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Eat food, not profits — with food industry inventory management

Say goodbye to spoilage. Using this article, you will learn how to optimize food industry inventory management and the ultimate tools for optimizing this process.

April 17, 2024
30 min read
James Humphreys

James Humphreys

Senior Content Manager

“As one bad apple spoils the others,” Benjamin Franklin was the first person to use this metaphor.

And although it applies to the observation of how one thing can corrupt another, it too applies to businesses handling food goods. One literal bad apple can spoil the literal barrel. If your livelihood depends on apples to make your apple pies, it doesn’t take much imagination to realize how this scenario isn’t good for you.

So, how do you ensure that your perishable inventory stays fresh?

Introducing food industry inventory management.

In this article, you’ll learn all about proper inventory management in food industry, tips for improving it, why it’s important, and the best tools for the job.

What is food industry inventory management?

Food industry inventory management involves overseeing the supply, storage, and accessibility of ingredients and products within the food sector. This process ensures optimal stock levels, reduces waste, and improves efficiency, critical for meeting consumer demand and maintaining freshness.

It includes:

An important part of inventory management in food industry is knowing how to store food items properly. This includes keeping track of expiration dates and using proper storage methods to ensure that products do not spoil or become contaminated. Additionally, businesses must regularly check their inventories to ensure enough supplies are on hand to meet demand planning.

Food industry inventory management systems can be manual or automated.

Manual systems typically involve paper records like inefficient spreadsheets and manual stock-taking, while automated systems like food inventory management software use computer solutions to track and manage stock levels. Automated systems can provide businesses with real-time data on inventory levels, which can help them make more informed decisions about ordering and stocking food items.

Effective inventory management processes in the food industry are essential for running a profitable food business.

It helps businesses keep track of their stock levels, minimize waste, and ensure that products are fresh and safe for consumption. Additionally, proper storage methods and regular inventory checks can help businesses avoid potential problems associated with food spoilage or contamination. Automated inventory management systems can provide businesses with tools for improving efficiency and accuracy in managing their food stocks.

Inventory management process in food industry in the United States generate about $200 billion in annual revenue.

What is food industry inventory management software?

Inventory management system for food industry is a tool that helps food businesses keep track of their stock levels, orders, and sales.

It can monitor trends and optimize order sizes to reduce waste and save money.

This type of software can be used by restaurants, grocery stores, caterers, and other food-related businesses. These programs offer many different features, but they all share the same goal — to help food businesses run more efficiently. Some common features of food industry inventory management software include:

  • The ability to track stock levels and sales data
  • The ability to generate reports on trends and inventory levels
  • The ability to set up reorder point alerts for when stock levels are low
  • The ability to process orders
  • The ability to track supplier information

Food industry inventory management is a valuable skill for any food business. Food software allows companies to save time and money while ensuring that their operations run smoothly.

Why is it important to stay organized in food industry inventory management?

Inventory management in food industry is one of the most water-intensive industries in the world.

One of the most important aspects of food inventory management is staying organized.

This means having a system in place to track what foods are being stocked, how much of each item is available, and when items need to be restocked. This can be done with manual methods like paper and pen or more sophisticated food and beverage manufacturing software programs. Staying organized is important for several reasons:

  1. It helps to ensure that all food items are accounted for and that there is no waste due to expired or unused products
  2. It allows managers to better forecast future needs based on past consumption patterns
  3. It makes it easier to spot trends or issues that could impact the business, such as a sudden increase in demand for a particular item

There are many different ways to stay organized in food inventory management.

The key is to find a system that works for your business and stick with it. This may mean trying out several different methods before settling on the one that best suits your needs. However, once you have a system in place, it will be much easier to keep track of your food inventory and make sure that your business is running smoothly.

The importance of safety standards in the food industry

Multiple racks filled with sweets

The food industry is one of the most heavily regulated industries globally.

This is because the safety of our food is of paramount importance. Every year, there are countless cases of foodborne illness and even deaths due to contaminated food. There are strict safety standards in place to try to prevent these occurrences.

These standards cover everything from how the food is grown or raised to how it is processed and packaged and where it ends up.

