What is restaurant inventory management?
Restaurant inventory management is a process that uses information systems and software to track and manage the movement of goods through inventory in restaurants. This process is used to track sales, inventory, products, purchasing, and storage. These systems include bar code scanners, point-of-sale (POS) terminal systems, cash register systems, smartphones, and tablets. Restaurant inventory management helps ensure that food is available to consumers when they need it. From there, these processes can be used to monitor employees as well as increase sales.
Restaurant Inventory Management- Best Practices That'll Improve Your Bottom Line
Why is restaurant inventory management important?

The goal of inventory management is to keep enough inventory on hand to meet customer demand while minimizing the inventory in storage. If a restaurant doesn't have enough inventory, it will have to search for it from other sources or wait for restocking. Or, if there is too much inventory, it will be sitting in storage and not generating revenue. Restaurant inventory management is important to ensure that the restaurant has the necessary supplies for customers and to remain profitable. Check out this article to know how an efficient inventory management system can benefit your company!
Restaurant inventory management affects net profit

Inventory is among the most important assists of a business. The efficiency of inventory management, as a result, has a direct impact on a company's bottom line. There are several costs associated with inventory, such as order costs, obsolesce or theft. It also accounts for indirect costs such as those related to human resources and finance. An efficient inventory management system tries to curtail these costs while ensuring the availability of stock in accordance with production thereby improving both productivity and the company's cash flow. Good inventory management, therefore, reduces losses and is geared towards achieving greater profitability.
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The benefits of restaurant inventory management

A restaurant inventory management system is a computerized system for inventory control. There are many inventory management software that you can use to increase your business's productivity and profitability. Inventory management software will help you ensure that the right inventory is in the right place at the right time in order to reduce waste, increase efficiency, and maximize profits. The major benefits of restaurant inventory management include-
Track Stock in Real Time- Cloud basedmanagement systems allow you to keep track of stock in real-time. These real time sock alerts help restaurants know exactly what they have in stock and what is running out.
Track Food Waste- Controlling food costs is crucial to managing food inventory. Managing food inventory includes purchasing the raw materials, their storage, production of menu items up till the point that it reaches your final consumer. Knowing your restaurant inventory levels considerably reduces the chances of food waste.
Recipe Costing- Inventory management software gives you actionable data at your fingertips and this allows you to optimize food costs by adjusting menu items, expenses, and stock levels. Recipes determine a lot for a restaurant and can help maximize profits.
Generate Purchase Orders (PO)- You can automate the purchase order process with an inventory management software. This will allow you to save on both time and resources.
Best practices for restaurant inventory management in your kitchen
A restaurant inventory management system is a computerized system for inventory control. There are many inventory management software that you can use to increase your business's productivity and profitability. Inventory management software will help you ensure that the right inventory is in the right place at the right time in order to reduce waste, increase efficiency, and maximize profits. We will discuss best practices in detail below!
1. Understand the terminology involved
Inventory management is key to streamlining the functioning of your restaurant and improving your bottom line. If you don't keep track of your inventory, chances are you're incurring losses due to wastage or theft. Essential to understanding inventory management is acquainting yourself with terms that are common to the process. These include cost of goods sold, sitting inventory, food cost percentage, inventory turnover ratio, catch weight, estimated usage, unit of measurement, actual usage, variance, food waste, yield, PAR level, deadstock, depletion, first in first out (FIFO), menu engineering, purchase order template, blanket purchase order, point of sale, pos system, among others. We will discuss these in greater detail at the end of this article.
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2. Choose your system carefully
There are plenty of inventory management software that can cater to various kinds of food and beverage companies. But to automate and improve your inventory management, it is crucial that you choose one of the best inventory apps out there! While choosing one for your restaurant, you might want to consider a few factors and features. Understand your requirements in terms of the solution you are looking for. What does your current inventory management system lack and what would you like an automated system of inventory management to achieve for you? Customization, usability, and integration capabilities are also worth considering when picking inventory management software. Lastly, choose an inventory management system that fits your budget and one that offers you support, assistance, and warranty after purchase.
3. Organize your space
Organizing your space is key to effective restaurant management. It is absolutely crucial that your team knows where the raw materials to produce your menu items are kept and can get to them without wasting too much time. It is also a good idea to labels on shelves so your staff can find items quickly and put items in food inventory that are in most use in the same accessible spot. This will also help with restocking.
4. Training of kitchen staff

