Executive summary
- Restaurant inventory management is the process of sourcing, monitoring, and tracking the ingredients your restaurant uses.
- Practices like setting PAR levels and following “first-in, first-out” ensure necessary inventory for restaurant function and prevent food waste.
- Inventory management software streamlines the tracking process and even integrates with your point-of-sale (POS).
- Inventory management directly impacts profits, determining which ingredients you buy, ensuring they are correctly used, and assessing whether the final product justifies the cost.
Anyone who works in a restaurant understands the potential effects of having an improperly managed inventory. Restaurant inventory management is the process of sourcing and tracking every ingredient and item that your business uses. Overlooking the importance of effective restaurant inventory management can result in running out of ingredients, food spoilage, and, even worse, lost profits.
From protecting you from having to 86 any items on your menu to helping you minimize waste, inventory management offers several benefits so that you and your customers stay happy. Following restaurant inventory management best practices helps you track what your restaurant uses and allows you to improve your efficiency and profit margins.
Setting PAR levels: Ensuring efficient stock levels
Keeping the proper inventory stock is a balancing act, as you want to have enough stock on hand to avoid running out of items but also don’t want to waste anything. One of the first steps in managing that balance is setting PAR levels, which can help you understand your minimum needs and serve as a valuable reference point for when to order inventory.
Understanding PAR levels and their significance
PAR levels are the minimum amount of inventory you need to have on hand to meet customer demand. When calculating par, you must account for the amount needed and a safety stock, which covers you for fluctuating demand.
Whenever your stock of an item falls below par, it’s time to reorder. This method ensures you avoid running out of an item, but it also makes sure that you don’t order an item too soon and risk food waste.
Factors influencing PAR level decisions
Although PAR levels are generally fixed, they may fluctuate depending on certain factors. Some factors that influence PAR level decisions include:
- Events and holidays – If you know demand will spike due to a holiday or event, then you should prepare by upping your inventory of essential items.
- Seasonal demand – Fluctuating demand is an inevitable factor for restaurants, so during busy periods, you’ll want to carry a larger stock of particular items.
- Supply chain concerns – In the event of extreme weather farther down the supply chain or even holidays that affect delivery, it’s a good idea to plan in advance and carry excess inventory for potentially affected items.
How to calculate and set PAR levels for different items
PAR levels differ depending on the restaurant and its needs, but there are some general calculation recommendations you can follow. A common formula for PAR level is:
PAR level = (How much you use each week + An appropriate safety stock) ÷ Number of deliveries per week
Look at sales reports and inventory turnover numbers to determine how much of each item you’re using and what you should set your PAR level as. Typically, a good safety stock is about 20-30% of what you use throughout the week.
Preparation is key! Make your prep work easier.
Qwick’s kitchen prep list template helps you determine what ingredients you need, set PAR levels, and, ultimately, keep your kitchen running strong.
Conducting regular physical inventory counts
Physical inventory counts are an essential part of running a restaurant and help you accurately keep track of your inventory. Perfecting the physical inventory count process can pay big dividends for your restaurant.
Benefits of regular inventory counts
Regular inventory counts allow you to verify your inventory levels and maintain accurate accounts of how much you have of each item. These counts also immerse you in operations, giving you insight into how the restaurant is functioning as a whole.
Some of the benefits of regular counts include:
- Maintaining appropriate stock levels
- Catching any items that may have been missed
- Ensuring supplier orders are accurate
- Identifying high-turnover items
- Identifying trends of waste or theft
- Tracking the popularity of menu items
Steps to conduct a successful physical inventory count
Physical inventory counts should be calculated and well-planned to ensure they are effective. To carry out a successful inventory count:
- Schedule a set time weekly for taking inventory
- Designate staff members or managers for counting and make sure they are well-trained in the proper procedures
- Have an effective inventory reporting sheet or spreadsheet
In addition to the above steps, ask your staff to keep track of inventory as well. Maintaining a well-stocked inventory is easier when you have multiple pairs of eyes on the case. You can also have your kitchen staff provide updates if they notice an item running low or approaching PAR levels.
Addressing challenges and ensuring accuracy
Although a physical inventory count serves many benefits, it does come with challenges. At times, the hustle of working in a restaurant doesn’t seem to slow down, leading to errors like miscounting or misreporting.
In some cases, restaurants find it difficult to make time for physical inventory counts at all amongst the consistent buzz of preparing food and serving customers. Both of these cases highlight the benefits of automated tools.
Utilizing restaurant inventory management software
Technological advancements are making their way into all aspects of the restaurant industry, and that includes inventory management software. This software can be integrated into your point-of-sale (POS) system so it can automatically update the number of designated ingredients upon customers ordering menu items. This integration makes tracking and reporting easier, allowing you to easily monitor inventory turnover.
Some of the benefits of restaurant-specific inventory software include:
- More accurate inventory counts
- Quicker ordering
- The ability to monitor + avoid waste
- Simpler tracking of inventory outflows
Implementing the First-In, First-Out (FIFO) method
The first-in-first-out (FIFO) method is a foundational piece of proper inventory management. FIFO is a necessary strategy for any restaurant and helps protect inventory against spoilage and waste.
