Careers Business Ownership Restaurant Inventory Management Tools and Tips Share PINTEREST Email Print Maskot / Getty Images Business Ownership Industries Restauranting Retail Small Business Real Estate Nonprofit Organizations Landlords Import/Export Business Freelancing & Consulting Franchises Food & Beverage Event Planning eBay E-commerce Construction Operations & Success Becoming an Owner By Hannah Hottenstein Hannah Hottenstein Hannah Hottenstein is a writer and small business expert. She is also the founder and proprietor of HänaSun, a fine art and antiques business. Hannah has written for Lean Labs, NewsBreak, and several Medium publications. Learn about our Editorial Process Published on 01/27/21 One of the most critical tasks for a restaurant is inventory management, which is the process of tracking, analyzing, and adjusting the cost and usage of inventory (like food and supplies) coming in and going out the door. Ineffective restaurant inventory management can lead to profit loss, customer alienation, and a poor industry reputation. This is why implementing and maintaining an efficient, accurate, and effective inventory system—one that involves maintaining inventory levels, monitoring point-of-sale (POS) data, tracking cost of goods sold, maximizing ordering, and regularly reviewing analytics—is essential for restaurant owners and managers. Restaurant Inventory Management Tools and Systems There are a variety of tools and systems that can play a crucial role in restaurant inventory management—though each business may have its own unique needs to navigate the process. Periodic Automatic Replacement (PAR) Developing a periodic automatic replacement (PAR) system can be essential for adequately setting inventory levels. PAR level is the minimum amount of food, beverages, and paper inventory needed on-hand at all times to meet customer demand while allowing for unexpected events (also called a safety stock). When inventory falls below that pre-calculated PAR level, orders are then placed to restock. The “Clipboard” Method This app-based “clipboard” method is simple—physically recording and updating inventory on a tablet or phone. And for smaller restaurants or those with lower traffic, it may be a more ideal fit because of its affordability and ease of use. QuickBooks also has an inventory feature if your business already uses its program for accounting. Basic Inventory Programs Another option is a lower cost, more straightforward POS program that tracks the amount of product ordered, the ingredients and products used for orders, and what is left over afterward. Examples include the iPad-based TouchBistro and the free software program, Loyverse. POS Integrated Inventory Software Systems For chains and high-traffic establishments, a POS system with built-in inventory capabilities can be highly beneficial as it can help managers and owners quickly analyze inventory and determine how to maximize profits. Upserve, Lavu, and Toast are great options for this required level of integration. End-to-End Custom Software For restaurants that need comprehensive inventory management, MarketMan and Ordoro are corporate-level software systems that handle everything from inventory, suppliers, and ordering, to menu pricing and report analytics. Tips for Successful Inventory Management While finding a specific system or tool that suits your inventory management needs is crucial, it’s also important to take certain actions to keep better track of food and supplies. Here are some tips: Choose inventory schedules that make sense for your business. Daily spot checks can help maintain ideal PAR levels, in addition to full inventory runs. Whatever schedule you decide on, just be meticulous and consistent.Find an inventory costing method that works for your business. Most restaurants use a first-in, first-out (FIFO) method to reduce spoilage; however, last-in, first-out (LIFO), and weighted average cost (WAC) are also viable options.Inventory systems are efficient, but it is always prudent to double-check by hand to ensure accuracy.Review past inventory reports and follow up with modifications if you see unplanned changes in inventory levels, waste increases, or anything else that looks inaccurate. When it comes to inventory discrepancies, software issues can sometimes be to blame, but they can also be due to employee error (or theft). Take time to shadow staff while taking stock or ordering and fill training gaps where necessary. Benefits of Restaurant Inventory Management It can be worth spending the extra time and money to set up a system for restaurant inventory management, which can provide benefits such as increased profit, reduced food waste, and customer growth and retention. Increased Profit The closer your inventory stays to PAR level, the wider your profit margin can be. Running out of ingredients or menu items can not only impede sales the day of, but lead to a potential future loss of sales due to disappointed customers who are influencing their social networks and creating bad word-of-mouth. Additionally, excess inventory items can lead to wasting money or accidentally serving expired ingredients to customers. Maintaining an optimally stocked inventory facilitates sales, and it can also increase them. You can demand higher prices by consistently creating superior dining experiences. Food Waste Reduction According to a 2017 report from the National Resources Defense Council (NRDC), the U.S. restaurant industry creates 22 to 33 billion pounds of food waste every year. Because the profit margin in a restaurant can be so razor-thin, a proper inventory management system is imperative to help reduce this waste. If you find that your business is throwing away more than 6% to 7% of your food inventory, it’s a problem that needs to be addressed. Restaurant owners and managers should keep a detailed waste log and regularly review it to determine if any repeat items appear to cause the issues before losing more profit. Customer Retention Ultimately, because 70% of retail and restaurant customers never make a return visit, the loyal 30% left are likely the repeat guests who bring in most of your revenue for the least amount of financial risk. That’s why it’s important to make a great first impression and continue to provide great experiences every time someone visits your establishment. And with a successful inventory management system in place, achieving these goals can be less daunting than it is doable each time you open your doors for business.