Inventory System Essentials

There is a core set of features that you should look for in any comprehensive inventory and recipe management system. These important features are discussed in this blog.

Inventory Management

A restaurant inventory management system should include features for ordering, receiving, transferring, and counting inventory items.

Ordering: Ideally, the ordering features will include order guides, par levels, and suggested reorder levels. Ordering should also include an option to order by vendor or order by item.

Receiving is for tracking invoices. An inventory system should be able to import scanned invoice images or vendor EDI invoices, including the inventory items received, so you do not have to enter any invoice or inventory item information manually. The receiving function should also be able to interface with your Accounts Payable system.

Transfers: If you operate multiple restaurants, an inventory system should include features for requesting, fulfilling, and approving transfers. The transfer features should decrease stock and cost from the transferor and add it to the transferee.

Counts: An inventory management system must also include the ability to count and value your inventory on hand. Ideally, the counts can be taken on a mobile device or via a worksheet. Count valuations should include the option to use the last case cost or the weighted average cost for items.

Actual Usage: An inventory management system should calculate your inventory usage at an item level as well as an aggregated level that is in line with how you track your cost of goods sold (COGS). The accounting formula for this is: Beginning inventory, + purchases, +/- transfers, – ending inventory = Actual Usage and COGS.

Accounting Integration: Your inventory system should be interfaced with your accounting system to export invoice information to accounts payable, export transfer adjustments, and export ending inventory valuation adjustments to your general ledger.

Recipe Management:

Ideally, your inventory system will also include recipe costing and modeling features. These features allow you to add the ingredients for each of your recipe items and then calculate the cost to prepare each recipe item based on the most recent ingredient costs.

Flexible Recipe Units: The best recipe costing systems accommodate using different recipe units for an ingredient in different recipe items.  For example, onions might be used by the weighted ounce in one recipe, by the cup in another, and by each in another recipe item. You should also be able to scale recipe units in a measure class (using a fluid ounce in one recipe, a gallon in another, and a milliliter for another, all for the same ingredient).

Preparation Instructions: A recipe management system should also include the option to enter preparation instructions including pictures, steps, descriptions, and preparation utensils.

Recipe Modeling: Ideally, a recipe for a sales item (a menu item you sell) can be modeled against a target cost percentage to determine what price the item should sell for to achieve the target. You should also be able to model different pricing to see the resultant cost percentage.

Prep and Production: Many recipe management systems include “prep or production” features that enable you to track items you prepare in a batch (like a 5-gallon batch of chili). The best systems can also suggest how much to prep or produce. Systems like COGS-Well can also provide an option to count and track theoretical usage for a prep or production item.

Waste: A quality inventory system will also provide the option to track and report waste. It should accommodate entering waste for inventory and recipe items.

Food and Beverage Cost Analysis:

A quality inventory control system will interface with your Point of Sale system to import the menu item sales mix (what menu items were sold, at what price, and in what quantity).

The system should be able to combine the sales mix with the recipes for each menu item to report what your theoretical cost of sales and inventory usage should be. The theoretical should then be compared to your actual cost and usage to determine variances to help you isolate problems such as theft, over-portioning, or too much waste.

Menu Analytics:

An inventory system that includes recipes and a POS interface should also provide you with an analysis of your menu performance (menu engineering). What items are not in line with your targets?

A common component of Menu Analytics is a "Menu Engineering" report. This report looks at menu item profitability and popularity to inform you about which menu items are contributing the most profit (stars) or which ones are not contributing (dogs).

Multi-Restaurant:

Even if you only have one restaurant location, having the flexibility in your system to address multiple locations should be included in your inventory system.

If you do have multiple locations, then sharing common vendors, inventory, and recipe items, is essential. It is also important to isolate unique items.

A quality inventory system will allow you to consolidate or isolate your locations for reporting as well as generate side-by-side comparative reports for all, or selected, locations.

Summary:

We have reviewed the five primary components to look for in a comprehensive inventory and recipe management system: 1) Inventory Control, 2) Recipe Management, 3) Food & Beverage Cost Analysis, 4) Menu Analytics, and 5) Multiple Locations.

A summary of the essential features of an Inventory and Recipe Management system is provided below: