Are you Ready for an ERP System?
More often than not, F&B owners tend to talk about implementing an ERP solution to include an end-to-end inventory system within their operations to monitor real-time inventory. It is the same concept as when chefs order an ingredient, the stock count in the system automatically reflects an increase, and when a dish is sold, the stock count automatically reflects a decrease. And, when the stock levels fall below the par level, it will either prompt the chef to order more or automatically place an order to the supplier.
Some owners believe that with the abovementioned system, they can ultimately stop doing monthly manual stock counts to reduce man-hours. The whole idea of knowing everything at your fingertips, reducing food wastage, pilferage, and reducing time is very enticing for every business owner.
But, the implementation of an ERP system is not as easy as it may seem, and for many businesses, it may take up more resources than expected.
And since we have encountered countless F&B owners who have gone through that route and regretted the heaps of money and months spent on the implementation of an ERP system, we think it is time for us to prepare a checklist for you to be doubly sure that you are ready for such a solution.
If getting an ERP system is in the cards, it is important for businesses to take the time to evaluate the resources they have and the operational capabilities they need. Business owners must also determine if they have the time, budget, and most importantly the expertise to diligently follow the workflow processes after the system is implemented.
Thinking through these key steps before rushing to implement will produce the best outcome. There are many potential downsides if not properly thought through before investing in such a system: ERP doesn’t fit into your daily workflow, clients don’t have the internal capacity to properly implement and maintain their ERP and frustration on both sides when the expected goals aren’t achieved. The net result? Time wasted and money down the drain.
Are you truly ready for an ERP that is a fully automatic Inventory System? A checklist.
Fundamentally, inventory control is about:
Control of Inflow - Food Spending (When you purchase goods from suppliers)
Control of Outflow - Food Cost (When you sell a dish and when you throw away food for whatever reasons)
Stockpile - Stock value
To get the Control of Inflow of ingredients accurate, here are a few checkpoints to note.
There is a term called “Three-Way Matching” commonly used in the ERP system workflow and what that means is that the Purchase Order, Delivery Order, and Invoice must match each other before payment is being made to the supplier.
You have to enforce ALL purchasing to be made via the system to the supplier. No more calls, Whatsapp, and emails. You will need to train your staff to do so, and with the high turnover rate in F&B and mostly non-tech savvy staff, it may end up taking a considerable amount of time and effort.
You need to have someone who diligently updates the product names, the unit of measurement, and unit prices. In restaurants, it is common to see a restaurant having 500 over SKUs. Which may, in turn, be more tedious work.
Whenever the store receives a delivery, they need to go to the system to check through the quantity and unit prices and make adjustments if it does not match. If you have a lean team of staff, this duty will definitely add on to the existing job scopes for your team.
To get the Control of Outflow accurate, here are a few checkpoints to note.
Most of your existing POS systems will likely have a recipe card module. You might most likely have set it up once before during the initial implementation and stopped updating it as it is time-consuming. This could especially be the case if you are running a fine-dining restaurant where you change your dishes biweekly/monthly.
Keeping all your recipe cards updated is one of the hardest things to do in a restaurant’s operation. You have to constantly update the UOM of the product if the supplier changes the packaging. Which can be common practice when they run of out stock. Try keeping 30 recipes and 500 inventory items updated and you will understand what we mean.
If your recipe cards are not constantly updated, you will not be able to accurately calculate your food costs using your sales data. Any inconsistencies in portioning will also affect your calculations.
There are two parts to Food Wastage that need to be recorded in the system.
Part 1: When goods expire or turn bad, and also whenever your staff throws them away, it has to be recorded in the system. Keep in mind, will your staff be diligently updating the system whenever they throw out a carton of milk?
Part 2: During the preparation of food, some parts of the food which are “ugly”, need to be removed. This also has to be taken into account in the system but with lunch or dinner services that are always so hectic, will your staff have the time to remember to account for them?
Complementary add-on/ free food
If you have loyal customers and you decide to thank them for their patronage by giving them one more piece of fish. Or when you need/want to give a glass of wine as a complimentary drink. Basically, anything that is stated according to the recipe card + selling price needs to be recorded as usage, or else the system will also be inaccurate.
Some questions to ponder over:
Why does this work in other industries such as retails but not so much in F&B?
When it comes to food, there are a lot of perishable products with a short shelf life. For each dish, there are many raw materials needed to produce a final product. You rarely get a finished product from a supplier that you can just sell to the end consumer. And that is also the reason why there are so many areas of concern while tabulating your “stocks” in your inventory management system.
Why are hotels able to implement this successfully and not in restaurants/cafes?
For hotels, they tend to have a dedicated Receiving Department whose whole job is to receive goods and do the necessary paperwork. While under normal restaurant operations, your chef has to spend time coming up with new recipes, preparing ingredients, ordering ingredients, cooking, etc. Your manager has to ensure that customers are satisfied, take orders, manage front of house staffing, etc. There is little to no staff that can do the job of a whole department dealing with an ERP system. It certainly isn’t the most cost-effective solution either.
To add on, all of these admin tasks like keeping the system updated will have to be done after their long service hours just before they go home for the day. In the long run, staff will get tired of doing “extra work” after service hours and you may even have to hire more people just doing data-entry.
In conclusion. An ERP system will be helpful if you have:
A dedicated project manager to set-up this system over a period of 3 to 6 months at the very least.
A dedicated admin team to keep the system constantly updated daily.
Well-trained staff who will diligently order out from the system and make manual adjustments daily.
If any of the ingredients end up missing, the system simply doesn’t achieve your objectives and the whole system defeats its purpose.