Inventory management often overlooked by pizzeria operators

Taking inventory –– it’s one of the most dreaded tasks in the restaurant business, but it has to be done. From fresh produce to canned goods and plastic ware, every product you purchase has to be tracked. In an industry with thin margins and stiff competition, poor inventory management can lead an otherwise profitable pizza shop into financial ruin.

Even so, both new restaurants and established shops often miss the mark. While high mark-ups and busy seasons can temporarily mask the effects of a mismanaged inventory, poor practices will eventually catch up. For restaurateurs who don’t have tight control of their inventories, the following best practices will help to reign in waste before it’s too late.

First, you can only improve what you measure. “It seems obvious, but lots of people have a very surface-level idea of what inventory management is,” says Cory Damm, LeaseQ vice president. “Metrics are fairly unique for each style of operation, and you need to identify which ones are important to you.” Per-pizza portions are paramount to a fast casual shop, for instance, while liquor is a major cost center for a dine-in pizzeria.

Aside from store-specific metrics, everyone needs to keep a close eye on turnover, spoilage and stock. “If I can optimize my turn, I’ll reduce my spoilage,” says Damm. Similarly, whatever gets scraped into the trash is ultimately a cost. Customers paid for the food, but if you’re consistently tossing a third or more of a given menu item, you’re missing a major opportunity to reduce your overhead.

Of course, measuring, managing and reporting on every item in your inventory isn’t easy, especially when you’re doing it by hand. “To keep track of a large inventory, you need a direct link between your POS, inventory and ordering,” says Konstantin Zvereff, CEO of BlueCart restaurant management software. Without that link, you lack visibility into critical metrics such as perishability, par levels and waste.

“Every restaurateur has to spend the money on some kind of software to run their business,” adds Anthony Theodore, director of operations and purchasing for Happy’s Pizza Inc. A solid software tool that automates inventory management based on customers’ purchases can mean the difference between turning a profit and spinning your wheels.

When it comes to ordering frequency, there are two schools of thought. “One of the biggest problems is too much product sitting on the shelves,” says John Arena, co-founder of Metro Pizza in Las Vegas, Nevada. “Everything should be ordered in a timely manner, but many operators are afraid of running out.”

On the other hand, Damm says, “It takes people time to stock, and if I order larger and less often, I can reduce labor costs and waste.”

The right path for your pizzeria depends on what you’re offering. Zvereff notes the popularity of farm-to-table, and if you’re pushing fresh, local produce, you’ll need to interact with farmers on a daily basis. On the other hand, if your restaurant relies heavily on canned and frozen goods, then bulk purchases and big back stocks can work in your favor. Excessive inventory will lead to waste in either case, though, and running low tends to be a high-quality problem –– particularly when pushing a new concept, store or demographic.

“Pennies become dollars very quickly in our industry, and we’re in a business of pennies,” says Arena. With so many ingredients going into every pizza, a few small mistakes can turn a profitable product into a loss. To provide for a predictable cash flow, you’ll need to standardize portions of cheese, proteins, veggies and dough. If you’re serving alcohol, consistent portioning is just as important for beer on tap and wine.

Aside from food, you’ll need to control the costs of flatware, detergent and other non-perishable consumables. “Chemicals are often the big money-maker for the equipment companies,” says Damm. Stretching soaps, sanitizers and even plastic ware can lead to significant savings in the long run. You don’t need to skimp when customers ask for extra napkins or knives, but you should set standards based on order size.

The best cost-cutting policies won’t do a thing if your employees aren’t on board. “Start by setting targets for waste, just like you’d set targets for sales,” says Damm. From the manager who makes the orders to the dishwasher or busser who scrapes leftovers off the plate, everyone needs to have that goal in mind. Still, “the only way to get everyone to pay attention is to create some kind of incentive,” Damm adds. Gift cards and discounts can help, but so can the simple recognition of a job well done.

Ultimately, though, better inventory management starts with you, the owner or franchisee. “Employees are going to do whatever the owner does, and if it’s important to you, it will be important to your workers,” says Theodore. If your employees see you taking temps, date-dotting and recording spoilage when you make your rounds, they’re far more likely to buy in themselves.

Cutting Costs

Five steps you can implement ASAP to optimize your inventory include:

• Schedule deliveries. “The person checking in the food should be the most experienced person available,” says John Arena, co-owner of Las Vegas-based Metro Pizza. Schedule deliveries so your ordering manager –– not your dishwasher –– is there to receive.
• Time bulk orders. Undercut competitors by ordering frozen and canned goods well before the Super Bowl, back-to-school season and other pricey purchasing times.
• Take inventory. Even with a sophisticated POS system, you need regularly scheduled physical checks to make sure your stock matches your theoretical inventory.
• Form a buying group. Join up with other restaurants in your area to negotiate the best prices on food and supplies.
• Don’t sidestep mistakes. Many managers overlook mistakes in the heat of a rush, but that’s the most important time to abide by spec. Volume will only mask poor practices –– not prevent them.

David LaMartina is Kansas City-based freelance copywriter who specializes in the finance, food and health industries.