Do you need inventory systems in your restaurant? Absolutely. Every restaurant needs to have methods in place to manage inventory and limit waste.
Your inventory is cash on the shelves, and waste, over-stocking, theft and spoilage immediately impact the bottom line—often to the tune of thousands of dollars per year.
But do you need inventory software? That’s a more complicated question.
You may already use some kind of inventory control software. Or maybe you use one or more spreadsheets to track certain items. But if you’re like many pizza operators, you probably do a manual count with a clipboard and a pencil once a week—if you do a physical inventory at all.
“Many operators aren’t ready for inventory control software,” commented one point-of-sale software developer. “It’s not what they need right now.” Despite the fact that nearly every POS on the market comes with some form of inventory software, it’s not for everyone. Until restaurants put some key inventory systems in place, inventory software is the least of their worries.
Simple Systems That Work
Mark Murr, who owns two Ali Baba’s Pizza locations in the Victoria, British Columbia area, has used a point of sale system in his restaurants for several years, but has never used inventory software. Like most restaurant operators, he tracks his inventory manually. But although he freely admits that he’s “not the best inventory manager,” Murr is actually several steps ahead of many pizza operators because he has some simple and effective systems in place to track and control his food costs.
At Ali Baba’s, they track the product as it comes into the restaurant, checking to make sure they are not shorted. Once a week, they do a manual count to check their weekly sales against the product that was received and the stock on hand.
According to Murr, portions are another key to controlling usage. For example, he says, “We purchase spices in measured portions, in the exact amount that we require to work with our crushed tomatoes.” If there are short spices or tomatoes at the end of the week, this method allows them to compare both ways. They do the same thing with cheese, which they also portion-control at the make table, so they can check for any “mismatch” at the end of the week.
Would Murr consider inventory software? Sure, if it were user-friendly enough. “In a small business, we can’t afford to hire someone specifically to keep a close eye on things like pricing from suppliers and inventory control software,” he says. “As the business grows and profits increase, we can start to look at those areas more closely.”
Chris Wadham, president of Vancouver-based consulting firm Restaurant Office Intelligence, explains that if you understand your food costs, you can “take your top 10 items, and there’s 80 percent of your food cost problem.” Some simple controls on the stock that costs you the most can make a big difference in your overall profitability. Most industry consultants recommend doing inventory and calculating food costs every week, scheduling daily counts on key items like cheese and pepperoni at different times of the day and limiting waste and spoilage purchasing by keeping no more than a week’s stock on hand.
So when does inventory software make sense?
There’s no question that inventory control software can save you money. The software can give you new insight into your real food costs and where waste is happening in the restaurant. According to Wadham, “Inventory control software will save you anywhere from one to two percentage points of your sales. That’s profit that goes direct to the bottom line.”
Chris Hands of Winnipeg’s TracRite Software agrees. When his customers start to realize how much is falling out the door—and in some cases how far out their food costing is—they say, “‘Gee whiz, I could have been making an extra 2 percent this year.’ That could buy them a whole new car.”
Before you invest in inventory software, though, you need to have some key systems already in place:
Do you have consistent recipes for all your menu items?
Are you portion-controlling your most costly items (particularly cheese)?
Are you keeping no more than a week’s stock on hand and systematically rotating perishable product to limit waste?
Are you doing a physical inventory at least once a week?
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How much money do you have tied up in inventory? To limit waste and spoilage, industry consultants recommend keeping no more than a week’s worth of stock on hand.
Manual counts, stock rotation, and portion control can help you control costs and ensure consistency. You will see the results in your profits at the end of the day. But sometimes the route from the make line to the bottom line isn’t all that clear. One advantage of inventory software is that it can help you identify exactly where your food costs are out of line.
Wadham shared his first experience with inventory software. In his restaurant, he was portion controlling, yield testing and doing a physical inventory every week. But it wasn’t until he began using inventory software that he realized that his inventory was out by exactly 4 lbs. of prawns every week (coincidentally, the exact weight of a box). Knowing that, it was relatively easy to identify the source of the problem: a prep cook who was helping himself to a box of prawns every Monday morning.
Whether you are using manual methods or examining your inventory in detail with software, when your employees see that you’re keeping close watch on inventory, waste naturally decreases. Letting your staff know that you are tracking inventory carefully can have other benefits as well. “It creates honesty,” comments Handy. “It really tightens things up.”
How Inventory Software Works
Inventory software works with your POS to give you detailed insight into your inventory and food costs. This is a step beyond the spreadsheets that some operators use to track inventory. Wadham explains, “The problem with spreadsheets is this: the data is never up to date. It doesn’t matter if it’s double what it should be – operators accept it as fine as long as it matches the historical data.” Inventory software, tied directly into a POS system, eliminates that problem.
Your POS system updates your “ideal” inventory (what you should have used, based on the recipes you have set up in the inventory software and the actual day’s sales from your POS). When you enter your physical counts into the system, your inventory reports clearly point out where the biggest discrepancies are.
Hands adds, “Inventory software helps the restaurant owner understand, especially in cheese, where the staff is over-portioning or where waste or spoilage is a problem.” On top of that, the software can save time in purchasing, and can help avoid shortages by prompting you when it’s time to reorder.
Food cost analysis reports show you exactly what your menu items are costing you. That can be a real eye opener for some restaurant owners, Hand says. They set their prices to meet or beat the prices of the big chain down the street without first understanding their costs. The first week using the inventory software, Hands notes, many operators will say, “We’re pricing this totally wrong.”
Hands adds that some operators encourage good inventory management practices by tying raises and bonuses to food cost numbers.
So does inventory software make sense for your restaurant? If you have the systems in place to use it, the insight you gain into your food cost and usage will save you money. But for most restaurant owners, the more essential question is, do you have your food cost under control?
Careful inventory management lowers food costs and increases profits. In an industry where margins only seem to get tighter every year, why wouldn’t you do it?
| Jennifer Wiebe manages marketing and customer programs for British Columbiabased pizza POS maker SpeedLine (www.speedlinesolutions.com). Through the company’s customer training program, the SpeedLine Challenge, Jennifer helps pizza operators take advantage of the marketing capabilities of their POS systems to increase sales. She has worked in marketing and media relations for more than a dozen years as a marketing manager, freelance writer and consultant. Jennifer can be reached at (888) 400-9185. |
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