Operations: The Simple Life

Operations software makes manually monitoring inventory and estimating recipe costs tasks of the past.

By Derek Gale, Associate Editor -- Restaurants & Institutions, 4/1/2007

Loews Hotels says its investment in inventory-control systems for wines and food has increased operations efficiency.

As recently as last year, New York City-based Loews Hotels relied on manually compiled reports and basic spreadsheets for food-and-beverage control and inventory management. The reports were so labor intensive that employees completed and immediately shelved them without reviewing reports for problems or ways to save money. Loews executives knew something needed to change.

A companywide rollout of procurement and inventory-control software since has replaced the "time-consuming and often inaccurate process of taking physical counts," while enabling the chain to determine where money is tied up in inventory that isn’t moving, says Zack Miller-Murphy, vice president and controller. "It’s hard now to imagine our operation without this software," he says.

Some data-entry chores remain, but as long as employees are diligent about proper and timely use of the system for products ordered and requisitioned, Loews can keep up-to-date on inventory, information that previously could have taken days to determine.

With sales recorded electronically and handheld scanning devices that read bar codes to speed counts, the entire process is streamlined. "Automating the process frees us to analyze and react to results, rather than spending time just tabulating results," Miller-Murphy says.

Loews now relies more on perpetual inventory values versus physical counts, and through improved controls that the system provides, the company has been able to reduce food-and-beverage costs at hotels by more than 1%. "In total dollars it is significant, and represents about a five-month payback on the system," Miller-Murphy says.

Know Where You Stand

"If you don’t know what you have after a day, week or month’s worth of buying and selling, you may as well wrap your silverware in $5 bills," says Christian Struck, food-and-beverage director for New Canaan, Conn.-based Ri Ra Irish Pub and Restaurants. Managing inventory is a metric by which profitability can be measured, he explains: "It can be the difference between pulling down that extra 3% to 4% a quarter when you can see what’s coming in and where it’s been going."

The 8-unit Ri Ra uses operations software that includes database-driven inventory control. With this type of system, "it’s important for the user to realize that the information generated is only as good as the data going in," Struck says.

For that reason, Ri Ra spends time training managers how to properly enter invoices and prep-and-portion registries and follows with training on using the reports to help run the business.

The software has saved the company money by providing instantaneous feedback on projected costs for items at the retail level, Struck adds. "We can quickly audit cost-of-sales information for specific periods or menu categories and make adjustments to recipes or pricing. We also benefit from being able to compare purchase pricing across units, which makes us prudent in bidding out companywide contracts."

Learning From the Past

At Salvatore’s Italian Gardens in Depew, N.Y., the chef used to come in each day, take a look around the kitchen, and decide what he needed to order. After installing procurement and inventory software, there are purchase orders for everything, costs are known in advance, and there are fewer mix-ups and substitutions, says owner Joe Salvatore.

"To me, the biggest advantage is having that history available at a couple of clicks, without going into a filing cabinet," he says. Salvatore and his purchasing team track top-moving items to see if they might be purchased in larger quantities; historical prices help determine how they might purchase items to get the best price.

He also appreciates the ability to cost out every banquet function. With an up-to-date inventory, he can track bartenders’ pours and any food shrinkage to help control loss. "We’ve cut food cost over 3% within the last year. Our liquor cost also has dropped," Salvatore says. "We’re a $5 million operation, so if we save a percent here or there, it adds up."

Miller-Murphy seconds that sentiment. "Aside from labor, inventory probably is the largest expense in a food-and-beverage operation’s financial statements," he says. "It makes economic sense to utilize the best tools available to control these costs, and to ultimately provide a higher level of product by monitoring F&B inventory through the use of such technology."