Ahh inventory... The ultimate Catch-22 of the production world. Too much and you waste space, tie up money in WIP and risk loss, damage and obsolescence. Too little and you risk bringing the whole line to a halt.
Good inventory management balances the risks (and costs) with the operational benefits (flexibility and protection). I've heard inventory described as an insurance policy, or the peaceful ocean that conceals the jagged rocks of production problems below.
There are ways to minimize inventory through proper production planning and just-in-time (JIT) strategies. However, you can never totally eliminate all inventory.
Try to imagine your kitchen with no inventory. No pantry. No refrigerator. Supplies arrive just as they are needed and only the exact amount that will be eaten is cooked. Sounds ideal doesn't it? No leftovers to turn green and furry in the back of the fridge. No lettuce liquefied in the crisper drawer. No can of beans lost for a decade. Nice, but not practical in real life.
First, there is the problem of minimum order quantities. I've never come across vanilla extract sold by the teaspoon. Second, there are the added costs of shopping everyday. Unless you happen to live or work in the same building as a Bulk Barn and green grocer, you will waste a lot of time everyday. Third, buying just the quantities we need eliminates our ability to capitalize on price breaks for buying in larger quantities.
So what's in your kitchen... er, my kitchen. There are lots of food type items in my kitchen from produce to pasta and meat to mustard. I am a baker, so I usually have 3 or 4 different types of flour. We also have in stock 3 or 4 different types of rice. We have a pantry, a refrigerator and a chest freezer. We are well stocked.
Not every item in my kitchen requires the same level of monitoring and attention. Just like not every item a company buys gets the same level of attention. A critical component that costs thousands of dollars and takes weeks to order in will be monitored much more closely than say, toilet paper.
Splitting inventory into categories is often done in an ABC system based on annual dollar volume. A being the top 15% , B the next 35% and C the remaining 50%. The key here is VOLUME, not unit cost. A 5 gram tin of saffron can cost upwards of $20.00 but will last you may months. According to the USDA Weekly Beef Report (yes, there is such a thing) you can spend $15.99 on a pound of fillet mignon that gets consumed in one meal. In a given year, you probably spend more on carrots than you do on saffron.
Typically, you would have an ERP system that could calculate this all out for you and you'd know exactly which items are in which category. I don't have one of those. I could calculate it out by hand, but frankly, I don't have that much time on my hands so we'll make some assumptions.
Splitting the items this way makes it easier to make the shopping list because I'm not reviewing every item in the kitchen to see if we need more. Some 'A' items are restocked on a weekly basis, things like fruit and veggies. Other items in this category are bought as needed based on the meal plan, cuts of meat or unique produce. 'B' items are restocked when they reach a minimum safety stock, when we are down to one meal worth of pasta or rice. 'C' items are only replenished when we run out.
Now, on to how much to buy. The easy answer is "as much as you need", but there are a few factor to consider:
1) Is the unit price less for larger package sizes?
2) How much space do you have?
3) What is the shelf life?
Let's look at an example, All-Purpose Flour.
You can buy flour in very small quantities at a bulk store or 20 kg bags at a wholesale club store, and the unit cost will vary considerably. Flour also has a shelf life, 10 - 15 months according to Good Housekeeping and less if you live somewhere hot and humid without air conditioning.
I price checked All-Purpose Flour this week and here is what I found:
At first glance, the wholesale club pack looks like a bargain (we're going to ignore membership costs here), it is less than half the unit price of the 5 kg bag. But is buying a 20 kg bag of flour really a good idea?
To give you an idea of how much flour that actually is, you're looking at approximately 40 loaves of bread worth. A full bag is approximately cubic foot in volume, which is a lot to store in a small kitchen.
So let's say you have the room for a 20 kg bag, when does it really become a good deal? Take a look at the graph below. Assuming the flour will be stored properly and has a shelf life of 12 months, you can see at which quantities each option is the best deal.
If you use less than 4 kg of flour a year, then buying from the bulk store is the more economical option. Between 4 and 5 kg, you are better off buying the 5 kg bag at $8.49. If you will use more than 5 kg of flour in a year, the 20 kg bag is the most economical option at $11.99. But what about holding costs?
I did the math on the holding cost of a 20 kg bag of flour in a rented 610 sq ft condo in Toronto. Based on the volume of the condo and the volume of the flour, less than $5.00 of your annual rent would go to storing the flour. In this case, it's not about the dollars, it's about the opportunity costs. Storing the flour means you can't store something you might need or want more.
So now you know what you have and how much of it you are going to buy. But how can you keep track of it?
Here it is, Ops Mama's 3 Rules for Inventory Management in your kitchen.
1. "Out of site, out of mind".
Stick with containers you can see through and try to keep like with like. Also, if you have a chest freezer that isn't in your kitchen, keep an inventory on your refrigerator door or inside your pantry. That way you can see your entire stock from one room. I use a sheet of white board stuck to the inside of the pantry door.
Next, the see through containers. I try to use containers that I know the approximate volume of. Canning jars are great for this, they come in standard sizes so I can quickly approximate how much is in the container. This will also keep dry goods fresher and safer from pests.
Avoid having items too many rows deep on a shelf, it is too easy to forget what is tucked away at the back. Yes, this is my pantry. And yes, I have an unhealthy relationship with my label maker. But it sure is easy to find things when I'm cooking.
2. "Know when you're going to run out, before you run out".
This especially applies to items that don't get measured every time they are used and are always kept in stock, things like spices and oils. Or toilet paper.
For these items, I use a two bin system. One container is for daily use and is replenished as needed from a larger container stored separately. When the larger container is empty, there is typically enough in the small container to last until more can be purchased.
3. "First In, First Out".
When you make your weekly meal plan, take a look at what you have in stock. Is there something in your freezer or fridge that is about to reach it's expiry date? Do you have the dregs of several types of frozen veggies that can go in a quiche or stir fry? Use them up first. Then decide what needs to be bought to meet your weeks planning needs.
So dear readers, now it's your turn. What do you do to keep your refrigerator from filling up with petri dishes of mold? How do you make sure you have the ingredients you need?
P.S. The label maker is optional.
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