Monday, February 28, 2011 at 3:52PMHow to Manage Inventory for Increased Efficiency and Profit
Here's another post from Greg McGuire at The Backburner:
As a restaurateur, you probably struggle with inventory on a regular basis. Balancing walk-in space, fast-selling menu items, and slow moving items can create a constant headache. Some of your product moves quickly, some does not, and inevitably some ends up sitting in the walk-in for far too long.
That sitting product is costing your restaurant money, because you’ve already invested money in it but you aren’t seeing any return in the form of sold entrees to customers. Even worse, it’s taking up room in your walk-in while it costs you money. So how to turn frozen product into dollars in the cash register? Some tips to help you manage inventory:
What do you need? What do you already have? It’s very hard to manage inventory when you don’t know what you’ve got and what you need. More than likely you use a POS system to help you manage existing inventory and to track sales so you know what you need more of. However, it’s important to supplement any POS tracking with a regular manual inventory of your stock. That way you can double check what the software is telling you while also checking that food quality has been maintained. A regular inventory schedule will also let you track trends in your inventory, like items that sell better or worse seasonally and product that you consistently have too much or too little of.
Get creative with what you’ve got. Once you identify the food products you’ve got more than enough of, you need to think of a way to move that product from walk-in to plate. That means getting creative. Develop specials and supplemental menu items that feature your excess product at a sale price. This strategy has multiple benefits: it adds some variety to your menu, it turns sitting product into dollars, and it can provide a little easy market research.
Variety and selling product are pretty self-explanatory. The most exciting benefit is testing new items made from product you already stock on your customers. You never know when you’re going to stumble across a hit that really sells well. When you do, adding it to the menu is easy because you already buy the product and you know how to prepare it. The best part is, you’re taking extra inventory that was sitting around and moving it out the door, all while giving your customers something new to rave about.
Effectively managing and utilizing your inventory first takes accurate data. Once you know what you’re dealing with, you can apply the best of your creative process to maximize the efficiency of your kitchen. The opportunities the extra product lying around your freezer represent an exciting way to hone your menu into a selling machine with very little waste. And once you get your restaurant operating at that level of efficiency, better sales, and better profits, will follow.
Reader Comments (3)
I spent a five years working for MTW's foodservice equipment business and worked directly with their Kolpak and Harford brands. After reading this article and understanding the topic, it dawned on me that using some LEAN Manufacturing tools might help alleviate the materials costs you are suggesting you are suffering from. Manufacturing widgets vs, assembling food isn't that significantly different in a Lean concept. Lean thinking is the systematic identification and elimination of "waste". Excessive materials stored in your Walkin would qualify as "waste" in a Lean mentality. Using a racking system, shadow boxing, FIFO material handling, visual triggers for reorder would or could help with the cost controls the article above is suggesting.
Case in point. Buying in bulk might reduce your per unit cost...say price per frozen chicken breast. However, you're focus should be on total cost...not per unit. Total cost will account for tying up your working capital in materials (Chicken), storage costs (walk in), and waste, expired food and/or discounted food/promotions to move those chicken breasts out of the Walkin.
A Lean audit is a fairly easy thing to accomplish. Focusing on your total costs and eliminating waste (non-productive capital) will help drive efficiency and profits to your bottom line.
Greetings Brian. This is a helpful and informative article on reducing excess inventory. One of the major components of a sound inventory model is reporting and taking action. In many instances the 80/20 rule applies to restaurant menus. Eighty percent of sales usually come from twenty percent of your menu. Owners often add new menu items with the belief that total sales will increase. An annual or semi annual menu analysis is needed to remove the dogs on your menu that lead to excess inventory and reduced cash flow. I suggest removing these items systematically. First, run reports and analyze what is not selling; if you do not do this regularly, you will be surprised. Next, remove the items from the printed menu. Allow customers to order the items for 1-6 months - do not create bad will. These items will quickly be forgotten. Last, remove kitchen procedures and P.O.S. selection.
The article makes another good point to supplement the P.O.S. with a manual count. This is a critical component of managing a sound inventory system. A manual count allows us to compare planned inventory usage vs. actual food usage. Further, you must determine how OFTEN each inventory item is measured / manually counted. Higher use items that impact overall food cost, should be counted more frequently. For example, cheese is used on every pizza, so in a pizza place cheese might be count daily to compare the planned inventory. Spices might not impact the bottom line as much and maybe counted weekly. Take ACTION. Determine why the actual usage of key inventory items is different than planned usage and take action. Some reasons for the variance might be a weak item measuring systems, the computer conversions could be inaccurate from bulk to usage unit, theft, or something else.
Rich, thank you for your input and advice. Your suggestions should be heeded by restaurant leaders industry-wide.