How to Reduce Food Costs Using Predictive Ordering

11th March 2014
Psychic Readings: A Creative Commons Flickr photo by squidish

One of primary ways to reduce food cost is to improve how food is ordered at your restaurant. Making food orders is tough. Busy employees need to balance having enough items on hand, with avoiding being stuck with food that spoils. Ordering items in bulk, to save money, has to be weighed against being able to store it.

While their are exceptions, generally a restaurant owner wants to have the minimum amount of inventory on hand that will allow them to fulfil patron’s orders, without running out of items. Keeping minimal inventory means less spoilage, lower carrying costs, less inventory to track and less space required to store the food. In today’s global food marketplace, this has become easier, because owners tend not to have to “bank” goods. If you are ordering lemons, you don’t need to stock three weeks worth because you are concerned they won’t be available again. The cost and quality may vary, but most foods are available year round.

The biggest roadblock in reducing food cost through inventory management is being able to predict how busy a restaurant will be over the next seven days. Every restaurant has a steady flow of traffic it can count on, but large daily variances can be caused by things like weather and major events. The daily pressures of a busy restaurant can mean that staff are often unable to give the thought to predicting next week’s traffic, and calculating what is needed to provide for it, the time it deserves. Research suggests that people will often over, rather than under, order to prevent running out of something. While this may not make or break a restaurant in the span of week, it adds up quickly over time, as inventory ties up cash flow in storage and begins to expire – you are throwing away money.

To help solve this problem, consider Predictive Ordering. Almost any Point of Sale (POS) can provide a trailing sales report, but this isn’t useful without being connected to a system that calculates the ingredients used for each item sold. In an ideal state, every item recorded as sold in the POS is broken down into ingredients, then those ingredients are removed from a digital inventory record as they are consumed. Later, on order day, the inventory system analyzes the previous month(s) consumption of goods, plus what is remaining on hand and automatically populates an order. Staff review the order, add any untracked consumables (paper towel or baking soda for example) and submit it electronically with the push of a button.

 How Predictive Ordering Reduces Food Cost:

  • Decreases the natural inclination to order more items than necessary, to prevent shortages.
  • Orders are based on an accurate history, rather than memory, which has a tendency to overemphasis recent and negative events.
  • Less frequently ordered items aren’t forgotten, reducing the need to pay more at a grocery store when they run out part way through the week.
  • The time taken to place orders is reduced, freeing up management to focus on other food cost cutting measures like decreasing spoilage and theft
  • Orders can be transmitted digitally, reducing errors and saving time.

What to look for in a Predictive Ordering Inventory System

  • Full integration with your POS. If this doesn’t exist, no system can efficiently predict what needs to be ordered.
  • Ability to adjust the period being referenced for historical data – allowing you to omit times that were anomalies (for example Christmas or Spring Break).
  • Electronic Data Interchange (EDI) integration with food service suppliers like Gordon Food Service (GFS), reducing ordering time and increasing accuracy.
  • Measurement in “Units Sold”, not dollars. When predicting what inventory to order,  you need to know that 150 hamburger patties were sold last week, not $500 worth of double cheeseburgers.  

Remember, overstocking is the restaurant owner’s enemy. No one likes to run out of goods, but every item sitting on a store room shelf is money doing nothing. Money that expires and needs to be thrown out. Alongside keeping accurate inventory (tips on how to do that here), using Predictive Ordering technology is one of the easiest ways to reduce this practice and other common causes of increasing food costs.

What are you doing to reduce food cost at your restaurant? Let us know in the comments section below.

Inventory Ebook Leaderboard

Chief Operating Officer at LIVELENZ. Greg began working part-time in restaurants when he was 15 and continued in the industry for a decade. He then began working for technology companies developing a passion for improving operational efficiencies at fast-growing organizations.

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