Food Industry Inventory Management - A Complete Guide

Food Industry Inventory Management - A Complete Guide

Niti Samani
Niti Samani
Table of Contents
Table of Contents

According to a study from Toast, both successful (39%) and no-growth (47%), restaurant operations cite high food costs as their number 1 challenge.

This challenge is made worse when you realize that approximately 10% of food is wasted in an average restaurant before it even makes it onto a plate.

This is an unrecoverable cost that is caused due to oversized portions, extensive menus, and kitchen staff behaviors. All of these factors can be detected and regulated by implementing sensible inventorying practices.

In fact, a 2017 industry report on restaurant technology has noted that 95% of operators say that technology improves the overall efficiency of their operations. In fact, 78% of these operators look at those metrics daily, thus highlighting just how important technology has become in the food industry inventory management.

Food Industry Inventory Management - A Complete Guide
Food Industry Inventory Management - A Complete Guide

Thus, food inventory management is your system for tracking what stock comes into your restaurant, what inventory leaves your restaurant, and what is leftover. A good food inventory management system will give you the most useful insights into how you are losing your money, how you can increase your sales velocity, and how you can maximize your productivity and profitability.

These insights will also help you identify your strengths and weaknesses, thus enabling you to take the necessary steps to either maintain your strengths or minimize your weaknesses.

Additionally, it will also help you stay updated with the preferences of your buyer personas, as well as external factors like weather, illnesses, government laws, and more, which will affect your business. This will give you the chance to make the necessary strategies, be it marketing strategies, sales strategies or production strategies.

The food industry however is continuously growing, with there being high competition in the industry. This makes it difficult to stay afloat at all times. However, one of the best ways of keeping up with the market dynamics, and competitiveness, and therefore staying successful is through efficient inventory management.

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To be able to do so, let us first understand the following topics related to food industry inventory management:

What is Food Industry Inventory Management?

Food industry inventory management is the process of monitoring and maintaining stock levels of food company items in a commercial setting. It includes, but is not limited to:

  • Ordering
  • Receiving
  • Storing
  • Distributing food products

An effective food industry management system is one that will help your business keep track of its food stocks, minimize waste, and ensure fresh and safe products.

In fact, in the food industry, an important part of inventory management is to know how to properly store food items. This includes keeping track of the expiration date or the use-by dates, as well as proper storage methods that will ensure that the food products do not become contaminated or are not spoiled.

Additionally, your business must check its inventories regularly to ensure that it has enough supplies on hand as determined in demand planning, including safety stock levels. This will encourage returning customers and increase in revenue and gross profits.

However, what you must keep in mind is that the food industry inventory management systems can be manual as well as automated. Typically, manual systems involve paper records like inefficient spreadsheets and manual stock-taking. In contrast, automated systems use computer software to track and manage stock levels.

The benefit of using automated systems is not only its accuracy and saving of resources but also that it will enable your business to have real-time data on its inventory levels, which will help you make informed decisions about ordering and stocking food items. In fact, the insights provided by the same will also help you in resource capacity planning.

It is crucial to have an effective inventory management process if your business is part of the food industry. This is because it will ensure that your business is profitable by helping you:

  • Keep track of your stock levels
  • Minimize waste
  • Ensure that your products are fresh and safe for consumption
  • Ensure that your products are adhering to the regulatory requirements and standards
  • Minimize expenses of keeping excess stock

Additionally, an effective inventory management process will also ensure that you are following proper storage methods and you are undertaking regular inventory checks. This will help you in avoiding potential problems associated with food contamination or spoilage. In turn, this will help you in maximizing your returns on investment.

Implementing an automated inventory management system is the best choice that you can make for your business as it will provide your business with all the tools for improving its efficiency and accuracy in managing your food stocks and other related operations.

What is Food Industry Inventory Management Software?

Food industry inventory management software is a tool that will help your food business in keeping track of its stock levels, orders, and sales. It comes with all the tools that will help you monitor these trends, and gain insights that will help you in optimizing your order sizes such that you will be able to reduce waste, and improve your cash flow.

