In and Out: Keeping Up with Restaurant Inventory Management

Restaurant inventory management may seem overwhelming, but no successful restaurant can afford to ignore it.

A restaurant’s inventory includes every single item the restaurant needs to operate. Reliable inventory management for restaurants breaks down big tasks into smaller steps so that the business stays well-stocked with as little stress as possible.

And thanks to restaurant inventory management software, the process can be easier still!

If a restaurant doesn’t organize its inventory realistically, it loses money. Knowing how to manage inventory is one of the few things a restaurant owner has control over.

Restaurant inventory management terminology 

It helps to have a common vocabulary when working on inventory. Here are a few standard terms for the restaurant business:

• Sitting inventory: The amount of food or supplies to be used. This inventory can be expressed in dollars or as a physical unit like ounces or pounds. The key is to use the same measurement across the board.
• Variance: Variance is the difference between the amount of product used and sold. For instance, a restaurant uses 500 pounds of bread during a week, but records indicate it only sold sandwiches that used 475 pounds. The variance is 25 pounds. To express variance as a percentage, divide it by the product used. In this scenario, 25/500 = .05 or 5%.

• Depletion: Refers to the amount of product used over a predetermined period, weekly, bi-weekly, monthly, and so on. As with sitting inventory, this can be expressed in a dollar amount or physical unit.
• Usage: Tells a restaurant owner or manager how long they have before an inventory item runs out. The formula for usage is sitting inventory/depletion. If a restaurant has 300 pounds of cheese (sitting inventory) and the kitchen uses 30 pounds per day (depletion rate), the usage is 10. If the restaurant doesn’t order any more cheese, it has 10 days of usage remaining.

Restaurant inventory management basics

Inventory management can vary from restaurant to restaurant, but every restaurant adheres to some basics. Perhaps the most typical and obvious is physical accounting for food inventory and other necessary supplies. Although restaurant inventory management software can simplify many tasks, you still need staff to itemize stock manually.

Scheduling restaurant inventory – when to count, when to order – is another key aspect of this system, as is choosing vendor supplies. Successful restaurant inventory management ensures responsible staff members help the owner or managers. Another big assist comes from using the right restaurant inventory management software.

Successful restaurant inventory management questions: What does the restaurant need to operate? How does it choose vendors for supplies? How does the restaurant budget in the most cost-effective way? How often does it do inventory? Who is allowed to do inventory? What kind of restaurant inventory management software exists to help the restaurant stay organized?

Itemizing supplies

Restaurant inventory management is a difficult, multi-step process. However, without it, a restaurant risks losing food, money, and customers. 

The first step in this process is listing every item the restaurant purchases. While the restaurant owner or manager collaborates with the kitchen and bar managers to make this list, the rest of the staff also contributes. 

This list includes the name of each item, quantity in a sensible measurement, price, and empty cells to list the date of purchase. It can help to have vendor contact information on this chart as well.

A restaurant inventory management chart might look something like this:

Item	Quantity	Price per portion	Date of last purchase	Vendor contact
Ricotta Cheese	20 lbs.	$10	5/01/22	cheese@vendor.com

Scheduling restaurant inventory management 

Scheduling inventory management in restaurants can be never-ending, and you need the entire staff’s involvement to get it right. Many restaurants do a light inventory check at the end of each day. This usually happens as part of closing duties. One of the closing cooks and one of the closing bartenders write down which items are running low and share this information with the restaurant manager or owner.

The person in charge of ordering most likely digs deeper into the restaurant’s needs each week to keep easily forgotten items like toilet paper or light bulbs in good supply.

Choosing vendors

Effective restaurant inventory management involves choosing vendors that provide a good product at a reasonable price. There are many sites online where restaurants can research and compare the best restaurant vendors.

Another tactic for choosing vendors is talking to similar restaurants. This helps the restaurant management team understand how each vendor works and if that work is up to standard.

Choosing inventory staff

Proper restaurant inventory management requires every staff member’s support. While the restaurant owner or manager is likely the one responsible for ordering, each employee should report inventory needs and shortages to the restaurant management team. This reporting can be as simple as writing down low-stock supplies on an inventory sheet.

When inventory arrives from a vendor, someone needs to take the time to check the physical supplies against the purchase order to make sure everything that’s been paid for has arrived. The owner or manager decides which staff members can perform this important step of restaurant inventory management. Staff members should also ensure that supplies are taken to their storage locations.

