Understanding Inventory Control & Pour Cost
There’s a lot of fun to be had in our industry. From designing the actual physical bar your guests will be served across to choosing the theme and coming up with your menu, we can really get our creative juices flowing. Figuring out a gimmick or two and fine tuning signature cocktails can be downright glamorous. Unfortunately, not everything is exciting meetings with interior and graphic designers. Sometimes, we have to look at spreadsheets and do simple calculations to protect our bottom lines.
The effective management of inventory is one of those important duties that isn’t necessarily exciting, unless you really liking counting and data entry. Kenneth Scholl, representing Southern Nevada SCORE, one of over 300 SCORE chapters nationwide, offered up some fantastic advice regarding inventory management during the 2014 Nightclub & Bar Convention and Trade Show. He has worked for Hilton Hotels & Resorts, Holiday Inn and Princess Hotels & Resorts.
The advice Ken shared about managing inventory related to purchasing, receiving, issuing, inventory, preparation, controls, shrinkage and sales. In terms of purchasing, it may seem obvious but you need to know the quantity of product you need to purchase. You can figure that out by taking a look at the storage space you have available. Not only will that help you to establish how much to order, it will help you establish the frequency with which you should be placing orders. Some of the best advice Ken had for purchasing was to inquire as to the minimum order size set by your distributor(s), discounts for volume orders, what specials are available at any given time and what items have limited availability. And always – always – make certain to use actual purchase orders.
When receiving your orders, don’t be passive. Don’t trust that the people pulling your order and loading it onto the truck got it perfect. Don’t just trust that the driver got your delivery correct. Instead, check your purchase order against the merchandise you’ve received for quantity and invoice price. Before the driver leaves, check the brands, age or both against what you’ve order and count or weight the delivery. Should you encounter discrepancies, note them on the invoice and have the driver sign it. To combat shrinkage, move your received purchases to a locked storage area as soon as you’ve checked them against the purchase order. Ken has encountered more than one situation involving storeroom employees and drivers were “sharing” bottles, a bar owner didn’t check the delivery scrupulously and they paid for items never received. Call your distributor before the driver leaves should this happen to you. Once received, rotate your stock properly and turn over your inventory one-and-a-half to two times per month. All dead stock does is tie up working capital.
Now that you’ve got inventory to store, you need to do so properly. You’ll want a storage area with clean air that’s free of strong light, odors or wild bacteria. When storing beer you’ll want your dark ales to be in an area with a temperature around 55 to 60 degrees Fahrenheit, your stouts should be stored between 50 to 55 degrees and your light beers should be around 45 to 50 degrees. When storing wine, red wine should be stored between 50 to 55 degrees Fahrenheit and white around 45 degrees with both being kept in an area with a humidity level of 75 percent. Keep your spirits stored in a dark, cool place. Improper storage leads to the degradation of your inventory. Consider establishing a requisition system and utilizing par stocks so that one empty is exchanged for one full bottle in order to cut down on shrinkage.
By now we’ve all been taught the benefits of recipe cards when it comes to controlling costs. But have you considered using a hydrometer to make sure the spirits you’ve ordered and received are at their correct proof? Have you thought about checking out the actual volume your glassware holds? Or how much your pourers actually pour? If you believe you’re ordering one-ounce shot glasses, fill it with water to overflow and measure how much they’re actually holding. If they’re larger than one ounce, you’re giving away profits. Smaller and you’re ripping off customers. The same goes for your pourers. Check to see how much they’re pouring against the capacity that you’ve ordered. A great way to ensure accuracy is to find a brand you trust, check it and always order only those pourers.
Understand your costs and you’ll be able to fix any revenue and cost problems you may have.
Be sure to register for the 2016 Nightclub & Bar Convention and Trade Show in October for the opportunity to attend education sessions like this one!