Safety standards in the food industry are important because they help ensure that the food we eat is safe. They also help protect those who work in the industry from potential harm. When safety standards are not followed, there is a risk that contaminated food will reach consumers.

For example, as recently as 2016, there was an outbreak of hepatitis A from strawberries used to make Tropical Smoothies.

Foodborne illness is a serious problem that can be prevented by following safety standards. By ensuring that the food we eat is safe, we can all help to protect ourselves and our families from harm. There are many different safety standards in place in the food industry.

These standards are constantly evolving as new risks are identified.

It is important for those who work in the industry to stay up-to-date on these standards to protect best themselves and those they serve.

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8 tips for improving inventory management in the food industry

The average inventory management process in food industry generates about 50 lbs of waste per day.

Now you know the damage one lousy apple — or strawberry — can cause. It’s time to look into the necessary steps to avoid spoiled inventory causing havoc in your business.

Here are eight tips to get you started on the journey to optimizing your food industry inventory management.

1. Know what you have on hand

The first step to effective inventory management is knowing exactly what you have on hand at all times.

Keeping accurate records of all the food items in your stock and their quantities. There are several reasons why it is important to know what you have on hand for inventory management in food industry. Perhaps the most obvious reason is you’re able to plan your production and sales accurately.

If you don’t know how much of each item you have on hand, you can’t accurately forecast how much you’ll need to produce or sell to meet customer demand. Inventory management is also important for food safety and quality control purposes. If you don’t know what ingredients you have on hand, it’s difficult to ensure that they are being used correctly and that they are fresh.

This can lead to spoiled food or products that don’t meet customer expectations.

Finally, good inventory management can help you save money.

If you know what you have on hand, you can avoid overstocking items that may go bad before they can be used. This can help you reduce food waste and ultimately save your business money. In short, there are many good reasons to pay close attention to your food inventory.

You can ensure that your business runs smoothly and efficiently while also providing quality products and services to your customers.

2. Keep track of expiration dates

It’s important to keep track of expiration dates for all the food items in your inventory.

This will help you ensure that you’re using and selling the freshest products possible. There are many reasons why it is important to keep track of expiration dates in perishable inventory. One of the most important reasons is to ensure that food items are safe to consume.

If a food item has expired, it may no longer be safe to eat and could make people sick.

Additionally, expired food items can also lead to waste if they are not eaten in time and have to be thrown away. Tracking expiration dates helps to avoid these potential problems by ensuring that food items are used on time.

Another reason why it is important to keep track of expiration dates is for quality control purposes.

Some foods may not taste as good or be as fresh after they expire. This can cause customer satisfaction issues if people do not enjoy their food. Additionally, expired food can also cause issues for those with allergies or other dietary restrictions.

If someone has an allergy to a certain food, eating that food after it expires could be very dangerous.

Keeping track of expiration dates is also important for financial reasons. Food that has expired can no longer be sold and becomes dead stock, which means businesses will lose money if they do not keep track of when their food items’ expiration date. Additionally, many businesses have insurance policies that require them to keep track of expiration dates to be covered in case of any problems.

There are many reasons why it is important to keep track of expiration dates in food industry inventory management.

Expiration dates help to ensure the safety of consumers, the quality of food items, and the financial stability of businesses. Tracking expiration dates is an essential part of managing food inventory and should not be neglected.

3. Rotate stock regularly

A good way to maintain freshness and minimize waste is to rotate your stock regularly. This means stocking up on the oldest items first and then moving on to the newer ones.

It is important to rotate stock regularly in food industry inventory management for several reasons:

  • It helps ensure that food is fresh and you can monitor it’s shelf life
  • It prevents food waste and spoilage — which can be costly
  • It allows you to keep track of your inventory levels to restock as needed
  • Regular stock rotation ensures that your customers always have the best possible experience when purchasing your products

4. Store food properly

Proper storage is essential for keeping food fresh and preventing spoilage.

Be sure to store all food items in cool, dry, and dark conditions. There are many reasons why it is important to store food properly. Inventory control is a critical aspect of any food business, and proper storage helps ensure that food is fresh and safe to eat.