This type of software can be used by:

  • Grocery stores
  • Restaurants
  • Caterers
  • Other food-related businesses

While these programs may offer many different features, they all share the same goal - to help food businesses like yours run more efficiently. Some of the most common features of food industry inventory management software include:

  • The ability to track stock levels and sales data
  • The ability to set up reorder point alerts for when your stock levels are low
  • The ability to generate reports on trends and inventory levels
  • The ability to create and manage orders
  • The ability to create invoices, and customize them as required
  • The ability to track supplier information
  • The ability to store recipes and other such important information

Thus, considering that the food industry inventory management software will help you save time and money by ensuring that your operations run smoothly, it is a valuable tool for any food business.

In fact, these new technologies are better at monitoring and tracking food. With a strong inventory management solution that incorporates these new technologies, you will be able to:

  • Optimize food safety and thus decrease food health-risk problems
  • Make your processes more efficient, and reduce the chances of your perishable goods going to waste
  • Get your food products faster on the shelves so that they are still ripe or consumable by your customers
  • Optimize your transit and packaging processes such that your costs are reduced

Moreover, your inventory management system will also be able to communicate with members of your supply chain, thereby giving you access to information about your products in real time.

This will lead to heightened visibility, as well as end-to-end traceability of your entire supply chain, and thus throughout the products’ entire life cycle.

The added benefit of this is that should a problem arise, this transparency will let you track the shipment in question. In fact, when you implement such a system, there will be a significant amount of data being shared between departments as well as members of the supply chain which will give you as well as them important insight into safety, overstock, and shipping issues.

With the right inventory management system, you will also be able to effectively balance your stock. This is because through the software, and all the integrated and streamlined historical as well as real-time data that it stores, you will be able to run algorithms to determine what inventory levels are acceptable.

Then you will also be able to compile a ream of data to yield inventory stock optimization. This will ensure that a situation of excess inventory stock which might go waste does not arise, and neither does the situation where you do not have enough inventory and thus lose your customers or wholesalers, does not arise.

Additionally, these systems will also assist you in planning your warehouse. Depending on the movement of certain food items, including temperature-controlled ones, the inventory management system will be able to help you in gauging where certain products should be located.

For example, in the case of popular items or highly perishable items having accessible shelf space, they can get on the truck faster.

Why is it Important to Stay Organized in Food Industry Inventory Management?

Staying organized is one of the most important aspects of inventory management in the food industry. This means that you need to have a system in place that will track:

  • What foods are being stocked
  • How much of each item is available
  • When items need to be restocked

While this can be done manually using pen and paper, or spreadsheets, to ensure accuracy and speed, it is preferable to use automated systems like Deskera MRP.

Staying organized in the inventory management of the food industry is important because of several reasons. Some of these reasons are:

  • It helps to ensure that all food items are accounted for and that there is no waste due to unused or expired products.
  • It allows your managers to better forecast future needs, based on past consumption patterns. This will increase the overall efficiency of your inventory management.
  • It makes it easier to spot issues or trends that could impact your business, like a sudden increase in demand for a particular item, thereby letting you take necessary steps, even if it is to control a bullwhip effect in your supply chain.

While there are several ways of staying organized in your inventory management process, the key is to find a system that works best for your business, and then stick to it.

While this might lead to several trials and errors, once you have a system in place, it becomes much easier for you to keep track of your food inventory, and have your business running smoothly.

What is the Importance of Safety Standards in the Food Industry?

Globally, the food industry is one of the most heavily regulated industries. The reason behind this is that the safety of the food being consumed by your customers is of paramount importance.

In fact, there are strict safety standards in place in an attempt to try and prevent countless cases of foodborne illness and even death due to contaminated food. These standards cover everything, from how the food is raised or grown, to how it is processed and packaged, and even where they end up.

To ensure that the food that your consumers eat is safe, it is vital that there are strict safety standards that all businesses in the food industry need to adhere to. These safety standards will also help in protecting your employees from potential harm.

In fact, when these safety standards are not followed, there is a high risk that either contaminated food will reach your consumers, or your employees will be harmed in some way. In either case, it can even cause serious illness or even death. For example, in 2016, there was an outbreak of hepatitis A from strawberries used to make Tropical Smoothies.

This highlights how serious foodborne illnesses can be, and hence how important it is to protect yourself, your family, your employees, your consumers and their families from harm.

In fact, to ensure the ongoing protection of all the stakeholders, these safety standards are constantly evolving as new risks are identified. It is crucial for all those who are involved in this industry to stay up-to-date on these standards to best protect themselves and those that they serve.