What is FIFO?
FIFO is exactly as it sounds—the food items that come into the kitchen first should be used first. By using the oldest items first, you can minimize the risk of spoilage and ensure all of your inventory gets used so that you avoid waste.
Why FIFO is crucial for restaurants
Restaurant demand is often unpredictable, so waste and spoilage can happen occasionally. However, if the FIFO process isn’t ironed out, you may be producing completely avoidable food waste.
FIFO ensures that the first food items purchased are used first and the newest items only after the previous stock is gone. This system ensures the previous stock doesn’t spoil while using more recently received items. Cycling through inventory properly ensures freshness and quality for customers while also improving efficiency for the restaurant.
Strategies to implement and maintain FIFO
FIFO is simple to follow as long as you and your staff make a conscious effort to do so. Some ways to help you follow FIFO include:
- Training staff on the importance of FIFO
- Labeling items with the date they were received and the date they need to be discarded
- Creating a running inventory list with stock levels
- Having established procedures for stocking new inventory behind older products
Reducing food waste: Strategies for efficiency
Food waste is a nationwide problem with vast implications, and it is an issue that affects many restaurants. However, restaurants can take multiple steps to minimize food waste. Incorporating restaurant sustainability practices protects your inventory, preserves the environment, and saves you money.
The environmental and financial impact of food waste
Food waste has both environmental and financial implications. Food production uses considerable natural resources, so any food waste is a waste of these natural resources. According to the National Resources Defense Council (NRDC), the amount of food waste in the US each year accounts for 21% of agricultural water usage, 18% of landfill content, and 19% of all croplands in the US.
Not only is food waste detrimental to the environment, but no restaurant wants to funnel money into the trash can. The restaurant industry alone is responsible for about $25 billion in food waste loss every year. Taking steps to reduce food loss makes the most of your inventory and protects your profits.
Common causes of food waste in restaurants
Food waste affects many restaurants. However, stepping back to address the root causes can help you avoid it entirely.
Some of the most common causes of food waste include:
- Overproduction – Preparing food that goes unused results in having to throw away any excess to prevent spoilage.
- Improper food storage – Any food that isn’t stored according to safety standards must be thrown away. Even storing food in the wrong location may lead to the item being overlooked and having to be discarded.
- Inaccurate orders – Restaurants can’t repurpose food if an order is inaccurate, so anytime a customer gets an order that was prepared incorrectly, it has to be thrown away.
If waste is currently a problem in your restaurant, consider conducting a waste audit, where you spend a week categorizing your waste by raw foods, spoiled foods, food or drink spills, and customer leftovers. This audit will identify how much food you waste and where it comes from. By pinpointing the issue, you can take steps to correct it.
Implementing strategies to minimize food waste
Food waste doesn’t have to be a necessary evil—creating a plan can help you mitigate food waste and protect your profit margins. Some great strategies for minimizing food waste include:
- Menu engineering – Menu engineering means tailoring the menu in a way that minimizes waste, including overlapping ingredients across multiple menu items and reducing the number of perishable ingredients used in foods.
- Portion control – Although restaurant guests often want more food, the truth is that many customers leave food on their plates because the portions they receive are just too big. Pay attention to food waste in the dining room. If you frequently notice plates full of remaining food after customers leave, it might be time to adjust portions.
- Using leftovers – Creatively using leftovers reduces food waste. Repurpose ingredients for other dishes, create daily specials, or even develop a community relationship by sending leftovers to a local charitable organization.
A key factor in these steps is the importance of training your staff to follow them. A well-trained staff ensures you have a collective unit that works toward minimizing waste.
Optimizing storage space for efficient inventory management
Organizing your food storage space seems like a simple and inconsequential process, but it comes with extensive benefits for your inventory tracking and even your production practices, making inventory easier to find and count.
Importance of organized storage for inventory control
Organizing your storage space in an efficient way offers multiple benefits in improving inventory management:
- Saves time – When your kitchen staff knows where everything is, the production process is smoother, and they are able to finish prep work and cooking sooner.
- Reduces waste – When everything is in its proper place, items are less likely to get caught behind others and rediscovered later when they are past expiration.
- Ensures food safety – Properly storing foods plays a crucial component in food safety, reducing the risks of cross-contamination and spoilage.
Utilizing storage space effectively
With the multiple benefits of an organized storage space, all restaurants should prioritize optimizing their storage for smoother workflows.
Some strategies for doing so include:
- Grouping similar items into specific spaces or zones
- Utilizing vertical space to your advantage
- Using shelving systems
- Labeling shelves and fridges for specific inventory items or categories
- Positioning frequently used items in more accessible areas
Tips for proper labeling and categorization
Labeling is one of the most essential processes in restaurants, as it is integral to organization and food safety. Each product label should feature:
- The item names
- Date of production
- Expiration date
The labeling process will also go hand-in-hand with properly adhering to FIFO, ensuring staff will easily see which items they should use first and by what date.
