Restaurant Inventory Management: 7 Actionable Food Inventory Tips to Implement in Your Business

A key part of restaurant management is inventory control. Proper food inventory management keeps service running smoothly, but a failure to do so can impact financials. One small stock management error can lead to food shortages, unnecessary food waste and inaccurate forecasting. All of which impacts food and beverage cost control for your food and beverage business. FoodPrint reports that up to 10 percent of the food inventory a restaurant purchases is wasted, meaning that 10 percent of their food cost will not generate revenue. 

You know the cost of everything that comes out of your kitchen. But, do you know where you’re losing money? Detailed Usage, Loss, and Sales Performance reports tell you what’s sitting on the shelves and where you’re losing money. 

The biggest risk for the food & beverage industry is rising wages and food costs. If you’re not constantly working to improve profitability and grow your revenue, the costs will take over. It’s imperative that you’re consistently and actively reducing costs to maintain your current level of success. How can you do this? 

In this article, you’ll learn the basics of restaurant food inventory management: what it is, what terms you’re likely to encounter, tips for keeping track of inventory and the tools you can use to do it. 

• What is food inventory management?
• The benefits of food inventory management
• Tips for taking restaurant food inventory
• Important restaurant inventory terminology
• Taking control of your stock with automated inventory

Let’s get started! 

What is food inventory management?

Food inventory management is a way of tracking what and how much inventory your restaurant is carrying at all times. Equipped with that information, restaurants can improve their inventory purchasing (i.e.; not buying too much or too little), minimize inventory lost due to theft, spoilage or food waste and maximize profitability. 

Restaurateurs with a firm grasp of inventory management know the following at any given time: 

• What inventory you’ve purchased and what amount
• The quantity of inventory used each day
• The amount of leftover inventory at the end of each day

The benefits of restaurant inventory management

Using a stock control system helps enhance business practices within quick-service restaurants, catering companies and any other type of food and beverage business. As mentioned previously, an inventory tracking system helps food and beverage businesses effectively manage waste, increase productivity and control cash flow.

It’s common practice in many industries to keep a close eye on manufacturing costs as well as the overall market value of products. Yet some food and beverage businesses don’t subject their menu to the same level of scrutiny. Maintaining an efficient stock control system can help you offset overhead costs, adjust menu pricing and devise a plan for portion control.

When your business implements a proper control system, you’ll find that you’re in a better position to make business decisions. For example, you may discover that certain menu items have lower profit margins than expected. In this example, when items go unsold, you burn even more money, negatively impacting cash flow. Armed with this information, you can make changes that recover lost profits and guard against similar pitfalls in the future.

For a deeper understanding of inventory management and its key components, be sure to check out our detailed resource on What Is Inventory Management.

Food inventory for loss prevention 

Keeping track of usage, dollar value and overall inventory levels is essential for restaurants to understand where the money they invest in food inventory goes. Equipped with that information, restaurants can improve their Cost of Goods Sold (CoGS) and maximize profits on each sale. 

Not only that, but understanding how the inventory you buy relates to sales helps pinpoint inventory that’s lost for any of the following reasons: 

• Spills
• Employee mistakes
• Staff meals
• Theft
• Comping disgruntled customers 

Preventing food waste

Adopting a food inventory management system can help you maintain your profit margins. Along with labor costs, replenishing your inventory is the most significant expense your business faces. By implementing a stock control system, you can reduce how much food your business wastes. Food waste is a massive problem throughout the United States with an estimated 30-40 percent of the supply ending up in the trash. With the right technology, businesses both big and small can help minimize their contribution to waste.

The ideal first step is to work out how much food you’re wasting unnecessarily. There are situations where food waste is unavoidable, for example, if the customer doesn’t like the dish and sends it back to the kitchen. However, things such as cooking errors, preparation waste and spillages are avoidable. With the right training and equipment, staff can become more mindful of food waste and how to minimize it.

If you’re concerned about how much food is going to waste, conduct an audit to determine where that waste is coming from. For the best results, do this when your restaurant is busy, but your kitchen is not operating at maximum output. While you want the audit to produce effective results, you don’t want to degrade the quality of your service by causing unnecessary delays.

Here are five of the most-common sources of food waste and practical steps for preventing it at your restaurant.

Over-ordering

Over-ordering product happens for a number of different reasons. The most common reason? An inefficient or improperly managed inventory system, which can easily lead to chefs ordering more product than actually necessary. Performing and tracking inventory regularly will keep food waste down and save you money on ordering food that you just don’t actually need.

