Enterprise Resource Planning (ERP) Systems for Restaurant Inventory Management
Restaurant owners implement Enterprise Resource Planning (ERP) solutions for inventory management and real-time low stock notifications. For example, when chefs order an ingredient, the stock counts in their ERP systems automatically reflect an increase in stock. When a restaurant sells a dish containing an ingredient, its stock count automatically registers a decrease. Also, when inventory levels fall below par, an ERP system will prompt a manager to re-stock, or even automatically place an order to a supplier.
With an ERP, owners can ultimately reduce manual inventory checkups, thereby reducing labor hours. The abilities of an ERP to reduce food waste and pilferage, as well as the reduction of billable labor for inventory management, are the key value propositions for restaurateurs.
However, the installation of an ERP system is not as easy. For many businesses, the setup might require more resources than expected. Selecting a good ERP is critical.
Because countless restaurant owners regret implementing unsatisfactory ERP systems, it is helpful to prepare a checklist to be sure that it will ultimately result in cost savings.
Businesses need to take the time to evaluate the resources they possess and the operational capabilities required to install an ERP. Business owners must also determine if they have the time, budget, and, most importantly, the expertise to follow workflow processes after the system is implemented diligently.
Thinking through these steps will produce the best outcome. Managers will waste money if the ERP system cannot fit into their staff’s daily workflow, if owners are likely to become frustrated when results take more than one month to materialize, or if clients do not have the internal capacity to implement and maintain an ERP system.
Below is an example checklist for an ERP that achieves the goal of 100% automation.
Fundamentally, inventory control revolves around three variables.
- Control of Inflow: Food expenditures, including when goods are purchased from suppliers
- Control of Outflow: Purchase timing and costs, including when dishes are sold and when to throw away food for any reason
- Stockpile: Stock value of product
The ERP will attempt to achieve Control of Inflow. To achieve this, it will need accurate ingredient prices. There is a term, “Three-Way Match,” commonly used within most ERP systems. Three-Way Match attempts to ensure that the Purchase Orders, Delivery Orders, and Invoices match each other before it approves payment to the supplier.
- In order to achieve Control of Inflow, owners must enforce that all ingredient purchases are transacted within the ERP system to the supplier. This means no more phone calls, WhatsApp requests, or emails. Managers must train their staff to utilize the ERP system for all purchases. Due to the high turnover rate in restaurants and traditionally less tech-savvy workers, this training might require a considerable amount of time and effort.
- Managers need to have someone who diligently updates product names, the unit of measurement, and unit prices. In restaurants, it is common to see inventories exceeding 500 SKUs, all of which must be uploaded into the ERP. Many ERP systems have convenient scanning capabilities for initial setup.
- Whenever a restaurant receives a delivery, the receiving staff must refer to the ERP system to validate the quantity and unit prices. Staff should make adjustments and resolve any discrepancies at the time of delivery. For lean teams, this duty might compound existing job responsibilities.
Secondly, every ERP system attempts to achieve Control of Outflow. Below are a few checkpoints to note.
Most Point Of Sale (POS) systems have a recipe card module. Similar modules exist in ERP systems. Managers should install these modules during the initial implementation. Managers should evaluate whether or not to set up recipes, which could become time-consuming or pointless for restaurants that frequently change their menu. Menu changes are commonplace for fine-dining and seasonal restaurants, for example.
Keeping all recipe cards updated is one of the hardest things to do in a restaurant’s ERP operation. Managers must continually update product numbers if the supplier changes packaging or runs out of stock. If recipe cards are not updated continuously, managers will not be able to forecast food costs nor sales. Inconsistencies in food portioning will also affect calculations.
Most ERPs request two data points regarding food waste that need to be recorded within the system.
- Whole good expiration: This timestamp will often coincide with a discard action by staff. Staff must register the expiration within the ERP system prior to throwing the item away. Managers must enforce diligent updates within the ERP by all staff members.
- Rotten items: During the preparation of food, staff might discard some parts of food. Staff ust also record these partial item discards within the ERP.
Complimentary Food and Adjustments
There are occasions at every restaurant for managers to reward loyal customers with free food or drink. Similarly, there are occasions for “comping” items for disgruntled patrons. Staff must record all of these actions within the ERP. For restaurants utilizing recipe modules, managers should also record any items that they serve to customers that are outside the recipe card.
ERP systems are common in retail industries. Unfortunately, restaurant owners do not often avail themselves of this robust tool. In the food service industry, there are many perishable products. Restaurant inventory items often have a very short shelf life. For each dish, there are many raw materials needed to produce the final product. Restaurants rarely receive finished food products from a supplier that they can simply resell to the end consumer. These are some of the reasons for hesitation prior to installing an inventory management system.
Restaurants also tend to employ fewer workers per location. Large retailers have dedicated receiving department workers whose whole job is to receive goods, complete paperwork and manage inventory levels. In a normal restaurant, the chef has to spend time on new recipes, food preparation, ordering ingredients, cooking for clients, and many other tasks. Restaurant managers have to ensure that customers are satisfied, seat guests or serve tables during busy times, as well as manage staffing and office tasks.
In conclusion, an ERP system will be helpful to a restaurant that can commit to the long-term benefits of automating inventory management.
- Installing an ERP requires a dedicated project manager who will enforce new practices.
- Owners must have the patience of three to six months to see the benefit of reduced labor hours.
- Long-term, an ERP will require some ongoing maintenance by an administrator to keep the system updated.
- Finally, managers must commit to training staff on the ERP system by diligently enforcing its use.
Without these practices, an ERP system will not achieve its objective of reducing labor hours.
On the other hand, if a restaurant is considering an automated inventory management system, there are other solutions available, including FoodRazor. Restaurant-focused solutions help to track product purchases, manage invoices, control expenses, and offer real-time notifications and insights to improve any restaurant.