Inventory Concepts

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Basic Concepts

Count Sheets

Each count sheet designates a completely separate physical inventory. You might, for instance, do physicals in your kitchen on Thursday mornings and at the bar on Wednesday and Sunday afternoons. Even if you do physical inventory all at once, you might want separate count sheets if the types of items on them are very different. For instance, you might separate your Food from your Merchandise, since there's no intermingling of the two.

  • Though an item can exist in more than one location, a single item cannot appear on more than one count sheet. An item may exist only at the locations belonging to its category's count sheet.

Inventory Locations

Each count sheet is made up of one or more locations. Each location can designate a logically or physically separate storage area. You set up "standard" item locations in each inventory category, but can easily change them for each item.

Departments

Departments represent groups of inventory categories, described next. Though you might have a number of liquor categories, for instance, such as "Import Beer - Bottle," "Domestic Beer - Bottle," "Wine - Bottle," and so on, these may all belong to the department called "Liquor."

Inventory Categories

Every inventory item, either base or prep, must have a category. The category defines which count sheet items belong to, and thus the locations in which they may be counted.

Adjustment Categories

Adjustment categories define the ways in which items can be added or removed from inventory outside the normal "buy it" and "sell it" routine. One particularly important adjustment category is called "Variance," which RPOWER will create for you when it posts a physical inventory.

Base/Purchased Items

A base item designates something that you use and/or count in inventory, such as "Milk" and "Eggs." You may purchase milk from several vendors in different packages, but milk is still milk no matter what, and so exists as a single base item.

Use By The... (Use Unit) 
You might use milk by the Ounce. That is, when milk appears in an ingredient list, you will specify how many Ounces go into either the menu item or prepared inventory item you are creating. An 8-ounce "Glass of Milk," for example, will contain eight Ounces of the base item "Milk."

We call this the use unit.

Count By The... (Inventory Unit) 
You might count milk by the Gallon. That is, when you take physical inventory or look at how much you have on hand, you will want to use and see "Gallons." You have to tell RPOWER how many Ounces there are in each Gallon. It's 128.

We call this the inventory unit.

Case Description 
If an item always comes in the same case size, no matter who you buy it from, then you can specify what that case is called and how many inventory units it holds. This saves you from having to specify the case size for each vendor's version of the item.
Yield 
If you determine that there is inherent overhead in the use of an item, you can specify a yield percentage. RPOWER simply uses more of the item than what's in the ingredient list. For example, if an item has a 90% yield, then selling 20 ounces of it will take 22.22 ounces out of inventory (90% of which is 20 ounces). Adjustments are performed unyielded. That is, you enter the actual amounts used or received.
Yield > 100% 
Items may have a yield over 100%, up to 999%. You might use this for dried beans, for instance, which may yield several times their weight when cooked and ready for use.

Vendors

Vendors simply identify vendor names, addresses, and contact phone numbers. RPOWER doesn't need the information except to identify vendor items.

Items Offered by Vendors

Vendor Items designate base items as offered by your vendors. This is how you tell RPOWER in what form to receive goods from invoices, what the case counts are, and how much the stuff costs.

Prepared Items

Items that you make yourself to be used as menu item ingredients are called Prepared Items. A prepared item can either be counted in inventory like any other item, or can simply exist as a "platter" or collection of other items to make ingredient entry easier and more consistent.

Inventory Item Types

You have several reasons to identify an "inventory item" in RPOWER besides the obvious one of counting it in your inventory.

  • You might want to track vendor price history of an item that you otherwise don't need or want to count, to see who has the best price or who is creeping the price up on you.
  • You might want to make sure that the item is expensed properly when you buy it.
  • You might want to enter items simply for their food-cost contribution, either by entering a known food cost at the outset or using the "last cost" from an invoice, or both. These items might represent extraordinary overhead costs relating to packaging, storage or equipment that affect your bottom-line food cost percentage.
  • You may want to enter uncounted items on received invoices to make entering received goods simple and consistent, so that when the invoice totals match up you know that everything was entered off the invoice.
  • There is a special kind of item we call a "platter" item that is simply a collection of other items to make ingredient lists shorter and easier, but itself is not counted in inventory.

Controlling Behavior

You control the behavior of inventory items by answering three questions: "Is the item Base or Prepared?" and "Is the item counted in inventory?" and for Base items, "Do I want to record the purchases for this item?"

