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Scan-Based Trading

Shrink Reduction Strategies for Bar and Restaurant Owners

To be successful in the bar and restaurant industry, you have to manage the inventory shrinkage to a point where you can comfortably see your earnings increase. Learn how.

As a retailer, or bar, or restaurant owner in the Food and Beverage industry, you face many challenges –high overhead, thin margins, fierce competition. And what about inventory shrink? Improper payment management can lead to a slew of other problems –starting with high volumes of shrink that negatively impact your business. 

How can you successfully reduce your inventory shrink while staying profitable –all while managing other facets of your business? You’ll learn:

  • How to calculate shrink
  • Tactics to avoid shrink
  • Technology that can help

Let’s start with how to calculate and avoid shrink.

How to Calculate and Avoid Shrink 

Inventory shrinkage is when you have alcohol inventory that is lower than what you need to run your bar or restaurant successfully. To record the shortage, you need to reconcile your sitting inventory and the inventory records on file.

To calculate shrinkage, you have two options. The first is the manual process of inventory management, where you subtract your actual inventory from the recorded inventory and divide the resulting figure with your recorded inventory.

Manually calculating shrink:

(Recorded inventory - actual inventory)


Recorded inventory

The second option involves investing in a solution that does the arithmetic for you –choosing software will reduce errors and give you an accurate view of your business. Depending on which one you decide to go with, you can also gain automated data reconciliation, insights, and more.

Overall, software is less expensive than manual processes and is devoid of potential errors that might affect the outcome when calculating and avoiding shrink. Below are tactics that can help you reduce inventory shrink –all of which a good software solution can do for you. Whether you decide to adopt these tactics manually or utilize a software solution, take note of these helpful methods for your business.

Tactics to Help You Reduce Inventory Shrink

Inventory shrinkage exposes you to lower profits and makes it difficult to meet your customer’s expectations. Tactics to curb inventory shrink include: 

Electronically manage invoices

Chances are, your business is running on tight margins. You can’t afford inventory shrinkage due to spillage or theft. A manual solution will not cut it, especially since it is resource-intensive. An electronically managed invoice provides you with a standardized means to refine and streamline your inventory management. If you are able to integrate this electronic system with automation, you would have a one-stop solution to getting complete data from your existing inventory and combat any inventory losses.

Notably, electronically managing your invoice can help you with scaling your business. Manual tools such as paper and pen or spreadsheets are unsustainable in the long run. And, they can also get expensive, since it requires a significant amount of money and time. Electronically managing invoices reduces the potential for error, and saves money and time. Overall, electronic tools for inventory management prevent invoice loss and help keep track of all inventory, while conserving resources.

Utilize inventory and sale analytics

Having too much alcohol stock at hand can cause a significant decrease in inventory turnover, primarily due to inventory shrinkage. Using a tool that provides inventory and point of sale (POS) data, you can determine out-of-stock brands and efficiently fill out an order form.

When analyzing both the inventory and sales, it’s possible to track inventory shrinkage. Data from your inventory and sales can also help with managing product variance, especially when looking at the cost of inventory.

Overall, inventory and sale analytics give you great insights which you can use to streamline your inventory management. The most beneficial aspect of using inventory and sales analytics is the ability to plan ahead. 

Foster great supplier relationships

To reduce inventory shrinkage, you need a healthy supply chain that is able to meet your growing needs. This will require that you create an efficient relationship with your supplier. A great way to accomplish this is to consolidate your supply chain by adopting operational practices that streamline the purchase process. You can achieve this by promoting transparent and consistent communication, regularly reviewing deliverables, and understanding and honoring your contractual obligations.

At the root of fostering a great relationship is understanding your supplier. This will aid in the creation of a foundation for partnership in which the vendor is on the same page as you on your business goals.

Using A Software System to Reduce Inventory Shrink

Using software systems to reduce inventory shrink has gained more traction over the last decade. And, with the right software, you can gain high-efficiency inventory control by minimizing and maximizing shelf presence. 

Scan-based trading  (SBT) is a platform used by retailers to forgo upfront inventory costs helping them remit payment to suppliers only when the inventory is sold. Using SBT software, the supplier is able to have more control over the inventory, which places them in a better position to grow their sales.

As a retailer, SBT offers you improved communication with your supplier, maximized route efficiency, and excellent supply chain labor savings. And, it provides you a competitive edge as you have greater control over inventory shrinkage. 

SBT is a must-have for business owners who purchase on consignment –benefiting from streamlined information flow, timely payment processing, and performance reporting. 

How SBT Helps Inventory Shrinkage 

To adequately reduce inventory shrinkage, you will need an SBT with synchronized item information. The catalog should help you send and receive item information to and from you and the supplier. There should be a POS item description that includes the unit cost price.

As far as features, there should be e-invoice and remit functionalities that form your SBT system’s native capabilities. Through this, you should be able to keep tabs on the point of sale activities, product performances and invoice your supplier at the agreed-upon time. Be sure to look out for a system that is designed to make collaboration simple with an easy-to-use interface for employees in charge of inventory management.

As a recap, a good SBT offers the following features to help inventory shrink:

  • Synchronized item information
  • Inventory management capabilities
  • Point of sale analytics
  • E-invoice and remit functionality
  • Easy to use

Reducing Inventory For Your Business

Small mistakes add up quickly when you are running a restaurant or a bar. Specifically, there is a great need to keep close tabs on the inventory turnover ratio and the sell-through rate if you are going to keep your margins. Despite your best efforts, keep in mind that shrinkage is unavoidable, but don’t let shrinkage keep your bar or restaurant from growing. Invest in a software solution that helps you strategize and reduce your shrink.

 iControl provides you with SBT software solutions that ensure accurate product and price-book setup. Contact us today and arrange a free demo and curb the shortfalls of inventory shrinkage.

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