Running a kitchen can feel a lot like trying to control a runaway train. One minute you're swimming in tomatoes, and the next you're missing the key ingredients on the gazpacho special.
If you could just get ahead of your inventory, you could keep your restaurant on track for success.
The reality is that mismanaged inventory is an all too common restaurant headache that leads to waste, lost profits, and low customer satisfaction. But with the right strategies and tools, you can streamline your stock, control your food costs, and boost your bottom line.
This article dives into the essentials of restaurant inventory management to help you transform your restaurant.
What is restaurant inventory management?
Restaurant inventory management means knowing exactly what you have in your kitchen and what you need to restock.
The goal is to find that sweet spot between having enough to meet customer demands and having minimal food going to waste. Order too much, and you're throwing money away on spoiled ingredients. Order too little, and you might run out of key items and miss out on sales.
Today’s restaurants mainly use restaurant inventory management software to track everything. This technology takes out the manual work and helps restaurant owners better manage costs and run their businesses.
What does restaurant inventory involve?
In short, restaurant inventory management is all about:
Tracking: Knowing exactly what's in your kitchen at any given time.
Ordering: Anticipating your needs and placing orders so that you have the right amount of inventory.
Controlling: Minimizing waste, preventing theft, and making sure all your ingredients stay fresh.
Analyzing: Using data to identify trends, optimize your menu, and make informed decisions about purchasing and pricing.
Restaurant inventory terms that you should know
Running a restaurant starts with mastering the language that comes with it. Use this “cheat sheet” of essential vocabulary used in restaurant inventory management:
Cost of goods sold (COGS): The total cost of ingredients and products you use to create your menu items. It directly impacts your restaurant’s profitability.
Units of measurement: The standard units (pounds, ounces, gallons, etc.) you use to measure your inventory items.
Catch weight: An estimated weight used to measure variable-weight items, like meats and produce.
Sitting inventory: The total value of all the items you currently have on hand.
Par level: The ideal quantity of each item you should have in stock to meet demand without overstocking.
Reorder point: The minimum stock level at which you need to place a new order so you don’t run out during service. It varies by purchase and sales cycle, delivery timeline, and item.
Inventory turnover ratio: A measurement of how quickly your inventory is sold or used. A high turnover ratio means efficient inventory management.
Usage: The amount of inventory used during a specific period. This is used to help you track your customers’ consumption patterns.
Variance: The difference between your expected and your actual inventory count.
Waste: The amount of food or beverage that's unusable or thrown away.
What are the benefits of effective restaurant inventory management?
In an industry where razor-thin profit margins are the norm, effective inventory management can make a big difference. More than half (58%) of restaurant operators say rising inventory costs are their top financial concern.
Managing your restaurant inventory well has the following positive effects:
Reduces food waste
On average, Americans waste about 60 million tons of food every year. Tracking your inventory helps you effectively use your ingredients before they expire or spoil, thereby cutting down on costly food waste.
Inventory management gives you a clear idea of how much of each dish you sell so you don’t over-prepare and end up having to throw things away. Moreover, it reveals consumer patterns. You can find out which foods or ingredients you often have leftover, allowing you to change your menu or order less of certain items.
Streamlines ordering and prevent shortages
Knowing what you have in the kitchen at all times helps you determine your ideal inventory levels. It’s easier to find the balance between having enough food ready and minimizing excess inventory.
You can also analyze sales data to more accurately predict future demand, especially during peak seasons and special events. Understanding what your customers prefer enables you to stock the right amounts of ingredients and optimize your menu.
Increases profits
Inventory management makes you more money.
How?
By reducing food waste and optimizing your orders. You spend less on unnecessary ingredients and increase your profit margin.
Knowing your exact food costs allows you to price your restaurant’s dishes more accurately, avoiding over- or under-charging your customers. And this maximizes your revenue.
Enhances operational efficiency
Instead of counting each item in your stock one by one, why not have a restaurant inventory management system that can streamline the entire process and save you valuable time?
With real-time inventory data, you can make informed decisions about your menu, suppliers, and promotions. Additionally, you’ll maintain better control over your inventory.
