Mini-max Inventory Management

Inventory tracking and sales tracking form the starting point for any good inventory control program.   Without knowing how much of any menu item you sold in a given week, or how much inventory you have consumed in that period, you will not know what your instantaneous food cost is, whether you are maintaining portion control, whether you are experiencing shrinkage, or whether you should adapt your menu.  By tracking sales, you can see where some menu items are dying, others are gaining in popularity.  By tracking sales, you can predict, year-over-year or week-over-week, what your sales might be in the upcoming period.  By predicting your sales, you can project your inventory needs. As a general rule, restaurants should conduct physical counts of inventory every month but preferably every week, and even daily on key items.  Without exception, restaurants should record the quantity of sales on every menu item, each day, and, if reasonable, during each peak period within the day.

However, tracking inventory is not just a task for restaurateurs and retailers. Every product-oriented business carries supplies, raw materials, finished goods and/or works-in-progress. These, too, should be monitored on a regular basis, and the most effective system of evaluation is the mini-max system.  

Mini/Max systems achieved a high level of popularity in chain department stores during the late 1970s.  By indexing prior period sales, factoring in an allowance for sales spikes, and multiplying that period’s demands by 2.5 times (allowing for double the order period and ½ to allow for emergency situations such as weather, shipment delays and supply shortages), the maximum inventory on hand is determined.  Using 1.5 times the period’s requirement, the store would know the minimum level to which that stock should fall before reordering to the 2.5 times level.  This was, in short, a minimum to maximum inventory ordering method that took subjectivity out of ordering, and the tendency to be overly cautious or overly optimistic.  Generally it works. However, if idiosyncratic demands of a local market are not considered in the national chain’s calculations, huge inventory spikes or shortages may result.  If there are anticipated peak demands (e.g. summer seasonal items or sale items), and mini-max order levels are not adjusted to reflect these needs, sales suffer.  In food service, as in any business, that simply is not acceptable.

Mini-max systems need to reflect the unique nature of each business and the particular demands of each market. They need to reflect potential supply line issues and waning demand or obsolescence. They should be fluid schemes, and responsive to emerging opportunity or problems.

A good mini-max system can provide the appropriate level of controls for any ordering program, but must be built into a thorough strategy of inventory management in order to be of greatest value.