Liquor inventory case study #3

In September 2011, a downtown bar asked us to help them with their bar liquor inventory. The bar is a high volume bar which caters to a younger, late-night crowd. They sell lots of beer, well drinks and shots. We completed a trial audit on September 11th and the bar had a strong Accountability score of 89% (see top graph in figure below) meaning that 89% of the product being used being sold and the rest was falling victim to liquor inventory shrinkage. This is a solid starting performance and their liquor cost started at 23.3% which many bars would be very happy with. Despite this, the greater detail contained in our liquor inventory audit report showed that their liquor cost was 3.5% higher than what was achievable given their pricing and product mix etc (far left bar of the bar graph “Liquor cost trend during last 5 cycles”). After running a staff meeting to explain the new liquor inventory system to staff members, the following week Accountability jumped up to 95% and liquor cost fell 2.5% to 20.8%. We continued with weekly liquor inventory audits and after 5 weeks working with the client, they were missing just 2% of the product used and the performance gap was just 1.2%. The result was that their liquor cost had fallen 4.1% in just five weeks. Given the bar’s sales volume, that change is worth around $42,000 per year in missing product. We are not able to accurately measure is the true effect on their bottom line or the increase in sales which resulted from making sure all sales hit the POS system. We’ve now been helping this client with their bar liquor inventory for nine months. Their most recent liquor inventory audit was on June 11th 2012 and a Accountability score of 98% resulted in a 20.2% liquor cost showing they have been successful at maintaining the improved level of performance and profitability thanks to our help with their bar liquor inventory.

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Posted in Bar Liquor inventory case studies