Expert Advice on Hospitality Topics

Better Inventory Management Equals a Better Bottom Line

Posted by Nick Kaoukis on Mon, Feb, 28, 2011 @ 09:02 AM
By Elizabeth Godsmark
Atlantic Publishing

Part 3 of 6: Good Liquor Inventory Management Improves Cash Flow and Maximizes ProfitsCash Flow

Inventory Levels Affect Cash Flow

The aim is to maintain that fine balance between J. running out and holding too much stock. Get it wrong, and you'll find that your working capital isn't working for you! Remember, the larger your inventory, the more difficult it is to control.

  • Keep inventory at a minimum level. But not so low that you risk running out. Recommended inventory for high-turnover brands is approximate­ly one to two weeks' worth of stock.
  • Jump in with special promotions. If you think you've miscalculated and overstocked, shift the inventory sooner rather than later, while it still has high value.
  • Get to know the drinking patterns of your regular patrons. This information helps you calculate the bar pars or minimum inventory levels for each bar and the main stockroom.
  • The perpetual inventory is a valuable tool. Keeping tabs on the flow of liquor, wines and beverages through your operation is probably the best way of knowing where to pitch inventory levels. Monitor stock daily.
  • Weekly deliveries. In the drinks industry, this is the norm. Work your inventory levels around these weekly deliveries and avoid the cardinal sin of running out.

Manage Your Stock Wisely and Maximize Profits

Your challenge, in a nutshell, is to order liquor, wine and other beverages in the right size and quantity and at the right time and price.

  • Inventory deliveries - timing. Schedule well liquor, beer and house wine deliveries for the same day each week, ideally a couple days after you place the order.
  • Well liquor quantities. Order items with a short turnover rate, such as well liquor, in bulk. Well liquor moves fast, offering you a great opportunity to boost cash flow. Take advantage of case discounts. Also, consider larger 1.75-liter bottles instead of the usual 1-liter bottles if you think your turnover warrants it. There are big savings to be made in this area. Use larger bottles for special promotions.
  • Beer is different. In order to sell beer at its freshest, arrange for deliveries on a weekly basis, or dally, if your establishment has the capacity to cope with the extra workload. Little and often is better when it comes to maximizing on beer profits.
  • Wine. Order house wine weekly, other wine bottles by the case once a month. Only buy special vintage wines once or twice a year. Take a specialist's advice before stocking up on expensive wines. They can cost you dearly.
  • Liquor and liqueurs. The following is a useful guideline: If it takes less than five weeks to turn a product, order by the case. If it takes longer than five weeks to sell a particular brand of spirits, order by the liter.

Topics: Bar inventory, bar inventory levels, Bar Management