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Taking Stock: MarketMan Cloud-Based Restaurant Inventory Management

Nothing can be more frustrating to restaurant management than running out of an important ingredient mid-shift. Explaining to guests that a dish is off the menu can not only be embarrassing, but it can cost you customers, especially first timers! This is especially disheartening when customers are placing an online order because they can easily jump to the next restaurant that pops up in their search feed.

Restaurant inventory management software monitors the stock of ingredients and other crucial supplies in real time. It can also help you make wiser and well-informed food, beverage, and supply order decisions. Effective inventory management is essential to day-to-day operations, long-term goals, and is directly tied to your restaurant’s bottom line. Managing your supply and food inventory requires diligence, but when done correctly, you can reduce food waste and boost profits.

The best restaurant inventory management software for your restaurant is the one that best fits the needs of your operation. Your restaurant inventory management system should facilitate automated online ordering via PAR levels and integrate with your POS system to compare inventory levels with sales data. Ultimately, restaurant inventory software should help restaurant management to reduce food costs and streamline inventory management operations.

MarketMan Inventory Management

A cloud-based inventory management and purchasing solution that simplifies back-of-house operations, MarketMan helps to streamline everything from inventory to budgeting, reporting to food cost calculating, and delivery to accounting.

MarketMan helps restaurants track food costs, examine purchasing history, and stay on top of inventory. By managing your inventory in the cloud, you can update pricing, add new products, and edit your menu on any device.

MarketMan’s inventory management tools allow restaurants to easily track waste, theft, and determine inventory quantity and value in real time.

Importance of Restaurant Inventory Management

Just as detrimental as under ordering inventory can be, overordering is the leading cause of food waste. Directly tied to your bottom line, the importance of restaurant inventory management becomes evident when you realize how much food waste is costing your restaurant.

A good inventory management system can help by:

  • Managing stock through PAR (Periodic Automatic Replenishment) levels and automated ordering

  • Maintaining food cost by tracking the cost of supplies compared to goods sold

  • Monitoring waste to reduce the amount spent on food that is trashed before it ever reaches the customer

The amount of inventory you need on hand depends on a few key factors: traffic patterns, storage space, number of deliveries per week, and PAR levels. PAR levels are the minimum and maximum limit on the quantity of any item of inventory so that you don’t under or overstock. And it’s not just about food. Running out of supplies like containers or packing supplies can shut down your restaurant’s entire delivery operation.

9 Tips for Managing Restaurant Inventory

1. Integrate POS Software

POS software provides numerous advantages, including data forecasting, order planning,and tracking inventory based on customer orders. Week-to-week, month-to-month, or year-to-year; regardless of which metrics you measure, you can use past sales data to budget the amount of inventory you will need to keep up with demand. Comparing sales data to inventory costs can also help make sure you’re charging enough for your dishes and you’re getting the best price from your vendors.

2. Take Manual Inventory

Be wary of relying too heavily on your POS system for inventory figures because, while a POS system can accurately keep track of the inventory metrics, it cannot account for other sources of inventory loss such as incorrect orders, spoilage, spillage, inefficient food prep, customer complaints, and theft. Taking inventory manually ensures a more well-rounded, accurate report.

3. Designate Staff to Track Inventory

Choose a few staff members to be designated as inventory-trackers to make identifying inconsistencies simpler. Also, since the same employees will consistently be taking inventory, they will be able to understand the patterns and nuances involved over time. To ensure the accuracy of your inventory, make sure you thoroughly train staff on the process. Also, consider offering employees bonuses as a result of inventory savings, and explain to them how proper inventory tracking impacts your bottom line.

4. Maintain a Consistent Schedule

Following a consistent inventory schedule enables you to accurately understand how much of your ingredients and supplies are utilized in a specific time period. While perishables and popular ingredients should be tracked daily, non-perishables and bulk items can be counted once or twice a week. Over time, patterns will become evident and you’ll be able to adjust your orders or menu offerings when deemed necessary.

5. Use FIFO (First in, First Out) and LIFO (Last in, First Out)

FIFO, or first in, first out, is the stock-rotation practice in which the oldest stock is used first to reduce the risk of spoiled or expired stocktake. With LIFO, or last in, first out, the stock is rarely rotated, as the most recent stock to be added is also the first to be used. This can be helpful for tax purposes, because when LIFO is used when prices are rising, it can result in lower net income - and therefore lower taxes owed. LIFO can help reduce costs by minimizing the need to buy from a fluctuating market where food prices may rise.

FIFO is typically the best stock rotation method for restaurants and hospitality businesses managing inventory, especially when you are dealing with fresh food and produce that is likely to spoil. LIFO can be the better choice though for businesses selling ambient or long-dated goods such as aged wines.

6. Track Food Waste

Properly tracking food waste helps you understand the actual costs of your food. Track the time, date, and amount of goods wasted, along with the reason (did it spoil, expire, drop, or spill or due to normal day-to-day shrinkage?) That way, you can pinpoint the main reasons for unnecessary waste easily, and determine if any staff are responsible for repeatedly causing waste. From there, you can manage inventory and staffing issues to save money.

While your POS system may include a place for this, allowing you to input the information digitally, a written food waste sheet is another way to make sure nothing falls through the cracks and allows you to come up with solutions for lost ingredients. If your food waste list shows that a significant amount of food spoils, for example, you can purchase less or find ways to otherwise utilize those ingredients. If, on the other hand, you notice a lot of waste is being generated due to incorrect orders, you’ll be able to pinpoint where the problem is occurring and deal with it in a timely manner. If you notice a certain server seems to be on the schedule during a time when a lot of orders have to be remade, then speak to that person and warn them of the possible consequences.

Train every staff member on the use and importance of the food waste software or manual entry system. Be sure to start a new sheet every day (or shift if your restaurant is very busy.) Include a column for time/shift, item, and always have the person entering the items initial the entry. This not only helps you with tracking waste, but it keeps staff accountable and more cognizant.

7. Utilize Surplus Ingredients to Minimize Food Waste

If you see that you have excess ingredients that will soon expire or spoil, incorporate them into existing dishes or have your chef create a special menu item that utilizes these ingredients such as soups, stews, salads, or dips.

8. Use Past Inventory Insights for Future Orders

By studying which ingredients were over- or under-utilized according to your inventory for a designated time period, you can make informed decisions for future orders. Using both your POS system and manual inventory, as well as your food waste sheets, you can predict the trends and make more economic decisions.

9. Practice Lean Inventory Management

Lean inventory management is the practice of focused waste reduction by carefully balancing inventory levels to keep only enough stock on hand to meet demand, thus reducing waste. Lean inventory management can lower the risk of carrying excess inventory, thereby cutting the risk of spoilage due to expired goods. Reducing the amount of inventory on hand at any time also cuts your carrying costs.

How Inventory Management Relates to Net Profits

Restaurant inventory takes "cost of goods sold" (COGS) into account. Your COGS is the cost of creating all of the items on your menu.

Here is the equation to find your COGS:

COGS = Beginning Inventory + Purchased Inventory - Ending Inventory

COGS is also part of the equation to determine your net profit.

Here is the equation to determine your profit and loss statement:

Net Profit = Gross Profit (Total Sales-COGS) - Labor Cost + Total Operating Cost

By analyzing the net profit equation, you will be able to see that a lower overall COGS leads to higher net profits.

Take Away

Almost nothing can wreak havoc on your restaurant's vibe, reputation, or daily sales more than running out of an essential item in the middle of a busy shift. Inventory management software that monitors stock in real time and sends and notifications when a staple is running low can help protect your reputation, reduce waste, and boost profits.

By Eileen Strauss


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