Managing inventory—and your time
Along with labor, food and beverage is one of the highest costs within a hospitality organization. Aside from the cost of the items themselves, there are many expenses associated with managing your inventory. What happens when something is ordered that then goes to waste? Or when you run out of something you need, and have to rely on more expensive, ad-hoc purchases to fill in? What about when there are discrepancies among what was ordered, what was sold, and what’s left in the walk-in?
Luckily, many of these expenses are avoidable. In order to maintain the highest-possible level of profitability, proper inventory management is vital. Along with forecasting inventory to meet demand, how you track what’s coming in and going out can make or break your margins.
Inventory management is an inherently reactive piece of the business: when managing inventory, you are looking at the differences among what sold (and what didn’t), what was ordered, what’s left, what’s going bad, and what’s now on its way. A huge part of this is counting what you have left at the end of the day.
While there are many ways manage stock counts, there are some ways that work better for certain concepts than others. For some, more frequent inventory checks are necessary to ensure optimal product quality. For example, for a farm-to-table restaurant that thrives on fresh, daily-made items, a daily inventory count may be necessary, as produce has an accelerated expiration date.
Yet many restaurants default to daily or weekly counts, even for inventory that doesn’t spoil as quickly as a local market peach. These counts are time consuming, can delay end-of-month reporting, and are error prone, especially with more manual inventory counting systems. Of course, the more frequently inventory is counted, the more time—and therefore, money—is spent counting it. As obvious as it sounds, this is a critical factor for certain restaurants. The amount of time spent overseeing inventory on a daily or weekly basis may actually translate to a higher expenditure than the discrepancies within the inventory itself.
For businesses with a strong loss-prevention systems in place (such as double-checks on how wastage is recorded, a tool like Fourth Analytics to gain a good understanding of actuals vs. theoretical, 3-way invoice matching to prevent initial loss at the ordering level), daily or weekly inventory checks may be an unnecessary expense.
For these businesses, selecting a few items to spot-check regularly (high-theft potential items like alcohol; goods that spoil quickly; items with high loss-percentages, like janitorial supplies) against the theoretical can help keep variances in check, while limiting the actual amount of time spend overseeing inventory. In this way, they can manage their inventory by exception: looking at discrepancies without having to review every line item each time.
Some restaurants may then choose to tailor their counting frequency by item type: a daily count for pricey and fast-moving items, weekly counts for most food and beverage, monthly counts for non-consumables, and annual counts for machinery and cookware. This also helps limit the amount of time spent on daily inventory reviews. After all, the labor spend associated with counting sugar packets shouldn’t end up costing your business more than the sugar itself.
At Fourth, we take the time to understand the needs of your individual business, and to help find the right solution for you. We generally recommend a weekly approach to start, to help highlight anomalies and to address any setup issues more quickly (instead of addressing at the end of a month). As the operation gains familiarity with the new solution, adjustments to a more blended approach can be made.
Want to spend less time and money managing your inventory? Schedule a free demo today to learn how we can help your business achieve more.