Managing inventory in a restaurant is a critical financial and operational function to minimize waste and control food costs. Ask any member of a restaurant operations team what it’s like to take inventory, and you’re guaranteed to garner a few eye-rolls.
For most restaurant operators, taking inventory is a time-consuming, tedious task that they’d rather do without. And, the truth is, they might be better off not taking inventory, because they’re doing it wrong. Before we explore why, let’s first explore why getting it right is important.
Why take inventory?
As noted above, taking inventory helps restaurants minimize waste and better control food costs.
Knowing how much of a given ingredient you have on your shelves prevents you from over-ordering and overstocking an item and therefore will likely end up throwing away. For a restaurant, throwing ingredients away is like throwing cash in the trash.
On the flip side of that equation, under-ordering and understocking an item may create missed revenue opportunities or unhappy customers when you’re forced to “86”, or cancel, a dish when you run out of ingredients.
In addition to knowing how many of an item to purchase, it’s also important to have a solid understanding of what you’re paying for the food that you’re selling and how that impacts your restaurant’s profits. The way to determine this is by calculating your restaurant’s cost-of-goods-sold, or COGS. Calculating the value of your inventory is a critical exercise in calculating you’re your COGS.
Perhaps the most critical aspect of managing inventory is being able to accurately account for the value of the food and supplies that are on the shelves and in the freezers or walk-ins. In order to generate accurate financial statements, such as a Profit & Loss Statement (P&L), restaurant operators must assign a value to the inventory that they’ve purchased. Essentially, those supplies and ingredients represent cash that’s sitting on your shelves.
So how are restaurants getting it wrong?
Let’s look at why we think that most restaurants are getting inventory management wrong.
Not taking inventory at all
The first mistake that a lot of restaurants are making is not taking inventory at all.
There are a lot of reasons for not taking inventory:
- Don’t have the time.
- Don’t have the team.
- Don’t think it’s worth the effort and resources.
- Order just-in-time and don’t carry a lot of inventory.
All of the above seem like rational, reasonable excuses. Yet, the benefits outweigh the costs.
Without taking inventory, you still wouldn’t know how many dry goods or supplies you have on hand or have the ability to determine if some steaks or bottles of Cabernet Sauvignon are slipping out the back door.
Struggling with old-school spreadsheets
Many restaurants use spreadsheets or Google Sheets to manage their inventory. You know who you are!
We’ve actually come across quite a few sophisticated spreadsheet set-ups. Nevertheless, anyone who is using spreadsheets will agree that it’s not an ideal method.
Some of the challenges associated with using spreadsheets are the limited capabilities of the user interface, the inability to easily drill-down dynamically without having to jump from sheet to sheet, and, very limited controls or reporting capabilities.
Like many legacy restaurant inventory management systems, spreadsheets require a lot of set-up and maintenance.
Too much maintenance
While there are a lot of restaurant inventory management software options in the marketplace today, most are missing the mark on what’s most important - making it easy to set-up and maintain. They may have plenty of bells and whistles, but operators need a tool that their teams want to use and will deliver metrics on what’s most important to their business.
Beyond too much effort to get good data from existing systems, the data is typically disjointed from your purchasing processes. This means that chefs and managers lack adequate visibility to historical prices paid for existing inventory and don’t have the ability to easily translate inventory needs into purchases to maintain par levels.
Inaccurate inventory values
Perhaps the biggest reason that restaurants are getting inventory management wrong is that the time and effort that they’re investing is yielding inaccurate results. Since the purchase price of ingredients are always changing, you would need to constantly update or average your recent purchase price in order to calculate inventory value. If you’re not constantly updating your prices, then your inventory values are wrong.
Operators must routinely update their inventory management systems or spreadsheets with new items and new prices. This requires manual maintenance, data entry and labor hours (i.e. cost).
Getting it right
To do inventory right, you need the right processes and the right tool that can accommodate your processes.
Your inventory management software needs to be flexible to account for the way your kitchen and storage is set-up, to be able to group products, delegate the workload by individual or role, to choose your own schedule by area, and, most importantly, to automatically and accurately update your inventory values recent purchase price data.
That’s what xtraCHEF has built. To learn more and to request a demo, check it out here.