Inventory Management Necessities and Techniques in the Food Industry

Operating within the food industry as a manufacturer, supplier, or distributor is not for the faint of heart. This is because:

  • There are strict federal and state regulations surrounding food and beverages.
  • Your customers will tend to be demanding.
  • Your food products themselves are often at the risk of perishing or passing sell-by-dates while on the shelves.

However, in order to be successful and safe, inventory management is a must for businesses in the food industry. To be able to carry out inventory management in the food industry, and to do so in an effective and efficient manner, there are three necessities. These are:

Batch and Expiry Tracking

This is one of the most important inventory management techniques for businesses in the food industry. Perishable products like fresh produce are particularly susceptible to spoilage, especially due to improper storage conditions.

In the event of contamination or spoilage, you need to be ready to run a recall for the affected products so as to preserve your goodwill and keep your customers happy and satisfied.

Batch and expiry tracking will enable you to track the incoming and outgoing of stock on a batch-by-batch basis, thereby ensuring that you can use or sell the older stock first - FIFO (First In, First Out) strategy. This will help you in preventing spoilage.

Using an automated inventory management system for the same will save you lots of time, while also being accurate.

Lot and Serial Traceability

While earlier only the enterprise-level businesses of the food industry had access to the lot and serial traceability, today, each scale company has access to it.

The ability, as well as the requirement of being able to track serial and lot numbers of your raw ingredients and finished goods from the beginning till the end of your product's supply chain, will lead to the following benefits:

  • Manage and monitor the quality control of your products
  • Keep track of your product’s expiration and use-by dates, and create sales and marketing strategies accordingly. For example, if an expiry date is close by, you can launch a limited-time offer on that product to increase its sales, while also keeping your loss in check.
  • Help in meeting all the regulatory requirements with ease
  • Boosting safeguards for potential recalls
  • And any other important additional information that might be required

With the use of barcodes and mobile tools, traceability has become not only faster but also more efficient. Especially because changes recorded by the same, will immediately be reflected in your inventory management system in real time. This will help you increase the effectiveness of your overall inventory management.

Just-in-Time Inventory

Just-in-time inventory can be the perfect solution when dealing with perishable goods. This is because this strategy is a combination of sales and purchasing, wherein raw and finished goods are purchased only when in demand.

The main advantage of this is that even while satisfying your customer’s demands, it helps in preventing the buildup of stale inventory and therefore prevents additional expenses.

For example, rather than purchasing three months of a high-demand product or ingredients at a time, with a just-in-time inventory system, you can reduce your purchasing cycles to every week or every other week. This will help you in reducing your on-hand inventory, and also prevention of waste from expirations.

However, what you need to remember is that for a just-in-time inventory system to work, you will have to take other factors into consideration like:

  • Your vendor’s location
  • Type of products you are carrying

Based on these factors, you will be able to determine whether this strategy is apt for your business or not. However, if you are working with high volumes of perishable goods, then this is definitely a solution worth considering.

ABC Analysis

ABC Analysis is an inventory management technique that is based on putting products into categories in order of their importance. Thus, A is assigned to the most valuable products and C to the lead valuable products.

While there are no hard-and-fast rules for dividing your products into categories, it will look something like this:

  • A Items - 20% of products, which accounts for 70% to 80% of consumption value
  • B Items - 30% of products, which accounts for 10% to 20% of consumption value
  • C Items - 50% of products, which accounts for up to 10% of consumption value

ABC analysis will thus help you with optimal stock ordering as well as allocation of resources to the most “high value” products.

This is especially important for businesses like yours, as it will ensure that you are able to meet your customer’s demand when they want it, without needing to keep excess or unnecessary stock on hand, and risk wastage in the process.

Hence, ABC analysis enables you to see your products based on their popularity and value, and take your decisions accordingly. This technique will thus help you minimize your loss while helping you maximize your income and profits.

Quick Order Fulfillment

Quickly getting your food products from point A to  point B is the key to:

  • Customer satisfaction
  • Ensuring the safe and fresh arrival of all deliveries

However, to be able to ensure this, you need to keep in mind that swift order fulfillment starts at the warehouse. In fact, to assist and ensure this, you should have an inventory management system on which you can filter, sort and prioritize your orders.

