For efficiency, it is always best to identify general criteria that must be met by initial suppliers. In advance of actually talking to initial suppliers, below are some key elements to carefully consider.

• Price Range Expectations
• Quality Expectations
• Maximum and Minimum Order Quantities
• Required time frame for deliveries (i.e. amount of lead time from receipt of your order to delivery)
• Required or preferred delivery method
• Storage and handling methods
• General Payment Terms / Conditions
• General Return / Cancellation Policies

Based on the criteria you’ve identified, begin reaching out to a handful of suppliers. In addition to our network of vendors, below are a few channels / resources to help you find relevant suppliers.

1. Recommendations / ReferralsLeverage recommendations / referrals from your friends, family, business acquaintances, or any others with experience in the restaurant industry. Such individuals can also provide you with unbiased reviews for specific suppliers they have used.

Remember that suppliers, themselves, can also be a good source of recommendations / referrals even if you do not end up buying from them. While you shouldn’t rely solely on comments from a single supplier, don’t hesitate to ask for additional guidance from each. An experienced supplier will likely have additional contacts you can reach out to and can provide expert insights regarding your inventory.

2. InternetAlthough it can be overwhelming at times, the internet can offer a ton of initial leads. Search both local and national distributors within your area through internet directories (e.g. Google, Bing, YellowPages).

3. Trade Associations / Trade ShowsDespite the fees, joining a trade association (e.g. National Restaurant Association) or attending trade shows can help you identify and connect with initial suppliers. You can also seek feedback on specific suppliers or obtain general advice from other experienced restaurant owners in attendance.

4. Industry Consultants / Advisors If you have the budget, you should consider hiring an experienced restaurant consultant or advisor. Not only can they identify some of the best suppliers, but they can also help negotiate payment and delivery terms. Some professionals offer free initial consultations, so even if you can’t afford the hire, make sure to leverage the free advice when available.

5. CompetitionResearching where your competitors source their inventory is another way of identifying relevant suppliers for your restaurant. While it may be difficult to identify the exact terms that competitors have with their suppliers, finding out which suppliers or what type of suppliers (e.g. national supplier versus local supplier) they use is often possible and a good starting point for your own research.

After identifying a handful of potential suppliers, begin comparing them across multiple criteria, not just price. While price is obviously very important when choosing a supplier, there are other key considerations to keep in mind, including:

1. ValueThe lowest price is not always the best value for what you are paying. Make sure to weigh in not only the cost of the supplies, but also the quality, service, and reliability of a supplier.

2. QualityThe level of quality necessary for your inventory will depend on your restaurant concept. However, you should always ensure the quality you are aiming for will be consistent. If you happen to use inventory that is lower than the quality you initially paid for or what your customers already expect, your customers will ultimately blame your restaurant, not your suppliers.

3. Service / ReliabilitySuppliers should also be evaluated on their service / reliability. In other words, do they deliver inventory on time? Are they going to give you plenty of warning if there are delays or an issue arises. The best suppliers will want to communicate with you regularly and will always try to find ways to serve you better.

4. Reputation / Past Health IssuesResearching a supplier’s reputation is one of the best ways to ensure a supplier will perform in manner consistent with what they initially advertise. Try talking with a supplier’s past customers and investigate how they have performed with other customers. If you do not have access to a supplier’s past customers, you should request customer referrals from the supplier.

Also check to see if any of the suppliers you are considering have had food safety issues in the past. If they have, ask what they have done to avoid such issues moving forward. Remember when Chipotle had an e coli outbreak a few years back? Well, customers ultimately blamed Chipotle, not their suppliers.

5. AlignmentDoes a supplier have the same core values as your restaurant and your customer base? Remember that the more aligned a supplier is with your long-term interests, the more positive impacts they will likely have on your restaurant’s business. For example, if your restaurant contributes significantly to environmental sustainability, choosing a supplier that implements bad environmental practices can tarnish your restaurant’s reputation.

6. Financial Security Make sure that each supplier you are considering is financially secure and can deliver what you want, when you need it. The last thing you want is a supplier that suddenly goes out of business when you need them most. Implementing a credit check can help ensure a supplier is financially stable.

Tracking inventory means knowing exactly what items your restaurant receives, what items have been used in your kitchen, and what items are left over within a specific time frame. Without knowing these exact numbers, you won't be able to know exactly how much inventory goes unused, which also means you cannot determine your actual earnings for a day, week, month, or year. 

We highly recommend that you track your inventory on a daily basis. While inventory management software will help automate this process, it is still your responsibility in making sure the numbers are always accurate and up-to-date. 

To start, it is important to understand and measure the key inventory metrics below. In general, you should aim to minimize as much variance as possible and adjust your inventory orders to maximize usage without sacrificing quality.

1. Sitting InventorySitting Inventory is defined as the number of inventory you have in stock at your restaurant. Sitting inventory can be referred to as either numerical counts or dollars worth, but you should always make sure to stay consistent in your methodology. 