It is important that companies train their staff in inventory tracking and help them learn how to use restaurant inventory management software. It is also advised to designate the job of inventory tracking to a few staff members such as the restaurant's manager or chefs. This makes it easier to identify shortages and inconsistencies. Another benefit of this is that these employees will eventually learn the patterns and nuances of your inventory flow over time. Training staff is key to ensuring proper inventory management. It might also be beneficial to incentivize good inventory management for employees so that they understand the importance of accurate and efficient inventory tracking and feel more involved with the process.
5. Seasonal items need to be accommodated

Restaurants rely on perishable and seasonal items. It is important to have a grip over your inventory to ensure that you are not ordering more raw materials than are required for the smooth functioning of your business. Learn to work with lean stock. This way you won't incur losses due to unhinged food costs or food waste. It is also a good idea to accommodate seasonal items as they are easily available and can often be procured at a cheaper rate. It also helps with attracting customers who are always looking for something new while preventing the wastage of perishables.
6. FIFO method
FIFO or the first-in, first-out method is a universally accepted and trusted method of tracking inventory. The method assumes that your oldest raw materials in a restaurant's inventory will be used first to avoid food waste and reduce associated costs. To calculate the cost of good sold using the FIFO method, determine the cost of your oldest inventory and multiply that costs with the amount of inventory sold. The FIFO method leads to higher profits and makes financial statements harder to manipulate.
7. Tracking of daily sales reports

It is also advisable to track your restaurant's overall sales daily with the help of POS systems. It is understandable that it would be hard to thoroughly track sales on a daily basis but with point of sale system, it becomes easier to identify and address issues quickly. This will further help you with data forecasting, integrated accounting and order planning reports.
8. Investing in right technology
Restaurants have increasingly begun to move away from conventional methods of monitoring operations to point of sales systems and other inventory management software that make work easier. Every business today needs to invest in technology to stay competitive. There are plenty of options to choose from and the key to ensuring that you make the most of automated systems is to choose the right one. A POS system that helps you manage and operate efficiently will also help your business with visible supply chain management, supply chain risk management, scaling faster while generally smoothing the running of your business operations.
9. Consistency
Consistency is key to any business's success. But what does it mean in the context of restaurant inventory management? Following an inventory schedule consistently enables restaurants understand the ingredients and equipment they need or have used over a specific time period. It also pays to be smart when designing your inventory schedule. It isn't important to count all your inventory every day. Perishables and fast-moving raw materials can be accounted for daily while non-perishables or bulk items can be counted in an interval of once a week. This will help you identify patterns over time and adjust your order patterns accordingly.
10. Always keep extra inventory in stock
This might seem contradictory to our earlier suggestion about learning how to work with a lean inventory. But in the restaurant business, keeping surplus stock may not be a bad practice. After all, demand forecasts cannot be 100% accurate when it comes to the whims and fancies of your customers. While your perishables should always be your fastest moving items, raw materials that are integral to the most popular items on your menu and can be held on to longer should be made part of your surplus stock.
Important terminology in restaurant inventory management

Here's a list of some of the terms that could be useful to you when trying to understand restaurant inventory management-
Cost of Goods Sold (COGS)- This cost represents your restaurant inventory over a specific period of time. To calculate the cost of goods sold, it is essential you record stock levels at the beginning and the end of the specified period while taking into account any additional inventory-related purchases.
Cost of Goods Sold = Beginning Inventory + Purchased Inventory - Final Inventory
Sitting Inventory- As the name suggests, this is the total amount of inventory you have on hand. Sitting inventory must be measured consistently in physical or unit measures or in dollar value.
Usage- This refers to the amount of goods used by a restaurant during a specified period. Usage can be calculated in daily, weekly, or monthly sales and is usually based on the sales reporting data obtained for POS systems.
Variance- Variance refers to the difference between the depletion of a product and its sales. It is usually tracked as a percentage. An average restaurant has a 2-5% variance.
Inventory Turnover Ratio- The rate of an inventory's usage over a period of time, usually a year, is referred to as the inventory turnover ratio. This ratio denotes the efficacy of the restaurant's inventory management and shows restaurants how good they are at making sales.
Yield- The ratio of the amount of products your POS system reports as sold in relation to the amount actually used is your restaurant's yield. In other words, it is a percentage that shows you the actual usage that is being accounted for in sales as opposed to the theoretical amount your POS system states should have been used.
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