To further enhance your fulfillment speed by reducing the time your warehouse employees spend on picking and packing orders, you should use barcodes and other relevant mobile tools.

9 Tips for Improving Inventory Management in the Food Industry

Inefficient or inaccurate inventory management has widespread detrimental effects on businesses in the food industry. These detrimental effects include but are not limited to customer dissatisfaction, loss of customer loyalty, reduced account receivables, increased account payables, and so on.

In order to avoid these detrimental effects and more, the 9 tips that will help you optimize your food industry inventory management are:

Know Your On-Hand Inventory

The key to having effective inventory management starts with knowing your on-hand inventory at all times. This involves keeping accurate and updated records of all the food items in your stock, their quantities, their expiration dates, and other such relevant information.

While there are several reasons why it is important to know your on-hand inventory in inventory management of the food industry, one of the most prominent and obvious reasons is that this knowledge will enable you to accurately plan your production and sales.

Without knowing exactly what you have on hand, you will not be able to accurately forecast the number of food products that you will need to produce or sell to meet the entire demand of your customers.

Additionally, by knowing what you have on hand, you will be able to ensure that the ingredients that you are using are fresh and safe. Simultaneously, you will also be able to ensure that they are being used correctly.

Thus, inventory management is also important for food safety and quality control purposes, in the absence or inaccuracy of which, there is the risk of spoiled food or products that do not meet the requirements of your customer expectations.

Lastly, good inventory management will help you save money. This is because only when you know your on-hand inventory, will you be able to avoid overstocking items that might go bad before they can be used, and which might lead to high storage costs.

Thus, by being informed of your on-hand inventory, you will be able to have efficient inventory management which will in turn help you ensure that your business is running smoothly and profitably, while also providing quality products and services to your customers.

Keep Track of Expiration Dates

Considering that your business is part of the food industry, it is vital to keep track of the expiration dates of all the food items in your inventory. This will help you in ensuring that you are using and selling the freshest possible products.

Simultaneously, it will also help you in ensuring that you are adhering to the regulating standards, thereby making your food items safe to consume. If your food item has expired, then it will no longer be safe to eat, and on consumption might even make people sick.

Additionally, expired food items cause food waste, as they are not eaten on time, and now need to be thrown away. This waste becomes an irrecoverable cost for your company, thereby adding to your operating costs.

Thus, by tracking the expiration dates of your food items, you will be able to avoid all such potential problems. In fact, this tracking will help you for quality control purposes.

Another benefit of keeping a track of expiration dates is that some of the foods may not taste as good or be as fresh after they expire. This will lead to issues in the customer satisfaction department as they will not enjoy their food. Additionally, expired food can also cause issues for those with allergies or other dietary restrictions.

Keeping track of the expiration dates of your food products is also important for financial reasons. This is because you would not be able to sell expired food and it becomes a dead stock.

This means that if you do not keep track of the expiration dates of your food products, then you will lose money, which will affect the health of your financial statements and financial KPIs.

Additionally, your business may also have insurance policies that require you to keep track of expiration dates, and which might need to be covered in case of any problems.

Thus, keeping track of the expiration dates of your food products is essential for improving your inventory management as it will help ensure:

  • The safety of consumers
  • The quality of food items
  • Adherence to regulating standards
  • Financial stability of your business

Rotate Stock Regularly

One of the best ways of maintaining freshness and minimizing waste of your food products is by rotating your stock regularly. This involves stocking up on the oldest items first and then moving on to the newer ones. In the food industry, it is essential that you rotate your stock regularly as part of your inventory management because:

  • It helps to ensure that your food is fresh
  • It helps you in monitoring the shelf life of your food
  • It helps you in preventing food waste and spoilage, which if it occurs can prove to be costly
  • It assists you in keeping track of your inventory levels so that you know when it needs to be restocked
  • Regular stock rotation will help you in ensuring that your customers always have the best possible experience when purchasing your products

Store Food Properly

In order to ensure that your food remains fresh, and spoilage is prevented, proper storage is essential. This means that you will have to make sure that all your food items are stored in cool, dry, and dark conditions. Proper storage of your food items is one of the ways of improving inventory management of your business in the food industry.

