What is inventory cost?
Inventory cost refers to the amount of your working capital that is being held up in stored goods. This includes fresh produce, frozen items, canned goods, and employee uniforms. If you purchased it for your restaurant, it’s inventory and if it’s sitting and not making a profit, it’s costing you money.
Why is it important?
Knowing what your inventory cost is important because it offers an overall financial overlook of your restaurant. If you’re selling far less a week than you’re storing, you’re holding up money that could be used for marketing or other ways to increase your sales.
The good news is that almost every restaurant can benefit from assessing their inventory costs and making subtle changes to lessen their storage and free up cash. Here are just a few suggestions to consider.
- Get organized
Carve out some time in your schedule to organize your inventory space. Make sure that new product is being placed behind existing product and that items are stored safely. For example, heavier products should be on lower shelves and your walk-in should be organized in a way that prevents cross-contamination. Finally, make a storage map that will allow team members to quickly and easily find ingredients.
- Protect expensive items
In a perfect world, we wouldn’t have to worry about theft. But even the most seemingly trustworthy employees could see exposed inventory as an opportunity to help themselves. If possible, lock away your inventory, especially alcohol, or install cameras in areas to prevent theft.
- Limit what you can
A large purchase could make sense at first because of the initial savings. But what many don’t take into consideration is that the inventory costs can quickly absorb any savings. Take seasonal changes into consideration as well when deciding what inventory you can limit. For example, frozen drink sales typically decline during colder months. There’s no reason to take up space all year for a mix that only sells for a few months.
- Utilize technology
If you’re currently taking inventory with a pad of paper and a pen, you’re missing out on the perks of inventory software. There’s more involved than just spreadsheets. Restaurant inventory software will not only speed up your inventory process but will also provide more accurate numbers, detailed data, and allow you to quickly assess your needs and adjust accordingly.
Whether you have two people handling inventory or your entire team has a hand in it, communication is important in keeping costs low. Never assume that another member has recognized a shortage of an ingredient or that everyone knows to push an overstocked item.
- Train properly
Professional inventory specialists recommend keeping those involved with inventory to a minimum. But for those who are assigned to assist with inventory, take the time to train them properly. A single mistake can cost plenty of frustration and money. Even if someone has inventory experience, show them exactly how your business handles it.
- Plan accordingly
Do you know all your seasonal items? Knowing what items sell more during certain months compared to others will help you plan your ordering and prevent shortages and/or ordering too much. While there’s always a little guessing involved, having data to back up your numbers will help you be more accurate and prevent stock issues.
This should go without saying. Every restaurant should make an ample effort to reduce the amount of product they throw away during a shift. When it comes to inventory, make sure that you’re not stocking yourself with so much product that it’s impossible to use it all before its expiration date. When you do notice a surplus, make arrangements with the kitchen and front of the house staff to push certain items.
Sometimes, products just don’t sell. If you have food or beverages that have been sitting, collecting dust, and not making any sort of profit, it’s time to find a way to get rid of them without just disposing of them. Extra bottle of alcohol? Come up with a cocktail and serve them on the house for your favorite guests. Extra food product? Come up with an appetizer and serve it to waiting patrons on busy nights when you’re on a wait.
- Talk to your suppliers
Having positive relationships with your suppliers can help your inventory tremendously. They’re experts in their fields and can make suggestions regarding your current ordering process. Are you ordering too much? Not as much as their other customers? With suppliers on your side, you can work with them to adjust your inventory as you make improvements.
Inventory can be time consuming, but it doesn’t have to be difficult. Once you learn ways to free up cash and space by organizing your inventory, the rest will fall into place. As you begin to see the most important benefit of all that comes with lowering inventory costs, higher profits, you’ll be even more motivated to improve your restaurant’s process.
At Torqus, our Restaurant Inventory software can help you manage your inventory effortlessly while helping you keep up on orders and track trends. Contact us to schedule a complimentary demo today.
About Author : Lisa Brown has been helping her readers in successful business and entrepreneurial strategies for the past 3 years. She currently works with Ekuep (http://www.ekuep.com/en/), which is the first online store in the Middle East that caters to the foodservice industry. It sells kitchen equipment, restaurant equipment, and food service equipment that are made by leading brands from all over the world. These machines and tools are trusted by all restaurant and cafe owners from across the world.