Inventory Control Basics: A Systematic Guide for Controlling Inventory in Your Restaurant

If you were just a common retailer, inventory control would be a relatively simple matter. Retailers purchase clothing, jewelry, hardware and other do-dads at wholesale prices, mark them up and sell them for a profit.

For these businesses, monitoring inventory is a matter of recording when the product is received and when it is subsequently sold, something any POS or accounting system can manage. If the store purchases 10 baseball caps and three are sold, then the system should show that seven remain in inventory. The seven caps might never sell at their original markup, but they will not "go bad" and can probably be liquidated at cost at some point.

One of the reasons the restaurant business is difficult is due to its approach to inventory control. Restaurants are both retailers and manufacturers, yet many of the principles for controlling inventory in retailing and manufacturing simply don't apply to restaurants.

Sure, restaurants often buy and sell products, such as bottled drinks or chewing gum, in the manner of the common retailer; however, the bulk of what they sell most often requires "value-added processing" of ingredients to produce a menu item. And this is manufacturing by definition; however, manufacturers track both use of raw materials and their inventory of finished products, which may be stockpiled. Unlike most manufacturers, however, restaurants manufacture and sell items at the same time; they do not have the luxury of stockpiling their menu items for obvious reasons. It becomes inedible and cannot be sold at any price.

Besides the fact that most of a restaurant's raw materials are highly perishable, restaurant raw materials often require trimming and preparation before it can be used in a recipe. The "yields" -- the amount available for use in a menu item -- vary based on quality of product, freshness and the skill level of workers doing the preparation. The process is further complicated by the creation of "daily specials" for which exact recipes may not be recorded, making inventory control of the ingredients even more difficult.

You are not a common retailer. As a restaurateur, you are a different kind of independent business person. In your world you face unique challenges, and one of your weekly battles is keeping track of inventory. Losing this battle can be the difference between business survival and defeat.