Ask any chef or kitchen manager if they have ever run out of product before the shift is over and you’ll probably get an earful.

Most every restaurant has experienced the dread of having to ‘86’ a popular menu item. For some, this may result in a bad habit of ordering excess inventory to make sure it doesn’t happen again.

Ordering too much of a product, simply because you are running out, can have dire consequences as well. Guests may not like you running out of food, but they certainly don’t want to be served seven-day-old seafood as an alternative.

Other ways restaurants end up with excess inventory include the practice of buying large quantities in order to get the discount. Sometimes this practice pays dividends and sometimes it doesn’t – especially when your freezer is stocked with six-month-old cod filets.

Better ordering control can help to free your cash from being tied up in excessive inventory levels. It is suggested that inventory levels for food products should turn over from four to six times a month.

Maintaining tight control on inventory levels ensures that your cash is in the bank and not on the shelf in the form of excess inventory – or even worse, susceptible to spoilage and waste. To calculate monthly inventory turnover, you divide the cost of sales for the month by the average value of inventory on hand.

For example, if you spend $18,000 per month in food purchases, then the on-hand food inventory value should range from a low of $3,000 ($18,000 divided by 6) to a high of $4,500 ($18,000 divided by 4). Compare that with turning your inventory over only three times a month, resulting in about $6,000 in inventory on hand and a $1,500 to $3,000 cash difference. Most operators will agree that having that excess cash can come in pretty handy on payday. Some good rules of thumb for inventory turnover in most restaurants are:

• Food – 4-6 times per month (5-7 days’ product on hand)
• Liquor – Approximately once per month (varies among concept/sales mix)
• Bottled beer – 2-3 time per month
• Draft beer – 1-2 times per month (varies with number on tap/concept)
• Wine – Approximately once per month (varies with size of wine list/sales mix)

Keep in mind these are rules of thumb. They should be used to spot red flags. Having inventory values that exceed these levels doesn’t necessarily mean your managers aren’t doing their job, but it should require an explanation. How about your restaurant; how often does your inventory turn?

Source: Restaurant Owner