Did you know that 75% of inventory shortages happen due to employee theft? Keeping close tabs on your inventory can deter theft and help you quickly identify and address any issues that occur.
7 best practices for better restaurant inventory management
A well-managed inventory keeps your kitchen running smoothly, your customers happy, and your restaurant thriving. Follow our seven best practices below to improve the way you manage your inventory once and for all.
1. Use inventory management software
Restaurant Inventory management software is like the sous chef you never knew you needed. It automates routine tasks, such as making purchase orders and setting stock alerts, to save you time and prevent expensive mistakes.
Most inventory management software systems have features like barcode scanning or POS integration to simplify the data entry process. This gives you accurate inventory records at your fingertips.
Moreover, inventory management software provides real-time reports on inventory levels and costs, giving you insights into your restaurant’s performance. These reports allow you to track sales trends, identify popular dishes, and make data-driven decisions to update your menu.
With Lark, you can go beyond inventory management. Report inspection results, track inventory updates in real time, and expedite purchase approvals — all on one platform.
2. Create an inventory schedule
Choose a regular schedule — weekly or biweekly, for instance — and stick to it. This helps you keep your processes consistent and maintain an accurate stock count.
Are certain items flying off the shelves on weekends specifically? Do holidays cause a surge in the need for specific ingredients?
By tracking usage patterns over time, you can better anticipate fluctuations in demand. No more guessing and being caught off guard when the Saturday dinner rush hits.
Remember, your inventory level should reflect seasonal changes, menu updates, and special events. So, if you're introducing a new summer salad or hosting a holiday party, your inventory needs will shift accordingly. Adjust your schedule frequency as you see fit so that the data remains reliable and up-to-date.
3. Train all staff on procedures
Every kitchen has its own inventory management process, and your employees need to understand their role in it.
Explain each step of the process clearly, and make sure your staff follows it. This helps ensure consistency, minimizes errors, and creates a culture of accountability.
Your training should include the following:
Proper counting techniques: Teach your staff how to accurately count individual items and bulk quantities and use tools like scales and measuring cups.
How to use inventory software: If your restaurant uses inventory management software, provide clear training on how to navigate the system.
Waste recording: Create a clear protocol for recording food waste. Specify the type of item, the quantity being thrown out, and the reason for disposal.
These practices will save you a lot of time and money in the long run.
4. Regularly review and adjust your menu
Your menu should evolve with your customers' tastes and your restaurant's goals.
Analyze your sales data to find your star dishes and those that just aren’t resonating. If an appetizer is consistently a top seller, keep enough of the ingredients you need for it in stock. If a new pasta dish isn’t quite hitting the mark, scratch it.
Understanding what's working for you and what's not allows you to make smarter choices about your menu items. Adjust your inventory based on popularity and seasonality.
Menu engineering techniques can also improve your profits. For example, put those high-profit dishes front and center, where they'll catch your customers' eyes. Or create combo deals that tempt diners to try something new.
5. Use the FIFO method
If you’re in the restaurant biz, you’ve probably heard of FIFO. This asset management method operates on a simple principle: first in, first out.
Whatever you purchase or receive first should be used or sold first. Organize your storage so that older items are used first and newer items are placed in the back. This keeps your ingredients fresh and prevents them from sitting around too long and going bad.
It’s important to train your staff on FIFO and its benefits when it comes to reducing waste and maintaining high food quality. Make it a part of your kitchen culture, and you’ll see the positive impact it has.
6. Build strong relationships with suppliers
With rising prices everywhere, building a strong relationship with your vendors is more important now than ever.
Clear communication is the foundation of a strong supplier-manager relationship. Be sure to communicate with your suppliers regularly about lead times, pricing, and potential issues. Keep them in the loop so that they can better anticipate your needs.
Positive relationships with these individuals can help you negotiate better deals or volume discounts. Be transparent about your needs and expectations, and don't be afraid to ask for that extra bunch of rosemary.
7. Track and analyze food waste
Turn food waste into data. By tracking your waste, you can find important insights into optimizing your inventory management.
