How To Keep Track of Your Food Inventory For Your Restaurant

James O'Donnell10/28/2021

What is a Food Inventory ?

A restaurant's food inventory consists of the food items they use for the dishes they serve. Because many of these items have a limited shelf life, efficient food inventory management is needed to optimize their utilization.

What Is a Restaurant's Food Inventory?

A business's inventory consists of the materials they require to do business. This includes raw materials, items in production, finished products that need to be sold, and business supplies. For a restaurant, their inventory consists of the materials they use to create and serve their menu items.

Inventory management is the process a business uses to track and control its inventory. The goal of inventory management is to ensure a business has the materials it needs when it needs them. How well a restaurant performs as a business depends largely on how effectively they manage their inventory.

For restaurants, a big chunk of their inventory consists of the edible materials they use to create their menu offerings. A restaurant's food inventory can consist of everything from raw materials like milk and flour to prepackaged food items. This food inventory represents a major major business investment.

Food inventory management describes the way restaurants track and control their food inventory. Food inventory management is important in the restaurant industry because the product it sells is a perishable commodity. Restaurants need to have enough food stocked to supply demand, but not much more, in order to prevent waste.

Food inventory management has a big impact on a restaurant's bottom line. Being able to meet customer demand and control food waste is critical to running a healthy restaurant business. The better your food inventory management, the better your business will perform.

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The Importance of Food Inventory Management

Effective inventory management is vital to the function of any business. It's especially important in the restaurant industry. Without the proper inventory control, especially food inventory control, a restaurant would be unable to function.

In the restaurant industry, food inventory management is a balancing act. On the one hand, you need enough inventory in stock to satisfy customer demand. You lose sales if you don't maintain enough inventory to keep up with demand.

On the other hand, you don't want to get stuck with too much inventory. Unsold food inventory drives up food costs and lowers profits. Food waste is one of the biggest challenges restaurants face.

Food inventory management is also about the storage and care of the restaurant's food inventory items. For instance, many food inventory items have to be stored under certain conditions to maintain freshness. Milk, eggs, and meat are just a few of the items that can spoil if not stored at the proper temperatures.

Successful food inventory management and inventory planning can provide many benefits, including-

  • Increased sales
  • Keep you in compliance with local health codes
  • Better customer experience
  • Better menu management
  • Higher profits
  • Smarter ordering
  • Less food waste
  • A better understanding of what sells and what doesn't
  • Optimizes inventory usage between multiple locations

It doesn't matter how good your food is, without food inventory management your restaurant won't remain in business very long. This means you need to have the best inventory management practices in place. What are some of these best practices and how exactly do they help your restaurant business?

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Food Inventory Management - Some Terms You Need to Know

Food inventory management encompasses a wide range of restaurant operations. Unfortunately, many restaurant owners aren't familiar with the basics of inventory management. Before we get into the details of food inventory management, here are a few terms you need to know-

  • Cost of goods sold (COGS) - Your COGS is the cost of the ingredients used to create the menu items you sell to your guests. This includes food storage costs as well.
  • Depletion - The amount of food inventory you use over a specific period of time.
  • Food Cost Percentage - this is the percentage of the sales price that covers the cost of an item's ingredients.
  • First in, first-out (FIFO) - An inventory management approach in which a restaurant uses the inventory products that arrive first to help reduce spoilage and food waste.
  • Inventory Turnover Ratio - This number expresses the rate inventory is used over a specified period of time.
  • Just-in-time (JIT) - A restaurant inventory management approach in which a restaurant keeps as little inventory on hand as possible - just enough to supply current demand.
  • Periodic automatic replacement (PAR) - This is the number of items you'll need to replace over a given time period.
  • Usage - The amount of product a restaurant uses over a period of time.
  • Variance - (Also known as shrinkage) The difference between the amount spent on a product, compared to its cost.

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The Challenges of Food Inventory Management

Inventory management is a complicated process for any business. For a restaurant with a perishable food inventory, effective inventory management presents many challenges. What are some of these challenges and how are they resolved?