Spoilage

Even if you aren’t over-ordering product, you run the risk of spoilage. If you don’t carefully inspect the food coming in, you might accept product that is already turning bad. Make sure to clearly label all incoming product with best-by dates. Labeling enables you to install the first-in, first-out (FIFO) storage method to reduce the amount of spoiled food you keep on hand.

Overproduction

Another common source of food waste is overestimating sales for a dish. Chefs often will prep and cook too much food to avoid 86’s. But, this leads directly to higher food waste. Tracking sales gives you a chance to periodically review your menu, create more efficient batching levels, and even eliminate dishes that aren’t moving fast enough. Try planning your staff meal around your extra ingredients to save the sunk costs of prep work.

Assorted misfires

A server forgets to add the allergy note for a dish including nuts. A line cook misread a ticket and prepared the wrong dish. Misfires can kill your bottom line. Proper training and active management can prevent these types of mishaps from happening during a shift.

Poor portion control

Do you throw away bags of untouched food every night? This could be a sign that your portions are off. Effective portion control means you can stretch your food budget further without sacrificing quality. Standardizing your measurements for each dish can prevent too much food reaching the trash when a guest doesn’t feel like packing leftovers.

It’s impossible to control food waste completely. That doesn’t mean you can’t drastically reduce the amount of waste you produce by taking a few simple precautions. This keeps money in your pocket, food out of the trash, and makes your kitchen better, too.

Restaurant food inventory tips to implement in your business

Now that you’re familiar with some fundamental restaurant inventory management concepts and terms, let’s move onto tips for taking accurately and consistently taking restaurant food inventory. 

Be diligent about counting restaurant inventory

The most critical aspect of managing stock items in a food and beverage business is consistency. Running a food and beverage business involves handling a variety of perishable goods. Because of this, you’ll want to take stock daily to ensure that you’re minimizing food waste and aren’t selling expired items.

One essential stocktaking rule is ensuring you do it at the same time every day. It’s best practice to take inventory after your doors close or before you open. Whatever you decide, make sure you’re consistent to avoid fluctuations in reporting. While this is not always possible, adhering to it as strictly as possible can help you get the most accurate numbers related to your stock levels.

You should also avoid taking inventory while deliveries are being made since this can lead to double-counting items. If possible, make sure the staff members you assign to manage your stock are consistent as well. This will not only speed up the process but it makes it easier to spot anomalies and reduce errors.

Another key tip? Leverage technology when doing your restaurant inventory counts. Doing so can improve restaurant inventory accuracy and efficiency. 

Software like Lightspeed Restaurant can streamline the process, allowing for real-time tracking of stock levels and easy identification of trends or discrepancies. 

Case in point: Bar 404, a cocktail bar in Toronto, faced significant challenges with inventory management. The general manager, Rohit Sharma, found himself overwhelmed with manual tasks, which consumed an entire day each week and hindered his ability to engage with staff and guests. 

Enter Lightspeed Restaurant, which streamlined the tedious components Rohit’s role and enabled him to free up his time for higher level tasks. 

“Before when I used to do inventory, it used to take six, seven hours, because everything was not integrated. When I came here, I did my first inventory in like an hour, one hour for inventory. Now I can do a lot of things after this,” he says.”

“Literally on Lightspeed, I come in here and check all the bottles, put in everything and everything generated and it’s done. So it saves my time. I’m actually saving almost 6 to 7 hours on my inventory day.”

Organize your food storage

The secret to faster inventory counts? It’s pretty simple: keep your product storage areas organized. But, keeping things organized is easier said than done, especially for large, diverse food and beverage programs.

If your stockroom is disorganized, stock taking is an uphill battle. The likelihood of double miscounting and either over or under-ordering, as a result, is higher than if the stockroom were organized. 

Here are some tips for keeping your stockroom, pantry and walk-in freezer organized year-round: 

• Group items by food category
• Label your shelves

Assign a stock-taking team

When it comes to counting inventory, consistency is key. Choose a few people on your team to always be in charge of stock-taking. Those same people should also be in charge of receiving orders and updating inventory records. 

Once you’ve established a team, you should also create an inventory counting schedule. Assure that your team counts inventory at the same time, on the same days. We recommend counting inventory at the beginning and end of each day.

Create an inventory consumption sheet

The concept behind an inventory consumption spreadsheet is to track how much of an item you use per day, how much you’re wasting and how much you’re spending on inventory. 

By tracking inventory consumption on a daily basis, you can better understand how inventory comes in and goes out of your restaurant and can reorder inventory with greater precision. 

