software, restaurant owners are well placed while negotiating with suppliers.

4. Improve decision-making- An effective inventory software furnishes important sales data that can help restaurant owners better understand the dynamics of demand and supply. It helps restaurant owners make more informed and data-driven strategic decisions by allowing them to better predict sales and consumer demand patterns.

5. Getting rid of human errors- Stock-taking by old-fashioned manual methods is time-consuming and open to errors. Technology makes ordering an automatic process, allowing managers to maintain a record of the inventory, while conserving effort and time and removing concerns about stocks running out or spoiling.

6. Management of food recalls- There are occasions when there is no other option but to recall an item to assure food safety. The presence of an unreported allergen in a food product, for example, may render it unfit for eating. Without good batch-tracking, tracing compromised items will be onerous and take up a lot of time. Food safety can be addressed with the use of inventory management and supply chain management systems.

7. Quality customer service- An inventory software alerts restaurant owners when stocks run low so that the restaurant business is always adequately and optimally stocked, especially with ingredients for its high-demand dishes. Using inventory management software to monitor goods in real time, a restaurant business can avoid embarrassing stock-outs and failure to provide a dish, despite high popularity.

How Does a Restaurant Inventory Management System Work?

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Restaurant inventory management seeks to keep track of raw materials and processed goods so that product purchases can be planned, food costs can be analyzed, and food waste can be minimized. If a restaurant can afford it, it should use an inventory management software solution that is integrated with the restaurant POS system.

A restaurant inventory management software works this way- Firstly, scanners use barcodes or Radio Frequency Identification (RFID) to identify the items purchased by customers. The scanners read the barcodes and relay the product information to the software. The barcode digits are interpreted by the software, which matches them to the type of item they represent.

This lets merchants keep a tab on sales and inventory with the help of a hand-held scanning device at the point of sale counter. POS systems update stocks when an item is bought by a customer in person or through online ordering. POS reports can then be analyzed by restaurant owners to gauge stock levels and take appropriate business decisions.

A specialized restaurant management software maintains a record of how much merchandise is purchased and how much remains in the warehouse and how much is left on the shelves at the restaurant. It provides the restaurant owners with a real time view of what is going on. The software solutions are sometimes set up in a way that they can order automatically at given points.

Once a decision is made to re-order an item, the system dispatches that information to a vendor electronically. This information is stored in the computer's memory and accessed by managers at both ends. An automated and intelligent inventory tracking and inventory management system doesn't just let you monitor stock levels, it also helps you prevent underutilization and overstocking.

Top 3 Inventory Management Systems for Restaurants

1. Zip Inventory- Zip Inventory outperforms the competition as far as inventory management software solutions are concerned. This product is simple to use and can be found on the restaurant app store, Hubworks.

When you take an inventory count on the mobile app, Zip Inventory automatically syncs it to the cloud. Inventory management software makes it easy to view your entire inventory in one place.

You can select count frequencies for each item. The total amount of each product bought by the customers is clearly displayed, and inventory tracking in real time is possible.

Inventory reports are available at all times, and the software gives a clear idea of the menu items sold and their price, expected total food cost, and the profit derived by selling each menu item.

Zip Inventory identifies the top-selling and popular menu items and makes sure that you are always well-stocked to serve your top products. A business owner is notified instantly if an inventory count is incorrect or if another inventory-related problem emerges, allowing him/her to take immediate action.

2. Upserve- It is a restaurant management system with a robust point of sale platform and rich inventory management features. Upserve can track the use of ingredients right down to the ounce. The software is cloud-based and app-based. It offers both, iOS and Android mobile apps that allow a restaurant owner to manage and control their business from anywhere.

This software solution also has an offline mode and offers a variety of hardware options. Upserve allows recipes to be synced to the point of sale system, and stock levels to be automatically replenished when new stocks arrive.

It also lets business owners perform vendor management tasks, purchase products with a single click, scan stocks using the mobile app, get notified when stocks deplete, monitor ingredient stocks in real time, and match expected and actual inventory reports.

Upserve works with tools for reservations and online ordering. It offers three subscription levels, with the Pro Plus and Pro plans offering inventory management features. The Core plan supports inventory management for an additional charge of $99 per month.

3. Zoho Inventory- This software solution provides innovative integrations, automated processes, and fulfillment of orders. This online inventory management solution comes with both, a free and a paid edition. Zoho Inventory is suited mainly for small businesses and start-ups. It allows a business to add items, review stock levels, and fulfil orders using any device. It supports the first-in, first-out, or FIFO method.

Zoho Inventory enables organizations to place orders for out-of-stock products or send order confirmations over email automatically, manage drop shipping, provide real time notifications to buyers, and receive automatic and real time stock updates throughout different channels.

This cloud based software is compatible with desktops, tablets, and smartphones. It is available through a web browser as well as iOS and Android apps.

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What do Inventory Management Systems Cost?

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The price of inventory management software is determined by a number of factors. These include-

  • Whether the business is looking to implement a cloud based or on-premise solution
  • Number of users who have access to it
  • Whether the business is using an all-in-one accounting and inventory software or just an inventory software
  • Whether the business requires other specific features
  • The extent of training and data migration required

When deciding on a budget to buy software, a business needs to consider if it will profit more from a basic system or a comprehensive accounting and inventory enterprise resource planning solution.

Not only will the cost of each system differ substantially, but so will the capabilities. The business may look to save money while investing in an inventory management system, but it also needs to see if the software it buys can meet all its business needs and expand in tandem with the business.

Most inventory software solutions nowadays are cloud based, and businesses have to pay a monthly or annual fee. For yearly payments, software suppliers may offer a discount, which could be as much as 10%. Prices for standalone inventory tools are based on the volume of orders, but POS systems that possess inventory tracking capabilities offer tiered plans with a wider range of functions.

The number of warehouses, store locations, and users may be capped by certain programs. Adding new terminals to a POS system may cost a business a bit extra. Inventory Management software is available for free or for a monthly fee of $300 or more. Plans that are priced higher cater to businesses with big sale volumes and may include additional features, such as advanced analytics, automation, and integrations.

Inventory Management FAQs

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1. How important is inventory management in the supply chain?

Since an organization must balance client demand, with space for storage and monetary constraints, inventory management is critical in the supply chain. Inventory management gives managers a full view of the supply chain (production, procurement, fulfillment, and so on), allowing them to synchronize delivery lead times with production schedules.

2. How is working capital impacted by inventory management?

Working capital is tied up by real goods in storehouses until they are sold. An efficient supply chain allows you to avoid carrying too much inventory. With inventory management practices, a reduction in sales can be avoided by stamping out errors in picking, storing, and transporting goods.

3. What can be done to improve inventory management?

Maintaining correct accounting records and performing physical stock counts on a regular basis will help strengthen inventory management efforts. A solution that delivers real time inventory visibility to your organization's stakeholders can assist them in making key business choices. You must be conscious of the requirements of a product, especially if it is perishable.

4. What is meant by policies of inventory management?

These are strategies for using inventory to satisfy customers, while lowering expenses. The organization's method of managing stock levels, for example, is outlined in policies.

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