Inventory Management: Too Expensive to Ignore and Too Complicated for Spreadsheets

Apps make the inventory process easier than ever
Apps make the inventory process easier than ever Thinkstock

Inventory management is a necessary evil of the restaurant business. It’s too expensive to ignore, but too complicated to handle with pen, paper, clipboards, or spreadsheets.

Inventory management is a necessary evil of the restaurant business. It’s too expensive to ignore, but too complicated to handle with pen, paper, clipboards, or spreadsheets. In restaurants that track inventory manually, patterns of waste, theft, and inefficiency fly under the radar.

Still, most restaurants would rather eat the costs of food waste than attempt to address it with archaic software. Independent, full-service restaurants can’t splurge on $10,000 to $20,000 systems that take nine months to implement, hijack the manager’s time, and burn thousands of dollars in maintenance costs. Instead, year after year, roughly three quarters of restauranteurs tell the National Restaurant Association that food costs are a challenge.

When you can’t answer questions like, “Where am I losing money?” or “What ingredients are we wasting?,” of course food costs are a challenge. You make the same mistakes again and again. Shopping multiple suppliers for the cheapest ingredients doesn’t solve the problem.

Let me illustrate why inventory management breaks down despite our awareness of how it should run. From there, I’ll discuss how technology could help solve this problem.

The Lesser of Two Evils

If you run a restaurant, you know exactly how inventory management should work—in theory. You decide to do inventory every Friday. You print out a spreadsheet with every item and ingredient listed. Some poor soul spends hours counting your stock and then entering everything into a spreadsheet. This inevitably leads to errors.

Because the task is so time-consuming and boring, the staff finds shortcuts and ‘eyeballs’ some counts. When you receive new inventory, someone takes count with pen and paper, adds the numbers to a receiving spreadsheet, and then copies those numbers to your master spreadsheet. Maybe you export a spreadsheet from your point-of-sale (POS) system and guestimate your recipe mixes to get an idea of theoretical versus actual food costs. In reality, you know what you spent on food, but you don’t know how much was wasted or why.

Even if you do have a rudimentary inventory management system, no one creates recipes for it. It takes too long to convert cooking units of measurement into the purchasing units used by your supplier (quick: convert your short rib recipe into a percentage of a 75-pound case of short rib, and do the same for 20 other ingredients).

Without an accurate recipe, the system can’t track how much inventory you use each time you sell the short ribs. Each time you order more short ribs and other meats, you print an order guide from the supplier and do a spot check because you can’t trust the actual inventory count from days ago. You never have a true, up-to-date picture of your inventory.        

Nonetheless, between wasting food and spending tens of thousands on better software, waste is the lesser of two evils. This begs the obvious question: how would technology fix the problem?

As Easy as iTunes

You know the best practices for inventory management. The barrier is technology, not knowledge. To solve this problem, your inventory software needs to meet four criteria:

1.     It must be so simple that a kid could use it without any training.

2.     Setting up items and recipes must be as easy as creating playlists in iTunes. The app must know when you are at your desk and work when you are running.

3.     The system must combine administrator and user roles. Your sous-chefs should be able to change a price or recipe on the fly without calling an IT pro for help.

4.     The application needs to be available on mobile devices and PCs.

If your inventory application meets these criteria, staff will count faster and more accurately because they’ll enter numbers directly into a smartphone. Your staff will also set up and adjust recipes on an ongoing basis because doing so is a quick, drag-and-drop process. If your recipes are up-to-date, and the app is integrated with your POS, the system can adjust inventory levels in real-time as you make sales. This narrows the gap between theoretical and actual sales, which means you can identify wastage and order ingredients more efficiently.

Let’s imagine for a moment that you have implemented this system. Initially, you should focus on tracking your top 10 highest-dollar, highest-use items to get a quick return on investment. That probably entails counting meat, seafood, fish, and alcohol as often as possible—once per shift is reasonable now that your staff can count from a smartphone. Shift-by-shift counts will reveal who is over-pouring the pinot or going overboard with bacon.

If you address waste among your top 10 items, you will correct wider-scale problems. For instance, if your team does over-pour the pinot, they probably over-pour other bottles you sell by the glass. You may correct wastefulness before you begin tracking the other items in your inventory.

Restaurants accept food waste because doing something about it used to be too time-consuming and expensive. The problem is the technology, not the methodology, and you’ll find that pattern throughout the restaurant industry. Where pens, paper, clipboards, and spreadsheets fail you, imagine the characteristics of the tool that would solve your problems. That exercise will show you what to look for and what to ask vendors. Where restaurant technology is going, no idea is too farfetched.     

Anthony Lye

Anthony Lye is the President & CEO of HotSchedules. He provides strategic direction and business guidance for the company, including the integration of multiple technology solutions into one integrated platform. Prior to his role as President and CEO, Anthony was Chief Product Officer for HotSchedules managing product development and cloud operations for all products, which include hiring, training, scheduling, business intelligence, shift communication, loyalty programs, labor and inventory management software and tools. Prior to joining HotSchedules, Anthony was global president of Digital Platforms, Customer Relationship Management and Channels at Publicis Groupe, the world’s largest digital agency. Prior to Publicis, he was senior vice president and general manager of CRM and Customer Experience at Oracle Corporation. He also held senior leadership positions at Siebel Systems, ePeople and Remedy Corporation.

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