Inventory Forecasting: You Can't Manage If You Don't Measure

Last week I kicked off a series of articles on controlling food costs.

I had the opportunity to work for one of the most respected CEO's in the restaurant industry who mastered the art of controlling costs. He was always saying, "You can't manage what you don't measure". It is an old management adage that is accurate today. Unless you measure something, you don't know if it is getting better or worse. You can't manage for improvement if you don't measure to see what is getting better and what isn't.

With inventory, you need to manage the uncertainties, the constraints, and complexities on a continuous basis. By doing this you will improve your inventory forecasting ability and accurately set inventory targets and pars.

The first thing to measure is your usage. Keep it simple and just look at a week and see how much you started with, add what was delivered, and then subtract what you have left. That's how much you use in a week. (Next week we'll talk about ways to dig a little deeper into what you should be using vs. what you are using.)

Now that we know how much we use, we can start to look at how much we need. One of the problems is the repetitive orders of the same products; you have undoubtedly asked yourself at what stock level you need to replenish your inventory. The goal is to reduce inventory levels without affecting you guests. The three main factors to consider when forecasting:

* The Lead Time - how long does it take for my delivery to come once it's ordered?
* Reorder Point - what's the level of inventory for each item, when I know I should order more?
* The Reorder Amount - how much should I get?

If you don't have a background in forecasting don't worry you can still learn to forecast. Keep track of the important factors, such as special events or the weather, holidays, advertising specials, etc. You need to track these by the day of week. Any special events in your surrounding area could impact business and should be noted.

The next step involves analyzing the variances. Highlight very low variances and very high variances. You want to improve the overall performance. Identify weaknesses and make adjustments in future forecasts. Try to imitate accurate forecasts. Find out what you did right on low variance predictions.

The key to building strong forecasts is a creating and keeping strong records, reviewing these records, which will enable you to improve your forecast. I never said this is going to be easy but don't stop, keep the process going and you will reap the rewards.

There are many tools available to help you forecast inventory, they can be as simple as an Excel spreadsheet or more sophisticated software solutions that master the art of inventory forecasting and ordering. You need to ask yourself which solution works best for you. But remember, the better tool will enable you to ensure you have enough product on hand at all times while reducing your inventory costs.

--from WhenToManage's Restaurant Biz Blog

Views: 5

Tags: cost, food, inventory, tips

Comment

You need to be a member of FohBoh to add comments!

Join FohBoh


Non-Operator
Comment by Robert Sloop on February 18, 2011 at 3:23pm

Jim

All tools are not created equal.

Why is the restaurant industry subjected to multiple best of breed, custom integrations when the talent pool to maintain them is scarce.

Where is the Full enterprise solution? (to date there is none)

Why be forced into multiple data base configurations, (GM likes Micros, Chef likes Cheftec,bookkeeper likes Quickbooks) that require custom hookups and reconciliations.

All have their strengths and weaknesses!

Compeat is the only low cost 3rd generation solution available (POS+Compeat) that has ease of use and provide an end to end solution with little customization

 

 

Comment by Jim McGinty on February 18, 2011 at 2:46pm
There are several tools available on the market place to help, WhenToManage, Compeat, ChefTec, Restaurant Magic, CTuit to name a few. All have their strengths you should take a look at 2 or 3 of these to see which one best meets your needs.

Non-Operator
Comment by Robert Sloop on February 18, 2011 at 11:56am

Spot on Jim

It's not the tool, it's how you use it

In my history as CFO of four multi-concept groups Compeat was my tool of choice.

It was the only fully integrated system that gave me everything I needed in one package

Comment by Miguel A Barrera Rodriguez on February 16, 2011 at 7:17pm

I completely agree with what you wrote, I am having trouble selecting a time series method for forecasting the demand for every menu item, which would you suggest??, for casual dining

Advertisments

 

DEPARTMENTS

Social Wine Club for Craft Wineries

Smartbrief

Fast-casual growth comes from new openings as market matures

Sales at fast-casual eateries are growing at a pace similar to that of quickservice and sit-down restaurants as young, high-i -More

Taylor® Grills. Cooking made Easier, Faster, and Smarter.
With efficiency and food safety top of mind, the Taylor® L810 two-sided grill is a foodservice industry favorite. Optimize profits and cooking efficiency with three separately controlled cooking zones, programmable cook times, pre-set temperature and automatic gap settings. To learn more click here.

