Why Low-Stock Inventory is the Key to Profitability
Imagine a diner goes to your restaurant during a busy dinner service. They order your hottest-selling menu item, only to be told, “sorry, we ran out.” The disappointed customer puts down the menu and walks out the door.
Our natural instinct as business owners demands we keep a full stock of everything so that this doesn’t happen. But, in a way, that might even be worse. A full inventory costs money, and restaurants are tight with cash even at the best of times.
Try keeping a low-stock inventory instead. It sounds risky–and it is, but your food establishment will be much more profitable as a result. Here’s why:
Keep cash liquid
What happens if you buy a full stock of sparkling mineral water nobody ever orders? You’ve just tied up your money on a slow-moving item and created a cash flow problem. Your cash is now stuck on the shelf, invested in an item few people want. You’ll never get it back–not even if you give it away.
Don’t restock slow moving items until you absolutely need to. That way, the cash you would’ve used to buy it can be spent on other, more urgent things. Like more of the hot-selling wines, or towards payroll.
As a restaurant manager, you know that certain types of food go bad very quickly. So why would you buy a full shelf of highly perishable items? You’re basically throwing that money into the garbage if you don’t sell them fast enough. Or you’ll be forced to serve them anyway, and risk the customer getting sick (and all the food safety risks along with it).
You should know enough about your menu to know which perishable items get consumed quickly and by how much. Order just enough to last you the week (and maybe a bit extra) but resist the temptation to order more.
A full stock room can be hard to organize, especially if you have a constant flow of people going in and out, moving stuff around. Taking inventory becomes unnecessarily time-consuming and complex.
Lesser stock means less inventory to organize and more room on your shelves for better organization. It also becomes easier to monitor stock levels if there are fewer items to keep track of in the first place.
Stop the guesswork
Don’t start ordering less just because it seems like a good idea. You don’t want to deliberately hamper your restaurant (and disappoint customers) just because you want to save money. Be mindful and change your order based on your knowledge of the business.
For example, you need to know what items need to be restocked most and least often, what the busiest days are, and how much gets used up on such a day. It even helps to know which cooks use more ingredients than necessary versus those that scrimp.
Approach the change carefully and regularly consult your staff on whether it’s making things better or worse. After a couple of order cycles of trial and error, you’ll be able to find a happy medium that keeps your establishment stocked just enough while freeing up a bunch of your operating cash.