February 17, 2015 |

Four steps to better inventory management

By Daniel P. Smith

inventoryWhen it comes to inventory management, Brian Coli of Georgio’s Chicago Pizzeria & Pub, a 13-year-old, two-store operation in Chicago’s northwest suburbs, knows he can’t afford to slip up.

“Cost of goods sold makes up roughly one-third of our total expenses,” Coli says. “If we’re not paying attention to our inventory, it can become a problem. You always want to use everything you’ve paid for.”

For any pizzeria, after all, small inventory mistakes can mean loads of lost money.

“Most mom-and-pop independents work on a five- to 10-percent profit margin and little bits here and there will quickly eat that up,” says Laura Dreesen, associate professor of business management at the Culinary Institute of America in New York.

In high-volume pizzerias churning out hundreds of pizzas each week, meanwhile, bungled inventory –– ranging from waste and spoilage to theft and loss –– can easily roll into the tens of thousands of dollars, ultimately threatening an establishment’s survival.

“As one of a restaurant’s prime costs, inventory can make or break the business,” confirms Dreesen, who is also the author of Math for the Professional Kitchen.

Cristine Ham, an account manager with Boston-based CrunchTime, a web-based, back-of-the-house solution for restaurant inventory and purchasing, says many operators grind day after day, often assuming that operations are humming along, yet ignorant to potential inventory management changes capable of improving the restaurant’s efficiency, profit level or guest experience.

“There’s a real opportunity to be a better operation if you look at how goods come into your shop and how those goods then move throughout the establishment,” Ham says.

To create a more tightly controlled inventory management system, follow these four steps:

Step 1: Appoint dedicated inventory personnel.

Ideally, a restaurant should have a specialized employee accepting all incoming inventory, ensuring that the quantity, price and quality of the receivables all match the purchase order. In some cases, product should be refused or an immediate price adjustment negotiated if defined specifications are unmet.

The designated inventory employee should always sign for the product, noting any renegotiated terms, before bringing the product into the shop, storing it according to safety standards and stamping it with the received-on date and expiration date.

“Inventory management is much more than carrying and counting boxes,” Dreesen says, recommending operators limit the hours that vendors can deliver product to times when the store’s appointed inventory leader is present. “Ultimately, your food is your responsibility and items that go into storage need to be rotated or stored in a certain way to ensure safety and profitability.”

Management might also name a defined storeroom clerk –– perhaps the same person receiving the inventory –– charged with monitoring inventory levels and requesting new product when counts reach a pre-determined threshold. The storeroom clerk would receive any inventory not headed into production and distribute goods to production staff on an as-needed basis, always recording what has flowed from storage into the production cycle.

Step 2: Institute documentation and controls

A receiving journal will carry all pertinent information of a given purchase, including: vendor; date; delivery time; item name; quantity; unit price and total price. A distribution journal, meanwhile, will indicate where the product went in the restaurant.

Even in a grab-and-go kitchen, Dreesen touts the diligent, check-and-balance benefits of receiving and distribution journals.

“If you don’t rule your habits, then your habits will rule you,” Dreesen says. “Recording these details brings attention to detail and accountability.”

Furthermore, expensive products, particularly alcohol, should be locked away.

“So much of managing inventory is setting up the kitchen in a way that you can monitor it even in a fast-paced environment,” Dreesen says.

Step 3: Establish standard recipes

worker_POS_systemStandard recipes, including the precise quantity of ingredients required to produce each menu item, are central to a sound inventory management system. Operators should know how much mozzarella goes on a large pizza, how many glass servings a bottle of wine produces and so forth. Production areas, meanwhile, should have a waste log to
account for any unused or rejected goods.

While some operators immediately jump to theft when inventory levels are off, Dreesen calls over-portioning a more common culprit. Either restaurants do not possess the proper measuring tools or managers fail to train and hold people accountable to prescribed standards.

“The standards are what all operators need to shoot for,” Dreesen says.

Step 4: Leverage technology

Operators might use bin cards to keep an ongoing tally of inventory items. It’s a low-tech solution, but effective. Others, however, use spreadsheets or leverage an existing POS system to manage inventory. Still others, such as Georgio’s, invest in dedicated inventory software to manage counts, highlight purchasing needs and identify items to be prepped on a daily basis.

By using an inventory system, Ham says, operators can identify specific opportunities down to the product level. With daily counts, for instance, an operator can pinpoint loss to a certain shift or even staff member and then determine if the issue of dwindling inventory is due to theft, waste or training.

“When you’re on top of inventory on a daily basis, it’s much easier to find opportunities for improvement,” Ham says.

Chicago-based writer Daniel P. Smith has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.