Monitoring food costs and profit margins
Inventory and food costs go hand-in-hand. By understanding how much your food costs, you can reconsider your inventory and make any necessary adjustments to your menu.
Calculating true food costs: Beyond the purchase price
When considering the costs of the food your restaurant produces, the purchase price of a menu item’s ingredients is important, but there is even more nuance to pay attention to.
For accurate reporting on your food costs, you should consider:
- The price of each of the ingredients
- The overhead needed to produce a menu item
- What revenue you generate from the finished product
By considering all of these factors together, you compile a more complete picture of the cost of your menu items and better understand your profit return.
Monitoring costs regularly
The market is constantly changing, and between inflation and other economic factors, prices fluctuate regularly, so it’s essential to monitor them along the way. Even just a few cents difference in the price of an item can add up to thousands of dollars of gained or lost revenue each year.
Therefore, you should be monitoring costs regularly and adjust your menu accordingly to make sure you preserve your bottom line. Pay attention to costs each time you order new inventory items. Inventory management software supports you by tracking changes in prices as you order new items to restock your inventory.
Using inventory data to adjust menu prices and improve margins
By gathering consistent inventory data, you can closely monitor costs, track revenue, and maintain strong profit margins. Gather data like:
- Inventory costs
- Amount of inventory used each week
- Revenue gained from menu items
- Amount of inventory wasted
This data helps you adapt to the changing market and avoid revenue losses due to factors like rising food prices. For example, if guests don’t order an expensive-to-produce menu item as much as you’d expected, carrying that inventory might not be worth it.
Start managing your inventory better.
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Training staff for effective inventory management
Running a restaurant is far from a one-person job, so inventory management shouldn’t be one either. Including your staff can go a long way toward ensuring effective inventory management and saving costs.
The importance of staff involvement and training
With so many moving parts in a restaurant, proper inventory management is unsustainable if it falls solely on one person. Involving your staff and training them on good inventory management will ensure long-term success.
Having buy-in from the entire staff keeps inventory procedures running smoothly and maintains accurate accounting. You can ensure a successful and sustainable process by accompanying established procedures with proper training.
Educating staff on inventory procedures and goals
Having staff that contributes to a successful inventory management process starts with proper staff training and education. Emphasize the “why” behind maintaining a rigid inventory management process, including the importance of maximizing efficiency and avoiding food waste, as well as the environmental and financial benefits.
Train your staff on aspects of inventory management like:
- What PAR levels look like
- When they should alert the designated staff about low inventory
- Where items should be stored
- How to follow FIFO
- Strategies to minimize waste
- Reviewing incoming orders from suppliers
Establishing strong processes and procedures and training your staff will develop a system that works long-term, and also make it simple for new staff to jump in and follow along.
Create a culture of responsibility and accountability
A culture of responsibility around inventory management is an important part of sustaining success. When all staff is on board, inventory management is more manageable, and your staff members are less likely to feel overwhelmed by the task. They’ll also be more willing to contribute to avoid letting their colleagues down.
Create this culture by assigning roles, incentivizing adherence to the process, and regularly discussing progress with the team.
Technology and trends in restaurant inventory management
Technology continues to advance and make multiple areas of restaurant operations simpler, including inventory management. Keeping track of the latest technology can make your inventory processes even more efficient.
RFID and barcode technology for enhanced tracking
Tools like barcode scanners and radio-frequency identification (RFID) readers make inventory management faster and are becoming more popular. RFID and barcode technology improve accuracy and speed by enabling you to quickly scan and track items by a tag or a barcode.
Scanners enable you to scan multiple items at a time, automatically log your inventory, and identify any discrepancies, all with minimal mental energy.
POS system integration and supplier ordering
POS system integration makes inventory tracking effortless, monitoring stock levels and providing alerts—they can even automatically order inventory if items fall below PAR levels. This software is becoming more sophisticated, so some options allow you to organize your product catalog in detail, reorder in a single click, or track shipment times.
Keeping up with emerging trends and innovations
Even with the number of tools available today, technology only continues to improve, with more innovations on the horizon. For example, AI-driven inventory forecasting and smart inventory sensors precisely track when inventory enters and leaves and signal when it’s time to order more. With such consistent advancements, staying current with industry trends and upcoming technologies is always a good idea.
Master the art of restaurant inventory management: Your path to reduced waste and increased profitability
Effective restaurant inventory management gives you a firm understanding of how much inventory flows in and out and at what costs. Developing strong procedures and sticking to them will allow you to succeed and create a seamless system. Over time, you’ll see reduced waste and improved profitability as you get a handle on your processes.
Of course, increased profitability is the goal of any restaurant. At Qwick, we have a wide range of resources available to help you boost your restaurant efficiency. Our platform helps to streamline staffing by matching you with skilled and qualified professionals to fill open shifts. Explore all of our available free resources.
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