Base or Prepared? 
You answer the first question by selecting on which list the item goes: either "Add or Change Base Items" or "Add or Change Prep Items" in Inventory Setup. You may also define new Base Items when setting up Vendor Items. An item is "Prepared" if you make it yourself.
Count in Inventory? 
You answer the second question by pushing the "Inventory" button on the item itself. When "Yes," an item is considered Counted. If Counted, an item is stored in inventory "buckets" each having a different size and unit cost based on what went in there in the first place, and are relieved upon sale oldest-first.
Record Purchases? 
You answer the third question by defining a "Vendor Item Offered" for the Base Item, and then actually receiving the item from an invoice.

Types Enumerated

To sum up, an item can be either Base or Prep, Counted or Uncounted, and Purchased or Cost-Only. An Item is "used up" out of inventory when you sell a menu item having it as an Ingredient. The combinations go as follows:

Base, Counted, Purchased

The item is bought and sold and inventoried. The item is placed in inventory by receiving, physical, or adjustment. Last Price is set on purchase. Last Cost is set on sale from the bucket(s) from which the item was removed. Cost of Goods Sold is posted on sale as the item is removed from inventory.

Base, Counted, Cost-Only

The item is sold and inventoried, just never bought. The item is placed in inventory by physical or adjustment using the cost you entered when setting up the item. Last Price is never set. Last Cost is set on sale from the bucket(s) from which the item was removed. Cost of Goods is posted on sale as the item is removed from inventory.

Base, Not Counted, Purchased

The item is bought and maybe sold, but never counted. The item does not go into inventory, but "empty" buckets are created to keep track of vendors' price history. Last Price is set on purchase. Last Cost is set on purchase or by entering it. Cost of Goods Sold is posted currently upon receipt of the item.

Base, Not Counted, Cost-Only

The item is for menu item food cost calculation only. The item does not go into inventory. Last Price is never set. Last Cost is set by entering it yourself. Cost of Goods Sold is never posted.

You can use these non-counted, non-purchased items to represent overhead costs (usually excluding labor) that significantly affect your food cost percentage to the extent that you would be getting an unfairly skewed view of your profit margins stated on your product mix and ingredient list reports. Since no posting is done to the General Ledger upon use of these items, you are not "double posting" previously expensed overhead costs. You may safely use these items as ingredients in prepared items, as described next.

Prep, Counted

The item is prepared, sold, and inventoried. The item is placed into inventory by preparing it with "Daily Prep." Last Price is not set. Last Cost is set when the item is prepared from the bucket(s) from which the ingredient items were removed. Prep constitutes an inventory transfer, such that ingredients are removed (credited) from inventory and increase (debit) Cost of Goods Sold, and then the prepared item is added (debited) into inventory and decreases (credits) Cost of Goods Sold. When the prep item itself is later sold and removed from inventory, then Cost of Goods Sold is finally debited as if it were a regular Base item.

Since RPOWER separates food cost from inventory value, it is safe to use "not counted, cost-only" items as ingredients. The inventory value of a prepared item is based on the total inventory value taken out of inventory from other counted items. But since RPOWER also calculates food cost, the correct "all inclusive" costs percolate up to the menu items where they belong.

Note that if you do use "not counted, cost only" items as ingredients, the "total value" of a counted prep item stated on your inventory item report will be less than the quantity on-hand times the "average cost", since minimum, maximum, and average costs are based on food cost, not inventory value.

Prep, Not Counted

The item is a "Platter" item to be used as a "collection" ingredient on menu items. Last Price is not set. Last Cost is set when the item is sold from the bucket(s) from which the ingredient items were removed. Cost of Goods Sold is posted by the ingredients. A Platter Item doesn't enjoy an independent existence; it acts simply as an "ingredient sucker." Using a Platter Item as a menu item ingredient is equivalent to using each of the Platter Item's ingredients.

RPOWER Inventory Unit Glossary

These are the built-in RPOWER inventory glossary units. Please revise and add to this list as you see fit, and then call RPOWER to discuss making the changes in the software.

     Bag-BA             Gallon-GAL          Pint-PI
     Bag-BG             Gallon-GA           Pint-PT
     Bottle-BO          Gallon-GL           Pound-#
     Bottle-BT          Gram-G              Pound-LB
     Bottle-B                               Pound-P
     Box-BX             Kilogram-KG
     Box-X              Kilogram-K          Quart-Q

     Can-C              Liter-L             Roll-RL
     Carton-CAR         Loaf-LF             Roll-RO
     Carton-CT          Loaf-LO             Roll-R
     Case-CA
                        Milliliter-ML       Slice-SL
     Dozen-DZ           Milliliter-M        Slice-S
     Dozen-D
                        Ounce-OZ            Tub-TB
     Each-EA            Ounce-O             Tub-T
     Each-E

UNIT          ABBR                  UNIT          ABBR


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