Manage Your Inventory Variance, Not Just Your COGS

I understand my COGS amounts, now what?

The restaurant business has managed their teams into the real COGS numbers. The age old equation,

Starting Inventory + PurchasesEnd Inventory = Utilization .

Usage/Sales=COGS.

The most prosperous operators understand this is just part of the equation. Understanding the Theoretical Cost or”perfect performance” and how far off the staff is from achieving their objectives, using a TvA style report.

Sources

https://www.connectpos.com/integration/

https://www.connectpos.com/shopify-pos/

https://www.connectpos.com/magento-pos/

https://www.connectpos.com/bigcommerce-pos/

The savvier operators utilize systems (such as Decision Logic) to make sure that this information pushes actions for the staff to actually begin managing these discrepancies.

Example: If I am managing my greatest expenditure by just COGS, so many things can influence that.

The purchase price of the items on the menu vs commodity cost.

Once I made the menu item, the COGS was 17%, now it is 27%. Can I raise prices? Or do I locate a more cost-effective solution to the components to bring price back down? Managers aren’t typically in charge of making these decisions, if they and their bonuses be held hostage to this?

The menu combination, or what guests are ordering.

We can suggestively sell. We are able to menu engineer to direct guests to the greater ROI items or reduced meals COGS items, but finally can’t”control” what they purchase. If I am managing only by COGS, my Salad and Chicken heavy shops will operate a better Food COGS because of lower COGS% products, but are they doing better? We need the TvA or IvA for that.

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If your system monitors Food Cost by last purchase price or market value, you may notice extra swings in COGS. Decision Logic will appreciate your Theoretical, your Actual, along with your Variance with a FIFO methodology letting you realize your price changes within the COGS. This gives managers a clear picture of what is happening to their COGS.

You definitely need to give your team tools to boost their profitability, enhance their confidence in the resources, and help them effectively manage their greatest spend classes.

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So, I have received my orders and posted my stock. I understand my COGS is large, now what? (OR) I have all this information, now what?

Most systems must show you a top 10, 20 or all for your variance. In the very least they ought to show you your variance between your theoretical and real cogs by account category.

All of us understand the accounting equation: Starting Inventory + Buy (orders) — Ending Inventory = Utilization. Usage/Sales = cogs. This is our Actual for the Theoretical versus Actual COGS.

Start with your top 10-20. Dig into each item. Assess your data entry, as garbage in equals garbage out. Are my start and ending counts true? Are my purchases true?

Next, are my recipes right? Most systems attach your theoretical use to your POS id’s to recipes constructed from the system, thus saying every hamburger gets an 8 oz patty, slice of cheese, slice of lettuce, 2 slices of tomato, and a bun.

All that checks out. Now, we begin making correlations.

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More information

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Are we monitoring our waste?

Decision Logic includes a waste sheet log in our app.

Waste by menu item or ingredient/prepped thing

By reason

Start seeing your waste by reason and address opportunities to improve

$284 in mis-rings? Preview tests, people!

$184 in lost food? Slow down!

Do I know my recipes?

My portion to get a side of fries is 6 oz — what exactly does that look like?

Is everybody portioning correctly?

Enter the restaurant and watch operations…wow, our staff is portioning 7.5 oz of fries. That is 1.5 ounces too much for EVERY. SINGLE. ORDER. That adds up fast.

The system says we’re”growing” a product or have adverse usage.

This is a garbage in/garbage outside dilemma.

We assemble the recipes to our back office system based on the recipe card made by our chefs. Examples:

we’ve got a recipe which has a cream-based sauce and requires a 4 oz ladle to pour that sauce in the sauté pan. The recipe says 4 quantity oz, and we enter that into our back office. Operationally speaking, we’re intending for this to be a 4 ounce (v) part in this recipe, however, in implementation, only two ounces of this sauce comes from the ladle to the pan. The recipe really utilizes 2 ounces and maybe 4. In the system, it reveals growth.

We use chicken tenders as a merchandise from our distributor. This is a pre-cut chicken product that we’ll bread in house and fry to market. However, 1 day we run from the proportioned merchandise and use arbitrary chicken to produce the tenders and market them that way. We’ll have additional loss on arbitrary chicken — not put up to deplete the chicken fingers, and develop chicken tenders. Maybe dollar for dollar this isn’t a problem, but the system will show that the variance.

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So, we discovered waste difficulties. Now what?

Sexy thing inventories can narrow down issue items daily and sometimes by change. This can help you identify training opportunities and/or theft difficulties.

We can monitor daily counts or hot thing inventories company-wide. We also can assign a couple of store-specific problem items on a store-by-store basis.

Another training opportunity.

We’re wasting 30 5lb. Bags of chips in a week. Prove the groups how many French Fries that’s visually–catch 30 5lb. Bags and allow them to see what that looks like.

Consider the recipe. 5 oz is a portion. Operationally go before the team and calibrate their eyes and hands. Reset staff expectations to what a percentage looks like and make sure everybody is implementing to that standard.

More

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Disclaimer: Aucarreview is the first product of ConnectPOS in the ecosystem, making transactions in physical stores become easy and automatic. It enables consumers to click and collect, synchronize information across platforms and devices and have a seamless shopping experience. It also helps retailers digitalize customer behaviors, track data in real time at customer touchpoints and provide intelligent business recommendations.

See our products: Magento pos integration, Shopify POS app, BigCommerce POS, Woocommerce pos, Multi source inventory management and Retail Pos

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