It’s important to record the type, quantity, and reason for disposal each time you throw something out. Is it spoilage, overproduction, or customer plate waste, for example? These clues will let you know if there’s a problem that needs to be fixed.
If you find a particular dish is consistently causing waste, it’s time to revise your recipes or portion sizes. Similarly, if certain items tend to spoil faster, you’ll need to adjust your ordering and storage practices.
How to craft restaurant inventory management policies that deliver results
To create a successful restaurant inventory management system, you need policies that produce results. Here’s how to take action:
1. Choose your inventory control system
How will you keep track of your inventory? Decide whether you'll use manual counts, spreadsheets, or software for tracking. Then, figure out a regular schedule for inventory checks.
Manual counts with inventory sheets might work for very small restaurants with limited inventory, but they’re prone to human error and can be time-consuming. And, while more organized, spreadsheets require meticulous data entry and can quickly become overwhelming as your inventory grows.
Lark is the most efficient way for larger or growing restaurants to manage inventory. By automating many tasks, providing real-time data, and offering insight reports, we empower restaurants to easily and effortlessly control their inventory.
2. Establish par levels, safety stock, and reorder points
These are three key things you need to know to keep your inventory in check (and to avoid a full-on kitchen meltdown):
Review your sales history and supplier lead times to find the best stock levels for each item. This is your par level — the ideal amount of stock that you should have in the kitchen at all times.
Figure out the minimum quantity of each item you need to have to meet demand. This is your safety stock — a buffer to protect against unexpected spikes in sales or delivery delays.
Calculate the stock level you need to place a new order to avoid running out of inventory. This is your reorder point — the trigger that tells you it's time to restock.
By establishing each of these, you can maintain a steady supply of ingredients and minimize the risk of running out of specific items.
3. Designate a head of inventory management
Appoint a specific employee to oversee all inventory-related activities. That way, you'll have a dedicated go-to person for all inventory concerns instead of having to chase down multiple employees for the information you need.
Typical responsibilities of a head of inventory management include monitoring stock levels, managing orders, and addressing discrepancies. Just make sure you outline and communicate these duties clearly.
It can be a great idea to give this person a good amount of autonomy, too. For example, encourage them to make decisions on when to reorder items, which suppliers to prioritize, and inventory policies.
This not only creates accountability but also allows the individual to make decisions based on real-time observations rather than relying on delayed information.
4. Build a process for receiving deliveries
Create a step-by-step guide for receiving deliveries. You should include steps for verifying the order, checking for damage, and properly storing items. Another tip is to include a list of essential tools needed for the receiving process, such as box cutters, thermometers, or scales.
Having a guide standardizes your delivery procedure, making it easier for everyone to follow the correct process. It also prevents your kitchen from turning into a chaotic episode of Chopped.
Additionally, ask your staff to double-check all incoming shipments against purchase orders. Catch discrepancies early on and make sure that you're not paying for items that you didn't receive or that arrived damaged.
5. Implement a waste-tracking system
Keep a food log to record each instance of food waste. This gives you a detailed snapshot of your kitchen's waste generation, helping you effectively identify and address recurring issues.
Develop a system for categorizing waste types, such as prep, cooking, and plate waste, to pinpoint the specific areas with the most waste.
Then, you can create a targeted solution. For instance, if you notice that your restaurant sees a lot of prep waste, you could explore different vegetable-peeling techniques and train staff on better knife skills.
6. Create a discrepancy resolution process
Can you tell if your inventory was missing a few steaks or had an extra case of avocados? Get in the practice of comparing your physical inventory count with your recorded inventory count.
Note any items that are over or under the expected amount, and find the root cause of this discrepancy. It could be spoilage due to improper storage, data entry errors during receiving, or even theft.
If spoilage is a frequent cause of waste, re-evaluate your storage practices and rotation procedures. If data entry errors are common, consider switching systems or software. Identifying the cause of waste is the first step toward preventing the issue from happening again.
7. Establish a schedule for policy review
Don't let your inventory policies gather dust like last week’s leftovers in the back of the fridge. Schedule regular check-ups — quarterly, semi-annually, or annually — to keep them fresh and effective.
