How to Calculate Precise Inventory Needs

8 December 2017
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Running out of items in your restaurant can create unhappy customers and a bad reputation for your business. Ordering too much or in bulk can also have negative consequences on your bottom line – especially if you’re serving older stock items that have been hanging on your shelf for a while. If this sounds familiar, then your business needs a proper way to calculate precise inventory and get a handle on controlling the ordering process. Check out some of the most effective methods to calculate precise inventory needs and get your levels under control.

Review Demand

It was Henry Kissinger who said that “If eighty percent of your sales come from twenty percent of all your items, just carry those twenty percent.” This rule of 80/20 can help you save money by reducing unnecessary waste of products that are in low demand. The best way to do this is to check your inventory levels and see what is turning over consistently.

Controlling Monthly Turnover

Enforcing controls on your inventory levels will ensure you have a healthy bottom line. As a rule of thumb, your food items should be going from stock to plate in less than seven days. Your liquor and wine should turn over approximately once per month and beer every two weeks to ensure the draft beer is still fresh and not flat. Anything over these levels should be tested to ensure optimal quality, and anything less should be tossed and evaluated to see if it’s something that should be scratched from your menu.

Calculating Turnover

You can also calculate your monthly inventory turnover rate to ensure that you’re generating profit and not a loss. The equation is (cost of sales per month / average value of inventory on hand). For example, if you purchase $20,000 in food cost per month and turn it over weekly, then your inventory turnover cost is $5000 a week. If you turn it over every two weeks, you have $10,000 in inventory on hand. As you can see, that can make a big difference in the amount of cash you will have on hand. So if you’re experiencing extended turnover rates, your stock and menu should be re-evaluated to figure out how to get your inventory to turn over faster and to stock items that turnover the quickest.

Installing Inventory Management Software

One of the best ways to combat this issue and calculate precise inventory needs is to install an Inventory Management Software system. A system like Optimum Control can track all of your inventory counts and values, allow you to scan barcodes for fast entry and use value inventory using FIFO, last cost, and average cost. The system can also automate your ordering and purchasing processes and can produce real-time reports so you can be on top of all your warehousing needs.

When your inventory needs better management and control, Optimum Control Inventory Management Software can help. This easy-to-use software will help you maximize your profits and track your precise inventory needs more effectively to allow your business to thrive.

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