In the swim: Gulf state seafood catch safe for now

Businesses fighting to preserve commercial access to seafood fished in the Gulf states scored a big win this month when the G -More

Ruby Tuesday revitalization prompts sales growth

Maryville, Tenn.-based Ruby Tuesday posted gains in same-store sales in the fourth quarter, with a 5% rise at franchised rest -More

JOBS & CAREERS

Posting a job or finding a job starts here at FohBoh. Call us about special $50 posting packages to syndicate across all major jobs boards.

National News

Main Event Entertainment to Open First Center in the Rio Grande Valley

Main Event Entertainment, the fastest-growing family entertainment center in America, is celebrating its new center opening in Pharr, Texas, a suburb near McAllen in the Rio Grande Valley. Doors will open to the public at 9 a.m. on August 6.

Darden Announces Leadership Succession Plan

Darden Restaurants, Inc. (NYSE: DRI) announced that Clarence Otis is stepping down as Chairman and Chief Executive Officer of the Company. Darden's Board of Directors has appointed the Company's current Independent Lead Director, Charles A. Ledsinger, Jr., as Independent Non-Executive Chairman of the Board, effective immediately. The Company also announced that it has amended its corporate governance policies to provide for the separation of the Chairman and Chief Executive Officer roles.

National Restaurant Association Statement on NLRB Joint Employer Decision

Today the National Restaurant Association issued the following statement regarding the National Labor Relations Board’s (NLRB) decision asserting McDonald’s Corporation is a joint employer of its franchisees:

National Restaurant Association Issues Support for Clearer ACA Definition of Seasonal Employment

The bipartisan legislation will align the definitions of seasonal employment in the Affordable Care Act and streamline the applicable large employer determination process.

Rising India, Inc. Announces Acquisition Strategy Toward a Sizable Slice of the QSR Pizza Pie

Rising India, Inc. (OTC: RSII), announces today it will immediately begin work toward the acquisition of up to 5 profitable stores in the popular Quick Serve Pizza Restaurant segment. Current targets are currently earning about $450,000 in revenues per year, per store. Acquisition of targets would provide immediate cash flow identified from profitable longstanding, absentee owner operations with proven model success.

CROWD FUNDING

If you are looking for capital to start or grow your restaurant, create the next 501c3, develop and launch the next app for the restaurant industry,or want to help your peers in some meaningful way, we want to know about it.

TED TALKS VIDEO

TED: Ze Frank: Are you human? - Ze Frank (2014)

Have you ever wondered: Am I a human being? Ze Frank suggests a series of simple questions that will determine this. Please relax and follow the prompts. Let's begin …

TED: Heather Barnett: What humans can learn from semi-intelligent slime - Heather Barnett (2014)

Inspired by biological design and self-organizing systems, artist Heather Barnett co-creates with physarum polycephalum, a eukaryotic microorganism that lives in cool, moist areas. What can people learn from the semi-intelligent slime mold? Watch this talk to find out.

TED: Shih Chieh Huang: Sculptures that’d be at home in the deep sea - Shih Chieh Huang (2014)

When he was young, artist Shih Chieh Huang loved taking toys apart and perusing the aisles of night markets in Taiwan for unexpected objects. Today, this TED Fellow creates madcap sculptures that seem to have a life of their own—with eyes that blink, tentacles that unfurl and parts that light up like bioluminescent sea creatures.

TED: Nikolai Begg: A tool to fix one of the most dangerous moments in surgery - Nikolai Begg (2013)

Surgeons are required every day to puncture human skin before procedures — with the risk of damaging what's on the other side. In a fascinating talk, find out how mechanical engineer Nikolai Begg is using physics to update an important medical device, called the trocar, and improve one of the most dangerous moments in many common surgeries.

© 2014   Created by FohBoh.

Badges  |  Report an Issue  |  Terms of Service