Managing Restaurant Inventory for Greater Profitability
The primary difference between cash and restaurant inventory is that one is kept locked in a safe (or a bank account) and the other is sitting on your walk-in and storeroom shelves.
Here's another difference: cash can be used to pay bills, buy more product or pay your staff. Not so with inventory. The only way to turn inventory into cash is to sell it. But if you have more product on the shelf than you can sell before your next cash need, you could find yourself scrambling to make payroll or time-sensitive obligations.
Restaurant operators continually seek the right amount of inventory to carry. Too little and they risk running out of one or more key products. Too much and they tie up their valuable cash and run the risk of higher food cost through spoilage and waste. Here are a few key insights to help keep your inventory levels accurate through proper restaurant inventory management.
Well managed restaurants typically carry 5-7 days of food in inventory, enough to safely get them through until the next delivery, with a “little” cushion built in. They do so by establishing proper build-to par levels. Order amounts are based upon the difference between what they have on hand and what is needed to "build up to" the designated par level. This is considered one of the most critical best practices in restaurant operations for maintaining proper inventory.
Many RestaurantOwner.com members manage their purchasing and par levels by using a product ordering tool often referred to as an Order Guide.
While every restaurant inventory management process is different - both in types of products and how much they use - it's typical to get more frequent deliveries (2-5 times a week) for perishables such as produce, dairy, meat and seafood, whereas some refrigerated, canned and dry goods need only be delivered once or twice a week.
Designated order frequency, with specific days of the week for delivery, is essential to setting proper par levels. For example, many restaurants set a twice a week order frequency for broad-line suppliers. Orders are placed on Mondays and Thursdays for Tuesday and Friday delivery, respectively. Par levels are set based upon anticipated usage between deliveries.
Past order history is the best indicator of anticipated usage.To determine usage, calculate the total number of purchases over the last 6 - 8 weeks for each product you carry, then divide that by the number of days within the period (6-week = 42 days, 8-week = 56 days). This will result in the average daily usage for each product. Set your par based upon past usage and an acceptable cushion to get you through in case of a delivery shortage.
Most vendors, especially broad-line distributors, can provide you with a descending case report for a specific time period.
Setting proper par levels is good business. It takes the guesswork out of purchasing and enables your entire staff, not just managers, to participate in the restaurant inventory purchasing process.
Moreover, it provides consistency and repeatability – the most important part of the guest experience.
Contact Jeff or Rosie today for more tips on restaurant inventory management and ask about accessing the inventory management forms and tools!
Thanks to our friends at RestaurantOwner.com for providing this insightful article and please visit them with the above link.
“Inventory is only an asset when it’s moving, otherwise, it’s a liability.”