Every business grapples with inventory management, but practicing optimal inventory management is especially crucial for restaurants. After all, these businesses have to balance tons of moving parts, from hard-to-predict demand to quality control to spoilage.
In this article, we’ll cover the basics of how to control inventory in a restaurant and how to determine the the best way to keep your customers happy while maximizing profits and reducing time-consuming tasks.
Why is restaurant inventory management so important?
Restaurant inventory management is critical because controlling food costs directly affects your business’s profitability. Order too much, and you’ll risk costly food spoilage. Order too little, and you’ll frustrate your diners—and possibly cause revenue consistency.
The first tactic a lot of restaurants use to keep costs down is minimizing labor spending. But this can quickly lead to resource management issues; a short-staffed restaurant can lead to longer wait times, frustrated customers, and an overall lower quality dining experience—not to mention unhappy employees. Rather than focusing strictly on hiring as few employees as possible, start with formulating a consistent, defined reordering strategy to help keep labor costs at budget.
Think of it this way: if your business wants to run smooth service every day, it will need to get organized—and stay that way. And practicing air-tight inventory management is key to that success.
Related: What is inventory control?
Unique challenges of managing inventory in a restaurant
To maintain profits and keep your customers happy, you’ll need to identify the right inventory strategy that works for your unique restaurant. But inventory management can be complex for restaurants and other food-based businesses. Here are a few of the reasons why:
1. Food can perish quickly
If there’s one thing that differentiates restaurant inventory from any other industry, it’s the risk of food spoilage. After all, every day, restaurants receive box after box of highly perishable ingredients. And it’s up to your team to ensure that food is sold before it’s too late.
2. Demand can be unpredictable
Customer demand can be hard to predict for restaurants and other service-based industries. Yes, you can review past orders and point-of-sale data to determine what items are most popular, but you’re unlikely to ever place a “perfect” order. After all, everything from a rainstorm to a big sporting event can change how many people visit your restaurant—and how they order.
3. Suppliers can experience stockouts, too
Even if your restaurant practiced perfect inventory management, keeping your shelves stocked wouldn’t be a piece of cake. That’s because your restaurant orders things like fruits, vegetables, and other ingredients that even your most reliable suppliers might not be able to keep in stock.
That’s particularly true during seasonal shifts or when the supply chain is stressed. Inventory for the food business can be volatile—so stay in touch with your suppliers and put together a list of backup vendors should your primary wholesalers run out of key ingredients.
How to manage inventory in restaurants
Establishing an inventory management strategy that works for your restaurant involves incorporating inventory best practices as well as the unique trends and preferences of your customers. While you may need to refine your restaurant inventory strategy over time, these ten fundamentals are a great starting point:
1. Know your numbers
In the restaurant industry, there are some essential facts and figures your business needs to know. Understand your cost of goods sold (COGS), and determine inventory pars—how much of different ingredients you need to have on hand at all given times.
You should also document all your recipes to include units of measure so you can easily calculate how much you need to order as seasons shift and demand changes. Understanding usage and yield—what you get out of the recipes you make and the ingredients you buy—can help you better predict exactly what you need to order.
It can be helpful to determine your inventory turnover rate, too. Your inventory turnover rate measures how fast your restaurant sells off inventory and suggests whether your shelves are over or understocked. Keep in mind the average restaurant’s inventory ratio hovers around 5.
2. Take inventory often
You already know that restaurant inventory is at high risk of spoilage. Knowing what you’ve got on hand can help you determine what needs to be used first, allowing you to set specials accordingly. Having a handle on what you have on hand can also help you control costs and save you from running to the supermarket to pay retail prices for ingredients that could have been purchased at wholesale price.
Most restaurants take inventory daily, sometimes before and after service. You may need to try out a few different strategies before figuring out the perfect time to take inventory.
3. Stay physically organized
Most restaurants know that the key to staying on top of inventory is an accurate, sustainable organization system. Find a way to keep your walk-ins, speed racks, and pantry shelves organized—and stick with that strategy.
Use clear bins, descriptive labels, and use-by dates to indicate critical details about every item in your inventory. Whenever possible, use the FIFO (first-in, first-out) method to ensure the food that needs to be used first is front and center, with food that needs to be used later stored behind it.
You can also use inventory management software to track expiration dates automatically.
4. Keep food safety top of mind
While food waste is a significant concern at most restaurants, so are food safety guidelines. You’ll likely find that many inventory management best practices—like reducing spoilage, carefully tracking expiration dates, and ensuring refrigerators and freezers are kept in the safe zone—can also protect your customers from dangerous foodborne illnesses.
5. Assign inventory-related tasks as required sidework
If you want consistently accurate restaurant inventory, you’ll need clear inventory procedures posted for every employee to see. Many restaurants find it helpful to assign each and every inventory-related task to employees as sidework. This includes counting inventory, checking expiration dates, throwing away old food, tracking food waste, preparing and placing orders, and receiving and inspecting deliveries.
If your restaurant uses inventory management software to track food and supplies, your employees can simply update the quantity and status easily in the software, either on company-owned devices or their own smartphone.
6. Train employees thoroughly
Even the most specific standard operating procedures are not helpful if your staff does not know how to complete their inventory tasks. Do due diligence by training employees properly and offering on-the-job lessons to new employees—and refreshing existing employees on best practices as needed.
Remember that many inventory apps, including Sortly, are intuitive, so most of your employees can get the hang of these systems as they learn the ropes at your restaurant.
7. Clarify how, what, and when you order
Your restaurant should have clear, easy-to-read instructions about how, what, and when it reorders. To compile this information, you’ll need to gather information on your suppliers’ lead times, minimum order quantity, and any other essential details.
You’ll also need to determine your restaurant’s own inventory minimums, setting appropriate safety stock levels to ensure you can avoid stockouts. While every business is different, most restaurants keep five to seven days of food on hand.
8. Track food waste and set goals
There’s no getting around it: every restaurant has food waste. But that doesn’t mean your business resign itself to regularly throwing out good food before it goes bad. Instead, your restaurant should define accept food waste, then track spoilage over time. Some restaurants use a specific sheet to track food waste and inventory spoilage.
If you find you’re missing the mark, double-check your demand forecasting methods. Unhappy with your spoilage rate? Get creative—tinker with specials, promotions, new recipes, anything you can think of to move inventory before it goes bad.
9. Keep seasonality and specials in mind
Demand for restaurants is constantly fluctuating, but placing orders can be especially tricky if your restaurant orders seasonal ingredients or runs daily or weekly specials.
Usually, the best option is to make an educated guess about how popular a special might be, erring on the side of underordering, especially if ingredients are expensive or highly perishable. If you do run out, make a note of it, and adjust how you order next time.
10. Consider an inventory app to better track ingredients, waste, and more
Almost every restaurant will track inventory in some way, whether manually, via spreadsheet, or using an inventory app. An inventory app can help you automate some of the most tedious inventory-related tasks, including checking items in, reviewing restaurant inventory across several locations, or setting customized, low stock, or expiration alerts.
You can also use an app to track assets like refrigerators, freezers, and stoves. The right inventory software can help you keep an eye on key maintenance dates, as well.
Experience the simplest inventory management software.
Sortly is a top-rated inventory management software solution perfect for restaurants of every size. Whether your need to organize one walk-in or a whole group of restaurants, Sortly has the intuitive, time-saving features you need to get your inventory under control quickly and ensure smooth inventory and supplies tracking—which can help you re-order with ease.
Ready to get started? Try Sortly absolutely free for two weeks.