How to drive a successful food and beverage inventory program

How to drive a successful food and beverage inventory programBy Matt Rolfe
March 31, 2015

 
How to drive a successful food and beverage inventory program

Are you making the money you feel you deserve from your business? In order to survive in the hospitality industry today, we need to turn food and beverage inventory into the optimal amount of retail dollars. In order to do this in your business, you are going to need an accurate and action focused inventory program.

Barmetrix has assisted thousands of hospitality operators improve their inventory control results by following the processes outlined in this article. The fact is, the average hospitality operation loses eight to 12 per cent of their food and beverage inventory each week. Contrary, the top performing locations lose two per cent or less and in the process net thousands of dollars in additional profits. These operators have a process and formula that everyone in the business — from ownership to front-line staff — believe in and follow on a daily basis.

From personal experience, I can tell you that the top performers in the industry do things fundamentally different than the rest. This article is designed to share these concepts, formulas and processes to help you take your food and beverage inventory program to the next level.

Setting the groundwork

 
  • Beginning with the end in mind – One of the most important elements of your inventory control program is having clear, measurable and actionable goals and targets. The top performers in the hospitality industry focus less on the process of counting inventory and more on the desired results or end goals. Do you have clear, defined inventory expectations? How do you recognize your team if they deliver on the results, and what actions are taken if you don’t deliver on those expectations?
  • Retail opportunity – If you own or work in a bar, restaurant, hotel or night club, you are in the retail business. Your products are sold inside the building you are currently paying for, warehoused in areas that need to be heated and/or chilled and delivered by staff that expect to be compensated for their time. Your end goal is to turn inventory into the optimal amount of retail dollars in your till. Getting your purchases right is important. However, focusing on retail opportunities will shift your bottom line.

Ardent Mills Organic 2016

  • Continuous focus – Inventory control results are fluid; good and bad results come and go like the waves of the ocean. Even if your business is currently producing great cost of sales or variance results, with management and staff turnover, product changes/additions and cocktail lists, you must maintain focus. Continuous change is a reality in our industry, no matter how busy, slow or strong your inventory results currently are. Remain focused and keep following the processes. The top operators have established great inventory measures as a habit that is focused on each week.
  • It might take more effort than you are currently giving it – Please take my broad stroke comments with a grain of salt. Most people reading this are conducting inventory audits today. I urge you to consider the following: Are you doing your audits on a frequency that will deliver the best results? Do you have the best person conducting the audits? Is the time and money you are investing in the process today delivering the desired results? If the answer is ‘no’ to any of the above questions, then I urge you make a change and apply more focus to your program.
  • Results come from the action you take – If you are looking to increase profits or improve your cost of sales, you must stay focused on taking action on the results from each audit period. Many businesses check the box when the counting process is complete, ship the results to the ownership, management or controllers and prepare themselves for the next counting process. If you intend to make the profits you deserve, you need to continuously take positive actions with your staff, purchasing and stock management team every week. For example some of the actions to review are your draught system, having the proper pour spouts and shot glasses or putting a new spillage or wastage program in place.

Now that we have identified the larger elements of your inventory program, I want to walk you through some of the granular details that can allow you to deliver remarkable inventory control results.

  • Consistent management of employees doing the inventory – It is important to ensure that you are as consistent as possible with the employees you have conducting your inventory. You will often find that different staff do inventory in different ways and ultimately produce different results.
  • Double check five to 10 products every week – Having a manager or staff perform your inventory each week is similar to allowing them to produce their own report card. I personally feel that nine out of 10 people are extremely honest; with that said, I recommend that someone not directly involved in the audit confirms the counts every inventory period for five to 10 key products.
  • Utilize the capacity of your POS system – To get an accurate, product-by-product inventory report you will need detailed information coming from the POS system. This involves removing all open keys, open cocktails and non-descript buttons from the POS system altogether. Each product should have a POS button; new products, cocktails or drinks should be added to the POS system on a weekly basis.
  • Be wary of only using cost-of-sales results – Many great businesses use their cost-of-sales results as their inventory results metric each audit period. This is a good indicator of your performance. However, often the cost-of-sales budget is set by simply using last year’s results. You also need to take into consideration changes in your sales mix, purchase values and your current retail pricing. Each of these factors can have a dramatic effect on your cost-of-sales results each period. My recommendation is to break your cost-of-sales target down by product category, for example draught, beer, liquor, wine, etc. This will allow you to get a much better indicator on where your business is thriving and what categories need extra attention.
  • Share the results with your front-line staff – For many hospitality businesses, the servers and bartenders are the ones pouring the drinks and plating the food. If you want to change behaviours and ultimately change results, you need to engage the people who directly affect the results. The key here is to share the results with staff every inventory period! Most staff are used to hearing about inventory when the results are negative. However, the best-run businesses display their results after every audit period, and take time to celebrate and recognize people when the results are on plan.

Turning your food and beverage products into a targeted amount of retail dollars every week is key to your business success. Most operators require a bit more time to perfect this process, and others may potentially require support from a third-party company to really drive the best possible results. The key to success is getting accurate figures in a timely manner and having positive accountability and actions expected after every inventory period. 

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About the author

Matt Rolfe is the CEO of Barmetrix Global, a hospitality coaching and consulting firm that helps clients multiply profits, maximize staff engagement and deliver remarkable guest services by design. He blogs every week at www.barmetrix.com/blog. Contact him at mrolfe@barmetrix.com to book speaking engagements or to discuss Barmetrix Services. For more information, call 416-367-2263

 
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