Inventory management is a necessity in every business, but more and more restaurants are realizing that it can be the difference between success and failure.

Inventory management is the process of controlling costs and waste through effective use of on-hand product. Combine this with a reliable forecasting model and restaurants can realize dramatic reductions in their monthly spending.

Every business is faced with the unfortunate reality that employees will steal from their employer. An effective inventory management system combined with secure storage and lock-up procedures will result in far less loss due to employee theft.

In the restaurant industry there are primarily three types of inventory management systems: Manual or Limited Integration, Mixed P.O.S. or Partial Integration and Fully-Integrated.

Manual or Limited Integration

Manual inventory management refers to the process of physically counting each item every week to obtain restaurant costs. This system is more suited to smaller, independently-owned operators who purchase fewer items and maintain simpler accounting records.

Once all counting is completed, then data can then be transferred to the restaurant’s accounting system. If there are no errors, the inventory is complete. If there are errors however, the entire inventory process must start again to find the mistakes.

Mixed P.O.S.

Mixed Point of Sale (POS) or partial integration, combines the restaurant’s POS system with manual inventory procedures. Point of sale refers to the computer system used to order food and drinks as well as settling all checks.

Each time an item is ordered through the POS it is removed from the current inventory. When the items are counted during inventory, the on-hand stock should match the inventory listed by the POS. If however, there are discrepancies between the two lists, another physical count of the inventory must begin.

This method of inventory management is more effective than the limited system, and when combined with strong loss-prevention procedures can result in large cost reductions per month.

Fully-Integrated

A fully-integrated inventory management system implements three different elements into its system. It combines the restaurant POS system with an Ordering/Shipping system as well as an electronic physical inventory system. This is the most sophisticated and accurate of the three systems and results in the least amount of monthly and overall loss of product and profits.

Some restaurant suppliers will provide their more important restaurants with an online ordering system. This system is integrated with the restaurant’s POS and can accurately predict what is in on-hand inventory, as well as forecasting the size of the next supply order.

Once per week or even per month there is a physical inventory done with portable, electronic bar-code readers and electronic scales. All data is automatically sent to both the supplier and the restaurant.

Some are so sophisticated that they incorporate the recipe breakdowns, by ingredient and then calculate the inventory. This type of system will save you money in the long run but also help you run a more streamlined and efficient restaurant business.

R&I Solutions is the maker of Cost Genie, a leading restaurant costing and inventory software program. Get a free demo at: http://www.costgenie.com.