Inventory & Recipe System Essentials
Updated: Feb 26
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.
A restaurant inventory management system should include features for ordering and receiving inventory items. Ideally, the ordering features will include order guides, par levels, and suggested reorder levels. Ideally, the receiving function will be interfaced with your vendor or AP automation systems to automatically import invoices.
For chain restaurants, an inventory system should include a feature for transferring inventory items from one restaurant to another. A transfer should decrement stock and cost from the transferor and add it to the transferee. Ideally, transfer requests can be initiated by the restaurant that is looking for stock, and fulfilled by the restaurant providing the stock.
An inventory management system should also include the ability to count and value your inventory. Ideally, the counting of inventory can be done on a mobile device or via a worksheet. Most systems can value ending inventory using either the last cost or weighted average cost for items. Some systems also offer a FIFO (first in, first out) as a valuation option.
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 your track your cost of goods sold (COGS). The accounting formula for this is: Beginning inventory, + purchases, +/- transfers, – ending inventory = Actual Usage and COGS.
Your system should be interfaced with your accounting system to import your chart of accounts, export invoice information to accounts payable, export transfer adjustments, and export ending inventory valuation adjustments to your general ledger.
Ideally, your inventory management system will be integrated with a recipe management system. Recipe management should provide features for building and costing recipes. Your inventory system should provide the ability to define recipe units, adjust them for yield, and continuously update inventory item cost changes to the recipes.
Recipe management should include the ability to use different recipe units for the same ingredient in different recipes. For example, onions might be used by the weighted ounce in one recipe, by the cup in another, and by the each in yet another recipe. Recipe management should also accommodate metric measures for recipe units.
Ideally, a recipe for a menu item (an item you sell) can be modeled against a target cost percentage to determine what price the item should sell for to achieve the target. The actual dollar cost and the cost as a percentage of the current menu item price should also be provided.
Some recipe management systems include “production” features. Production enables you to track items that you prepare in a batch (like a 5-gallon batch of chili). When you produce the chili, the ingredients are depleted from inventory. With production, you can also compare theoretical to actual usage for chili (if your system is interfaced with your POS).
The ability to include preparation instructions, pictures, steps, and equipment; as well as the ability to scale recipes to different portions, will make recipe management more valuable. You can generate a “recipe book” or display recipes for prep or line-cooking staff.
Food and Beverage Cost Analysis:
When you add an interface to your POS system you gain the ability to report what your theoretical costs should be and what your theoretical inventory usage should be. You can then compare theoretical to actual to determine variances and isolate problems such as theft, over-portioning, waste, etc.
An inventory and recipe system that includes a POS interface should also provide you with an analysis of your menu performance (menu engineering). What menu items are not in-line with your targets? Which menu items are contributing the most profit (stars) or which ones are not (dogs).
Even if you only have one restaurant location, having the flexibility in your system to address multiple locations should be included and it should not cost you more money.
If you do have multiple locations, then having the tools to use common inventory or recipe items, as well as unique ones, in different restaurants is important. So is the ability to share or have unique vendors (or both). And you will need to have the ability to track and report on an individual or aggregated restaurant performance.
We have reviewed the three primary components to look for in a comprehensive inventory and recipe management system: 1) Inventory Control, 2) Recipe Management, and 3) Food & Beverage Cost Analysis. A summary of the essential features for an Inventory and Recipe Management system is provided below: