Inventory Yields

If we look at inventory management as only physical stock management, we may be ignoring the best available control over loss of profits in our business. Inventory control applies as well to supply and materials management as it does to stock, and almost as well to human resource management.

Restaurant inventory management provides the simplest example. Yields of burger patties, buns, and even pickles, ketchup, lettuce and onions are obvious targets for inventory management. But beyond the hamburger itself, we should look at yields of such items as napkins, takeout containers and wraps and even yields of natural gas consumption to run our grills and fryers. They all vary, depending on the items being prepared and sold, and vary depending on management of our rush and off-peak demand loads.  Even grill stones can be managed, by monitoring sales and yields.

Yields often vary in food service outlets based on demand. However, the same yields analysis can reveal how items in production and manufacturing settings can be affected by fluctuating demand and “portion” control.  Yields on welding rods, grinding discs, jigs, etc. are vital to effective pricing and determination of margins and markups.

Hand in hand with use of yields analyses is regular, accurate use of waste (spoilage, damage) and return/refund sheets. Factoring in these negative forces on our yields will show us how to tweak product development, handling & sales to minimize waste and returns. With trendy or perishable items, monitoring patterns of sales, in conjunction with patterns of yields will provide valuable clues as to when to delete an item, adjust pricing or modify production to maintain profits for that item. For example, if you sell an item that needs diesel fuel in the manufacturing process, wild variations in price also will affect your profit, and you should be able, at a glance, to determine when you need to shift away from that item or find more cost-effective solutions for production. Other items may have strong seasonal impacts, particularly in the agriculture or food service industries.

Yields analyses will reveal the most effective pricing strategy, as well, and will show you, even before you put an item into production or on sale, whether that item is likely to be profitable, or at what level you need to sell in order to be sustainable. This means that yields analyses should form a key part of any business planning or feasibility studies.