Chefs are great at cooking, and not always so great at stock control. After all, they’re usually creative types, not accounting types!
Working closely with the hospitality industry over the years, I’ve noticed a worrying trend that tends to happen in most newly established businesses, and even in some of the well established venues.
And by ‘trends’, I’m not talking about the latest in cuisine or the new and odd phenomenon of people taking photos of their meal and posting them to social media, No, I’m talking about who in the business is assigned the responsibility of stock control.
Who should be in control of stock control in a hospitality business?
Many venues leave the responsibility of stock control to the chef or the venue manager: They’re left in charge of the menu selection, the subsequent ordering of stock each week, and the decisions about the daily or weekly specials.
So what is the problem with this approach?
In a nutshell, it could greatly reduce your business’ profitability.
Sure, there are some chefs and managers who have years of experience in the industry and they are very capable of monitoring and managing the cost of stock each week.
But this is the exception, not the norm.
If you leave your stock control to the judgement of your chef or manager, then the cost of your stock is likely to be significantly higher than it needs to be.
In addition to ensuring you have the right people in the business assigned the responsibility of stock control, it’s crucial you provide them with a system and process to follow with clear Key Performance Indicators (KPI’s) in place to guide their decisions.
Without good stock control your hospitality business can experience a gradual accumulation of waste. This happens when staff members:
- don’t have a full understanding of how the business works,
- don’t understand the main drivers of the business’ performance, and
- don’t understand how seemingly subtly price increases over time can dramatically affect the business’ profitability and, ultimately, its viability.
Consider this stock control scenario in a hospitality business:
- The business spends $350,000 a year on stock
- They haven’t done a menu change for twelve months
- They’ve had the same kitchen team the entire time
- Over the past twelve months, the suppliers’ prices have increased slightly (by 1.5%)
- The staff have not been given a clear stock control process to follow or specific KPI’s to monitor and their relaxed approach leads to a little more waste (say, a 1.5% increase)
No big deal, right? Everything will be fine.
Without noticing it, the gradually accumulating daily waste results in the following over the course of twelve months:
- Annual Purchases – $350,000
- Price Increase 1.5% – $5,250
- Wastage Increase 1.5% -$5,250
- Total Expense Increase -$ 10,500
That means $10,500 in extra cost is coming out of the business owner’s pocket every year. What a waste. (As a family owned business, there are plenty of better ways to spend $10,500. New York, anyone? Whitsundays? Europe?)
The good news is that with the right internal controls, sound stock control processes and proper training of staff members, this wasteful scenario is completely avoidable.
So what should you do to fix this?
6 crucial stock control tips for your hospitality business
- Quantify your inventory cost on a weekly basis: Keep your bookkeeping and reporting 100% up-to-date on a weekly—if not daily—basis. (If your bookkeeper can’t do this, we can help here).
- Re-cost your entire menu: There are some great apps which can be used for this purpose, including Market Man (Link http://marketman.com/) and Chef Sheet[MC1] (http://www.cookingthebooks.com.au/)
- Once you fully understand what stock should be costing you, set some realistic KPI’s and then communicate these to your team.
- Keep your team informed of the results on a weekly basis. Remember, “What you can measure you can manage,” and “What you measure, improves.”
- Using all the information above, set your par stock values, so your team members know how much to order each week. Even though this is likely to change occasionally, depending on business circumstances, having a par value takes human error out of the equation.
- Re-price your suppliers. Can you get a better deal? For instance, could you negotiate with your suppliers a discount if you agreed to pay on a 7-day account rather than a 30-day account? It’s worth asking. We’ve found that most suppliers will reduce their prices if they are guaranteed their money on a weekly basis.
These six steps are guaranteed to reduce the cost of your stock and, in turn, increase in your profit.
Need help implementing these stock control tips?
If you’d like hands-on guidance in reducing costs in your hospitality business, get in touch here.
Stock control and waste reduction for hospitality businesses is a specialty of ours and we’d be delighted to help you reduce your costs, improve your profits and, ultimately, have a few more choices for your family holidays at the end of each year.