Inventory is the backbone of your restaurant — an adequate stock of fresh ingredients enables your kitchen crew to prepare delicious meals and maintain consistent menu item availability. The process of managing inventory can be complicated, particularly in a fast-moving restaurant environment. With the right system, you can track and replenish consumable products in real time.

Restaurant inventory management is critical to daily operations. Implementing a specific workflow and utilizing restaurant inventory management software can help your business meet its revenue and growth goals.

Why restaurants should care about inventory management

Inventory management is the process restaurants use to order, store, monitor, and use beverages, food items, and disposable goods. A finely honed system enables you to keep enough food on hand to feed guests — usually, 5-7 days’ worth — but not so much that the excess goes to waste.

Some benefits of effective inventory management are:

• Less food waste. Inventory management helps you avoid over-ordering, which means it’s easier to use food before it rots or passes its expiration date.
• Lower food costs. Wasted food is effectively wasted money. By adopting a more efficient, waste-free inventory management system, your restaurant automatically spends less on food. And because restaurant inventory management software clarifies your true ordering needs, it’s easy to identify opportunities to save money by ordering in bulk.
• Higher profit margins. This is another side benefit that happens when restaurants reduce food waste — you’ll be paying less for ingredients but making the same amount of money. 
• Easier ordering processes. Once food inventory is under control, you have better visibility into the entire system. This makes reordering easier and more efficient.
• Improved vendor management. When you’re not placing last-minute rush orders or calling to check on the status of a critical delivery, your vendor relationships thrive. You may even be able to set up automatic recurring orders to streamline the workflow throughout the restaurant supply chain and reduce food cost.
• Better customer satisfaction. Inventory management ensures you use items when they’re still fresh and full of flavor. Overall food quality rises, keeping customers happy. And with an appropriate stock of food on hand, you never need to nix items from the menu.

Effectively manage your restaurant inventory with these tips

Ready to overhaul your restaurant inventory management system? These tips can help you bring order to the process.

1. Determine inventory turnover

Inventory turnover is the number of times you need to replenish your food inventory in a specific time period. It’s important to calculate turnover for different items and categories — that way, you know which items need to be restocked most often.

Inventory management software can help streamline this process. POS systems can track your inventory levels, so you can see the inventory turnover rate and stock levels at a glance. These figures help you refine the ordering process. A low turnover ratio could indicate you’re over-ordering; an unusually high turnover ratio might mean you need to increase average order size.

2. Label and organize inventory

To prevent food waste, you must use ingredients on a first-in, first-out basis. This strategy ensures the oldest ingredients are always used first before they have a chance to go bad.

Every time an order comes in, label it with the delivery date. Then, organize your storage system so the oldest items are the most accessible. This intuitive system helps employees choose ingredients quickly during the dinner rush. At the end of each shift, do a food inventory count to ensure the system is intact.

3. Keep stock levels low

Many food items are perishable, which means they should spend as little time on the shelf as possible. Keeping stock levels low reduces the risk of spoiling for items such as vegetables, fruit, dairy, and meat. Because many foods lose flavor and texture over time, you’ll also maintain high food quality.

4. Track wasted food

Food waste indicates that one part of your inventory management system isn’t working effectively. Ask employees to make a note every time they have to throw out an ingredient before it goes into prep. Keep a notebook in the supply rooms to help them remember.

After a week or so, examine the data and look for trends. Do certain food items tend to go to waste frequently? Investigate the reason. If you’re ordering too much, just reduce the volume and see if it reduces waste. If customers simply aren’t ordering the dishes that use the ingredient in question, you may need to rework the recipes or eliminate the menu items.

5. Monitor sell-through rate

The sell-through rate tells you how much inventory sold during a specific period relative to how much inventory you bought during that same time. It’s a critical metric for inventory management because it helps you understand:

• Demand for specific items
• Changes in demand throughout the year
• How fast your restaurant converts purchases into revenue

Sell-through rate can be another way to develop a better ordering strategy. If the rate skyrockets in the summer but falls in the winter, you can adjust purchase volume accordingly.

6. Train staff on inventory tracking procedures

As a restaurant owner, you can’t handle inventory all on your own. Instead, train your team members to handle inventory tracking on a daily or shift-to-shift basis. Write out standard operating procedures, and ensure everyone understands how to track levels and where to report them. Assign specific people on each shift to handle the task, and make sure you have backup support to step up as needed.

How to pick the right restaurant inventory management system

Historically, restaurant inventory management was done using spreadsheets. Although the pencil-and-paper method is affordable, it increases the potential for human error. Today, businesses can choose from a variety of digital tools, including restaurant inventory management software. These systems help streamline the process, increase accuracy, and provide predictive insights.

Some common inventory tracking solutions are:

• POS systems
• Electronic records
• Restaurant inventory management software

The right inventory management system for your restaurant varies based on sales volume, the number of locations, and existing technology. Use these tips to select the best option for your needs:

• Evaluate your operations. How complex is your restaurant operation? How many customers do you serve? Larger businesses often need powerful restaurant inventory software; a smaller establishment may be able to get away with a simpler setup.
• Determine POS compatibility. Restaurant inventory management is more accurate when it’s connected to your POS system. Software that connects effortlessly to your existing technology can ease the transition and increase compliance.
• Identify critical features. Modern restaurant inventory management programs often include automatic ordering, integrated reporting, AI inventory forecasting, and real-time stock adjustments. Identify the features that will have the biggest impact in your business.
• Choose between digital and in-house solutions. In-house systems are typically loaded onto local computers in your restaurant; digital systems are located in the cloud. If you’re managing multiple locations or you need to access inventory data remotely, cloud-based food inventory management systems are often the best option.
• Examine pros and cons. Look closely at your top choices. Do the features justify the cost? How will the system change your operations for the better? Are the interfaces user-friendly? What level of training is necessary? What is the implementation process like?

Keep your stocks manageable with the right resources at your disposal

Effective restaurant inventory management can transform your operations. Repeatable in-house practices and the right technology solution can help you reduce food waste, control costs, ensure food availability, keep customers happy, and stay competitive in the restaurant industry.

Once your inventory system is under control, you’re well positioned to grow the business. Grubhub can help you reach more local customers and increase delivery volume so you can build revenue over time. To find out how our technology can improve your sales and enhance the customer experience, get started with Grubhub.