When most people hear the term “inventory management,” they are likely to think of warehouses that ship products to consumers or manufacturing facilities that need to keep track of the different parts and equipment used in their work. But inventory management is just as applicable in the hospitality industry as well.
This is especially true of hotels, restaurants, bars, casinos and other facilities that offer food and drinks to their patron. Inventory management can already be a challenge when dealing with uniforms and other supplies; it can become a true headache when dealing with perishable food items.
By partnering with a quality inventory management partner, you can have greater confidence in your ability to manage these necessary items in a way that will reduce waste and keep your patrons happy.
1) Lack of Price Visibility
Food has been one of the main areas affected by inflation, with recent reports revealing an 8.8 percent year-over-year increase in prices from 2021 to 2022. Supply chain issues, rising labor expenses, harvest disruptions and other factors are increasing the costs of a variety of food and drink staples used for home cooking and at hospitality businesses.
Inventory management practices that only focus on the quantity of items needed may not adequately account for price increases in meat, milk, fresh fruit and vegetables and other staples. Without knowledge of how your suppliers are increasing prices, you could easily begin seeing a significant reduction in profits.
Price visibility requires identifying if suppliers change how much they charge for various items and evaluating your options. Do you find another supplier, or do you increase how much you charge your own customers? By evaluating pricing trends in your inventory management system, you can proactively account for this common expense increase.
2) Inventory Waste
Inventory waste is one of the biggest headaches any hospitality business has to deal with. For example, it is estimated that between four and 10 percent of restaurant food purchases go to waste before it reaches a customer — and that doesn’t even account for food that a customer doesn’t eat after it is served to them.
One of the most common reasons why this food goes to waste is that it doesn’t get used before its expiration date. Poor inventory planning could cause perishable food items to go unused for days or even weeks — and by the time they are needed, they can no longer be served.
While some waste is inevitable due to unpredictable customers or mistakes by food preparers, a quality inventory management partner can help reduce waste by optimizing inventory replenishment. By accounting for the shelf life of items and only making requisitions as needed, waste can be significantly reduced.
3) Unused Inventory
Food spoilage isn’t the only way that inventory can go to waste. All too often, hospitality businesses spend money on items that they don’t actually use. Menus change over time — and as a result, so do the ingredients that your facility needs to prepare dishes.
Without regular evaluations of requisition orders, a restaurant could easily continue ordering items that are no longer used, because the dishes they were originally needed for have been discontinued. These unneeded items don’t just add to the total cost of each requisition. They also take up valuable space in your storeroom.
A quality inventory management system will allow you to track inventory levels over time with historical counts. Ingredients that are carried over frequently should be evaluated further to determine why they are still being ordered, and if they are even still being used. Items that are no longer used for recipes should be eliminated from requisition orders entirely. Reducing order amounts and closely monitoring usage of rarely used items can further reduce waste.
Automated requisitions can also ensure that you don’t keep ordering inventory that doesn’t get used often. When items are only replenished when they reach a set level, new orders will only be submitted as stock is used.
4) Lack of Insight Into Customer Patterns
When you understand your guests’ purchasing behaviors, you can allocate inventory accordingly. For example, during the NCAA March Madness tournament, some restaurants might notice an uptick in demand for menu items such as wings or nachos. Demand for other items could vary based on the season or regional events.
Seasonal changes can even impact the number of guests who patronize your facility each day — another crucial consideration when trying to plan for inventory. You don’t want to run out of a popular item because you didn’t order enough stock, nor do you want excess inventory to go to waste because you miscalculated demand.
Without a strong inventory management system, such variations are often left to guesswork. On the other hand, the right system will allow you to gather detailed data so you can identify specific trends among your customer base.
Demand for certain items can even vary based on the day of the week. Analyzing these patterns will allow you to forecast demand so you can allocate stock accordingly. This way, you’ll always have the right amount of each item your facility needs.
5) Lost Time to Manual Inventorying
Inventory management is essential for understanding your facility’s supply levels. Unfortunately, many in the hospitality industry continue to rely on time-consuming inventory sheets that must be completed by hand. Not only does this require a massive time commitment, but it can also be alarmingly inaccurate.
After all, the average employee isn’t going to want to spend an extra hour or two counting stock after they close and clean up. Research from the Association For Psychological Science reveals that people make less accurate decisions later in the day. A desire to simply be done with mundane tasks could result in an employee simply using last week’s requisition numbers rather than going through a time-consuming inventorying process.
Tools such as barcode scanning, mobile apps, and automated inventory tracking can greatly reduce the burden on your employees. This ensures more accurate inventory levels by reducing the risk of human error — and it makes life easier for you and your staff.
6) Failure to Follow Portioning Guidelines
Within the restaurant industry, portioning guidelines are crucial for keeping inventory management on track. Even minor alterations to the recipe (like an extra slice of cheese), or filling drink glasses too high can throw off your cost calculations and inventory levels. What seems like a minor mistake by a junior chef can eventually become an ongoing cost problem if it isn’t corrected.
To alleviate this, hospitality businesses must establish standard recipes that clearly outline the procedure for preparing a dish, as well as the exact amount of each ingredient that may be needed. All who are involved in food preparation should be trained so that they understand the importance of following these guidelines with exactness.
Restaurant managers should also ensure that appropriate portions are being served to customers. If a particular dish is often left unfinished, with leftovers either thrown away or carried out, adjusting the serving size will reduce the restaurant’s food waste and lower inventory expenses.
While some kitchen loss is inevitable (such as when a junior chef drops a slice of meat on the floor), a carefully regimented system will make it easier to keep stock at the expected levels.
7) Trouble Tracking Transfers Between Locations
Inventory management is already challenging when you have a single facility, but with multiple storerooms and customer-facing locations, this can get even more difficult. Multi-unit businesses often facilitate internal orders to transfer inventory from one location to another as needed. While this can help save money by reducing the need for new requisition requests, it can also introduce new inefficiencies and tracking issues.
Not only does your team need to track its central ordering needs, but you must also monitor how each location uses its inventory. A sound inventory management system allows your team to quickly and accurately record transfers and internal orders so that you have real-time insight into how much stock is available at each location.
Tracking internal orders can also provide crucial data that allows you to make location-specific changes regarding item replenishment values. By ensuring that managers record each transfer in the system when they occur, you won’t have to worry about miscommunications causing inventory levels to be incorrect for the locations involved in the transfer.
Improve Your Inventory Management Processes With BirchStreet
While inventory management in the hospitality industry is rife with potential pitfalls and inefficiencies, this doesn’t have to be the case when you have a strong inventory management partner at your side. BirchStreet’s Inventory Management With AccuBar offers a broad range of capabilities to help you manage inventory costs, counts, and spending.
By interfacing with your point of sale (POS) systems, you can gain access to valuable inventory reports and even automatically replenish items or receive alerts for items at low inventory levels. Handheld scanning, perpetual inventory tracking across unlimited locations, and multiple costing methods ensure that this solution can scale alongside the needs of your business.
By giving inventory management the attention, it deserves, you can stop waste and ensure higher profits for your hospitality business.
About BirchStreet Systems
BirchStreet Systems powers hospitality and food and beverage enterprises with a comprehensive procure-to-pay business solution. As the global leading provider of spend management solutions in the hospitality industry, 15,500 enterprises in over 130 countries subscribe to BirchStreet to connect with a network of more than 450,000 suppliers.
Established in 2002, BirchStreet is privately held and is headquartered in Las Vegas, NV with offices in California, China, Singapore, India, and the UK. For more information, please visit www.birchstreetsystems.com.