Proper storage of food items will help you in minimizing food waste. Additionally, it will help you prevent situations where if the food is not stored properly, it can spoil quickly and becomes unusable.

Not only will this wasted food cost your business money, but it also contributes to environmental pollution and greenhouse gas emissions. This is especially detrimental to your brand image and business objectives if you are trying to achieve eco-friendly manufacturing.

Lastly, proper storage of your food items will help you in preserving their nutritional value. This is because when your food spoils or is mishandled, then its nutrient content can be decreased. This can lead to serious health problems for people who consume the affected food.

Thus, to avoid all these situations, and ensure that your customers get the most out of their food, it is vital that you store your food properly.

Do Not Overorder

To have improved inventory management of your business in the food industry, it is important that you strike a balance when auditing inventory with barcode scanning, ordering new inventory, and other techniques that you need to perform.

Having this balance is important because if you order too much, you will end up with excess stock that will most likely go bad before you can use it. Conversely, if you do not order enough, then you could run into shortages that will disrupt your business. Thus, the key to a successful manufacturing business is effective inventory and purchase order management.

The benefits of keeping track of your on-hand inventory are that:

  • It will save your business from the additional costs of storing excess inventory, and then it goes to waste.
  • It will also prevent situations where you do not have enough food items in stock, leading to a loss of revenue as well as customers.
  • It will let you know the exact amount of inventory that your business needs, and that there is demand for, and also by when it is needed. This will thus help in maximizing your returns on investment as well as the net profit ratio.

Some of the reasons why overordering can prove to be problematic for your business are:

  • It ties up your capital - If you are constantly buying more food than it is needed, then your carrying costs will increase, with your money being tied up in inventory, instead of being used to grow other aspects of your business.
  • It decreases your profit margins - The more inventory you order, the more you will have to pay for shipping and handling. This can eat into your profit margins.
  • It increases the risk of food spoilage - There is a greater chance of the food going to waste if you have too much food on hand. Not only is this a waste of money, but it can also be a health hazard.
  • It creates storage issues - If you are overstocking your inventory, then you are more likely to face storage issues, with your kitchen being filled with it. Overstocking can thus make it difficult for you to move around and find what you need, and when you need it. Thus, it can lead to inefficiencies and accidents.
  • It makes it difficult to keep track of your inventory - If you have too much food on track, then it will become even more challenging for you to keep track of what you have, and what you need. This thus can lead to ordering mistakes, mistakes in what is used first or sold first and what is to be sold later - based on their expiration dates, and other such problems.

Thus, by taking care of what you are ordering, and how much you are ordering, you will be leading the path to a more efficient inventory management of your business in the food industry that is not facing all the hassles and headaches associated with overordering.

Use a Just-in-Time Inventory System

The primary benefit of using a just-in-time inventory system is that it will help you avoid both - underordering as well as over-ordering.

By following this system, you will be ordering only the amount of inventory that you actually need for a specific period, thereby laying the foundation for an efficient inventory management system for your business in the food industry.

The few key reasons why it is essential to use a just-in-time inventory management system in the food industry are:

  • It will help you reduce food spoilage and waste.
  • You will be able to ensure that you only have the amount of food on hand that you will actually need at any given time, thereby keeping your customers happy, and your expenses in check.
  • You will be able to successfully reduce the risk of having too much food sitting around and going bad before you are able to use it.
  • A just-in-time inventory system will help you streamline your inventory management process, making it more effective and efficient in the process.
  • Lastly, not only will you be able to improve your customer service through its implementation, but also be able to keep your costs down, and therefore maximize your profitability and productivity.

Thus, by using a just-in-time inventory system, you will be able to have effective inventory management of your business, with happier and returning customers, higher net profits, lower costs, and better-performing business metrics and operational metrics.

Stay Organized

One of the other keys to effective inventory management is a good organization, which involves keeping accurate records, and storing all your food items in an orderly manner.

There are several reasons why it is important to stay organized when managing your food inventory. These are:

  • It will help you in ensuring that all your inventory is accounted for and that nothing is going missing.
  • It will help your staff members in knowing what ingredients are available, where they are stored, and what needs to be ordered. This will save a considerable amount of their time when preparing meals, while also ensuring that they are always able to satisfy your customers.
  • It will help you in preventing food waste by ensuring that expired or unused items are correctly disposed of.