Help from restaurant inventory management software

Managing inventory can be pretty simple if you use the appropriate software. Inventory management software can help categorize supplies, track physical or financial waste, automatically order supplies, and more. It helps automate many similar daunting tasks.

Restaurant inventory management benefits

Without restaurant inventory management, a restaurant risks wasting food and losing money. There’s also a higher chance of running out of menu items if the restaurant’s inventory isn’t managed correctly. This negatively affects customer satisfaction and loyalty.

On the employee side, maintaining proper inventory reports makes it easier for front-of-house staff to serve customers.

Avoiding food waste

Some items needed for restaurant operations like napkins, trash bags, or uniforms can be ordered and stored indefinitely. Obviously, this is not the case with perishable food products at risk of spoilage.

Keeping the menu current

Although food waste should happen as little as possible, a restaurant has to keep itself stocked enough to prepare every item on the menu. Every restaurant runs out of certain things from time to time, but customer satisfaction takes the brunt if it occurs too often.

Optimizing costs

If a restaurant wastes food inventory or loses customers because of food shortages, it loses money. At this pace, restaurants will not be able to keep up with competitors and risk shutting up shop.

An efficient restaurant inventory management system keeps supplies and profitability always on point.

Restaurant inventory management challenges

Even though restaurant inventory management has many benefits, that doesn’t mean inventory count is without its challenges. A restaurant’s needs, potential food waste, proper storage, and inattentive staff are all challenges to creating a well-run restaurant inventory management system.

Unpredictability 

Restaurant inventory management has to contend with the instability of the restaurant industry. Budgeting and forecasting software can help sort out the ups and downs, but there’s always room for error.

Restaurant inventory management helps recognize this challenge and make adjustments. Restaurant inventory management software tied to a restaurant point-of-sale (POS) system can track shifts in sales and inventory. Owners and managers can then analyze this data to modify orders and maximize profit.

Staff error

While restaurant inventory management staff are trained to use restaurant inventory software, part of doing inventory count also includes manual reporting. People make mistakes. It can be good to have more than one staff member evaluate the restaurant’s inventory to guard against those mistakes.

Kitchen staff may also engage in wasteful practices while preparing food. It’s important to educate them about waste prevention and provide appropriate training on good waste management practices. Always remember that minimizing waste increases profits.

Storage space

Restaurant inventory control includes timely ordering and budget management, but it should also make sure there’s enough room to store products safely. Once orders arrive, designated employees take care of storing perishable items right away using the first-in-first-out (FIFO) method.

Non-perishables can wait if the restaurant is too busy to spare kitchen or waitstaff, but everything should be put away sooner rather than later to avoid clutter. These same employees also handle the hygiene of the restaurant’s storage spaces, staying on top of food safety regulations. 

Calculating supply costs

Finding ways to cut costs is essential for a restaurant’s bottom line. Making financially-cautious inventory management decisions means planning inventory ordering in line with the restaurant’s budget. This helps the restaurant practice cost control for short-term and long-term goals.

Cost of goods sold

A restaurant’s cost of goods sold (COGS) is the amount of money used to purchase supplies directly tied to the food items sold. 

Food loss cost

Food loss cost is the amount of money a restaurant loses from unused food. Before calculating food loss cost, you need to know the average cost of disposal per pound of food and staffing per day. 

Next, the kitchen weighs the amount of food waste over a set period. They compare this number to the total amount of food used to get the food loss percentage. 

When all the necessary measurements are taken, the formula below determines the food loss cost in dollars.

The formula may sound complicated but makes sense in practice. Let’s say the average fresh food cost is $1 per pound, food disposal is $.30 per pound, and staffing per day is $1600. 

Suppose the kitchen staff monitors food waste for three days. They throw away 75 pounds of food while using a total of 1500 pounds of food. During these three days, the food waste is 5%. 

Plugging in these numbers looks like this:

Over the course of three days, this restaurant’s food loss cost is $330.

Food cost percentage

This is simply the amount spent on food expressed as a percentage of overall sales.

Liquor loss cost 

Liquor loss cost includes spillage, complimentary drinks, and staff consumption, if applicable.

Liquor cost 

Some restaurants like to keep separate calculations for food and liquor. The liquor cost formula is the same as for COGS.

Liquor cost percentage 

Again, this figure is for restaurants that want to track food and liquor separately. It follows the same formula as food cost percentage.

Restaurant inventory turnover 

Inventory turnover is the time it takes for a restaurant to sell its food and beverage inventory. Here are the steps to calculate this turnover.

