The Pareto Principle in Hospitality: Inventory Control

August 22, 2019

Build Systems for Forecasting, Ordering, and Prepping

Inventory control can be in a way for most people a very mundane, repetitive practice that consumes most of your day and you’re left with a solemn feeling towards the end. But it will always be an asset for preventing waste and to better prep for your establishment in the near future. 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 waste creation and theft from your employees.

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) takes 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, conversate with different suppliers that sell the same products for a cheaper price. Suppliers are looking to build relationships and gain new clients, so do your research and plan accordingly. During service, communicate with your best employees (category A employees) about promoting certain cocktails or dishes that will make the best utilize your product. Overstocked with lemons? promote the cuisines and drinks 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 inventory checks. Your Category B employees can take the responsibility of handling these products, this will get everyone involved in the 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 inventory control of these products.

A coherent analysis and consistent schedule can lead to reduced working capital and carry costs for your business. Directing the freed-up costs towards solving other issues in your restaurant and analysing your reorders to better understand what items need to be a priority.

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 this waste and throwing your money out the window. Plan your weekly promotions to highlight these products and use them immediately.

Routinely analyse your inventory for high priority items when performing cycle counts. You can change your inventory 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.

Conclusion

An ABC analysis for your inventory control will provide you with a data-driven layout. This will allow you to focus on things concerning your orders and waste prevention. Segregating your products based on their importance will increase efficiency and plan your weekly purchases effectively. Better control creates more opportunities to increase sales and reduce waste.

Posted in: Hacks, Insights