6 inventory management mistakes that impact your restaurants' margins.

Inventory management in a restaurant is complex, you have to find the right balance to avoid losing sales and avoid losses that impact your margin.

Sophie Gaaloul


December 2022

The 6 inventory management mistakes that impact your restaurants' margins.
In this article:

Few restaurant owners have a detailed analysis of their inventory allowing them to understand where they are losing margin. And yet, the addition of all the supply errors and the lack of control of the material cost can quickly cost thousands of euros per month. 

In this article, we will review the 6 sources of errors that impact your restaurant's supply chain:

Not anticipating raw material needs 

Knowing what to order and when to order it to avoid stock-outs and/or waste is the difficult equation that restaurant owners face every day. 

Error n°1 : Over ordering

If we order too many products with a short use-by date, the loss rate increases, we lose margin, and this is all the more problematic with expensive raw materials such as fish or meat. For products with a long use-by date, there is also an issue with overstocking. It is a question of unnecessary financial assets that burden your working capital needs and that generate problems of limited storage space. 

Error n°2 : Under ordering

And on the contrary, if you don't order enough, you may be out of stock in the middle of a service. Result: you risk a loss of turnover, the depreciation of your rating on delivery platforms and the disappointment of loyal customers.

The placing of supplier orders is a task that is the responsibility of the restaurant manager or the cook and is sometimes even kept in the hands of the founder of the restaurant chain, the slightest error having a direct impact on the profitability of the establishment.

Forgetfulness, errors in quantities, fear of running out...? We know that it takes years of experience for a restaurant manager to be able to forecast his stocks, to have experienced several seasons, to know what impacts the frequentation of his restaurant, the success of certain dishes, the volume of his sales in delivery... With the current problems of recruitment in the restaurant sector, the turnover tends to accelerate. Relying on the experience of a person is an additional risk.

The key is therefore to anticipate and accurately place orders in order to provide just what is needed, just in time, and thus maximize profitability.

At Inpulse, we have designed an artificial intelligence capable of forecasting raw material needs by anticipating future sales. Forecasts are made by day, by finished product and according to all the factors that influence them: the weather, calendar events (Valentine's Day, school vacations, religious celebrations...), sporting events (Champions League, 6 Nations Tournament...) and promotions implemented locally in your restaurant.

From its sales forecasts, our inventory management software is able to make order recommendations based on stock status, shelf life, and the conditions of each supplier. Regardless of the manager's experience, Inpulse allows you to secure just-in-time supply and therefore control your margins.

Discover the testimony of Tiphaine, manager of the Gruppomimo restaurant who relies on Inpulse to place their daily supplier orders or make an appointment with an Inpulse expert for a free demonstration.

What you don't measure can't improve 

Mistake #3: Not controlling inventory

The markdown is the difference between the actual stock and the theoretical stock, i.e. the products that should remain in stock if the products that have been sold are deducted from the stock. Markdown is measurable through regular inventory counts. It highlights this kind of "black box" of raw material that has disappeared for many reasons such as :

  • Breakage: The products are damaged by negligence,
  • Fraud: The more stock there is, the greater the risk of fraud,
  • Products consumed by the staff (except for the contractually agreed meal) or offered to the customer without having been declared at the cash desk,
  • Undelivered goods,
  • Overconsumption of products: Non-respect of technical data sheets,
  • Unreported losses: The FIFO (first in, first out) inventory method is not implemented in the kitchen, which contributes to food waste.

Knowing your markdown or consumption gap is the starting point for identifying and correcting inventory management anomalies. At Inpulse, we recommend that our clients take a weekly inventory of their top 10 products: those that sell the most and have the most expensive ingredients. This way, we can focus on the most sensitive stocks and space out the inventories of the other non-food products with a lower turnover.

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Mistake #4: Not trusting the recipe cards

Once the discrepancy between the actual stock and the theoretical stock is known, the investigation stage begins, which consists of verifying whether it could be an overconsumption in the kitchen. In order to dissociate the casting from an overconsumption of products, it is necessary that everyone has easy access to the technical sheets. They detail the composition of each dish or intermediate product recipe to the gram and are the foundation of a restaurant's profitability. It is therefore essential to check if the real consumption is in accordance with these recipe sheets, to identify if there is an overdose and to set up training, equipment and necessary verification (weight tools) so that the cooks can standardize the dishes on all your restaurants.

Here is an excerpt from Kamal Zaoui, founder of the Lüks Kebab restaurant chain: " We have a food cost to respect, to achieve this, we rationalize all the dishes so that we have the same dosage between the restaurant on 13ᵉ and that on 10ᵉ. Inpulse allows us to have an eye on the material cost. I especially look at meat, it is more or less 30% of the food costs. As soon as there is a discrepancy I can intervene to ask the cooks to reduce, because just for example 30 grams more on each sandwich, over a week it can be catastrophic for us."

Non-centralized data limits responsiveness 

Mistake #5: Not reconciling supplier invoices, purchase orders and credit memo requests

You don't reconcile your invoices and purchase orders? With the multiplication of substitute products and the incessant price changes since the Ukrainian crisis, you can no longer skip the control step at reception. Errors being more and more numerous, it is recommended to check the delivered goods and to keep a trace in case of problem: substitute product, defective product, quantity, price difference...

At the time of invoicing, your accountant will need your help to ensure that the supplier invoices received correspond to the quantities received and to avoid overpayments.

By centralizing your orders and credit requests in a SaaS solution like Inpulse, you gain accuracy and valuable time.

Mistake #6: Not centralizing purchasing data 

Access to the history of all sales and stock data allows you to compare, over time, the evolution of losses and to suggest ways to improve. Are there any anomalies in the stock returns due to unusual breakage, theft, or poor management of shelf life?

Management control managers, financial managers and purchasing managers need to analyze the differences and the reality of the supplier relationship (order volume, breakage, price fluctuations, credit note requests, etc., both globally and by establishment) in order to adjust and negotiate annual contracts.

By automating your activity forecast, supplier orders and material cost calculation with Inpulse, you avoid costly errors. No more waiting for your accountant to compile data at the end of the month. Inpulse provides real-time access to your restaurant chain's key performance indicators: Sales, gross margin, material cost, consumption variance... You can analyze by outlet, drive your business from headquarters, and react at the same pace as the price fluctuations, which you face.

Ask for an appointment with an expert today to find out what Inpulse can do for you.

To go further

More than 1,200 restaurants and retail outlets use Inpulse on a daily basis