Prime cost

Prime cost is the sum of COGS and labor cost. Restaurant owners can determine how much to charge their customers if they know the prime cost. 

A successful restaurant's prime cost is around 60%. To calculate prime cost as a percentage, follow this simple formula:

Restaurant inventory management tips

Every restaurant owner or manager needs help with inventory management. Below are some tips to ease this burden.

• Take stock by hand, but use restaurant inventory software to streamline costing, ordering, and scheduling.
• Maintain a consistent manual inventory schedule
• Make sure responsible staff members are part of inventory management
• Keep up friendly relationships with vendors, from salespeople to delivery staff
• Store deliveries as soon as possible. For perishable items, use the FIFO method to make sure older food items don’t go to waste
• Use restaurant inventory management software to plan long-term financial goals that reduce waste

Best restaurant inventory management software

Restaurant inventory management software is an invaluable tool. Owners or managers use it to streamline every aspect of inventory management, including ordering, paying vendors, minimizing food waste, and creating menus.

To qualify for inclusion in the restaurant inventory management category, a product must:

• Track and record restaurant inventory
• Compare income to supply costs
• Make vendor information and sales history easy to access
• Keep tabs on invoices and receipts in a digital format

*Below are the top five leading restaurant inventory management platforms based on G2 data collected in March 2022. Some reviews may be edited for clarity.

1. Posist Inventory Management

Posist Inventory Management provides restaurant inventory management strategies for more than 10,000 establishments worldwide. With its real-time inventory tracking, restaurateurs can stay on top of ordering and reduce waste.

What users like:

“Easy to create the master for stock, and the very user-friendly system is easy to work on. Easy to manage the multi-store with one location and helpful to track the store's inventory. Most useful, the consumption reports or variance reports tracking everything.”

– Posist Inventory Management Review, Ajay S.

 

What users dislike:

“Inability to calculate the staff meal cost into the inventory to give an exact picture of the restaurant cost.”

– Posist Inventory Management Review, Ifeoluwa S.

 

2.Restaurant365

Restaurant365's accounting and operations platform is geared directly toward restaurants. It collaborates with POS, vendors, banks, and payroll to help restaurant owners make profitable business decisions.

What users like:

“Support and constant innovation. Restaurant365 is always updating to make processes easier and better. Their support is second to none.”

– Restaurant365 Review, Rob G.

 

What users dislike:

“It looks old and has a functional yet not aesthetically pleasing design. It seems like a program I would have used in the early 2000s. It was not built to be pretty, and sometimes I get lost in the flow.”

- Restaurant365 Review, Rosie A.

3.Craftable

Hospitality professionals and tech experts teamed up to create Craftable, a complete restaurant management system for ordering, itemizing, and costing.

What users like:

“The color-coding is excellent, and the whole UI is highly user-friendly. The ability to undo things becomes extremely helpful, and the search engine makes work so much easier! The notifications don't let you miss out on due assignments and keep me out of trouble!”

– Craftable Review, Luis W.

What users dislike:

“Onboarding process can be complex for uniquely-structured operations or those that don't have a dedicated technology resource employed to focus on launch.”

– Craftable Review, Tyler S.

4. MarketMan

MarketMan is a cloud-based restaurant inventory management system. It helps restaurant owners and managers streamline aspects of inventory management, such as ordering, budgeting, and purchasing.

What users like:

“The complete support of the inventory and cost of goods process – recipe management to receiving invoices. It really is an all-in-one system that makes managing our data simple.”

– MarketMan Review, David R.

 

What users dislike:

“Limited audit trail for changes made in the system.”

– MarketMan Review,  Frank C.

5. UrbanPiper

UrbanPiper offers a suite of products to help manage restaurant businesses' online growth and presence.

What users like:

“The product dramatically simplifies operations, and the business owner gets accurate data. Once you start using this tool, you can never go back. The prime tool is also quite good and helps give all the operations team visibility. Better than all other options in the market.”

– UrbanPiper Review, Bert M.

 

What users dislike:

“UrbanPiper could introduce POS along with online integration so that it will turn into a complete package.”

– UrbanPiper Review, Karthikeyan S.

A place for everything, and everything in its place

When restaurant inventory management works well, it keeps restaurants running smoothly and on time. Although it takes many, sometimes tedious steps, restaurants can’t risk having a subpar system in place.

Restaurants with an efficient restaurant inventory management plan will reap the rewards now and in the future.

Inventory is just the beginning. Click here to read about the whole world of restaurant management!