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Inventory Management

Taking Inventory…of Taking Inventory

July 30, 2013 By: Brian Warrener


Editor’s Note: This is part One in a Two part series of articles on inventory control.

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Inventory Check List If your business is like the businesses of so many independent operators in the beverage industry, it is generating hundreds of thousands of dollars in sales revenue and is purchasing hundreds of thousands of dollars in products you use to generate these revenues. Systems need to be in place to control these two significant components of your financial operations.  A reliable and accurate inventory system is a key factor in exercising this control, maximizing profitability and assuring viability going forward.

Unfortunately, many operators manage, record and calculate their inventory haphazardly.  Taking inventory is boring and time consuming.  Recording and calculating it can be even worse.  It is however, a necessary evil…like flossing. You should do it and to get the maximum benefit, you should do it right.

In Part I of this two part series we’ll take a look at choosing a system to control your physical inventory and the policies and procedures necessary to make this system work to your benefit.

Controlling your Physical Inventory -- Open or Closed Inventory System

Exercising adequate control over your physical inventory is a deterrent to theft and can assist in assigning costs to particular outlets within your operation.  You have an important decision to make about which kind of system you will employ.

An open inventory system is one in which employees, or key employees or managers have access to liquor rooms and coolers and can access product to stock outlets as is required.  A closed inventory system is one in which employees fill out requisitions and bring them to an employee who fills the requisition from stores.  In some cases filling requisitions and managing beverage stores may be this employee’s only function.

A closed inventory system provides clear advantages for the control of product.  It should be obvious to you that only large operations, like casinos and hotels, can afford the payroll associated with an employee dedicated to controlling the issuance of product.  An alternative to this is to have a manager on duty accept and fill requisitions from the bar. One person is responsible for issuing product and ultimately for any issues that may arise. It includes many of the benefits of the system described above with less payroll expense.  The problem here, though, is that managers may be busy performing other duties and, especially at the busiest times, bar staff can’t wait.  Service suffers and customer satisfaction declines.

Out of necessity, the great majority of operators will find themselves operating an open inventory system. Requiring requisitions as part of an open system can still afford an operator adequate controls over the movement of product. Employees are required to complete requisitions for any product they remove from stores.  Like guest checks, these requisitions can be reconciled at the end of a shift, when there is adequate time and when the effort will not encroach upon the delivery of service to customers.

Here are policies and procedures you must put in place in order for this system to function.

  1.  Your storerooms should be secure -- This seems obvious, but I’ve seen operations where stores remain unlocked during operations to ease restocking.
  1. Only select employees should have keys to your stores. In some operations, only one person has keys.  If you’ve worked in these operations you know it can be a nightmare to find the person with the keys.  Service and customer satisfaction suffer.  In other operations, everyone has the keys.  Even worse, the keys are on a nail behind the bar or in the register draw – might as well not lock your booze up.  A select group of employees should have keys to your beverage stores. This favors operational ease and still provides control over who can access inventory. This group must be held responsible for access and for adherence to established procedures.
  1. Require adherence to the procedureIn order for this to work, you, your managers and your employees must commit and there must be consequences for not following the procedure.  Like every other policy and procedure in a restaurant, this one gets forgotten when things get busy.  In the weeds or not, staff must comply in order for this to work.
  1. Reconcile requisitions at the end of every shift.  You should be able to keep an accurate running inventory in the storeroom.  A quick physical count can confirm that the amount of any given product matches that running total minus whatever was requisitioned during that shift.

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