This document discusses best practices for inventory management in restaurants. It addresses who should be responsible for inventory tasks, what types of items should be tracked using periodic vs perpetual inventory methods, when key inventory activities like ordering, receiving, and counting should occur, and why accurate setup and tracking of inventory is important for controlling costs and increasing profits. Maintaining accurate inventory through daily discipline and periodic analysis of discrepancies can help recover half of inventory losses and improve gross profits.

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Inventory Best Practices
The Who, What, When and Why of
Inventory

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• POS systems are adept at informing you WHAT
you sold.
• Unless you know what you used in producing
products for your customers, you only know
what disappeared from inventory.
• Your in house recipes don’t just ensure your
customers get quality food, they allow you to
measure what raw product you SHOULD be
using.
WHY Inventory

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• More profitability is giving your customers a
great product and never skimping BUT closing
the gap between what you put on the plate
and what you used. That means controlling:
– Raw Waste
– Finished Waste
– Unauthorized Use
– Shrink
WHY Inventory

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• There are two ways to maintain inventory
tracking:
– 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 = Shrink
WHAT To Track

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• BOTH ways are useful in your restaurant:
– Periodic Inventory
• Items you don’t control (sugar packets, napkins, salt and
pepper)
• 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

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• 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

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• 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 know
why)
• 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

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• 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 what
you 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 items
WHEN Inventory

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• 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 an
item by the case, but input a cost by the #10 Can, your
recipe cost will be too low)
Why Are My
Numbers Whacky?

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• Item setup
– Some items take subtle management techniques
• Beef items and block cheeses are “catch weight” items
you may order 3 boxes but each box has a different
weight. IF you use these by the ounce or LB, set up your
purchase unit as the LB
• Chicken Breasts are catch weight, but you serve them by
the piece, so the weight doesn’t matter! If you get 16
pieces in a box, you will sell 16 portions – it doesn’t
matter whether the box weighs 11.5 LB or 12.25 LB, it’s
still 16 pieces.
Why Are My
Numbers Whacky?

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• Recipe setup
– Using a computer shows where recipes need work
• Look at the recipe unit of measure – does it say LB and
you’re putting in an 8 OZ portion but you wind up using 8
LBS?
• What about yield percentages? If you pour spirits, do you
REALLY get 100% yield, or does spill, evaporation and
overpour account for 3%? If you buy raw top round and
cook it for roast beef sandwich, you only get 68% yield!!
• Are your “paper” recipes just wrong? Sometimes, we
spend YEARS assuming a portion that isn’t correct.
Why Are My
Numbers Whacky?

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• 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 the
kitchen and correct them
• If several recipes that use the same item are wrong,
chances are the item setup is the problem
Why Are My
Numbers Whacky?

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• Run 2-4 cycles before making ANY changes
– What items are showing large discrepancies
between 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 profit
Using Inventory

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• 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 and
counts on my computer
– Anything else I save on ANY item is PROFIT!
Using Inventory