Management of inventory is one of the most important aspects of running a successful restaurant. This article will help you understand what inventory management is and how to manage it. Restaurants rely on their inventory to run smoothly.

More importantly, your food inventory plan keeps everything in place, organized, and connected – and a very simple oversight can result in a very drastic change for your business.

It is estimated that 10% of food is wasted before hitting the plate in some restaurants. Based on your current inventory system, you may not realize 10% of your revenue.

Is it possible for you not to let that happen in your restaurant? Here are some quick tips on how to keep track of inventory in a restaurant. First, let’s talk about what inventory management is and why it’s so important.

What Is Food Inventory Management?

Keeping track of your restaurant’s food inventory is both a loss prevention tool and a measure of profitability for your restaurant as a whole.

Why is it important for your restaurant to keep track of its inventory? It’s important to know what you’re losing in order to know what you could be earning if you also know what you’re losing.

Keeping track of inventory means knowing exactly:

• In terms of the supplies that your restaurant receives,
• How do you keep your kitchen clean, and what should you do to keep it that way
• Back of the house leftovers.

It is impossible to fully understand where your money (and your supply) is going if you do not know these exact numbers.

For instance, it is one thing to keep in mind that your cheese shipment depleted quite quickly after your recent shipment. However, it is another thing to know exactly why it happened.

Were all of the products sold to satisfied customers? In that case, great! Almost every ounce of the weight you are looking at should be attributed to a price point.

Did you consider these possible losses before you bought around for the house?

• The spillover
• Errors by employees
• Resolving customer complaints
• Meals for employees
• Stealing

It’s not always possible to put everything on a plate because of accidents, complaints, and clients. It’s inevitable the restaurant industry will experience losses, but they’re not catastrophic. However, they are also the source of loss for your business, affecting both your inventory control and profits.

There’s also the importance of tracking these areas because if you aren’t aware of what supplies have been wasted – for whatever reason – you wouldn’t know how much inventory has been unused. That means that, for a shift, day, week, month, or year, you are unable to calculate your true earnings with any degree of certainty.

The Best Way To Manage Inventory in a Restaurant?

What can you do easily to keep track of your inventory?

1. Become familiar with the terminology

Sitting Inventory

This is the amount of product (or dollars worth of product) that is in-house. Based on your business, you may refer to sitting inventory as dollars worth or as physical units. What is important is that you utilize the same unit of measurement consistently.

Deflation

The amount of product used over a specified period of time (or dollars worth of product). Your depletion can be calculated with sales reporting data from your POS based on daily, weekly, or monthly sales.

Application

The amount (or dollars worth) of sitting inventory divided by the average depletion in a set period. Here’s the formula:

Sitting Inventory ÷ Average Depletion (during a given time frame) = Usage

For example, if you have four liters of cooking oil and you plan to use one liter a week, you have four weeks of usage.

Variance

Cost differential between your product and usage amount.

Assume you have $150 worth of pork meat left in your inventory at the end of the day, but your POS shows only $120 in sales of your signature roast pork tenderloin. Therefore, your food cost variance equals $30, or $30 worth of pork meat is unaccounted for.

Variance can also be a percentage to help you compare more easily. In this scenario, the $30 variance/$150 (the usage amount cost) = -5% variance.

2. Choose your system

Automated Inventory Management

Managing inventory through your restaurant’s POS system is the most accurate method for tracking it. Software that tracks inventory movements within your restaurant allows you to keep track of the actual usage, taking the guesswork out of how inventory is moved for a more accurate view of how it moves.

Pros: It’s the most efficient method of keeping track of inventory at a restaurant.

Con: It is not compatible with all POS platforms. It should also be noted that very few POS systems have integrated inventory management, so you should verify that your restaurant point of sale system has this capability.

Par Inventory Sheets

Inventory management by type and/or supplier can be accomplished using a par inventory sheet. A manager or owner can set a level for how much of a particular item they wish to stock in their facility. This is known as a “par level.”

When the time comes for a restaurant manager to place their next inventory order, they use their restaurant’s par inventory sheet to determine what and how much inventory they need to order based on their sitting inventory, how fast previous inventory was moved through the restaurant, and any upcoming events they think may require additional inventory.

Cons: It takes simple math and forecasting to come up with inventory orders. It’s intuitive.

Pros: Costs and variances aren’t considered – just usage, so over-portioning and theft can easily go unnoticed unless held up to actual variances.

3. Create an organized workspace

In order to track and manage inventory effectively, organization is crucial. In this case, labeling is crucial. All food in containers should have a date and a label. To achieve success, organize your walk-in and dry storage so that each type of food has its own area.

