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

Restaurant Inventory Management- 7 Best Practices to Consider

Restaurant inventory management is about finding ways to minimize inventory loss and food costs while streamlining day-to-day practices. Even minor mistakes in inventory management, such as overstocking perishable items, can cost businesses thousands of dollars.

In fact, many restaurants are wasting up to 10% of their food inventory. Using a comprehensive restaurant inventory management system is essential for daily operations, and inventory management software will track every ingredient that goes in and out of the kitchen to improve supply flow and reduce errors.

Common Sources of Inventory Loss

Monitoring areas of inventory loss in the kitchen is the first step towards increasing restaurant efficiency and profitability. Knowing the source of inventory loss provides accurate information on the margin of losses, and allows you to make informed decisions about stocking.

For example, if a supply of fresh produce is depleting faster than usual, close monitoring will show if this item is being sold at a higher rate, or if the inventory is being lost before or during preparation.
Common sources of inventory loss that many restaurants face include-

  • Overstocking
  • Food spoilage
  • Correcting a customer complaint
  • Employee errors
  • Accidents that result in food loss
  • Unapproved meals served to the staff
  • Theft of inventory
These sources of inventory loss can have a major impact on profitability, and lead to costly gaps between inventory purchases and customer sales. Restaurant inventory management software provides a solution by tracking inventory purchases, restaurant sales, and shelved inventory to identify the source of the loss.

While it's impossible to prevent inventory loss altogether, monitoring losses will provide accurate data and present solutions to optimize inventory planning and increase profit margins.

Best Practices for Restaurant Inventory Management

Successful restaurant inventory management depends on the implementation of a few key methods. Follow these best practices to mitigate losses and optimize inventory planning and efficiency.

1. Closely Monitor All Stock
The first step in successful restaurant inventory management is to closely monitor all stock. Sitting inventory should be organized and tracked at the beginning and end of each day using inventory management software.

This provides a clear picture of food spoilage, waste, and inventory used each day. Some variance between physical stock and POS is expected, and variance of up to 5% is completely normal. Larger inconsistencies indicate a serious food waste problem, high staff error, or even theft of inventory.

2. Standardize Recipes
Great inventory management depends on standardized recipes that clearly state the exact quantity of each ingredient. This provides a fixed price point for every ingredient, guarantees food quality, and calculates profit margins when setting the price of each dish.

Integrating standardized recipes with the POS system and inventory management software will also streamline the restocking protocol.

3. Manage Perishable Foods and Raw Materials
When it comes to best practices for restaurant inventory management, it's important to manage perishable foods and raw materials to avoid food waste and keep costs low. Stock only what is needed and avoid overstocking items that spoil quickly. Take a look at the menu, and plan to use seasonal products to avoid expensive food waste.

4. Manage Shelf Life
Inventory doesn't last forever, and an important part of restaurant inventory management is keeping close tabs on the stock to manage shelf life. Most dry goods, such as pasta, rice, or beans, can last for years, while other inventory, like fresh vegetables, fruit, and dairy, must be used before a certain date. Set best before dates on all stock and monitor these dates. If staff routinely throws away stock that's past its due date, reevaluate ordering practices to minimize food waste.

5. Optimize Inventory Ordering Processes
For large establishments with centralized kitchens, POS systems integrated with business management software will make it easy to manage inventory across locations, as well as in the central kitchen. Inventory software will provide recommendations and restock orders based on use and demand at each location, and show stock levels across locations. Each location can also manually request more stock from the central kitchen, note that they've received the goods, and confirm that all the inventory arrived in good condition.

6. Hold Staff Accountable
Cut inventory costs and increase profitability by holding staff accountable when it comes to restaurant inventory management. Using the POS system, task certain staff members with inventory checks at the beginning and end of the day, and hold those staff members accountable for accurate inventory reports. This promotes responsibility among staff, lowers incidents of inventory loss, and immediately highlights any discrepancies in stocking or reporting.

7. Invest in Inventory Forecasting Software
Get accurate reports and analytics with inventory forecasting software, and use this data to optimize efficiency. Forecasting software combines precise stock reports, inventory usage, POS data, and loss and profit reports to make restaurant inventory management easy. Inventory software can also integrate with forecasting tools to predict inventory needs. Analyzing ingredient usage on a daily and weekly basis provides insight into stock loss, as well as ways to increase efficiency and boost profitability.

Successful restaurant inventory management will closely monitor stock, reduce sources of inventory loss, and take the guesswork out of ordering inventory. From managing perishable foods and shelf life to finding the right inventory software, learning the ins and outs of stock management for restaurants will minimize loss, and boost both efficiency and profitability.