Some of the features that will help you stay organized are product SKUs, barcode scanning, serial number tracking, lot number tracking, and batch number tracking.

Regularly Review Your Inventory

It is important to review your inventory regularly so that you can ensure that it is accurate and up-to-date. The benefit of following this practice is not only an improvement in your inventory management but also, it will help you solve any problems at their early stages, therefore letting you make necessary adjustments.

Some of the reasons why reviewing your inventory control regularly are important are:

  • It will help you ensure that you have accurate records of what you have on hand. This information is crucial for financial as well as customer service reasons, as discussed above.
  • It will help you identify trends, and make predictions about your inventory levels. These insights will help you in adjusting your ordering as well as stocking practices, such that it is the most efficient, productive, and profitable.
  • It will help you spot potential problems before they become serious, thereby keeping the ratio of your operating income higher than operating expenses, and your customers satisfied.

Regular tracking of your inventory will lead to a more effective and efficient inventory management system for your business in the food industry. In fact, due to this, you will have an overall more successful business with increased sales, income, and profits.

Learn Customer Behavior and Take Advantage of the Big Data

One of the most significant benefits of using big data is its ability to make accurate predictions, which in turn will boost your inventory management considerably.

Throughout the year, your customers will often show different buying habits for food and beverage products. While some of these will be more obvious to understand, for instance, seasonal holidays such as Christmas and Easter and their consequent traditions and buying habits.

But sometimes, there will be changes in their buying habits that you would not be able to catch or understand without data analysis.

Thus, to improve your inventory management, you should rely on data technology to stock items at the right time, thereby ensuring that you do not have too much or not enough inventory.

Once you keep track of how often you are restocking certain items, data technology will help you in identifying if there are any trends or patterns in your product flow and the reasons for the same.

The insights gathered will help you have a complete understanding of how your customers behave, thereby making it possible for you to stay ahead of the dry spells and mad rushes through the maintenance of the right inventory balance.

Having an inventory management system that helps you with such analysis and insights will be a boon for you as not only will it be automating key business processes, but it will also be helping you make better data-driven decisions. Overall, this will give you a competitive edge in an industry which has lots of competition.

Additionally, all this data will help you improve the efficiency of your inventory management by identifying problems that you might not even know existed. For example, identifying any processes or machinery that are not working at maximum performance, or providing guidance when something is due for repairs.

Several times, these problems are identified in the early stages, thereby giving you the time to take corrective actions and protect your company’s cash flow as well as net revenue.

Benefits of Inventory Management in the Food Industry

In an industry that is as dynamic, competitive, and challenging as the food industry, businesses like yours will benefit a lot by carrying out proper inventory management.

These benefits will amplify further when you use an automated, cloud-based inventory management system for the same. Some of the benefits of inventory management in the food industry are:

Less Food Loss

Studies have shown that restaurants waste up to 10% of food purchased by them, even before it reaches its consumers. This is because, without proper inventory management, businesses in the food industry end up buying more than they need, leading to spoilage and wastage, even before it reaches their customers.

However, this is prevented with proper inventory management, wherein the food inventory is maintained as per the demands and tracked regularly to ensure their expiration dates or use-by dates are not crossed and are stored properly so that there is no contamination or spoilage due to it.

Lower Cost of Goods

Generally, food costs make up 28% to 35% of the total costs for a restaurant. These percentages only go up when the food is lost or spoiled.

However, with inventory management, you would be able to lower your cost of goods sold as you would be able to optimize your inventory purchasing, storing, as well as use. This will maximize your profits while keeping your costs in check.

What will help the most to get here is demand forecasting and demand planning which is going to be a part of your inventory management.

Better Vendor Management

One of the other advantages of inventory management is that it will enable you to track your food and purchases more closely and efficiently, which in turn will enable you to better manage your purchases and payments to vendors. This in turn will improve your vendor management, as well as your relations with them.

Automatic Inventory Supply

Another benefit of an inventory management system is that it will give you insight into your business's food supply levels. This will let you take important decisions related to the replenishment of your supply levels, including keeping safety stock.

In fact, some of the inventory management systems also have features to create automatic processes that replenish the food supplies to the appropriate amounts, thereby being able to meet your customer’s demands, while also being able to avoid waste. This will not only help in managing your lead times with demands but also help you control your business expenses.

