With so many challenges to deal with during the pandemic—from fewer customers to increased sanitation to shifts in staffing—inventory control might be the last thing on your mind. But this isn’t the time to lose track of your supplies. As profit margins narrow, inventory management has become more important than ever.
“Our industry hasn’t ever understood inventory as the empowering profitability, sales, and marketing tool that it is—and I don’t think it’s anyone’s fault,” says Anjali Kundra, co-founder and vice president of customer success at Partender. “We’re just an old-school industry, beyond our cocktail menus and buildouts.”
But that means there’s room for both improvement and optimism. “Now is the time to think differently to survive and ideally thrive,” says Kundra.
This is an opportunity to gain a sharper understanding of what’s on your shelves and to track its movement more closely. “My recommendation for all restaurant and bar owners is that they should increase the frequency of inventory, and then be very aware of what’s going on operationally,” says Patrick Cottrell, regional director of Florida for Sculpture Hospitality.
Food and beverages that you have in stock should be treated as the cash. “It blows my mind that we as an industry count the few hundred dollars in our register multiple times a day but don’t count the thousands of dollars in liquid cash—and potential sales—sitting on our shelves,” says Kundra. “To start, you must start counting your liquid cash at least weekly, especially if you order weekly.”
Cottrell also says weekly inventory is a best pratice. “In some cases, we would also recommend doing spot checks on high-volume sale items or items that see certain opportunities of loss.”
For these items, doing more frequent spot checks or even daily inventory can create a more granular picture of which items move fastest day-to-day. For example, if you’re a bar that serves a lot of bottled beer, you need to know what specific brands and types of beer are sold regularly, versus which ones sit on the shelf.
Josh Saunders, founder of Backbar, says, “Smart inventory management gives operators more insight into which menu items are moving and turning profits and which are sitting on shelves. Bar operators can prioritize their best performing products and improve cash flow by eliminating their slow movers.”
Kundra says usage is a critical metric. Evaluate your total deadstock and which products actually moved, and adjust orders accordingly. “If you poured out two bottles of XYZ in a week, why are you ordering a whole case?”
The key to keeping up with a weekly or daily inventory regimen is efficiency. If the process takes too much time, it’s too easy to let it slide. This is a growing concern due to the pandemic, when many bars have reduced staff, or when staff may fall ill and miss work unexpectedly.
“Smaller staffing means managers will be working longer hours and taking on even more responsibility,” says Saunders. “Bar and restaurant managers were swamped with work before the pandemic; it’s even tougher to manage time now.”
But as Kundra says, “Not having people isn’t a good reason to stop counting your liquid cash.”
With so many technological tools to choose from, it’s no longer necessary to take inventory using pen and paper—a process that is tedious, time-consuming, and rife with error. If you’ve never experimented with an inventory management software before, now is the time to try.
“Technology not only helps automate, but creates accuracy and also can easily guide the business decisions you need to make to increase profits and cash,” explains Kundra.
Partender is an inventory management program that increases inventory efficiency. “If you’re using our best practices, you can literally do an accurate actual count in minutes,” says Kundra. “And you can send orders, complete invoicing, view your beverage cost and distributor price changes with no data entry.”
Partender helps bar owners complete inventory more frequently, negotiate better rates and rebates from supplier or distributor partners, and maximize gross profit. It can also track how much deadstock you have and estimate its potential revenue.
Kundra emphasizes that the program can be used to solve specific inventory challenges. “One of our earliest operators actually mapped out two brands on the analytics portal to see top mover and loser in a specific category. In a few clicks, this operator was able to instantly increase sales by slightly increasing the menu price of a trending item, and he was able to share the graph with both suppliers to receive better pricing for the product that was moving and promotional support for the deadstock.”
Backbar is another inventory control option for bars. Describing the software as a “full beverage management platform,” Saunders says, “Using an inventory platform like Backbar saves time and streamlines taking counts, giving operators more time to focus on other tasks.”
Backbar’s features include taking inventory, building and placing orders for vendors, and tracking important data such as product usage rates and cost of goods sold.
Whatever software you choose, it’s important to find one that matches your needs and to learn how to use it effectively. A common mistake is to choose a random off-the-shelf app and abandon it after finding it isn’t the right fit.
Cottrell suggests going beyond the idea of physical inventory to find a software that can do more. “Connecting the inventory to your POS and your purchases will then give you a variance report that tells the bar and restaurant owner how much they’re actually losing and what their opportunities are,” he says.
Sculpture Hospitality offers a variety of inventory solutions, from the full service model where Sculpture does the inventory for you and sends an analytical report, to a self-service tier where Sculpture trains owners in completing the process using infrared scanners and bluetooth scales. With local support representatives available in all fifty states, Sculpture can provide clients with on-site support and training.
While efficiency matters for inventory, so does accuracy. Eyeballing the liquid in a bottle can lead to inaccurate measurements and subjective differences depending on which staff member is judging the contents. Sculpture solves this problem. “We use a proprietary software that connects to infrared scanners and also connects to bluetooth scales,” says Cottrell. “Kind of like the grocery store, you just scan the barcode over it, put the bottle on the scale, and it reads the information.”
Sculpture’s system weighs everything in grams, resulting in accuracy to a fraction of an ounce. This is especially important for high-priced bottles. For example, if a single bottle of wine costs $100, and you were to inaccurately eyeball its contents during inventory, being off by 10-15% can add up fast.
“With our scanners and our technology, we’re just scanning the barcode and letting the software read how much is in the bottle,” says Cottrell, who explains the software links back to a database of bottles that stores the weight of the bottle and the weight and density of the liquid, allowing it to produce an accurate measurement.
Beyond conducting inventory itself, this is also an opportunity to rethink your menu. Saunders recommends shifting to a smaller menu with more focus on cash flow, “Fewer products means less inventory to manage and replenish. The key thing is to know which products to keep on menus and how often to order them. Knowing things like product usage rates helps streamline managing inventory.”
For bar owners looking to scale back their menus, Cottrell says, “They should focus more on the items that sell frequently, or those staple items on the menu that have the highest sales. With that, they can then tweak and make sure the food cost and beverage costs for those items are appropriate to maximize profit.” He recommends focusing on the costs of individual items to make sure they’re tabulated correctly to meet your margins.
Kundra recommends reducing spending by making the most of your deadstock. “Before ordering more, rally your creative folks and look at usage to convert this stock into cash, either with creative drinks or by selling off your deadstock, especially now,” she says. “It’s a pandemic, people will drink anything. They are just so excited to be in your venue or get delivery from you.”
When it comes to menu pricing, Kundra says, “If you have a target gross profit you want to make, you can create your menu prices based on that gross profit goal—for example, 30% pour cost on my items. There are plenty of great tools to do this; we have a tool we provide to operators as well. The biggest mistake I see is getting stuck in the theoretical.”
It’s easy to get caught up in creating menu pricing for a specific pour cost or cost percentage target. “But if you’re spending so much time engineering your menu prices, why aren’t you measuring your actual beverage cost more often, or if at all?” asks Kundra. “You must measure your actual beverage cost to see if you’re hitting the goal and the costing you set up.”
Ultimately, Kundra says, “What can’t be measured can’t be managed. If we claim slim margins, we have to work smarter and track what we’re doing to maximize profits and cash flow. I believe we can do it, and we’ll come out of this much stronger. I want our industry to be more profitable and have more cash, so we can take care of our people.”