June 18, 2019 Modern Bar Inventory Solutions Can Leverage Your Efforts to Boost Profits
Taking inventory isn’t the most exciting task performed at your bar, but it’s crucial to running your business. Fortunately, modern inventory systems can make this process faster and more efficient. In addition, many third-party inventory providers can deliver data that will help you identify products which are underperforming. By addressing the issue causing this poor performance, you can significantly improve your bar’s profitability.
There are three different things that your bar inventory efforts can address:
- Determine what you need to order – This is the most basic function associated with bar inventory. It involves seeing what you have on the shelves and determining how much you need to order to avoid running out of product.
- Calculate your liquor cost – Liquor cost is the figure that tells you how much is spent purchasing product for every dollar of sales generated. For example, if you have a 20% liquor cost, it means you’re spending 20 cents purchasing product to generate $1 in sales.
- Monitor performance to improve profitability – This is the most sophisticated function associated with bar inventory. By comparing what was poured vs. what was sold, you can identify products that are underperforming due to drinks being given away or poured incorrectly. Addressing this can significantly reduce your liquor cost, which will make you a lot more money over time.
The right inventory solution for you depend on the goals you’re looking to achieve. There are a variety of advanced systems that can speed up the process, automate your ordering and make it easier to calculate liquor cost. However, if you want to reach this third level of the inventory process and leverage your efforts as a profitability tool, you’ll need to choose a system that allows you to compare what was poured vs. what was sold down to the serving.
Old School Inventory Methods: Time to Retire that Clipboard
There are still many bars using old school inventory methods. This typically involves picking up a bottle and estimating how much liquor is left in it. For example, if a bottle of Jack Daniels is 40% full, you’d write down .4 on a clipboard.
This is a clumsy process. You have to take time searching for the Jack Daniels line on your spreadsheet to record that .4 value. You then need to count all the extra bottles contained behind any other bars and in your storage area, and record these counts as well. This could result in recording multiple counts for every product. Once this is done, you have to manually transfer this information into an Excel spreadsheet.
There are several problems with using this old school clipboard method:
- Time consuming – Everything must be done manually, which takes much longer than modern software which can automate many aspects of this process.
- Prone to errors – Due to all of the manual data recording and transfer, your likelihood of errors is much greater.
- Provides minimal value – The end result isn’t very useful because it doesn’t break down the performance of individual products, preventing you from using your inventory efforts to improve profitability.
Technology can Address these Problems
Bar-i has been providing inventory services to bars and restaurants for over 10 years. We’ve performed over 8,000 inventory audits across 25 states, and we have extensive experience doing inventory for bars of all sizes and concepts. We’ve seen first-hand that technology holds the solutions to the problems associated with the old school inventory process.
From our experience, the average bar is missing 15-20% of everything that’s being poured. In other words, out of every 100 servings being poured, 15-20 of those aren’t generating any sales revenue. While this amount of missing product is costly, the missing retail dollars associated with this lost product is exponentially detrimental to your bar’s profitability.
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Modern Solutions to Perform Physical Inventory
In order to address these problems, the use of full-service inventory systems has historically been the go-to solution. With these options, a third-party inventory provider comes to your bar once per inventory cycle. They do all the counting for you, and then they reconcile your purchases and deliveries in order to compare how much product was poured vs. sold during that period. One of the most prominent full-service bar inventory providers is Bevinco/Sculpture Hospitality. Bar-i also offers full-service inventory options in certain parts of the country.
These full-service systems provide extremely effective results and can significantly improve your bar’s profitability. However, these options are typically very expensive. In addition, the use of a third party to count your inventory can create a contentious environment where the staff feels like someone is coming into the bar to check up on them.
Recent inventory innovations provide a more cost-effective way to achieve your goals. These include:
- Self-service, app-based systems
- Hybrid systems
- IoT (Internet of Things) systems
Self-Service Inventory Systems
Self-service (DIY) systems allow you to keep this task in-house using your phone, laptop or other mobile technology to perform inventory counts. Examples of app-based, DIY inventory systems include Partender, Bevager and BevSpot.
