Why Buying Larger Quantities Does Not Save Money

It's common for suppliers to quote products at one price for a small amount of a product and a lower price per unit for purchasing a larger amount.

After doing the math it may appear to be an easy way to save some money but if it leads to purchasing more food and more products than are needed, this practice can easily lead to higher food cost and less profit.

Carrying an excessive amount of inventory often leads to the following problems:

There aren't many absolutes in this business but if there is one this is it: Consistently keeping on hand more product that you need invariably leads to more spoilage, over-portioning and theft. In fact it's one of the most expensive things you can do.

When you have more than enough inventory on hand, you are tying up cash. Operating cash flow is critical to running a profitable restaurant. You need it for expected expenses, such as inventory that sells, and unexpected expenses, such as equipment repairs. Otherwise, you have to turn to borrowing or cutting into after-tax profits that you and your partners would like in your own bank accounts. In short, every dollar of product on your storage shelf is a dollar you don't have in the bank or money that can't be used for other purposes.

Having excess inventory leads to over-portioning. When storage shelves are stocked with more than enough product, employees tend to be less careful in how they use and handle your valuable inventory.

Think about it this way: At home, after opening a new tube of toothpaste, many, if not most people will put a bigger portion of toothpaste on their toothbrush than they did when the last tube was starting to run low. Most of us do this because when we have a lot of anything, be it toothpaste, shampoo, shave cream, etc., we value it less and tend to use it more liberally, because we have an abundant, plen- tiful supply with no worry of running out any time soon.