On top and in control

Published in Bar & Beverage Business Magazine, Winter 2010:
An online dictionary defines inventory control as "supervision of the delivery, availability, and utilization of an organization's inventory in an attempt to ensure adequate supplies and at the same time minimize expenses caused by theft, spoilage or excessive stock."

For bar operators, the term can be defined more simply as knowing what you’ve ordered, what you paid, and how much you've used.

Knowing those things is the key to maximizing efficiency by seeing that, as near as possible, the volume of product you bought equals the volume sold.

Any shortfall between inventory and volume sold is reflected in your establishment's profit. Or, as Fraser Brooks of InfoSpec Systems (maker of Profitek software) so succinctly puts it, "Anything you can do to reduce that shortage goes right smack dab on your bottom line."

So inventory control includes keeping track of purchases, keeping track of your bar’s sales, knowing when to order more supplies, and trying to prevent “slippage” in what you have in stock.

You might say it’s a mighty tall order. Fortunately, Canadian companies are ready and able to help out with products and services to make inventory control much easier.

In and out

CLR Concepts’ Leena Lowe distinguishes purchasing control – knowing what you've bought and when to buy more – from the rest of inventory control. In fact, she thinks of them as pretty much separate things.

Purchasing control is obviously crucial to running a successful business, she says, as "you never ever want to be in a position where you’ve purchased too much, because that’s just costing you money. And you never want to be in a position where you haven’t purchased enough, because then you’re losing sales.

“Inventory control is tied into it,” she continues from her office near Vancouver, “but it’s kind of a different question.

“When I hear people talking about inventory control, what I’m really hearing is them saying ‘What am I going to do to make sure that my inventory is not walking out the door?’ That’s a whole different question.”

Inventory loss can come in other forms, of course. Some may be lost to everyday spillage, for instance. But industry research has shown theft and fraud to be taking a sizeable bite out of bar and restaurant revenues.

Lowe often hears bar operators express concern about how much profit is being lost due to employee dishonesty.

“I guess the question then is, How do you control your inventory? And the only way you can do that is by monitoring the usage. And that’s where it ties into purchasing, because if you purchased 30 cases of Budweiser and you, according to your computer, have sold five cases, you should have 25 cases left. If you don’t, you have an issue.”

Lowe says Clear POS, made and sold by CLR Concepts, has proven a useful ally in inventory control.

Clear POS includes inventory control as “an integral part of the program,” Lowe says. “When you have a choice between buying our POS system and somebody else’s, often ours is not necessarily the cheapest. The reason people go for ours is quite often the inventory control. It tracks inventory very well and very simply.”

On guard

By keeping a record of what your business has sold, all POS software – whether the brand name is Profitek, Clear, Squirrel or what have you – helps with inventory control. Aloha goes a step further with its Restaurant Guard, a supplementary product which analyses transaction patterns to find possible fraud and theft.

Bill Tischner of Edmonton-based Time Business Technologies points out that studies indicate about five per cent of bar and restaurant revenue is lost to theft by staff.

“That’s five per cent of their gross sales," he underscores. “Not their net – their gross sales. That’s a significant dollar amount that’s going into the bartenders’ jeans and the servers’ jeans through what you call industry scams.”

Tischner relates that when he operated restaurants, he observed significant inventory gaps that he chalked up to spillage and the like – honest mistakes.

“Now that I work on this side of the fence I can see that it is mostly staff theft. So the bartenders are getting rich and the owners are going broke.”

Aloha Restaurant Guard, which got its Canadian launch last year at a trade show in Vancouver, is a web-based product sold by Time that forensically audits transactions for potentially fraudulent activities.

Restaurant Guard monitors transactions and analyses them for signs of such common fraudulent practices as the “wagon wheel” scam. In that style of theft, a server collects in full on a bill, then subtracts a commonly ordered item (say, a fountain drink) before putting cash in the till, then transfers that item to the another table’s bill. The process is continued throughout a shift so that the server collects several times on the item but the establishment gets paid just once, with the server pocketing the rest.

Clients get weekly reports on suspicious activity.

Tischner says one client estimates Restaurant Guard is saving his Alberta restaurant chain as much as $500,000 annually in losses. “The monthly fee that he’s paying for Restaurant Guard, he saves in one day in what would have been losses.”

The product also spares the owner from spending a lot of time every week auditing transactions in an effort to spot theft and fraud.

Another effective tool for minimizing slippage is a liquor control system such as those made by Azbar Inc.

Azbar’s product line includes the AzGun, which dispenses up to 18 liquids according to pre-programmed portion sizes, and the AzJunior control station for small operators, as well as cocktail towers and draft beer dispensers. The Quebec City-based company also has a POS system.

The AzGun can let a bar’s inventory control system know to subtract from the volume level for each product, so that management knows which products should be replenished soon.

Company founder and president Robert Blouin says Azbar has, in its 20-plus years, became a North American leader in liquor control because of the high quality of its products.

“We’re the best in the world right now,” he proclaims, “and I want to stay that way.”