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For most people, hospitality inventory control is a monotonous, repetitive practice that consumes most of their time and leaves them with a solemn feeling. However, it is a valuable tool for preventing waste, reducing food costs, and better preparing for the future of your establishment.
In this article, we will show you how to use the Pareto principle to improve your inventory management practices.
What Is The Pareto Principle?
According to Wikipedia, the Pareto principle states that 80% of effects come from 20% of causes. This means that if we can identify which 20% of our actions have the greatest effect on our business, then we can focus our efforts on those things. In other words, there are some activities or tasks that account for the majority of our profits or losses. These are known as the “Pareto-efficient” activities.
What is Hospitality Inventory Control?
Hospitality inventory control refers to managing your stock to prevent spoilage and losses arising out of it. It is a method that informs businesses regarding how much inventory or stock to order and when to order it. Planning when to repurchase your inventory is an important part of the process.
Hospitality inventory control is a part of hospitality inventory management. It is a crucial piece in the hospitality industry because it helps bars, restaurants, and hotels make sure that they don’t overstock products and services that they won’t need.
How does inventory control work?
Hospitality inventory control is more than the management of stocks. It is a process of monitoring, organizing, and managing supply and inventory levels of products, services, and materials. It involves understanding demand, supply, and cost so you can minimize loss and maximize the profitability of your business.
Why Use The Pareto Principle In Hospitality Inventory Control?
There are many reasons why the Pareto principle should be used in inventory control.
First, it helps us understand what activities are important in order to reduce costs and increase profitability. Second, it allows us to find out which areas need improvement so that we can make changes accordingly. Third, it provides us with an easy way to see where we could be wasting money by way of food waste. Fourth, it gives us an opportunity to take advantage of low prices when they occur and to plan ahead for future events. Finally, it helps boost your sale.
How To Apply The Pareto Principle To Inventory Control?
This is where we apply an ABC analysis, a principle that applies by segregating your products into categories from the most important (category A) to the least important (Category C) and everything in between (Category B). Here is how an ABC analysis would be applied behind the bar.
So, what do we make of this data?
Understanding this information will prevent you from over-purchasing or under-purchasing products which in turn can hinder your prep time and efficiency during service. Additionally, it will prevent food wastage and employee theft thus leading to more profits.
Categorizing your products according to the ABC analysis will boost your savings and reduce waste generation. If you take into consideration that 20% of your products behind the bar (Lemons, Limes, Bitters, Mint) take up 70% of consumption from your patrons, you should place these products in the A category.
This will further help you focus your attention on products that have a high rate of going bad in a very short amount of time. When purchasing, talk to different suppliers that sell the same products for a cheaper price. Suppliers are looking to build relationships and gain new users, so do your research and plan accordingly.
During service, communicate with your best staff members (category A employees) about promoting certain cocktails or dishes that will make the best use of your inventory. Overstocked with lemons? Throw in cuisines and drinks in your menu that will use lemon juice or slices.
For your category B products, you can become a bit more lenient. Some items may come handier than others in the long run, purchasing an excess of category B products will reduce your delivery cost and ordering time without the need of making constant checks. Your Category B employees can take the responsibility of handling these products, this will get everyone involved in the food inventory control process.
Finally, place your category C items on an automated ordering system. Keep plenty of C products in the back house as well to prevent any problems in the future. Category C employees can also take responsibility for control of these products.
Your business can reduce working capital and operating cost by adopting a coherent analysis and a consistent schedule. Utilize the freed-up resources to solve other issues in your restaurant and analyze your reorders to determine which items need to be prioritized.
Challenges of the ABC analysis
As a restaurant owner, you will often deal with products with a shorter shelf life. Category A of your analysis will usually consist of vegetables, fruits, and meat. Yet, this will not predict when your products go to waste. It will only show how often these products are ordered. For example, you may notice certain fruits are already becoming wasteful when an order arrives. Figure out ways to prevent wastage by routinely checking your inventory sheet. Plan your weekly promotions to highlight these products and use them immediately.
Routinely analyze your stock for high-priority items when performing cycle counts. You can change your inventory levels according to the demand and seasonal changes.
The NoSpoilers storage units section help segregate these items with ease. This will help you focus on your category A products without worrying about your Category B & C items.
Why small businesses in the hospitality industry should adopt inventory control?
When you think of inventory control, you may think of huge businesses with colossal warehouses. However, inventory control is as much a part of small businesses as well.
As a small hospitality business, you’re just as likely to encounter products control problems as a huge corporation. The reason behind this is that you have to deal with a lot of stock, thereby making loss and theft a real concern. Therefore, it’s important to make sure you’re aware of the stock control concepts, so that you can better manage your business.
Rarely do small businesses in the hospitality industry want to adopt inventory control. The reason is because of the cost associated with keeping track of stock. However, there are many benefits to tracking your goods such as:
- Better forecasting
- Increased sales and profit margin
- Reduced labor costs
- Reduced overhead costs
- Increased productivity
Picture a line of customers outside your business. And because of a lag in goods management, you are having a hard time serving them all. Imagine the kind of bad impression you’d create for your business.
How could you have avoided this situation?
You guessed it – a proper inventory control process.
How can a small business track inventory in a way that saves time and money?
Inventory control is a very important part of any hospitality business, especially when you have to deal with a large number of guests and the need for a high level of customer service is paramount. If you are overwhelmed by manual inventory tracking and control, here’s how you can better manage it.
Automate your inventory management system.
This will allow you to have time to focus on your core business. Also, it will save you money.
Keep your inventory organized.
One of the benefits of automating your inventory management system with software is organization. A good software or inventory app will make it easy to manage the wide range of stocks that your business may have to handle every day.
Account for all your stock
It’s good to have an inventory list to streamline your inventory process. Again, with a good management app, you can easily have inventory tracking, inventory variances, current inventory, real-time inventory tracking, and inventory reports all in a single dashboard.
What is inventory control in hotels?
Hotel inventory control involves ordering, storing, and distributing a hotel’s current assets or goods.
What are the 4 types of inventory?
The four main types of inventory are raw materials, work in progress (WIP), finished goods, and maintenance, repair, and overhaul (MRO).
How is inventory controlled?
Inventory control entails managing the physical quantities of goods as well as their cost as they move through the supply chain.
What are inventory control techniques?
Inventory control is the practice of tracking products, components, and ingredients across vendors, stock on hand, production, and sales.