Liquor Inventory Case Study #9

Liquor Inventory Variance Report: Know What You’re losing

This case study is a good example of how the ‘Variance Report’ portion of the Bar-i liquor inventory software report can help bar owners and managers recognize problem products that are affecting their liquor cost. Owners and managers can then manage their liquor cost more effectively based on that information. The bar in the graphic below is from one of our larger bars that prefer that they be inventoried weekly. The fact that they are inventoried weekly is an important decision because of the short period of time in which shrinkage can mount up and negatively affect liquor cost. Due to the large volume which this bar does (around $50,000 per week in liquor sales), taking inventory on a weekly basis allows them to address problems quickly. At $50,000 in sales per week, a 1% change in their liquor cost means $500 in lost profits. By actively managing their liquor cost, this bar is able run an overall liquor cost in the mid teens!
The variance report lists products which have missing inventory. The products are organized by category with the products with the most missing dollars listed first. In this bar there have been two products that have been a consistent detriment to liquor cost. Both Red Bull and Jameson continually struggle with performance while most other spirits perform consistently well. The two problem items are highlighted in yellow in the figure below and the missing amounts are reported in the column labeled “Missing units”. The report shows 2.1 bottles of Jameson and 27 cans of Red Bull missing (remember this is in one week). For 2 bottles of Jameson and 27 cans of Red Bull to go missing in one week (even though this is a busy bar) is alarming. Provided with this information, the bar owner took corrective action by meeting with his bartenders and taking corrective action. One step which was taken was to add a ‘Staff Red Bull’ button. By offering the staff discounted Red Bull, the staff is able to consume their favorite hangover cure without affecting the bar’s bottom line. The result has been multiple weeks of improved performance of Red Bull and Jameson. Prior to having the Bar-i variance report, this bar was aware that they were losing the shrinkage battle but were not certain which specific products were missing and therefore could not effectively address the situation. Are you fighting a battle against shrinkage without the weapons to effectively control your liquor cost?

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Posted in Bar Liquor inventory case studies