More Satisfied Customers

With inventory management, you will be able to have happier customers as you would have all the ingredients on hand that are required for all the dishes on your menu. This will encourage returning customers, while also improving customer retention.

Increased Profits

One of the major determinants of your net profit is the total cost of goods sold. Considering that with inventory management you will be able to decrease your waste, and control your operating costs, the cost of goods sold will be lowered, ultimately leading to an increase in profits.

Maintain Cash Flow

With inventory management, you will be able to largely ensure that products enter and leave your storage area quickly. Additionally, it will also enable you to keep your stock levels as low as possible while also ordering the precise amounts to replenish the supply and meet the demand.

This will help you maintain your cash flow, as well as even improve your cash flow as you would not incur additional storage and spoilage costs. Simultaneously, you will also be able to meet your demand, which will help you in earning gross profits.

Benefits of Implementation of Inventory Management System in Businesses in the Food Industry

Implementing an inventory management system will be a huge help for your business in the food industry. Among several of its benefits, this system will give you insights into your expenses and sales, which you cannot expect from manual tracking.

You should use such an inventory management system to connect back-end financials, POS, and your inventory in a cohesive cloud platform.

The several benefits of implementing an inventory management system in your business in the food industry are:

Real-Time Visibility into Inventory

Your inventory management system can integrate with your POS to track even a single order of a meal, and how that impacts your inventory. This will thus lead to higher accuracy in your inventory management.

Easy Tracking of Sales

When you integrate your inventory software with your POS system, you will be provided with in-depth insights about which of your items are most popular and profitable. This will help you in several of your major decisions.

Faster Product Recalls

Considering that your inventory management system will be tracking your inventory from the beginning till the end of its life cycle through batch tracking, serial tracking, barcode scanning, or even SKUs, in case you need to recall a batch of your products due to contamination or spoilage or expiration, you will be able to do this quickly.

This is because your system will help you know where the products which need to be recalled are. This in turn will preserve your brand image, as well as improve customer retention.

Tracking Promotions

You will also be able to use your inventory management system to track the success of your marketing, loyalty programs, and other promotions. This will help you in determining whether your sales velocity has increased due to it, or not. It will also help you determine the profitability of these promotions.

More Effective and Efficient Tracking

You as well as your employees will be able to use the inventory management system to efficiently and accurately track your stock digitally. Your stock will be updated in real time due to this system.

Automating Purchases

You will be able to use this system to automate orders of items when they reach a specified level. This will make sure that your customers are satisfied.

In-Depth Reports to Help Decision-Making

Your inventory management system will provide KPIs like financial KPIs, marketing KPIs, and so on. Additionally, it will also provide other relevant data like operational metrics, and business metrics. This will help you in making better decisions and thus, increase your profits.