Making use of your space effectively and storing ingredients properly will ensure that you will be able to find what you are looking for when you need it.

Furthermore, as you begin your day, you can easily dispose of any expired foods or items that you have no longer need for your menu as you start your day.

4. Train all your employees

It is impossible for one person to handle all aspects of inventory management. Whenever they clock out, managers and shift leaders should provide detailed inventory reports to their teams and alert them to any major issues or outages.

You also need to encourage your line cooks and back-of-house staff to make notes of spills, errors, and rotten food throughout their shifts as it can be a challenging task to manage. You may find it difficult to train your staff members to become experts in inventory or dedicated mathematicians. You can make your employees’ jobs easier if you put in place a simple inventory system that they can use.

5. Consider seasonal product options

Make sure to plan ahead according to the seasons in your restaurant.

You can use inventory tracking to determine how long to keep your peppermint hot chocolate on the menu if it doesn’t tend to move after the holidays. When it loses its appeal day-by-day for your customers, you will see it sooner rather than later, so that you don’t take it off your menu too soon or too late.

6. FIFO all items

FIFO = first in, first out. Basically, you should use the items you receive first.

You might think this makes sense. If someone unloading your newest shipment hasn’t been properly trained, it can be easy to place it at the front of your stack when your kitchen gets deliveries.

If you are going to do this, you should move your entire stock from the back to the front, and leave room at the back for the new delivery to be made. Getting a new package delivered is also a wonderful opportunity for checking expiration dates and getting rid of any items that are no longer good for consumption.

7. Monitor your sales reports every day

Inventory is directly influenced by sales, of course. In order to keep track of sales for inventory purposes, it’s important to keep a daily eye on them.  

The best way to track restaurant sales is to monitor them daily, even if you can only manage a five-minute review of your metrics daily (although these check-ins should be taken as part of a bigger, weekly review).

Checking daily rather than weekly, bi-weekly, or monthly, will allow you to track and respond to minute-by-minute changes in your restaurant, giving you the opportunity to make changes to your restaurant’s inventory planning and provision delivery on a timely basis.

8. Make sure your technology is up-to-date

If you don’t have the right technology, tracking sales and analyzing data can be a huge challenge.

Consider accessing data directly from your point of sale system, rather than manually computing from an inventory spreadsheet or worse – guessing. Using this approach, you can pick up on variances and figure out where the loss originated.

9. Always keep a little extra inventory on hand

Think of this scenario: you are running a sandwich shop, and a massive snowstorm knocks out the power throughout the entire state. Due to this situation, you may not be able to have your bread supplier deliver your sub rolls for the day, and your cheese supplier may not be able to deliver the slices of cheddar you need for your most popular sandwiches.

There was a day when you had to tell your customers who came into your sandwich shop to order a sandwich that you were out of key ingredients and could not make any of the most popular sandwiches.

A situation such as this would not occur if you had “just in case” inventory: a reserve of inventory on hand that would be used up quickly in the event of an emergency. In addition to this, you should make sure that this just-in-case inventory is changed out regularly so that it doesn’t expire.

10. Consistency is key

Keeping inventory in control in any restaurant business is all about consistency, which is also true for inventory management. If you want to keep on top of your inventory management, you have to develop a plan. You can stay on top of your inventory by using proactive management. This allows you to prevent waiting until the last minute to replenish a product.

Having a regular schedule and habit will make your inventory process more straightforward in the long run. As a result, you will experience far greater profits over time, increasing the overall success of your establishment.

FAQs

What is the frequency of restaurant inventories?

If you have deliveries in your restaurant, it will depend on how often you have them. There are most certainly restaurants that check in their inventory once or twice a week, but it makes sense to take an inventory count every time you are restocking, to make sure that everything is still fresh and within its expiration date.  

What is the calculation of food costs?

The percentage of food cost for goods sold is calculated by taking the cost of the goods and dividing it by the revenue or sales generated by that particular finished product.

Should a restaurant have a large food inventory?

A little extra in case of an emergency should be enough to cover your sales and cover your inventory needs. If you’re getting one or two deliveries per week, this means you’re usually stocking up on inventory for about five to seven days.

How do you determine the right inventory-to-sales ratio?

You should sell your entire food inventory between 4 and 8 times each month, which means that you should sell the entire inventory between 4 and 8 times each month.

How often does restaurant food inventory turnover?

In order to determine how frequently the store sold out its inventory in a certain period of time, one measures the turnover ratio of its inventory. If you have a low inventory turnover rate, it indicates either a low level of sales or too much inventory in stock. On the other hand, if you have a high inventory turnover ratio, it indicates either a strong sales level or an inadequate inventory purchase plan. In the restaurant industry, the average inventory turnover ratio is about 5.

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