Inventory best practices


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Inventory best practices

  1. 1. 5/17/2013 1Inventory Best PracticesThe Who, What, When and Why ofInventory
  2. 2. 5/17/2013 25/17/2013 2• POS systems are adept at informing you WHATyou sold.• Unless you know what you used in producingproducts for your customers, you only knowwhat disappeared from inventory.• Your in house recipes don’t just ensure yourcustomers get quality food, they allow you tomeasure what raw product you SHOULD beusing.WHY Inventory
  3. 3. 5/17/2013 35/17/2013 3• More profitability is giving your customers agreat product and never skimping BUT closingthe gap between what you put on the plateand what you used. That means controlling:– Raw Waste– Finished Waste– Unauthorized Use– ShrinkWHY Inventory
  4. 4. 5/17/2013 45/17/2013 4• There are two ways to maintain inventorytracking:– Periodic Inventory• Starting Inventory + Purchases – Ending Inventory = Cost– Perpetual Inventory• Starting Inv + Purch – Recipe Usage = Ideal Cost• Ideal – Waste – Comp Waste – Transf = Theoretical End• Theoretical Ending – Count = ShrinkWHAT To Track
  5. 5. 5/17/2013 55/17/2013 5• BOTH ways are useful in your restaurant:– Periodic Inventory• Items you don’t control (sugar packets, napkins, salt andpepper)• Items with low cost per unit (bulk condiments)– Perpetual Inventory• Key cost ingredients (CHEESE, meats, seafoods)• Indicator items (cups, boxes)• Highly seasonal items (produce)• High volume items you control (flour, oil?)WHAT To Track
  6. 6. 5/17/2013 65/17/2013 6• What does this mean:– Periodic Inventory• DON’T include in recipes, not worth chasing• Count weekly for reorder purposes– Perpetual Inventory• Include in ALL recipes where the item is used• Determine yield percentage for prep shrink items• Closely track usage and shrink• THIS IS YOUR INCREASE IN GROSS PROFIT!!WHAT To Track
  7. 7. 5/17/2013 75/17/2013 7• Key Philosophy for Successful Inventory:– Accuracy Takes DISCIPLINE!!• Ordering – should reflect weekly needs• Receiving – must be kept up DAILY for accuracy• Recording waste, transfers, etc. (you won’t sell it, but you knowwhy)• Physical counts – the graveyard of all bad input!!– Is the Manager the BEST person to do this?• “Management Is Getting Things Done Through People”• Can a senior crew person record inventory receipts and waste?• Managers can do orders and counts• Managers should KNOW THEIR NUMBERS!WHO Does It
  8. 8. 5/17/2013 85/17/2013 8• Ordering– As many times a week as you expect to receive goods• Receiving– Every day for what came in that day (you can’t sell whatyou don’t own)• Recording waste, transfers, etc.– Every day for the current day (unless you waste nothing)• Physical counts– As often as daily for key cost items (Cheese, meats)– Prior to order for other itemsWHEN Inventory
  9. 9. 5/17/2013 95/17/2013 9• Item setup– Each item has a unit by which you• Order it (e.g. “Case 6 #10 Cans”)• Count it (e.g. “# 10 Can”)• Use it in recipes (Oz, or Fluid Oz)– There is a conversion factor between these• Are all 3 units of measure correct?• Is the relationship between them accurate• Is your purchase cost set up properly (e.g. If you buy anitem by the case, but input a cost by the #10 Can, yourrecipe cost will be too low)Why Are MyNumbers Whacky?
  10. 10. 5/17/2013 105/17/2013 10• Item setup– Some items take subtle management techniques• Beef items and block cheeses are “catch weight” itemsyou may order 3 boxes but each box has a differentweight. IF you use these by the ounce or LB, set up yourpurchase unit as the LB• Chicken Breasts are catch weight, but you serve them bythe piece, so the weight doesn’t matter! If you get 16pieces in a box, you will sell 16 portions – it doesn’tmatter whether the box weighs 11.5 LB or 12.25 LB, it’sstill 16 pieces.Why Are MyNumbers Whacky?
  11. 11. 5/17/2013 115/17/2013 11• Recipe setup– Using a computer shows where recipes need work• Look at the recipe unit of measure – does it say LB andyou’re putting in an 8 OZ portion but you wind up using 8LBS?• What about yield percentages? If you pour spirits, do youREALLY get 100% yield, or does spill, evaporation andoverpour account for 3%? If you buy raw top round andcook it for roast beef sandwich, you only get 68% yield!!• Are your “paper” recipes just wrong? Sometimes, wespend YEARS assuming a portion that isn’t correct.Why Are MyNumbers Whacky?
  12. 12. 5/17/2013 125/17/2013 12• Take Time First to Get Setup Right– Don’t count on setup being accurate from day 1• Look at your first reports with an eye toward fixing errors,not controlling costs• Get your hands dirty! Find your false assumptions in thekitchen and correct them• If several recipes that use the same item are wrong,chances are the item setup is the problemWhy Are MyNumbers Whacky?
  13. 13. 5/17/2013 135/17/2013 13• Run 2-4 cycles before making ANY changes– What items are showing large discrepanciesbetween theoretical and actual usage?– Make it your goal to recover HALF of the discrepancy• Better vigilance in portioning• Better crew training• Best yield items from suppliers– Trying to recover 100% can never happen, but 50%usually costs less than you make in added profitUsing Inventory
  14. 14. 5/17/2013 145/17/2013 14• Example:– My shop does $10,000 sales per week– I order 800 LB of cheese per week– Live inventory usage shows I’m 4% off ideal usage• 32Lb per week• At 1.75 that’s $56/Week– I can recover half of that ($28) with proper tools– That pays for my added cost of entering invoices andcounts on my computer– Anything else I save on ANY item is PROFIT!Using Inventory