Proper storage also helps to minimize food waste.

When food is not stored properly, it can spoil quickly and is unusable. This wasted food costs businesses money, but it also contributes to environmental pollution and greenhouse gas emissions — which is not good for those who want to achieve green inventory management.

Finally, proper storage of food helps preserve the food’s nutritional value.

When food spoils or is mishandled, its nutrient content can be decreased. This can lead to serious health problems for people who consume the affected food. Proper storage can help prevent these problems and allow people to get the most out of their food.

5. Don’t overorder

It’s important to strike a balance when auditing inventory with barcode scanning, ordering new inventory, and other techniques you need to perform.

If you order too much, you’ll end up with excess stock that will go bad before you can use it. On the other hand, if you don’t order enough, you could run into shortages that will disrupt your business. It’s no secret that one of the keys to success in business is effective inventory and purchase order management.

After all, if you can’t keep track of what you have on hand, you’ll never know when you need to order more, which can lead to serious problems.

But what many companies don’t realize is that there is such a thing as too much inventory.

Yes, it’s important to have enough food on hand to meet your customers’ needs, but if you order too many raw materials, you could waste a lot of money.

There are a few reasons why overordering can be problematic:

  • It ties up your capital — If you’re constantly buying more food than you need, your carrying costs go up and your money is tied up in inventory instead of being used to grow other aspects of your business
  • It decreases your profit margins — The more you order, the more you have to pay for shipping and handling and that can eat into your profit margins
  • It increases the risk of food spoilage — If you have too much food on hand, there’s a greater chance that some of it will go bad before you can use it. Not only is this a waste of money, but it can also be a health hazard
  • It creates storage issues — If your kitchen is crammed full of food, it will be difficult to move around and find what you need when you need it. This can lead to inefficiencies and accidents
  • It makes it difficult to keep track of your inventory — If you have too much food on hand, it will be hard to keep track of what you have and what you need. This can lead to ordering mistakes and other problems

As you can see, there are a few good reasons why you shouldn’t overorder your food inventory.

By being mindful of your ordering habits, you can save yourself a lot of money — and headaches — in the long run.

6. Use a just-in-time inventory system

A just-in-time (JIT) inventory system can help you avoid both overordering and underordering. With this system, you only order the amount of inventory you need for a specific period.

There are a few key reasons why it is essential to use JIT inventory management in food industry. First, it can help reduce spoilage and waste. With JIT inventory, businesses can make sure that they only have the amount of food on hand that they need at any given time.

This minimizes the risk of having too much food sitting around and going bad before using it.

Another reason to use JIT inventory management is that it can help to keep costs down.

By only having the necessary amount of food on hand, businesses can avoid overspending on inventory that will ultimately go to waste. In addition, JIT inventory systems can help to streamline the inventory management process, making it more efficient and effective.

Finally, JIT inventory systems can also help to improve customer service.

When businesses have the right amount of food on hand, they can more easily meet customer demand. This can lead to happier customers and repeat business. Overall, using a JIT inventory system is important for effective inventory management in food industry.

Pro tip: JIT inventory is only one of many inventory management methods. To find out about other techniques that have again and again proven their efficiency in many different industries, check out our article on inventory management techniques.

7. Stay organized

Good organization is key to effective inventory management. Be sure to keep accurate records and store all your food items in an orderly manner.

There are several reasons why it is important to stay organized when managing food inventory:

  • It helps ensure that all inventory is accounted for and that nothing goes missing
  • It helps staff members know what ingredients are available and where they are located, saving time when preparing meals and creating goods
  • Staying organized can help prevent food waste by ensuring that expired or unused items are correctly disposed of

Implementing technology like barcode inventory systems will help you stay organized and automated.

8. Review your inventory regularly

It’s important to review your inventory regularly to ensure that it’s accurate and up-to-date. This will help you solve any problems early and make necessary adjustments.

