Point of sale

Inventory Management for Small Restaurant Owners

Sahana Ananth
February 16, 2024
1 mins

Table of Content

Imagine a customer craving fish and chips, only to hear, “Sorry, we’re out!” because their go-to restaurant ran out of potatoes. Of course, it is not good for business.

Conversely, having extra sacks of potatoes waiting to be turned into crispy chips is wasteful. Excess inventory just sitting around makes no profit; it costs unnecessary space and money.

Both of the above scenarios have an immediate effect on the net profit and this is why inventory management is beneficial. 

Still, about 43% of small businesses do not track their inventory and struggle to serve their customers accurately. You too? We get it: inventory management is tedious. While we can’t make the process fun, we can suggest the right tools and strategies to manage it better.

So, let’s begin!

Inventory Management for Small Business Restaurants: A Brief

First things first, what is inventory management? Inventory management in restaurants is about keeping track of the inventory and controlling it as it is bought, stored, and used.

On its surface, it may seem straightforward. However, managing over 200 raw materials that are not always the same thing does not happen magically. It involves knowing exactly how much and to whom you paid for each item, their nutritional value, and whether it is expired. 

Managing inventory is not a monthly or hourly task. It requires constant updates almost every second. Here are some key points to remember:

  • Take the help of a tool that makes inventory management more manageable and gives you visibility of your stock. 
  • Monitor essential inventory items such as vegetables, spices, sauces, etc.
  • Maintain sufficient backup supplies.
  • Avoid running out of critical high-quality items.
  • Ensure you stay within planned budget limits for specific foods.
  • Conduct detailed weekly inventory checks, considering the turnover rate (It means keeping track of how quickly items are sold or used to ensure things are moving smoothly). 

Tools to Use for Inventory Management

Managing inventory requires careful tracking. However, keeping it in order via pencil and paper or a spreadsheet becomes tricky due to the large amount of data and the fast inventory turnover rate. Listed below are some tools you can trust for inventory management:

1. OneHubPOS

Escape the limitations of traditional inventory management systems with OneHubPOS smart inventory. Backed by Loomis, OneHubPOS is a feature-rich and easy-to-use POS software built for automating routine tasks and managing everyday operations for multiple restaurants. From real-time inventory management to payments and software integrations, manage all on a single dashboard.

Key Features
  • Centralized inventory control of all the outlets, real-time tracking, and automated alerts for inventory levels.
  • Bulk addition and editing of the products in the inventory.
  • Easy integration with POS systems that allow you to track your inventory seamlessly.
  • Manage your purchase order with vendor integration in one place. 
  • Use trends analysis to avoid wastage of products for future orders.
  • Simple user interface and handy mobile app for managing your inventory management easily.
  • Barcode scanning for efficient inventory management
  • Excellent customization and white-label POS in addition to reliable customer support.

Cost: $75 per subscription

2. Zip Inventory

The Zip Inventory software is another inventory management software to facilitate the process. It can handle all the inventory counts, track stock levels, and allow easy refill of items to reduce waste.

Key Features
  • Sends notifications/alerts to the team on any ingredient depletion
  • Shelf-to-sheet inventory counting allows you to scan and update the items in real time. 
  • Get insights on where and why your inventory is shrinking, allowing you to make the right decisions to save waste and increase revenues.
  • $125 per subscription

3. Lightspeed

Lastly, Lightspeed works for full-service and quick-service restaurants to improve inventory management. It has tools for menu management and customer care to ensure increased mobility.

Key Features
  • Automatic tracking and detailed reporting help you understand your inventory variance.
  • Calculate meal costs and returns by recording every ingredient—and any price changes.
  • Simplify inventory management with real-time deductions when menu items are sold and automated replenishments when inventory is received.

Cost: It is not available for the inventory management module. 

Why Managing Inventory Should Be a Top Priority?

Inventory management is critical for every business. It helps manage costs and ensures you have enough supplies to meet customer expectations. Given below are some reasons why inventory management for small businesses matters:

Customer Satisfaction

A robust inventory management ensures you can always serve your special dishes to customers. It results in happier customers and increased repeat business.

Cost Control

Inventory makes up a large amount of a restaurant's costs. Effective inventory management saves money by eliminating waste, minimizing overstocking, and optimizing purchase decisions. This led to increased profitability for the restaurant. 

Optimized Operations

Inventory management improves operations by lowering the time and effort required for inventory-related procedures such as ordering, receiving, and tracking them.

Quality Control

Maintaining the right inventory levels ensures that food supplies are fresh. By efficiently rotating stock and monitoring expiry dates, restaurants can minimize the danger of serving spoiled food, which otherwise can harm their reputation and result in health code penalties.