These options are attractive because they significantly cut your costs and allow you to perform inventory audits on your own schedule. The main challenge with these systems involves execution. Many of the self-service apps don’t use barcode scanners, making them hard to set up. It can also be problematic to change the products being counted as your bar adds new items to the menu.
Additional drawbacks to app-based, self-service systems include:
- Many of these systems don’t use scales to weigh bottles, making them less accurate. They utilize a digital tenthing method. While this is faster and more efficient than old school tenthing with a clipboard, it isn’t any more accurate.
- The user isn’t an inventory expert. Usually, this task is performed by a bar manager who only spends a small portion of their time performing inventory, compared to third-party inventory providers who specialize in this task.
- One of the most important purposes of the inventory process is to check up on the overall performance of your bar. Having a person involved in the bar’s operations do the checking without any oversight creates challenges since they are essentially evaluating their own performance.
- Additional challenges are created when used by multi-location bars. When inventory at different locations is handled by different people, it will always be performed using a slightly unique process at each location, even if you’re using the same software. This makes it hard to get an accurate comparison of the performance at each location.
Hybrid Inventory Systems
Hybrid inventory systems try to take the best aspects of full-service and DIY options, blending them to provide the effectiveness of full-service audits with the cost savings associated with self-service systems. Bar-i’s most commonly used product is our hybrid inventory system.
An important component of a hybrid system is that you have an independent inventory expert to help you with the data. After your staff collects the data, the third-party expert evaluates this information to see where errors may have been introduced in the counting process. These potential errors are then presented back to your staff in a variance report, allowing all actual errors to be identified and corrected quickly and easily before all the data is analyzed. This provides a more efficient way to correct errors and ensure all inventory reports are as accurate as possible.
The Bar-i hybrid system also gives users the benefit of hardware (barcode scanners and scales) in addition to dedicated counting software. This makes the process more efficient, accurate and fast. After you’ve finished counting, you run a sales report and gather your purchase invoices so that we know what was delivered. We then take all of this information in order to evaluate the data and provide a detailed report highlighting the performance of every product sold at your bar.
IoT Systems and Other Modern Inventory Options
There are also several IoT (Internet of Things) inventory solutions available. These provide real-time counting and feedback as drinks are being poured. They are most commonly used with draft beer products. Some of the most common real-time IoT inventory solutions include:
- SteadyServ – This system places scales
under each keg to monitor how much beer is remaining.
- US BeerSAVER – With this service,
flowmeters are placed into draft beer lines to measure dispensing in real time.
- KegSafe – KegSafe uses ultrasonic
transducers to measure the liquid level inside the keg in real time.
- Berg – This option uses radio frequency
(RF) microchip technology and wireless liquor dispensers to control pours and
track usage data for liquor bottles, beer kegs and wine bottles.
- BarVision – BarVision uses flowmeter
spouts to monitor the performance of liquor products in real time.
These IoT options provide accurate and effective ways to monitor the performance of your products in real time. However, the main challenge we see with these solutions is that full liquor bottles, beer bottles and wine bottles don’t lend themselves to being effectively measured in this manner. In addition, the integration with your POS system may be more challenging. As a result, IoT solutions often require more management by your staff, which often leads to variable levels of execution.
Some restaurant accounting platforms, such as Compeat and Restaurant365, offer inventory integrations. However, they don’t tend to have as good of a user experience as dedicated inventory software products. Also, while they can help you calculate liquor cost, they often don’t have the capability to evaluate the performance of each individual product sold at your bar. This prevents you from leveraging your inventory efforts as a profitability tool.
The Right Inventory Solution Depends on the Unique Needs of Your Bar
If you’re still using a clipboard to take inventory, you’re losing money and wasting time with your efforts. It’s worth spending a little time evaluating these advanced inventory systems in order to see which one will provide the greatest benefit to your bar.
The right solution for you will depend on your sales volume in each product category (draft beer, bottled beer, liquor and wine) as well as your goals for your inventory efforts. If you just want to save time and streamline the inventory process, just about any of the options discussed above will deliver effective results. However, if you want to improve your profitability, you’ll need to choose an inventory system that provides the detailed data necessary to compare what was poured vs. what was sold for every product you serve.
Article provided by Bar-I