Reviewing your inventory control regularly is important for several reasons:

  • It lets you ensure that you have accurate records of what you have on hand — This is important for both financial and customer service reasons
  • It helps you identify manufacturing trends and make predictions in your inventory levels — This information can be used to adjust your ordering and stocking practices
  • It helps you conduct regular reviews of your inventory operations— This can help you spot potential problems before they become serious

Reviewing your inventory regularly is the best way to ensure that you have accurate records, allowing you to identify trends and spot potential problems early.

Taking these simple steps, you can save yourself time, money, and headaches down the road. These tips will help you improve your food industry inventory management and keep your business running.

Food and beverage businesses inventory software

Complete control and maximum efficiency with Katana Cloud Inventory that integrates with e-commerce, accounting, and many other platforms. Track batch and expiry dates and manage your entire business from a centralized platform. Sign up for a demo call with our team of experts and see Katana in action.

Food industry inventory management systems

An illustration showing how batch tracking helps to monitor expiry dates

Good tree or bad, fruit expires.

It’s a fact of life. But with the right inventory management system for food industry, you can keep your fruits and vegetables fresh and nutritious. The key to success is knowing when your produce is at its peak.

With accurate, up-to-date information on hand, you can make the most of your harvest — and avoid waste.    

That’s where Katana Cloud Inventory comes in.

Katana is a food industry inventory management system stuffed full of goodies and treats, which automates repetitive day-to-day activities. Katana supports businesses, so they don’t have to waste time and money being stuck in admin, and can instead focus on making their food that much tastier. With Katana, you can get access to:

You can see Katana in action without any strings attached. Simply sign up for a free demo call and have our team of experts introduce all the features and tools to help you nurture and grow your business.

Common restaurant inventory terms

If you’re new to the food production industry, you may be overwhelmed by the different terms used to describe inventory. To help you make sense of it all, we’ve compiled a list of common inventory terms and their definitions.

Bill of materials

Bill of materials is a list of raw materials, components, and assemblies required to build a product. It is typically used in manufacturing and engineering and provides important information about the product, such as its size, weight, and cost. Bills of materials are also sometimes referred to as product structure diagrams or product breakdown structures. In the food industry, a bill of materials is often called a recipe.

Food cost

The food cost is the percentage of your total sales spent on food ingredients. For example, if your food cost is 30%, you spend 30 cents of every dollar made in sales on food ingredients.

Landed cost

The landed cost is the total cost that a product incurs from its point of origin to the final retail purchase. This includes transportation fees and duties and any other associated costs. The landed cost is important to consider when making purchasing decisions, as it can significantly impact the final price of the product.

Yield management

Yield management is a strategic approach to pricing and selling inventory that considers demand, availability, and other factors.

Par level

A par level is the minimum amount of inventory you need to have on hand to meet customer demand.

Buffer stock

Buffer stock, or safety stock, is extra inventory that is kept on hand to help ensure that customer demand can be met, even if there are unexpected spikes.

Stock turnover

Stock turnover, or inventory turnover ratio, measures how often your inventory turns over or sells in a given period of time. A high stock turnover rate is indicative of a healthy business.

First in, first out (FIFO)

FIFO is an inventory management method in which the first items to be received are also the first to be sold. This ensures that inventory is fresh and reduces the risk of spoilage.

Just in time (JIT)

JIT is an inventory management method in which items are only ordered as they are needed to minimize waste and storage costs.

Cycle counting

Cycle counting is a method of inventory management systems in which a certain number of items are counted each day, week, or month, rather than counting all items at once. This helps to ensure accuracy and prevent stockouts.

Kanban

Kanban is a Japanese word meaning “sign” or “card.” In inventory management systems, kanban is a system that uses cards to signal when an item needs to be replenished. This system can help in reducing waste and improving efficiency.

We hope this glossary of terms has been helpful! Managing inventory doesn’t have to be complicated. By understanding the basics, you’ll be on your way to keeping your food business running like a well-oiled machine.

Katana cloud inventory software

See Katana in action and find out why thousands of businesses have already made the switch.

James Humphreys

James Humphreys

Senior Content Manager
James Humphreys has produced content on manufacturing and inventory management practices for 5+ years. He began his journey into writing via the creative industry, writing and producing plays, some of which toured the UK and Europe.

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