Last Updated On July 27, 2020 / Written By Jin Hyun

Food Inventory- Best Practices to Reduce Waste & Boost Profits

Most businesses that handle food will keep a list of items or food stock called a food inventory.

Food inventory management is the practice of tracking these often perishable items as a way to prevent loss, measure profitability, and food costs. It also helps explain what supplies and money are used for within an establishment.

Tracking is as simple as it sounds, it helps keep note of the exact numbers of what supplies come into the restaurant, what goes out of your kitchen, and what's leftover.

The reasons behind these numbers should also be tracked. For example, it should be clear whether inventory loss was caused by spillage, employee mistakes, staff meals, or theft.

A good way to understand Food Inventory Management is to see it as a diary for your restaurant. If it is done well, you should be able to paint a picture of the losses and earnings of each shift, day, week, month, or year.

Learn the Language of Restaurant Inventory Management

Although most of the language involving restaurant inventory management is relatively straight forward, it's beneficial to get a grasp on their full definitions to understand them better.

Here are 4 important terms to get familiar with.

1. Sitting Inventory
Usually measured in dollars' worth or the physical amount, sitting inventory describes the amount of product businesses have in their restaurants. It's best to use just one of these units of measurement and stick to it consistently.

2. Depletion
This term describes how much product is used up over a period of time that you set (i.e. daily, weekly, or monthly). The way this is usually worked out is by using sales reporting data in the restaurant's POS system.

3. Usage
As the name implies, usage is a calculation to work out the amount or dollars' worth of product businesses have used over a specific period of time.

This is calculated by dividing the amount of sitting inventory by the average depletion (over a set time period).

Sitting Inventory Average Depletion = Usage

4. Variance
This number usually describes the difference between the cost of a product and the product usage cost; it shows how much of a product may be unaccounted for.

This figure is easier to read as a percentage. For example, if a business' inventory is down $60 worth of cheese at the end of the day but the POS states $55 worth of cheese was sold that day, the cost variance would be - 5%.

Key Management Tips

To see these terms and information in practice, here are some commonly used strategies restaurants utilize in their inventory management to reduce profit loss and prevent food waste.

1. Take Inventory by Hand When Necessary
POS Systems and inventory management software are excellent. However, to increase the accuracy of stock data, businesses should utilize both manual and automated counting methods. By matching the actual inventory with what has been digitally recorded, businesses can pinpoint when and where inventory has gone missing.

It is still vital to consistently utilize software, however, as they are useful for data forecasting, integrated accounting, and automated inventory tracking based data on customer orders.

2. Minimize Staff Members that Track Inventory
It's best to assign the role of taking inventory to a small amount of staff if possible. This is because your inventory is unique, and it is important to have a good understanding of it. The more an employee handles the inventory, the more time they will have to understand the patterns and nuances of it, which can pave the way for inventory savings. Good inventory tracking means good business, so staff should be carefully trained on the process and understand its impact.

3. Stick to a Schedule
Being consistent with a schedule means that there's more of a chance to understand how ingredients and supplies are used. If a schedule is done right, specific areas can be looked at closely and accurately, which means adjustments can be made to improve as necessary.

4. First In, First Out (FIFO) Method
This method is a great way to reduce food spoilage. Organize coolers, dry storage, freezer, and shelves so that items received first' are at the front and first out'. A quicker way to do this is to invest in containers and dispensers that are engineered to dispense in the FIFO method.

5.Create a Food Waste Sheet
A food waste sheet can make inventory tracking more accurate, as it shows where inventory is going outside of sales. Tracking food waste can mean there is more opportunity to plan shipments, find ways to purchase less or find better use for ingredients.

6. Make the most of surplus ingredients
To avoid wasting extra ingredients that are going bad soon, try and come up with ways to use them in existing recipes or create new ones around them. Let your guests know about the menu changes as this can lead to potential sales.

7. Study previous Inventories
Past inventories hold key information on what could save money or increase efficiency. Look into what items were over-used or under-used to decide what is best to order into your inventory. Try and spot trends to inform decision-making processes and run operations more optimally.

Food Inventory Management Software

Fortunately, the process of Food Inventory Management can be streamlined with inventory management tools and software.

This software can instantly automate inventory tracking and integrate with your POS system to save time and eliminate human errors. Some of these features can also help with reducing lead time, meeting inventory KPIs, and batch tracking.