Common Inventory Terms in the Food Industry

  • Bill of Materials - This refers to the list of raw materials, components, and assemblies required to build a product. Bill of materials is most commonly used in manufacturing and engineering and provides important information about the product like its size, cost, and weight. Sometimes, a bill of materials is also referred to as a product breakdown structure or product structure diagram.
  • Food Cost - This is the percentage of your total sales spent on food ingredients. For example, if your food cost is 40%, you are spending 40 cents of every dollar made in sales on food ingredients.
  • Landed Cost - This is the total cost that a product incurs from its point of origin to the final retail purchase. This includes transportation fees, duties, and any other associated costs. When making purchasing decisions, considering the landed cost is very important as it can significantly impact the final price of your product.
  • Yield Management - It is a strategic approach to pricing and selling inventory that considers demand, availability, and other factors.
  • Par Level - Par level refers to the minimum amount of inventory that you must have on hand to meet your customer’s demand.
  • Buffer Stock - Also known as safety stock, it refers to the extra inventory that you must keep on hand to ensure that you are able to meet your customer’s demand, even if there are unexpected spikes.
  • Stock Turnover - Also known as the inventory turnover ratio, this ratio measures how often your inventory sells (turns over) in a given time period. A business is found to be healthy when it has a high inventory turnover ratio.
  • First In, First Out (FIFO) - This is an inventory management method in which the items that you receive first, are also the ones that are sold first. This will help you in ensuring that your inventory is fresh and that there is a lesser risk of spoilage.
  • Just-in-Time (JIT) - This is an inventory management method in which items are ordered only as they are needed. This will help you in minimizing your waste as well as storage costs.
  • Cycle Counting - This is a method of inventory management systems in which a certain number of items are counted each day, week, or month, rather than counting all items at once. This will help you in ensuring accuracy as well as in the prevention of stockouts.
  • Sitting Inventory - This is the total amount of products that you have on hand. You can measure sitting inventory in your currency, or use another physical or unit measurement. Irrespective of how you calculate its value, it is important to stay consistent with that method.
  • Depletion - It is the dollar value of a product that your business has used in a specified period of time. You can track depletion daily, weekly, monthly, or over longer terms.
  • Usage - This is a measurement of how long you have before a product is entirely gone if you have not purchased any more. To calculate the usage, you will have to divide the sitting inventory of a product by the depletion rate for that product. For example, if you have 250 pounds of hamburger, and you use 50 pounds of it per day, then your usage will be five days.
  • Variance - Variance is often tracked as a percentage, and is the difference between the depletion of a product and how much your records say was sold. For example, at the end of a weekend, your inventory of pizza dough is down by 200 pounds. But, your POS system says that you sold pizzas that used 190 pounds of dough. Thus, the variance found is of 10 pounds (10/200) or 5%.
  • Yield - This represents the ratio of the amount of product your POS reports as sold, compared to the amount actually used. In the previous example, the POS said you sold 190 pounds of pizza dough when you had 200 pounds less of pizza dough. Thus, your yield here is 190/200 or 95%.

How Can Deskera Help You with the Food Industry’s Inventory Management?

As a manufacturer or retailer, it is crucial that you stay on top of your manufacturing processes and resource management.

You must manage production cycles, resource allocations, safety stock, reorder points, and much more to achieve this.

Deskera MRP is the one tool that lets you do all of the above. With Deskera, you can:

  • Track raw materials and finished goods inventory
  • Manage production plans and routings
  • Maintain bill of materials
  • Optimize resource allocations
  • Generate detailed reports
  • Create custom dashboards

And a lot more.

It is also possible to export information and data on Deskera MRP from other systems. Additionally, Deskera MRP will give you analytics and insights to help you make decisions.

So go ahead and book a demo for Deskera MRP today!

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Key Takeaways

The food industry is a little different from other industries with large inventories. This is because the inventory stock in the food industry is often perishable, which becomes a major determining factor in how businesses in this industry manage their inventory.

Food industry inventory management is the process of monitoring and maintaining stock levels of food company items in a commercial setting. It includes, but is not limited to:

  • Ordering
  • Receiving
  • Storing
  • Distributing food products

An effective food industry management system is one that will help your business keep track of its food stocks, minimize waste, and ensure fresh and safe products.

Some of the necessities and techniques of inventory management of businesses in the food industry are:

  • Batch and expiry tracking
  • Lot and serial traceability
  • Just-in-time inventory
  • ABC Analysis
  • Quick order fulfillment

However, this industry is one of the most dynamic and complex industries due to changing preferences of consumers, ever-changing regulating standards, and the perishability of food products. This makes the inventory management of businesses in this industry a whole lot more challenging.

Some tips for improving your inventory management in this industry are:

  • Know Your On-Hand Inventory
  • Keep Track of Expiration Dates
  • Rotate Stock Regularly
  • Store Food Properly
  • Do Not Overorder
  • Use a Just-in-Time Inventory System
  • Stay Organized
  • Regularly Review Your Inventory
  • Learn Customer Behavior and Take Advantage of the Big Data

The benefits of inventory management in the food industry are:

  • Less Food Loss
  • Lower Cost of Goods Sold
  • Better Vendor Management
  • Automatic Inventory Supply
  • More Satisfied Customers
  • Increased Profits
  • Maintain Cash Flow

One of the best ways to have an accurate, as well as resource-saving method of inventory management is by implementing an inventory management system like Deskera MRP. The benefits of the same will be:

  • Real-Time Visibility into Inventory
  • Easy Tracking of Sales
  • Faster Product Recalls
  • Tracking Promotions
  • More Effective and Efficient Tracking
  • Automating Purchases
  • In-Depth Reports to Help Decision-Making

Thus, make your business a success with proper inventory management using inventory management systems.

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