Managing Restaurant Inventory in a Questionable Economy: Strategies for 2024

The economic landscape in 2024 poses significant challenges for the restaurant industry. With inflation, supply chain disruptions, and fluctuating consumer spending, effective inventory management is more critical than ever. This article explores key strategies for managing restaurant inventory in a questionable economy, including Data-Driven Forecasting, Time-Optimized Ordering, and Enhanced Vendor Relationships.

Navigating Economic Challenges

The current economic climate requires restaurants to be agile and resourceful, because in many cases, today’s external market forces are far beyond what could have reasonably been overcome with the simple solutions that worked in years past. High food costs, labor shortages, and unpredictable demand have been a boon to the industry for decades, but today’s economic environment necessitates more innovative inventory management strategies. To remain profitable, restaurants must focus on optimizing their inventory processes to make the most of every item in the cooler.

Key Strategies for Managing Inventory

1. Data-Driven Forecasting

Most restaurants have a Point-of-Sale System or a “POS,” which can contain valuable information when trying to create an accurate forecast upon which to plan a budget for the upcoming week(s) or month(s). Some POS systems have features that will give an operator a trendline upon which they can sometimes reasonably estimate their volume.

However, trendlines and data are best used as key pieces of a larger strategy. For instance, if it is December and one is trying to forecast what January, February, and March will look like, it would be foolish to simply look at a trendline and induce that one should expect to trend up or down as during the prior months.

In such a situation where one is trying to forecast January, February, and March, it makes sense to pull month-specific year-over-year data for the past three or four years (unless these prior years were in the midst of a pandemic) and develop a picture of what prior January, February, and March looked like and develop a trend based on how each month compares to the prior years and then adjust them for your current trailing nine-month trend.

Once a forecast upon which one may reasonably rely has been created created, then one should integrate the forecast with astute ordering practices.

2. Time-Optimized Ordering

There are times to hold inventory on the shelves and then there are times to deplete inventory to the last can, cup, or barrel, but how does one know when the time is right? Use data-driven forecasting to determine times when cash is high and business is predictable to determine what may be used in the leaner times when cash is tight and business may become volatile.

Sometimes, there are soft considerations to inventory management, such as supply chain dependability, whether a certain good is inflating at an unreasonable rate, the shelf life of each item one considers holding or depleting from inventory, or there may be a plan to change the menu offerings which will most definitely impact inventory projections.

Some operators choose to fly by night and work with whatever their broad liner has on sale that week, but that seldom results in a sustainable long-term strategy. Data-driven forecasting coupled with time-optimized ordering can help smooth trendlines and improve the cost of goods sold to help the savvy operator squeeze out a profit in lean months.

Time-optimized ordering is most effective when the operator has a strong relationship with their vendors.

3. Enhanced Vendor Relationships

Vendors are usually the first place many operators look when they start trying to manage their inventory in a questionable economy. Unfortunately, many operators look to the vendor as a disposable commodity in favor of the next vendor to offer them a deal. All too often, the former approach is responsible for an operator dividing their buying power, most likely resulting in a higher cost of goods sold.

One may ask what value buying power has when a primary vendor is charging double for can liners, etc., but what is seldom recognized is that while the prices of some items are substantially higher than an operator would like, other sometimes more voluminous products are a substantially better value resulting in an overall reduction in inventory spend.

However, when working with a vendor, invest in the relationship with the vendor and their representatives, ask about national buying programs, association programs, and when certain goods may spike in price on a cyclical basis. A vendor knows their costs and pricing better than any other source an operator could hope to consult.

Thus, working closely with a vendor and their representatives will give the savvy operator a great resource to consult when conducting data-driven forecasting and time-optimized ordering.

Conclusion

In 2024, it is important to keep in mind that profit margins are subject to economic headwinds that are well beyond those of the early 2000s when inflation was less concerning, the supply chain was more dependable, and the cost of goods was not as likely to change from week to week.

However, with self-education and hard work, savvy operators can manage their inventory to promote profitability by leveraging Data-Driven Forecasting, Time-Optimized Ordering, and Enhanced Vendor Relationships to stack the deck in their favor and limit erratic profit margins swings. For more information on how you can optimize your inventory to promote profitability, visit HB Consulting, LLC to learn more about our services and to book your Free Consultation.

Disclaimer: The information contained hereinabove is offered for educational purposes only as it is general in nature, is a matter of opinion based upon information and belief, not predicated upon any person or organization’s specific facts or circumstances, should not be relied upon, nor should the writing hereinabove be taken by any reader as Legal, Financial, or Tax advice under any circumstance.  

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