Menu Planning and Pricing

You can leverage inventory data to identify the most profitable menu items. This data also helps uyu with the insights to adjust pricing to reflect changes in ingredient costs, and create new dishes based on available ingredients.

How to Get Started With Inventory Management: Strategies and Best Practices

Practicing effective inventory management is one key step to finding long-term success. It helps you keep the correct ingredients and food on hand to meet the demand.

1. Use the Right Software

Many modern restaurants have turned to technology and use online inventory systems for the same reason.

Thus, is necessary to ensure you select the right tool for your business. Here are some crucial points to consider when picking software:

  • The software must grow with your business and adapt to changing needs.
  • Once you have cross-checked all the essential features you need, check for seamless connection with other systems you use in your business for smooth data flow.
  • Look for software that provides centralized management for multiple locations or business types on a single platform for higher optimization of operations.
  • Check for customization options to ensure it can be tailored to your specific requirements.

A robust system helps you track inventory efficiently, reducing the supply chain's cost and streamlining daily operations such as managing orders and menus, processing payments, and accessing reports and analytics. OneHubPOS is one of the options that ticks all the boxes! The automated software removes the need for manual work and lets you concentrate on providing the highest satisfaction to your customers.

3. Leverage the FIFO Approach

First-in, first-out inventory management is among the most common techniques. It is simple, reliable, and accurate. FIFO assumes that items purchased first are sold first. 

Using the FIFO approach is pretty straightforward. You must only label the inventory with their arrival date and shelve them carefully. It is ideal to place new products from the back so the older items are at the front.

4. Focus on Quality Control

Following a quality control protocol ensures your restaurant stocks serve excellence to customers. Inventory management makes this possible. It also prevents unnecessary waste in the kitchen. Here are some small quality checks you can do:

  • Daily Inspection: Was the chicken stored right? Did the staff wash the lettuce thoroughly before preparing the dish? Conduct a pre-cooking inspection to check vegetables and spices.
  • Quality Assessment: Any slip in quality demands a detailed evaluation. If something is off, identify the issue and ensure each ingredient is in good condition.

5. Group your Inventory Into ABCs

ABC analysis is a method that sorts inventory into three categories in the order of decreasing value. Organize and tidy up the storage place before you take inventory.  Let us understand how your restaurant can leverage ABC analysis. 

  • A is for high-value goods, for example, fresh produce, premium meats like Wagyu, and expensive seafood.
  • B covers mid-range essentials like pasta, grains (rice and lentils), and dairy products.
  • C includes everyday basics with longer shelf lives, such as sugar, salt, cooking oils, and certain produce.

The Pareto Principle claims that 20% of goods (the A-items) contribute to 80% of revenue. Therefore, prioritizing these high-value items on the menu can increase profit margins. If your A category remains unsold or is close to its shelf life, put it on special or offer a discount to minimize wastage.

6. Supply Chain Management

Inventory management and supply management share a close relationship as both help manage the flow of supplies to run the restaurant smoothly. The only difference is that the restaurant supply chain focuses on the procedures involved in acquiring food and other supplies from vendors for restaurants. 

It includes managing supplier connections, assuring timely delivery, tracking inventory levels, regulating costs, and delivering food to customers. Proper inventory management lets you understand the essential information about your restaurant’s purchase pattern and requirements. 

This helps streamline the supply chain management, reduces the overall cost, optimizes inventory, reduces waste, and eliminates bottlenecks.

7. Meeting the Compliance

Ensuring that food is safe and compliant is non-negotiable when you run a restaurant. A restaurant inventory system helps to track expiry dates and ensures that perishable items are used before they deteriorate. It also assists in maintaining the correct storage conditions for different food items.  

OneHubPOS: A Point-of-Sale Inventory System Built for Small Businesses

Now you know the importance of inventory management. While all of the information was empowering, following it can be overwhelming. Understanding the relationship between inventory and POS systems and how it can lead to better decision-making will simplify it.

So, are you interested in taking the easy way to manage your inventory?

Consider OneHubPOS! We present an all-in-one restaurant management software that can handle restaurant POS, inventory management, table service, online ordering, and more.

We can give you a hand in controlling your stock with automated inventory management, reducing waste, and creating accurate reports for future purchases. So, get started with OneHubPOS; you can start at $1 today!

Sahana Ananth
Director, GTM - OneHubPOS

Sahana is a seasoned GTM leader with a passion for building startups. She excels in crafting GTM strategies for tech products, driving revenue growth.

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