What Is Inventory Management?

Simply put, inventory management refers to the process of tracking the raw materials used by a business right from purchase to sale. The goal of inventory management is to ensure that at all points of time, there is enough stock at the seller's disposal to meet the demand of its product.

Why Does Your Restaurant Needs Inventory Management?

Cost Cutting

Whether you run a cloud kitchen or a dine-in restaurant, inventory management lies at the heart of minimizing spoilage, spillage, theft, and human errors. It enables you to narrow down the means through which you might be losing stock.

This would not only help cut your costs but also streamline your restaurant’s operations by setting up period automatic replacement (PAR) levels. Additionally, inventory management also helps you maintain a positive cash flow, ensuring you don’t have too much money tied up in stock.

Customer Satisfaction And Higher Sales

Order cancellations create as much trouble for restaurants as they do for customers. For restaurants, insufficient inventory is one of the major reasons for cancellations. There is a heavy penalty - aggregator platforms reduce the restaurant’s Health Index score which in turn reduces their visibility and hence sales on these platforms. For customers, cancelled orders create an unpleasant experience which then reflects in the restaurant’s ratings. Lower public ratings essentially erode the restaurant’s reputation and negatively affect sales.

Inventory Management allows you to prevent the consequences listed above by enabling your restaurant to prepare meals timely and avoid cancellations, thereby creating positive customer experiences that boost your brand’s credibility and sales.

Best Practices For Restaurant Inventory Management

Here are 6 ways to go about your restaurant’s inventory management that will help you operate efficiently and grow your restaurant business.

1.    Track Inventory Rigorously

The inventory records of your restaurant business stand at the core of successful inventory management. They give you key information such as stock count, ingredients required, frequently wasted materials, reordering cycle, and more. Tracking these metrics is the first step towards building an effective inventory management process for your restaurant.

Here’s a step-by-step process to track your restaurant's inventory.

1. A stock count at the beginning and end of day.

2. Cycle counting to understand reordering frequency.

3. Identifying trends in ingredient usage to guide purchasing decisions.

4. Specifying the shelf life of each item in the inventory.

5. Updating your inventory records consistently and promptly.

By completing the steps listed above, you would have created a detailed log describing key information about your inventory. This will be crucial for analysing your inventory in the upcoming process.

2.   Create A Food Waste Sheet

Day-to-day restaurant management involves spillage and wastage both. Monitoring food wastage helps you understand commonly wasted ingredients, find trends in wastage, and therefore come up with solutions to avoid loss.

To track food wastage, you could use a separate sheet in your inventory table including the following columns:

• Time and Date
• Item
• Amount
• Reason for Wastage
• Employee In-charge

This record, if updated accurately and consistently, can help accentuate trends in your restaurant’s food wastage. It will also help you make observations that you could use to cut down costs. For example, if your data shows frequent and significant food spoils, you would benefit from purchasing less and utilising the current stock better.

Additionally, you would benefit from training your staff so that they account for food wasted accurately and consistently.

3.  Set A Reorder Level For Your Raw Materials

Many restaurants are forced to cancel orders because of shortages in their inventory. Even lacking a single ingredient could sometimes prevent you from successfully preparing a meal. One goal of the entire inventory management process is to make sure that such gaps are never created.

To ensure a smoothly flowing meal preparation process:

1. Define the minimum level of stock for each item in your inventory. The idea is to start the restocking process on reaching this threshold.

2. Set reminders for your staff to restock materials when they reach pre-set reorder levels.

3. Create a follow-up mechanism to ensure that all ingredients needed are being restocked timely and reflecting on your inventory management spreadsheet.

While creating a mechanism where this is implemented without fail may be challenging, it is critical to get this running because if you do run out of supplies during operation hours, you’ll have to cancel orders requiring the stocked-out items. That could lead to a lower restaurant health index score on aggregator platforms and negative reviews by consumers for your restaurant.

4. Follow the First In, First Out (FIFO) Method

To effectively manage your inventory, use the FIFO method. First In First Out simply means that you use your raw materials in the order in which you brought them. Essentially, materials brought first shall be used first. This is opposed to using the most fresh or latest materials first. FIFO will help you prevent losses caused due to perishability of raw materials.

Since you will use the oldest food and supplies before any others, arrange your inventory such that the oldest items in your storage areas sit in the front and are easy for your staff to access.

5. Standardize Recipes To Estimate Inventory Requirements

While improvisations in recipes can be helpful for innovation, they are less than desirable as far as inventory management is concerned. All your recipes should have a fixed procedure and a fixed amount of ingredients to be used for each serving.

Standard recipes help you accurately estimate the stock needed in your meal preparation for any given cycle. Ultimately, accurate estimation, if used to restock timely, will help you complete orders and minimise cancellations due to shortages or mismanagement.

An Honest Confession | Don’t Make This Common Mistake!

While you can use a spreadsheet or pen and paper to manage your restaurant’s inventory, it could end up making your inventory management process time-consuming, erroneous, and challenging to execute consistently.

Apart from making your inventory management process inefficient, these outdated methods also take a toll on your restaurant staff who would need to manually collate every data point for you to be able to get an understanding of your inventory. This may also compromise on the accuracy of your data due to manual errors.

But don’t worry! You can solve for this by incorporating a POS system in your restaurant. A POS will help you execute all the 5 best practices of inventory management listed above along with making the entire process much more simpler.

For example, on one tap, a POS can offer you detailed reports based on the consumption of stock, your most popular ingredients, most used and fast depleting supplies, and more.

Additionally, your POS will store recipe information and your inventory details. Every time you fulfill an order, it will automatically deduct the ingredients used in that order from your inventory, keeping it updated in real time.

Furthermore, when you reach your reorder level for ingredients, the POS will automatically notify you. You would not need a person in charge to do the counting and deducting for you.

Your POS will also help with billing & KOT, menu management, delivery integrations, advanced analytics, and more.

Here’s the good news - we can get a powerful POS system up and running in your restaurant within 10 days! Get it now.

If you’re still not sure, understand how best to choose a POS for your restaurant.

Recommended Reads

1. 8 SEO Tips For Your Restaurant’s Website
2. 10 Ways To Up Your Restaurant’s Social Media Game!
3. 6 Ways To Boost Your Restaurant's Online Presence