Sitting inventory can not be used to buy more inventory and until it’s sold, it simply represents a potential for profit. In addition to acting as tied up cash, sitting inventory can be prone to damage, spoil, or theft and, the more inventory you have, the more work it becomes to manage that inventory (e.g. stocking it, counting it and keeping track of it).

In general, you should limit the amount of sitting inventory in your restaurant as much as possible without risking shortages.

2. DepletionDepletion is the number (or dollars worth) of inventory used within a set period of time. It is a direct function of your restaurant's business activity and is often calculated using the sales reporting data from your POS system. A large part of your inventory decision-making will be based on depletion rates and trends. 

3. UsageUsage is the number (or dollars worth) of sitting inventory divided by the average depletion in a given period of time. For instance, if you have 20 gallons of milk (sitting inventory) and you plan to use 4 gallons a week (depletion), you have 5 weeks of milk usage.

4. VarianceVariance represents the difference between your actual and theoretical usage of a specific item. For example, let's say your steak inventory is reduced by $100 at the end of the day (actual usage cost), but your POS system says you only sold $90 worth of steak (theoretical usage cost). This results in a variance of $10, which also means $10 worth of steak is unaccounted for. 

For easier comparisons, variance can also be a percentage. In this particular scenario, $10 (the variance amount) / $100 (the actual usage cost) = 10% variance. According to statistic provided by Toast, the average restaurant has a 2-5% variance. 

While you should always aim to limit your inventory variances, they are a natural part of the restaurant business. For example, a server / cook can accidentally ruin a large batch of food or the cancellation of some big event leads to waste. Regardless, always investigate significant variances from expected usage as it could also represent theft.

Once you create a system for tracking inventory, you will also need to analyze the numbers you track. A common way in which restaurants do this is by setting pars for each of their items and adjusting supply orders based on current par levels. 

A par is the amount of each item you need on hand to satisfy usual production demands between vendor orders. In other words, par levels represent the minimum amount of a certain supply that must be on hand at all times. When your inventory stock falls below a predetermined par level, you know it’s time to order more. Your par levels will help in maintaining accurate and consistent inventory levels, so they should always be updated to meet your restaurant’s current business. 

Below are some tips to help you identify your par levels.

• Analyze your sales by periods (e.g. weekly is common)
• For each period, track how much of each supply was used. Compare this number to previous periods, and adjust for expected future growth (e.g. multiply by 1.1 if sales are growing 10% between periods)
• Add a small amount to create a margin of safety. You should base this margin on historic spikes in your restaurant's business
• YOU SHOULD BE UPDATING YOU PAR LEVELS CONTINUOUSLY. Note that it is much easier to make par updates with the help of good inventory management technology / software that stores historical data. Some even allow you to generate forecasts based on expected sales

Despite the up-front research and decision-making required, setting par levels will create a system for ordering your supplies. Not only will it make it easier for you to make decisions quickly, it will allow your staff to make decisions on your behalf.

Below are 5 common best practices to implement when managing your inventory.

1. First In, First Out (FIFO)FIFO is a popular accounting system used to value inventory for tax purposes. Under FIFO, inventory is valued at its most recent cost and the goods you receive first are the goods you sell first. 

From a restaurant’s perspective, FIFO means your restaurant should leverage your oldest dated supplies first (unless quality does not meet your standards of course!). In other words, when a delivery is made, make sure the newest supplies are put behind the supplies you already have in stock.

Implementing a FIFO system helps to insure product quality and reduce waste.

2. Establish a Specific Policy / Schedule Many restaurants review their inventory daily or even in real-time, and almost all restaurants do it at least weekly. Specify the exact inventory records that need to be kept and make sure you allocate time specifically for reviewing and analyzing your inventory. It’s often easy for inventory time to slip past you if you don’t plan it into your schedule. 

3. Involve / Educate Your StaffIn addition to the work that you as an owner will do, implementing inventory management will generally require some involvement from your staff. This means you should be educating your entire team on the value of having accurate inventory levels and reminding them how inventory management impacts not only your business as a whole but also them as individual employees (e.g. inventory management is correlated with restaurant success and restaurant success generally means job stability and higher compensation for your employees).

After educating the broader team, we highly recommend designating at least one party to be specifically responsible for inventory management. Doing so can help to promote consistency and efficiency when making inventory management a regular routine. In addition, allocating special importance to such tasks helps communicate to your broader team that maintaining accurate inventory is critical.

4. Contingency PlanningIn the restaurant industry, it’s often not a matter of if problems arise, but when. Thus, always try to identify where possible inventory issues may pop up and prepare contingency plans in advance. This means summarizing how you will react and the specific steps you will take to solve the problem. 

5. PrioritizationIn most restaurants, some inventory items will likely need more attention than others. As such, it is always best to prioritize your inventory management. For example, you can implement inventory reviews for critical, higher cost / higher usage items (e.g. meats and produce) on a daily basis versus a weekly basis used for less critical, lower-cost / lower-usage items.