Poor inventory management eats into net profit. Learn about the errors many food and beverage business owners usually make to avoid repeating them.
Food waste is a global concern. According to Boston Consulting Group, all countries will collectively throw 2.1 billion tons away a year by 2030.
Other than the alarming social and environmental effects of food waste, this negligence also can have a tremendous economic impact on businesses. Such amount of wasted food could translate to a staggering revenue loss of $1 trillion for food and beverage (F&B) operations.
Significant food wastage happens due to a multitude of reasons, but it almost always stems from inventory mismanagement. Your inability to control the flow of goods, perishable or not, that come in and out of your establishment can hurt your business as well as the local community.
Although the Philippines isn’t exactly a microcosm of the world, food waste remains a concerning problem here—a country with a sizable percentage of its population still living below poverty. In Manila alone, more than 2,000 tons of food end up in landfills.
Not one strategy can ultimately solve the puzzle of restaurant food waste. But avoiding the following common errors in inventory management is a good start:
1. Going Crazy With Your Orders
Demand forecasting can be tricky. If you underestimate your projected sales over a certain period, you’ll miss out on considerable potential revenue. But if you buy more perishables than you can cook and sell, you stand to lose a ton of money.
The only way to stop purchasing goods with abandon is to have a deep understanding of your inventory. You ought to monitor the contents of your freezers, coolers, dry storage units, and shelves regularly to know when and to what extent you should replenish your stock.
Actually, you can automate this process with a robust purchasing platform. If you adopt such software, you can stay on top of your orders no matter what device you prefer to use and communicate with your suppliers more effectively.
2. Letting Excess Items Perish
Buying more ingredients than necessary is one thing, but watching your surplus items go to waste is another. Allowing them to spoil with inaction is unwise, wasteful, lazy, and unimaginative.
To save your extra perishable goods in stock, you must give them priority since you’re racing against time. Incorporate them into your dishes or come up with new offerings using them. Selling them to break even beats letting them go bad and get nothing in return 100% of the time.
Furthermore, you could plan your staff meals around your surplus ingredients. They may not turn into revenue, but they at least help drive down your overhead.
3. Cooking Too Much
Overproduction is one of the surest routes to food wastage. More often than not, it happens when you don’t read your sales figures properly, sticking to an outdated menu, continue to use inefficient batch levels and all of the above.
Sometimes, it’s inevitable no matter how good you are at managing your inventory, but you shouldn’t immediately count it as a loss. You could still salvage untouched cooked food by turning it into a promotion.
Bakeries excel at this. Many of them sell their last pastries while they still taste fresh at a discount hours before closing in order to offer entirely new batches of bread the next day.
4. Being Too Generous
Reckless portion control can lead to food waste in more ways than one.
By allowing too much food per serving, you’re basically encouraging leftovers. Likewise, giving irregular portions could result in overproduction. If the remainder of the dishes isn’t enough to make average servings, you’ll be forced to send them to the trash.
The key to effective portion control is optimized menu engineering. Part of thoughtfully creating your menu is precisely identifying and understanding the portion cost of each item. With this information, you can standardize the measurement of each dish and begin serving food no more than you should.
5. Mishandling Storage
“First In, First Out” is a universal method for preventing spoilage. However, even your most vigilant employee will find it difficult to follow if your food storage areas lack organization.
Using Mosaic Solutions’ inventory platform to generate centralized inventory reports can help guide your staff keep tabs on the expiration dates of dozens of items. But it may not efficiently assist employees in making decisions on the fly in a busy kitchen.
To nail the FIFO method without fail, consider investing in proper containers and dispensers with eye-catching labels. Of course, discipline is paramount, for no amount of documentation and signage can improve your inventory management efforts when the people in charge of storage habitually disregard the rules.
6. Relying Solely on a Point-of-Sale (POS) System
A POS system records your sales, allowing you to identify your best-sellers and determine any emerging and prevailing spending trends of your customers. However, its database can’t paint the whole picture. POS reports can’t accurately highlight your sources of food waste.
What you need is a platform that rolls POS and inventory into one or a piece of software you can integrate into another solution that can monitor your stock levels and the movement of your ingredients from storage.
Otherwise, you’ll be blinded by incomplete reports and be clueless about why your supplies don’t generate your expected sales revenues.
7. Ignoring Historical Data
More often than not, tolerated dated policies and uncorrected bad habits can explain many of the incidents of inventory mismanagement affecting your business. You can’t chart long-term solutions to dramatically reduce waste without analyzing your historical data.
Doing so may be impossible if you haven’t used any kind of sheet for food waste. That’s why you should begin recording your orders and the usage of your supplies in detail now.
If you have a deep, updated repository of inventory data, glean insights from it. With advanced analytics, you’ll be able to know which ingredients you historically underused or overused on a regular basis. Use such information to make prudent decisions moving forward.
In Conclusion
In any F&B operation, inventory is fundamentally tied to net profit. It’s a sin not to fully understand and effectively control how you buy and use your ingredients.
Any restaurateur can commit any of the mistakes we discussed here. But it becomes a decision when you continue to make them if you know better. Invest in the right technology to curb your food waste and watch your net profit gradually go up.