Prioritize each review and schedule it ahead of time on Lark Calendar. Then, invite your inventory manager and kitchen staff to participate in the review process. Review data, gather feedback, and make necessary changes to your policies based on the insights you gain.
8. Develop a training program for staff
Your inventory management system is only as good as the people using it. Its success will rely on how well your employees understand and follow established procedures. That explains why employee training is one of the top priorities for restaurant management.
Teach your staff how to count inventory accurately, record waste, and use your inventory system. Moreover, provide them with refresher training to clarify any confusion and keep them updated and aligned.
Keep training programs and information accessible on Lark. Store onboarding guides and online documents for your staff to access on-demand anywhere in the kitchen.
How do you pick the right inventory management system for a restaurant?
The ideal inventory management system should seamlessly integrate into your restaurant operations and share these four features:
Automation
Why manage your inventory if it can manage itself? Follow the 54% of restaurants that plan to increase their spending on automation tools in 2024 by automating your inventory management.
Your system should automatically create purchase orders when stock runs low based on your pre-set par levels and reorder points. This will save you time and help ensure that you’re never short on key ingredients.
Some systems warn you when stock is low or there are inventory discrepancies. This gives you time to fix the problems before your customers are affected.
With Lark Base, you can streamline operational routines, automate inventory tracking, and create custom workflows that work for you.
Customizable templates
Templates are your inventory's new best friend. Instead of starting from scratch every time, use a system that has customizable templates to significantly reduce your workload and chances of error.
Consistently and quickly record inventory data with pre-made templates. Lark offers a variety of handy templates designed for restaurant inventory use, such as store inventory and revenue tracking, order and inventory management, and purchase order management.
Moreover, Lark’s reporting feature provides important insights into your inventory trends, usage, and costs. You can even generate easy-to-understand, shareable, standardized reports.
Barcode scanning
Scanning barcodes is the fastest way to track your inventory accurately. A quick scan instantly updates your records and gives you an accurate look at your stock levels whenever necessary.
Some systems speed up the process with mobile apps that allow you to scan items on the go. This means you can ditch the clipboard and take inventory counts from anywhere in your restaurant.
Lark Approval sweetens the deal even more by providing fast budget, purchase, and reimbursement approvals. Keep your inventory stocked and your cash flow healthy with the click of a button.
Multi-location centralization
With 3,381 locations, how does Chipotle manage inventory? Centralized inventory management.
Centralizing is the key to keeping your growing restaurant empire in sync.
Use a system that allows you to track inventory levels across all your restaurant locations in real time. With this information available, you can proactively transfer stock between locations when needed to balance inventory and prevent shortages.
Reports that show combined data from all your restaurant locations will also be your lifesaver. They'll help you make strategic decisions across them all.
Easily communicate with different locations with Lark Messenger. Quickly address inventory issues, share best practices, and maintain a unified approach to inventory management.
Common FAQs about restaurant inventory management
Here are answers to some commonly asked questions when it comes to restaurant inventory management:
1. How do restaurants calculate inventory?
Restaurants can manually count their inventory, automate tracking with software, or use a combination of both to double-check for accuracy.
2. What is the best inventory method for restaurants?
The answer to this question depends on your restaurant's size, budget, and specific needs. While counting by hand and using spreadsheets might do the trick for smaller eateries, like food trucks and coffee shops with a limited menu, bigger establishments or multi-location restaurants should consider investing in restaurant inventory management software.
3. What challenges do restaurants have with managing inventory?
Inventory can be tricky. Restaurants often struggle with food going bad, being prepared too early, and theft from either employees or vendors.
Data entry errors are also common challenges that can throw off stock levels. Additionally, it can be difficult to predict fluctuating customer demands and prepare appropriately beforehand.
Lark: Your recipe for restaurant management
Countless restaurants use Lark to manage their inventory and transform their operations.
Coconut & Co, for example, streamlined their inventory management with Lark's real-time stock alerts and visual inventory checks, replacing error-prone manual processes. As a result, they were able to more accurately track stock levels, improve communication between teams, and ultimately, increase their operational efficiency.
Lark might just be the missing ingredient in your restaurant's recipe for success — see how we can help you.
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