Inventory shrinkage – the mysterious disappearance of your supplies without corresponding sales – can be a significant cost for any business, but it’s a particularly acute problem in the restaurant industry where perishable goods and a large number of moving parts can muddy the waters and make it difficult to discern its source. 

Shrinkage can occur in multiple areas of the business – employee theft, over-portioning, waste or spoilage, and it all has a cascading effect on your bottom line. This guide will highlight the most critical areas to be aware of and equip you with the tools and insights you need to start preventing shrinkage in your restaurant.

Defining Inventory Shrinkage

Inventory shrinkage refers to the contrast between your recorded inventory levels and the actual count of projects. 

It is the unaccounted-for reduction of inventory and can occur at any stage of your operations – from the point of delivery to the point of sale. Recognizing the three primary types of shrinkage is the first step in tackling this issue head-on. 

Known Shrinkage

This portion of shrinkage is identifiable but not typically recorded or attributed to a singular cause. Perhaps a new pre-made appetizer has arrived, and the chef prepares a few pieces to ensure quality and understand the new offering. Or, when trimming a side of beef, the excess bones, fat, and meat (otherwise known as trim) represents a type of known shrinkage. 

Human Error

Sometimes food gets excessively charred and never makes it to a guest table – this is an example of human error generated shrinkage. Another example could include improper portions. For example, overpouring liquor at a rate of 1 ounce per drink could equate to a 20% loss of revenue on a single bottle. Similarly, providing extra food on a guest’s plate may gain appreciation, but disrupts established plate costs and, in the case where you share caloric information with guests, reduces accuracy. 

Less purposeful forms of human error shrinkage include spoilage and waste. Over-ordering product or stocking for production of menu items that are rarely ordered, causing spoilage, are two additional examples of shrinkage.

Theft

The most insidious form of shrinkage is theft and is often the most challenging form of shrinkage to tackle. Delivery drivers could skim product off deliveries, employees could be removing product from the kitchen, and even customers may resort to theft of things like glassware, cutlery, and other pieces of inventory.

Instigating Shrinkage Control Procedures in Your Operation

Now that you understand the potential sources of shrinkage in your restaurant, you can take several steps to reduce or even completely eliminate it. 

Training to reflect expectations. Educate your team about the value of your inventory and the cost of improper management. Regular training on portion control and waste reduction should be mandatory and recurring throughout the year. 

Establish inventory systems. No one (okay, very few people) enjoy taking inventory. But there’s a reason it is a best practice in well-managed restaurants – it’s a critical accountability tool. Proper inventory can help teams spot trends and hotspots for shrinkage more quickly. Procedures should be well-documented and communicated to all staff. Best practices should include: 

• Utilizing technology like inventory management software. 
• Implementing First In, First Out (FIFO) methods which prevents spoilage and waste.
• Regular data analytics to spot trends and outliers, following up with appropriate action.

Conduct audits. Regular, surprise cash or inventory audits keep your employees on their toes and deters employee theft. 

Security cameras in the right places. Installing security cameras or even conducting bag checks in extreme circumstances help ensure employees and customers are not lifting inventory. Think about the blind spots in your operation and consider bolstering your security accordingly. Look at places like delivery areas, entry points, storage areas, and other high traffic back- or front-of-house areas. 

Inventory shrinkage, although a challenging prospect, is not an insurmountable issue. By diligently implementing the measures laid out in the guide, you’re ensuring that your restaurant is financially secure and operationally efficient.

Remember, the key to mitigating shrinkage is proactive management, continuous monitoring, and fostering an environment of accountability within your establishment. By maintaining persistence and consistency, you can significantly reduce, if not entirely eliminate, inventory shrinkage.