Restaurant Inventory Management: Tips and Best Practices6 min read

Every restaurant is heavily dependent on perishable goods to offer customers a service. This is the main reason why good inventory management is more important for restaurants than for many other kinds of businesses. Through good inventory tracking, a restaurant will always be stocked adequately and avoid any food waste.

Keeping track of the restaurant inventory plays a key role in calculating one of the most important metrics – the inventory turnover, a ratio calculated by dividing net sales by the average cost of inventory.

For restaurants, a healthy inventory turnover ratio should be kept at less than seven days. Whenever the metric is higher, it indicates insufficient inventory purchases or an imminent supply shortage. A very low inventory turnover rate could be indicative of too much food being bought. Business could also be slow, which will eventually contribute to the waste of large quantities of ingredients.

To determine your inventory turnover, you have to keep track of the things you buy, the ingredients you use the most and the ones that contribute to significant resource waste. Many restauranteurs aren’t doing inventory management in the best way, which leads to the loss of money and clients. If you don’t know how to get started, the following guide will acquaint you with the essentials.

Reasons Why You Should Be Doing Restaurant Inventory Management

Investing in the right restaurant inventory management solution will help you accomplish multiple things:

• Enhance your menu to attract the right clients
• See which ingredients are needed the most and the least
• Make the right product purchasing decisions
• Improve service quality
• Reduce costs
• Control waste
• Calculate effortlessly the cost of goods sold (COGS)

This is a lot more than what you could accomplish if you’re doing inventory tracking by hand. Many small restaurants still don’t use inventory management software, which leads to missed opportunities.

Basic Restaurant Inventory Management Terms and Procedures

A universal solution for restaurant inventory management hasn’t been formulated yet. Thus, you have to pick the right technology and define the processes bound to deliver the best results in your restaurant.

Before selecting the right tools, you have to understand the basics of inventory management. There are several inventory management terms and essentials to focus on:

• Your sitting inventory: the in-house inventory that starts with ingredients and moves on to dinnerware and cleaning supplies
• Unit of measurement: you need the right unit of measurement to track amounts and depletion
• Depletion: the amount of products used within a pre-determined period of time
• Usage: to calculate usage, you have to divide the amount of sitting inventory by the depletion rate for the specified period
• Variance: difference between product costs and usage amount costs

All of these can be entered in a spreadsheet for easier tracking. You can also use a restaurant inventory management solution to automate some of the calculations. Choosing the right inventory management solution for your restaurant will depend on a couple of key considerations.

How to Select the Best Restaurant Inventory Management System

Your POS system will play a massive role in how inventory management takes place in your restaurant. Some POS systems feature inventory management characteristics and most of them can be integrated with the popular restaurant inventory software products.

Inventory management software solutions feature many characteristics that will help you do a good job. Here’s a brief overview of the features you may want to look for in yours:

• Real-time management: this is one of the biggest strengths of inventory management products – it can happen easily when your inventory items and your menu items are linked to each other.
• Vendor relationship management: through the right system, you can create purchasing orders for your suppliers whenever inventory amounts start running dangerously low.
• Financial reporting: knowing the cost of inventory and which items are most profitable will enable you to optimize overall operations and increase the effectiveness of your business.
• Security control: contemporary inventory management solutions make it possible to authorize specific staff members to see certain kinds of information. This way, you protect sensitive data and customize the program usage experience to give every staff member the data they need to do their job.
• Bulk uploads: every restaurant receives new inventory on a regular basis. In the absence of bulk upload features, using the inventory management software can become an absolute nightmare.
• Scalability: things don’t remain static in a restaurant. Simplicity and user-friendliness are both very important when you’re getting started with a new product. Still, make sure that the inventory management tool features more complex capabilities that will be reflective of the needs of a growing restaurant.

Keep in mind that very few restaurants today rely on a stand-alone restaurant management system. Do look for an integrated, contemporary POS for your restaurant to ensure smooth transactions and effective, detailed reporting.

The final thing to do before buying is to examine the cost. While the price shouldn’t be the determining factor (try to identify the right price to quality ratio), it can help you finalize your decision when you’ve narrowed it down to just a few viable solutions.

Best Practices: A Few Additional Restaurant Management Tips

Now that you know the main terms and the specifics of restaurant management, it’s time to pay attention to some of the best practices in the field.

Having a good POS solution isn’t enough to do effective inventory management. You also have to train your staff members to use the system and make the most of the available functionalities.

While everyone should have access to the system, you should remain in charge. Thus, set up alerts for new inventory requests. Getting to review quantities and costs before new orders are finalized will enable you to prevent misuse and even fraud.

You should be even more diligent if you occasionally change menus. Restaurants that rely on seasonal items will need to modify their inventory lists several times per year. Changing menus and seasonal items necessitate adjustments as soon as possible to still be in complete charge of inventory.

Finally, food chains will need to transfer items from one outlet to another. This is also a process that can be controlled through the inventory management system. Transferring unused inventory from one venue to another prevents food waste and saves you money. Modern POS systems for restaurant chains make that possible with the click of a button.

Restaurant Inventory Management Is Vitally Important

Calculating inventory by hand or using a spreadsheet is not optimal, even if you’re running a small restaurant.

Cost-efficient solutions for small restaurant businesses optimize inventory and they have a range of additional capabilities. As a result, such software products optimize processes and reduce operational expenditure.

Good software can do reliable tracking, automation of purchase orders, help you meet inventory-related KPIs and ensure the seamless integration of front-end and back-end operations.

Once you’re given access to all of this important information, you can better understand your restaurant operations, waste and why it happens. Based on this data, improvements can be introduced so that you’re not throwing money in the trash bin.

Great inventory tracking isn’t just about data collection and knowing what’s going on in the restaurant. It’s also about evolving in your restaurant practices to make sense of waste and prevent it from ever happening again.