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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