As a restaurant operator, understanding the importance of maintaining accurate inventory levels for your restaurant is critical to running a successful business. High inventory levels in comparison with the corresponding food sales can severely hinder your potential for profitability. Excess inventory levels will lead to poor control practices, inefficient use of product and susceptibility to petty theft, mostly resulting from inherent human nature.
Effectively reducing your inventory levels will have a positive impact not only on your food cost but on other aspects of your business as well, such as;
• Freeing up cash,
• Providing a more accurate inventory valuation,
• Reducing over-portioning,
• Reducing excess waste,
• Reducing theft and pilferage.
How to measure your current inventory levels?
To determine the proper levels of inventory for your restaurant, you will need to calculate your current number of days of food and alcoholic beverages inventories on hand and compare it to industry standards.
Food Inventory Levels
Based on industry standards, the food inventory count for a full-service restaurant is on average 7 days’ worth of inventory and 5 days’ worth for quick casual. You can calculate your current number of days of food inventory on hand and compare it to industry standards using the following formula:
1) Calculate your average monthly food cost by multiplying your average monthly food sales by your food cost percentage.
2) Calculate your day of food usage by dividing your average monthly food cost by 30 (days/month).
3) Obtain your inventory food count.
4) Finally, calculate your number of days of inventory on hand by dividing the inventory food count by your daily food usage.
Alcoholic Beverage Inventory Levels
Based on industry standards, the number of days of alcoholic beverage inventories on hand are as follows:
Liquor: 15+ days
Beer: 7-10 days
Wine: 15+ days
Please note that liquor and wine inventories may vary based on the type of establishment. Restaurants that specialize in wine, bars and clubs will carry more alcoholic beverages inventory than the standard full-service restaurants.
To calculate the number of days of alcoholic beverage inventory on hand for your restaurant, simply follow the same steps previously listed for food inventory calculations but using liquor, wine and beer average monthly sales, product cost percentages and inventory counts.
How to improve your inventory levels?
Now that you have obtained the number of days for food and alcoholic beverage inventories on hand for your restaurant, you will be able to assess your business current standing and determine whether you will need to reduce your inventory count to be in line with industry standards.
Here are some ideas on how to improve your inventory levels:
• Cease bulk ordering to obtain discounts. Suppliers offer attractive discounts to persuade bulk purchasing when only a specific quantity for a product may be needed. Inventory that sits on your kitchen shelves for over a week ties up your cash.
• Order accurate levels of product.
• Ensure the prep cooks are using the specific portioning and ingredient specifications for each recipe.
• Ensure that bartenders and barbacks use appropriate measuring tools to pour drinks.
• Ensure proper practices are in place to review products when delivered at the restaurant.
• Properly store product to preserve quality and proper shelf life.
• Ensure food inventory counts are accurate and that up to date pricing is utilized.
• Monitor supplier prices and product quality.
For more information regarding best practices for inventory control, please contact us.