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Out of control, out of business: How to reduce inventory control losses at your restaurant
By Matt Rolfe
February 22, 2013

 

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How to reduce inventory control losses at your restaurant, bar or foodservice operation
High gross margins on beverages and food can cover up a massive amount of operating errors in some businesses. Now — due to increasing costs, bargain seeking, and socially connected consumers — those margins are eroding, and operators are being forced to look closer than ever before at inventory control.

They’re finding that the average bar or restaurant is losing 10 per cent of its beverages and 15 per cent of its food to variance and shrinkage. These are crippling and unsustainable losses.

Doing the job right

Reconciling your inventory has never been tougher. In adult beverage service, for example, the average bar has over 120 products. Who could have imagined having 10 gins, 15 vodkas, or 50 cocktails? Most managers spend 95 per cent of their time merely counting and producing reports. Only a few follow up by actually using that information to create plans for reducing the losses and that’s a mistake.

 

Counting the physical inventory is only half of the process. The other half is to take those results and break them down into simple tasks and expectations for your team to put into effect before the next inventory. By helping various operations in this effort, I’ve learned that bar owners, managers and even staff want the benefit and peace of mind that the control brings to their bottom line. Below, I’ll highlight a few key points on how to reduce inventory losses in your business. The steps will help you take the inventory process and put it into action.

Close is not good enough

A flawed report does more harm than good, which is why you should implement a data collection process. The first thing you want to do is truly evaluate your current inventory process. Who is performing it? At what frequency are they doing it? And, most importantly, how are they completing the inventory?

 

Start by calculating the amount of time your team invests in the data collection process. What tools are they using, and are the tools accurate? You have a hard cost to your company to complete the inventory, and often that cost is in manager hours, which means you end up paying more money. Plus it’s actually less accurate than other solutions that are on the market. Investing in a third-party inventory company or program might allow you to reinvest the management team’s time - currently tied up in counting - into following up on and taking steps toward utilizing the inventory results instead. That could add thousands of dollars to your bottom line.

The days of taking an inventory of wine and liquor by eye and “guesstimating” draught inventory are behind us.

Build a culture of control


In many establishments, the only time most staff members hear about inventory is when there is an issue. This way of operating creates not only a black cloud around the topic, but also a lack of trust between owners, managers and staff when it comes to the inventory results. Instead, look at this as an opportunity to connect with your staff and build a culture of control around your inventory results and process.

Explain in detail to all of your managers and staff the importance of tight inventory control. As already mentioned, being average in our business leads to losses of 10 per cent — that’s thousands of dollars in lost profit. Simply coming down on your staff or managers when the results are not meeting your expectations isn’t helpful.

As an owner or manager, you are most likely only going to personally pour a small portion of the drinks served in your business (if any). In order to engage those actually pouring these drinks, clearly explain what is expected of them when it comes to inventory each shift. Share the results with the team so they know what they’ve helped produce. Listen and involve them in conversation around the results (whether good or bad) every audit period. By doing this, you will create a culture of control that is completely missing from most businesses.

Create visibility

One of the most impactful solutions for improving your inventory results is to create a control scoreboard. For example, try putting a whiteboard in a staff area, clearly displaying the inventory results each audit period along with the actions you are planning to implement based on the results. If you’ve done the previously discussed step — explaining clearly to staff members what is expected of them — the scoreboard is your vehicle to communicate results and follow-up plans openly and consistently each inventory period.

My suggestion is to post results on product losses or variances in dollar figures and units, if possible (pints, ounces, glasses, etc.). Posting on a whiteboard, along with a message from the owner or manager, makes everyone in your business aware of the results, good or bad. Including your team in the results will not only improve your staff involvement when it comes to inventory, it’ll also remove any questions they might have of what you’re expecting them to carry out in the coming period.

Communication is key

Most often, discussions about inventory loss have a negative context to them. The idea, then, is to change the conversation. Go out into your market and contract the right company, or get the right tools to complete the inventory properly. Be sure to have a consistent conversation around each and every inventory period. Whether positive or negative, be sure to talk about the results. And, last but not least, post the results for everyone in your organization to see. Let everyone know that inventory is important to you—and needs to be for them as well. 

I urge you to take less time performing inventory, and more time communicating the results and the actions you are going to take. Instead of fighting to TAKE control of your inventory, think of how you can GIVE control to your management teams by providing guidance, budgets, support and clear expectations. In many industries, you can make it by being average. In our industry, being average sometimes means bankruptcy. Change the way you’re doing things. Follow these steps, and bring about a massive increase of profits to your business.

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About the author

Matt Rolfe is the CEO of Barmetrix Global, a hospitality coaching and consulting firm dedicated to helping their clients increase profits through improved inventory control, staff training and staff engagement exercises and retail pricing strategy evaluation. For more information on Barmetrix franchise opportunities or services, please email mrolfe@barmetrix.com or visit www.barmetrix.com.

 
 
 
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