Knowing what inventory you have on hand.
To effectively manage and control your food inventory, you have to know how much inventory you have on hand. Food Inventory management software tools provide a great way to know how much inventory you have at any given time.

Knowing where your inventory is.
Knowing how much inventory you have in stock doesn't help if you don't know where it is. Inventory software lets you know exactly where your inventory is located even across multiple locations.

How long you've been holding food inventory items.
Knowing how long you've had a food item in stock is important. A restaurant's inventory management system needs to be able to accurately track when inventory arrived to prevent waste.

Forecasting customer demand.
Anticipating customer demand is a challenge all restaurant managers face. You need a system in place that allows you to accurately forecast customer demand.

Avoiding waste.
Having too much of an item can be as bad as not having enough to meet demand. Good restaurant inventory management practices ensure you always have what you need, with as little waste as possible.

Inefficient inventory management methods.
Are you using the best food inventory management methods? An efficient food inventory management process is critical to controlling costs and increasing profits.

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Restaurant Inventory Management- Best Practices

There are many challenges when it comes to managing a restaurant's food inventory. To control inventory costs, you need to have an effective food inventory management process in place. Here are a few of the best inventory management practices to help your restaurant business stay profitable-

Conduct frequent, regularly scheduled inventory counts. In order to manage your food inventory, you're going to need the latest and most accurate data. Digital inventory tools are more accurate than traditional hand counts and provide real-time data.

Teach your employees the importance of inventory control. Train your employees in the basics of inventory practices. They can help keep track of inventory levels and alert you to inventory problems you may not be aware of.

Apply FIFO (First-In, First-out). In the FIFO inventory management method, you focus on using the oldest inventory items before using fresher products. This greatly helps to reduce food waste.

Also, JIT (Just in Time). In the JIT restaurant inventory management approach, you keep just enough inventory on hand to satisfy demand. This can be tricky, but helps reduce standing inventory costs.

Know how to use your data. It's not enough to have accurate food inventory data, you have to know how to apply it. Food inventory data can help you in all aspects of your operations, from forecasting customer demand to menu management.

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Restaurant Food Inventory Management Reduces Food Waste

Not having enough food inventory on hand can hurt sales. Having too much inventory can be worse. Food waste can take a big bite out of your profits.

One of the main goals of restaurant inventory management is reducing food loss and waste. A restaurant's food inventory is a major investment; without it, they can't do business. Unfortunately, there are billions of dollars in food waste each year due to poor food inventory management.

Sometimes food loss is unavoidable. A cook may get an order wrong or a customer may return a meal. However, most food loss is avoidable.

With the right food inventory management practices in place, you can greatly reduce losses due to food waste. You'll be better able to identify where your losses are occurring and why. Some of the causes of food loss include-

  • Cooking errors
  • Employee mistakes
  • Order errors
  • Overordering inventory items
  • Overproduction
  • Portion control
  • Reducing food waste
  • Spills
  • Food spoilage
  • Staff and comp meals
  • Theft

A food inventory management system gives you the tools to optimize your food inventory resources. By finding new ways to utilize your food inventory you can boost sales as well as reduce losses due to food inventory waste.

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Restaurant Food Inventory Management Software Tools

Traditional restaurant inventory methods involve hand counting the items you have in stock. The problem is, manual count methods are time-consuming and labor-intensive. And they can't track inventory changes in real-time, so the data may not reflect actual inventory levels.

More and more restaurants are adopting digital restaurant inventory management tools. Inventory management software tools are programs specifically designed to track and control inventory levels. They can be applied to perform a variety of restaurant inventory management tasks, including-

One big advantage is that these restaurant inventory management systems are cloud-based. They can be accessed using any Internet-connected mobile device. Most can be integrated into an existing restaurant POS system.

Integrating a cloud-based inventory management system into your POS provides many benefits. Automating your inventory management procedures saves you time and money. You can use it to increase sales, reduce losses, boost profits and provide a better customer experience.

When selecting a food inventory software system for your restaurant, there are several factors to consider. Do your research. Make sure you select an inventory management system that provides all the features you need at a price you can afford.

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