Inventory is the backbone of any food product or culinary business. This is what keeps one going on with the usual business sale even if there are not enough ingredients at hand. Continuous over or under ordering can be bad for the business as they can create problems of increased costs and customer dissatisfaction. Running out of stock is rarely good for business. In the hospitality industry, businesses face intense competition and operational challenges, making it imperative for owners to stay vigilant about stock and expenses. Effective inventory management is crucial for achieving this goal.
Inventory management is the process of tracking, monitoring and ordering the items that are needed by a business. Inventory management is necessary in order to keep track of items that are coming into and out of the store. It also helps to know when a product needs to be replenished in order to avoid running out of an item. There are several ways in which inventory management can be done. The most common way is by using an inventory management system where all information about the inventory is stored electronically. This includes details such as when an item was ordered, how much stock there is and what price it should be priced at for sale.
Inventory management, if done correctly can prove long-term success and profit. Taking control of your inventory by stuffing everyday essentials can keep you stocked and serving. Food and beverage establishments like Goody Professional consider inventory management as an essential component.
Inventory management is not a single time investment or decision but it is a continuous part of restaurant management. Time to time variables governing this phenomenon change and so business measures relevant to inventory have to change accordingly. Keeping track of inventory allows you to make everything perfect from customer satisfaction to sales. There are several significant formulas and concepts to analyze how much each individual drinks or eats in terms of ingredients at a particular time to calculate inventory required.
● Variance
Variance is simply the difference between the product cost and its usage. In every establishment, some variances are similar. However, you still need to have a closer look at your operations to check variance of every product.
Variance = Cost of Goods Sold – Inventory Usage
● Usage
In a specific timeframe, calculation of the amount of inventory used is referred to as usage. With this, you understand better what to stock and restock.
Usage = Starting inventory + Inventory added – Ending inventory
● Sitting Inventory
Sitting Inventory is the amount of inventory available at a given time. Product amount or dollar value are the trackers of this amount. Use one unit of measurement at a time while counting your sitting inventory and use that continuously.
● Pour Cost
Cost of each ingredient in a particular drink and the price of the drink is pour cost. This comparative cost analysis gives you an idea of the profit. Later, an overall analysis of each ingredient cost with other items of the menu will tell you what drinks to keep and what to not.
Pour cost = Usage / Total Sales
● Par Level
The amount of inventory that is required to meet the usual demand is par level. This calculation depends on the amount of deliveries in the specific time period. Inventory levels should generally be based on these calculations but inventory levels are generally higher during seasons or holidays. For example, a fine dining restaurant may stock above their par level during holiday season.
Par level = (Weekly usage + Safety stock) / Number of deliveries in a week
● Safety Stock
Safety stock is the emergency stock restaurants keep for emergencies or unexpected demand. However, having an ample amount of safety stock seems a very good idea theoretically but practically it may be too expensive if the situation turns around and the stocks are not used. Hence, safety stock should not be more than 20-30% of your weekly usage.
Recently, with the growth of technological advancements in the business field, several digital solutions have come up in the field of inventory management as well. Automated inventory management is one of them. It provides you with actionable insights so that you can make better purchasing decisions. Automated inventory management come with the following advantages:
Recently, with the growth of technological advancements in the business field, several digital solutions have come up in the field of inventory management as well. Automated inventory management is one of them. It provides you with actionable insights so that you can make better purchasing decisions. Automated inventory management come with the following advantages:
● View automatic replenishments when inventory is received.
● Reduce waste and manage costs.
● Calculate recipe costs and margins by tracking every ingredient.
● Eliminate manual stock counting.
● View existing inventory and inventory value.
● See real-time deductions when drinks or other menu items are ordered.
Inventory management is a critical aspect of the restaurant industry. It is one of the key success factors for any restaurant. It is essential for restaurants to have an efficient inventory management system in place to keep track of their inventory, manage their supply costs, and avoid overstock or shortage. Running a restaurant business is an extremely exhausting job as much as it is fun. Managing inventory can take most of your planning time and so choosing an automated option might serve you well. The right inventory management approach will give you data and insights, which will help reduce cost without compromising on the quality.
Inventory management is a crucial process for restaurants. It can make or break a restaurant business. The key is to know when to order and when not to, so that the inventory does not expire. Businesses need to have an efficient system in place for inventory management and they need to do it right the first time. Otherwise, they will end up with too much or too little stock of their products, which will lead them into losses.
