The food service industry is worth at least $730 billion in the United States alone, and the trends suggest that number will only go up in the next five years. Businesses and entrepreneurs are drawn to this vast market and often operate on small margins in order to be competitive. Given the sheer size and breadth of the food service industry, we will be focusing on the best practices in restaurant inventory management, though in many cases, these practices can be applied to any food and beverage business.
Inventory Challenges in Restaurants
Restaurants and other food service businesses face a unique set of challenges when it comes to inventory. With perishable items, timing and stock control are critical to minimize any spoilage and wasted expenditure. According to Restaurant Hospitality, food wastage costs US restaurants $25 billion a year.
On top of the usual inventory challenges, here are a few more issues specific to restaurants and other food service businesses:
- Ordering: Trying to figure out how much to order and when is critical for restaurateurs. Order too much, too soon, and you risk losing fresh ingredients. Too little, and you run the risk of stock outs.
- Organizing: Not all inventory is food. You have machinery, kitchen equipment, and other non-perishable items. Organizing these types of inventory on top of the food poses a logistical challenge and can be challenging to stay on top of.
- Measurements: This can often be overlooked, but consistency over units of measurements is essential for a restaurant. Communication breakdown between suppliers and customers can lead to substantial costs and stock problems.
These are just some of the challenges restaurants face. However, investing in overcoming these issues and minimizing food wastage through restaurant inventory management can add 15% growth for businesses.
Best Practices in Restaurant Inventory Management
Of course, you need to invest more than just money to address inventory management in restaurant industry challenges. It’s about creating an infrastructure from which you can retain complete oversight and track all items in real-time.
- Get organized: The first step is to get organized and devise a categorization system for your inventory. Work with your team members to ascertain their needs in terms of equipment and perishable goods. Consider grouping different items (dry goods, refrigerator, office supplies, etc.) and place this information onto a spreadsheet or storage map so they can be quickly located.
- Embrace automation: There’s no reason to have a paper-based inventory management system in today’s digital world. Using specialized software, customized for the food service industry can bring a host of benefits, including
- Being able to track inventory from the supplier to the customer in real-time
- Automate ordering processes catered to the restaurant menu
- Review and verify costs for contracts, orders, shipping, and reconcile quantities against bills of lading.
- Real-time visibility for all relevant stakeholders
- Control of staff access and ability to edit
- Train staff: The system will only work once your staff are fully trained and know how to use it. It’s worth investing a premium to ensure everyone knows their role and how to fulfill it. The idea is to ensure your employees understand the system and minimize any wastage or spillage.
- Follow the FIFO method: The first in, first out (FIFO) method is made for the food industry. This involves sorting food by the expiry date or by the order they come in. By following this plan, you will be able to serve customers the freshest dishes possible while cutting any wastage.
- Regularly check inventory: It’s always a good idea to monitor stock levels and carry out checks on a regular basis. With an automated system, this should be a relatively straightforward process compared to traditional paper-based systems. Not only will you stay on top of your inventory, but unintentionally cooking with out of date food could lead to illness for your diners and breaches of health and safety regulations. Either of these could cause irreversible damage to your business.
- Control storage: The longer inventory is sitting in your storage space, the more it accumulates cost to your business. It’s essential to strike the balance of having enough stock so your restaurant can keep serving excellent dishes while limiting wastage,
- Constantly review needs and requirements: Menus and recipes can change which will lead to changes in inventory requirements. It pays to have the system under constant review, where you can adjust accordingly.
- Get your food cost percentages right: One of the areas where restaurant inventory management can prove useful is with calculating food cost percentages. By having all the information on a single, accessible platform, you will be able to cost menus in a far more efficient manner than with a paper-based system. Getting this aspect right will help you avoid becoming one of the 60% of restaurants fail in their first year. Letting inventory costs spiral out of control will push your already thin margins over the limit.
- Have a contingency plan: One of the advantages of inventory management software is that you can forecast events. For example, if you run a city-center restaurant, then you may get occasional large groups walking in on the weekends. By planning for this, you will reduce the risk of stock-outs and be able to deliver great food for them to talk to their friends and family about.
- Take deliveries into account: Many restaurants are seeing a surge in deliveries, largely thanks to the availability of food delivery apps. While this does present an opportunity to generate another revenue stream, it’s also an added cost. Ensure you factor in the shipping when calculating the delivery menu.
- Focus on the customer: The common denominator in successful restaurants is delivering the food and experience the customer expects. This does not necessarily mean serving 3-star Michelin dishes every time. For example, people go to McDonald’s for fast, convenient food. Tailor the inventory management system so you can deliver the menu your customers want.
These are just some of the best practices your restaurant or food service business needs to follow in order to deliver excellent service. It’s essential to take a holistic approach and to master how to control inventory in a restaurant. Having an accessible central platform where your staff can see the critical information in real-time is a solid foundation to build upon.
It’s also worth bearing in mind that most of these principles set out above are relevant to the wider food service industry. In an ever competitive world, there is significant profit to be made in optimizing your inventory management system.
The food service industry is in a constant state of evolution, with food delivery apps being the latest trend to shake the landscape. There are plenty of opportunities and, as we’ve seen, it’s an industry that’s fast approaching the $1 trillion mark globally.
However, this does mean plenty of competition which brings about thin margins between profit and loss. To stay ahead of the game, focus in-house, implement a robust inventory management system that you can rely on and allow your restaurant to thrive.