In our last blog, we talked about what inventory shrinkage is for bars and restaurants and the top five causes. If you have already read the blog, you know that inventory shrinkage happens when you have less inventory on the shelf than is recorded in your records.
You will also know that there are several reasons for inventory shrinkage including theft, admin errors and spills.
Now that you know what can cause inventory shrinkage, it’s time to find out what you can do about it to improve your inventory management processes and improve your profitability. Here are four tips to get you started:
Using PAR levels (periodic automatic replacement) or reorder points can help optimize the amount of alcohol and ingredients you have on site to meet demand while reducing the risk of spoilage and waste.
A PAR level is the minimum amount of product your establishment needs to have on hand to serve customer demand until more inventory is delivered. It is calculated by:
Par Level = (Average Inventory Used Each Week + Safety Stock) / Number of Deliveries Each Week
Reorder points are minimum inventory levels your inventory can reach before placing another order. They are calculated by:
Reorder Point = (Average Daily Unit Sales x Delivery Lead Times) + Safety Stock
One of the best ways to keep track of PAR levels and reorder points is using inventory management software that can use historical trends and forecasting to help calculate them.
Creating standard operating procedures and ensuring staff are properly trained can help reduce inventory shrinkage. This is especially true for shrinkage related to over pouring, administrative errors and spills. It can also help reduce spoilage by ensuring inventory is properly rotated and that old stock is used before new.
In the case of spills, replacements and other day-to-day accidents, procedures can also ensure that losses are properly reviewed and recorded to help keep inventory levels up to date for better ordering and reduce the risk of staff entering false write-offs for their own gain.
The more frequently you take inventory, the more likely you are to identify the source of discrepancies. This will help you adjust procedures and provide additional training to reduce future losses.
In addition, regular inventory counts create accountability, further deterring internal theft.
While inventory can be managed using spreadsheets and calculators, this significantly increases the risk of error. This can throw off your shrinkage rates, along with other key inventory performance indicators. It can also be incredibly time consuming to draw out decision making data, especially when you have a larger inventory of food and drinks moving in and out of your bar and restaurant.
To help reduce opportunities for error, save your business time, and improve metrics, you should consider an inventory management system. It will automate calculations, such as shrinkage rate, par levels and spoilage rate, as well as automate processes through integrations with POS systems to ensure more accuracy.
If you are interested in learning about our inventory management system, contact us today.