While each restaurant’s inventory consumption sheet will vary depending on what it sells, these are a few things to consider including: 

• Ingredient name
• Unit of measure
• Amount used
• Cost per ingredient unit
• Total cost
• Beginning inventory
• Ending inventory
• Daily consumption rate 
• Waste quantity
• Waste cost

Teach your staff how to take inventory

This is especially true for restaurants with multiple locations, but inventory management can’t be just one person’s responsibility. Managers, shift leaders and other staff need to all know how to count inventory so that, in the event that someone on the stock-taking team cannot, stock is still counted. 

Front of house and back of house staff can also contribute to inventory management. For instance, if something is spilled or is spoiled, they should notify someone immediately so that it’s accounted for in the inventory consumption sheet. 

Track your sales every day

By monitoring sales and inventory levels every day, restaurants are in a better position to respond to changes in real-time. For instance, if you sold much more of a menu item than expected and are running low on ingredients, you can order them to support demand without having to remove it from your menu in the interim. 

Keep extra supplies 

For ingredients that your restaurant uses fast, it may be a good idea to always keep some “just in case” inventory. 

For instance, if you’re a local burger shop, it may be wise to keep extra inventory of fries to fulfill an unexpected influx of customers. Just make sure that you’re keeping track of your extra inventory’s freshness and swapping it out as necessary. To avoid wasting it, consider using unused extra inventory for staff meals. 

Important restaurant inventory terminology

There are a few terms that anyone with aspirations of mastering restaurant food inventory needs to be familiar with:

• Sitting inventory
• Depletion
• Usage
• Variance

Sitting inventory

Sitting inventory refers to the amount of inventory (or the dollar value of inventory) a restaurant is carrying in-house. When tracking sitting inventory, be sure to choose one unit of measure (dollar value or physical amount) and stick to it. 

Depletion

Depletion refers to the amount of inventory used over a specific period of time (either expressed in dollar value or physical amount). You can calculate depletion using your POS system’s sales reporting data either on a daily, weekly or monthly basis. 

Usage

Usage is the amount of sitting inventory (expressed in dollar value) divided by average depletion over a period of time. 

For example, if you have 70 pounds of ground beef and you plan on using 10 pounds per day, you have seven days of usage. 

Variance

Variance is the difference between your product’s cost and the usage amount’s cost. 

Let’s say you used $500 worth of beer over the course of a week, but your POS system is reporting that you only sold for $450 worth. Your variance would be -$50, meaning that $50 worth of beer is unaccounted for. 

Take control of your stock with automated inventory management

Inventory management is an important part of running your restaurant, but it is notoriously a very time consuming task. Until now.

An automated inventory management system built-in to your restaurant POS, can free up hours of time for you and your staff, allowing you to focus on what’s really important—hospitality.

How does it work? With automated inventory, your stock numbers are depleted as items are sold. You can see your stock in real time and get alerts when a key ingredient is running low. In addition to the time savings, you’ll also reduce food waste and food costs. Tracking inventory diligently assures that every penny you spend can be attributed to sales.

Want to learn more about how an automated inventory solution can help your restaurant save time and money? Talk to one of our experts to find out how Lightspeed can help!

FAQs

What is a restaurant inventory management system?

A restaurant inventory management system is a tool or software that helps restaurant owners and managers track and manage their food and beverage stock. It helps in recording what is used, what needs to be ordered, and often includes features for tracking costs, predicting future needs, and reducing waste.

What is the best inventory method for restaurants?

The best inventory method for restaurants typically involves regular, consistent tracking – often daily for perishable items. The FIFO (First In, First Out) method is widely recommended, ensuring that older stock is used before newer deliveries. Also, leveraging technology, such as inventory management software, can greatly enhance efficiency and accuracy.

How is inventory tracked in a restaurant kitchen?

In a restaurant kitchen, inventory is tracked by regularly recording the quantities of all items in stock. This can be done manually or using digital tools. The process usually involves counting items, recording usage, and updating records after each delivery to keep track of what’s available and what’s needed.

How much inventory should a restaurant carry?

The amount of inventory a restaurant should carry depends on several factors like the restaurant’s size, menu complexity, customer volume, storage capacity, and delivery frequency. The goal is to have enough to meet customer demand without overstocking, which can lead to increased waste and costs.

Who is responsible for inventory in a restaurant?

Typically, the responsibility of inventory in a restaurant falls to the kitchen manager or head chef. In some cases, there might be a dedicated inventory manager. The responsibility includes ordering supplies, tracking usage, and ensuring that stock levels are adequate to meet the restaurant’s needs.

How do I make a restaurant inventory list?

To make a restaurant inventory list, categorize all items (e.g., meats, vegetables, dairy, beverages), and list each item with details like unit of measure (pounds, liters), current stock levels, and ideal stock levels. Include space for tracking usage and new deliveries. It’s important to keep this list updated and accurate.