It's the ideal way to do inventory:
Every customer order entered into the POS system results in the subtraction of the exact amount of ingredients from that pizzeria's running inventory. And at the end of the day, through automatic cross-checking against prescribed par levels and historical business trends, the POS system tallies that day's use and generates a suggested product order.
No pencil and paper, no eyeballing and counting. All of it done by machine rather than man.
Not at all. Believe it or not, this automated inventory technology exists and it works. The feature is an option on many high-end POS systems and lots of operators even knowingly chose and paid extra for it. But few use it because of the effort required to make it work.
No one's talking about a high-browed programming effort, rather what's required is dull and tedious data entry into the computer about every product brought into the store. And even then, those numbers are only as good as the operator's recipes and every line cook's adherence to portion controls. Where there's waste or special orders or deviance from a recipe, there's inaccurate information.
"It sounds like a great thing to have, but it takes dedicated resources and a huge commitment to make an automated inventory system work," said Joe Erickson, vice president of RestaurantOwner.com, a restaurant education Web site. After spending 10 years working for a POS development firm, Erickson knows what benefits POS systems can provide, but he also knows how much time operators actually have to spare. "Most operators are already working 70 hours a week, so they probably can't dedicate that amount of time to make such a system run. Even the cost savings they might get might not warrant doing it."
Laura Gaudin, sales director for Houston-based POS developer Revention Systems, believes that no more than 25 percent of her company's customers use the automated inventory feature on their systems. The feature is technologically impressive, she said, but it still requires manual updating. And until transactions between distributors and operators become completely and seamlessly electronic, operators won't be free of the clipboard, spreadsheet and pencil.
"I think that it's a good idea in theory, and a lot of people tell us they want that," Gaudin said. "They want the POS to manage it and tell them what to order. But when they understand the type of effort it takes to do it, that's when they start veering away from it."
Until that technological utopia arrives in the pizza industry, Erickson, a former operator himself, advises others to use what he calls a "perpetual inventory and order guide ." Though the system is fully manual, Erickson said it is far superior to manual systems he's seen.
The perpetual inventory guide includes three weeks of inventory and order information, allowing operators to see at a glance if their par levels are correct and whether their order amounts are too high or too low. The decidedly low-tech method also is designed to help operators reduce the number of days on which they order and receive goods to two.
The result, Erickson said, is better control of all products coming through the back door and the elimination of over-ordering.
From nothing to smooth-running
When Sean Brauser bought Romeo's Pizza several years ago, there was no inventory and ordering system. Food cost was out of control and employees ate pretty much what they wanted.
To stop the bleeding, Brauser, a CPA, produced some Excel spreadsheets and devised an inventory program he could compare against sales and use to place his orders.
But despite getting a handle on ordering and inventory, his food cost remained off the charts. With the help of a consultant, Brauser developed tight recipes and strict portion controls, saving him $900 a month on average.
"If you don't portion control what you're selling, it doesn't matter what you're doing with ordering and inventory," said Brauser, whose two-unit company is headquartered in Medina, Ohio. The operator can know exactly he's got and what's coming in, Brauser said, but if the cooks aren't following the specs, "they might as well be stealing it."
Brauser also pared back his suppliers to two, both of whom deliver twice weekly. He established a prime vendor agreement with one and arranged for a "block-plus" cheese price. That partnership netted him better costs on other products, too, which dropped his food cost further.
"It's easier to order twice a week rather than doing it three or four times a week like we used to," he said. "We don't have anything going bad because we ordered too much, and we're not running out of stuff because we have a second delivery."
Romeo's general manager is now in charge of ordering (and to ensure it's done correctly, the manager's bonus is tied to positive results), but that's not keeping Brauser from considering other inventory innovations. He recently installed a new POS system that has an automated ordering system, but like many others, he's concerned about the time required to utilize this supposed work saver.
"It'll work great as long as you put the information in, and that looks like a lot of work to me," said Brauser. "Yeah, it would be nice to generate inventory
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Brauser will soon begin ordering all his food and supplies online, which will help, too, but he said every step of the inventory and ordering process needs to be more automated if the system is to be truly beneficial.
Gaudin said the technology exists in various pieces, but no one has assembled the full puzzle for smaller end-users, like independent pizza operators. Distributors and their suppliers work with fully electronic invoicing by using the same forms and communications protocols, but operators don't have access to those yet.
"The question is whether every vendor will support a universal format everyone can use," she said. "But it's just not there yet right now."
And even if it were, Erickson said, there are so many variables in the pizza business that may always keep operators ever tweaking their POS systems in order to keep pace.
"It's really a challenge in this industry if you want to do a special pizza," he began. "If I want to put a new cheeseburger pizza out there, I want to put it out there without worrying about making a new recipe, entering all that data into the POS, getting a key for it ... the work involved in setting it up properly would be enormous. Plus, people order different (toppings combinations) all the time, so how do you account for that?"
Gaudin pointed to special occasions, such as Super Bowl Sunday, when typical par levels get thrown out the window because sales will be extraordinary. In the end, she said, operator experience and constant finesse of the system will be vital if an automated system will ever work well.
But that's not keeping her or Erickson from dreaming about what could be. Gaudin envisions an automated ordering system so effective, that it has always-on Internet access so it can compare prices on key items like cheese, between vendors, and even suggest which vendor to order from.
Erickson believes hybrids of tools employed in retail department store operations can be useful in pizza stores. If operators had an inventory form that could be shared by a POS system and an electronic handheld device, pencil and paper systems would disappear.
"I believe you'll see those integrated with online ordering systems some day," he said. "You'll still have to count things because you have to see them to collect that information with a handheld. But then you can generate a purchase order with that device and then use it again to check the order against what the distributor brings to the back door. Now that's a solution anybody can use."