Fix Your Food Cost Problem, Part 2 – Purchasing, Storage and Stock Management
Use the crisis of rising prices to create better purchasing, storage and stock management systems. Want the Action Sheet ? Click Here
Food costs, recipes and menu profitability are a big topic, so we’re covering it in two parts. In this second article, we look at purchasing, storage and stock management. In the First Article we look at how better counting, weighing and menu management will help reduce food cost problems.
The price of supplies has risen dramatically in the last 12 months – dry goods, meat, seafood and vegetables. We want to keep offering our favourite recipes, done the way we always have. And we fear that menu prices might lead to customers going elsewhere – even though our competitors face the same issues. Better cost control is essential.
There are also security issues: food and alcohol have good ‘street value’, and poor storage and stock management systems can tempt people to be dishonest. Tight stock management systems help you run a profitable venue, with everyone on the same track.
Let’s work to improve purchasing and stock management…
Double Check the Expensive Proteins
List meat, seafood, dairy and nuts on a spreadsheet, then sort weekly purchase totals from biggest spend to least and see where most of your money goes – this gives you a priority list.
Check recipe portion sizes are being followed – 150g of fish, not 180g!
Check the recipes that use the expensive ingredients – a recipe costing system will help tell the truth. Eg Restoke, recipe software or spreadsheets.
Reduce your Stock of High-Cost Items
The fridge and freezer is where 80% of product value is stored. Do you really need to hold enough for a week, or is 3 days enough?
Set Par Levels for expensive Items – minimum quantities to be held before re-ordering is done. This eliminates over and under-ordering, both of which are expensive.
If you don’t stocktake regularly, a one-off, totally honest counting session will reveal many surprises. Organise the lists, the scales and an early start on the day you do it.
Stop the quick trips to the supermarket or 7-Eleven… at twice the price! A ban on emergency shopping will have some short-term pain and force an improvement in ordering.
Double down on stock security – are there enough locks and security cameras? Check the article on Improving your Receiving System.
Discuss your Food Cost Problem with Key Suppliers
Make time for a fresh, honest conversation with your key suppliers – when you can both sit quietly without interruptions. You may want to include the chef, but this needs to be run by the business owner.
Prepare to meet by working out monthly and annual purchase totals for each vendor – it may be way more than you realise!
Be ready to negotiate in a new way – will they offer a better deal if you give them all your business for a year, rather than spreading it between two or three suppliers?
Work to eliminate ‘buying friction costs’ – delivery times, daily delivery, your rules about no substitution, their rules about minimum orders, payment terms, how they communicate with you and how you order. If you help reduce the supplier’s costs, those should flow on to you.
Taking time to focus on the ‘food cost problem’ will give you an immediate payoff, through reduced stock holding and better prices for many, if not most of the ingredients you buy. It also brings your staff in on the ‘crisis’, and makes them aware of the real cost of running a business – the more you can open your books with this, the better.
Now’s the time to go through supplier invoices line by line, and meet with your suppliers. Who’s going to do this? Chances are the chef doesn’t have the time or experience – they can run the stocktake system you set up, but negotiation with suppliers should be led by the owner.
Want to get some 1 on 1 help? Talk to one of our coaches
Want the Action Sheet ? Click Here
Food costs, recipes and menu profitability are a big topic, so we’re covering it in two parts. In this second article, we look at purchasing, storage and stock management. In the First Article we look at how better counting, weighing and menu management will help reduce food cost problems.
The price of supplies has risen dramatically in the last 12 months – dry goods, meat, seafood and vegetables. We want to keep offering our favourite recipes, done the way we always have. And we fear that menu prices might lead to customers going elsewhere – even though our competitors face the same issues. Better cost control is essential.
There are also security issues: food and alcohol have good ‘street value’, and poor storage and stock management systems can tempt people to be dishonest. Tight stock management systems help you run a profitable venue, with everyone on the same track.
Let’s work to improve purchasing and stock management…
Double Check the Expensive Proteins
List meat, seafood, dairy and nuts on a spreadsheet, then sort weekly purchase totals from biggest spend to least and see where most of your money goes – this gives you a priority list.
Check recipe portion sizes are being followed – 150g of fish, not 180g!
Check the recipes that use the expensive ingredients – a recipe costing system will help tell the truth. Eg Restoke, recipe software or spreadsheets.
Reduce your Stock of High-Cost Items
The fridge and freezer is where 80% of product value is stored. Do you really need to hold enough for a week, or is 3 days enough?
Set Par Levels for expensive Items – minimum quantities to be held before re-ordering is done. This eliminates over and under-ordering, both of which are expensive.
If you don’t stocktake regularly, a one-off, totally honest counting session will reveal many surprises. Organise the lists, the scales and an early start on the day you do it.
Stop the quick trips to the supermarket or 7-Eleven… at twice the price! A ban on emergency shopping will have some short-term pain and force an improvement in ordering.
Double down on stock security – are there enough locks and security cameras? Check the article on Improving your Receiving System.
Discuss your Food Cost Problem with Key Suppliers
Make time for a fresh, honest conversation with your key suppliers – when you can both sit quietly without interruptions. You may want to include the chef, but this needs to be run by the business owner.
Prepare to meet by working out monthly and annual purchase totals for each vendor – it may be way more than you realise!
Be ready to negotiate in a new way – will they offer a better deal if you give them all your business for a year, rather than spreading it between two or three suppliers?
Work to eliminate ‘buying friction costs’ – delivery times, daily delivery, your rules about no substitution, their rules about minimum orders, payment terms, how they communicate with you and how you order. If you help reduce the supplier’s costs, those should flow on to you.
Taking time to focus on the ‘food cost problem’ will give you an immediate payoff, through reduced stock holding and better prices for many, if not most of the ingredients you buy. It also brings your staff in on the ‘crisis’, and makes them aware of the real cost of running a business – the more you can open your books with this, the better.
Now’s the time to go through supplier invoices line by line, and meet with your suppliers. Who’s going to do this? Chances are the chef doesn’t have the time or experience – they can run the stocktake system you set up, but negotiation with suppliers should be led by the owner.
Want to get some 1 on 1 help? Talk to one of our coaches
If you cut weekly food costs by 1%, what would you save in a year?
One week of food costs = $______ – divide by 100 = $______ X 52 = $________
If you cut weekly beverage costs by 1%, what would you save in a year?
One week of beverage costs = $______ – divide by 100 = $______ X 52 = $________
Check the other useful blog posts on the Foodie Coaches website…