I’m working with a small coffee shop on profitability and I’ve been working on managing inventory. At MBA school we learn standard inventory management methods and how important it is to track, but it’s not so easy to implement where the dollar meets the register. For starters, perpetual inventory with food is really challenging – we’d need a super detailed POS system which is expensive. I’m starting to see why my banking school instructors said they think 50K is a minimum for starting a successful business. Without technology your business can’t be very efficient, and you’re competing against businesses that do have technology. It seems the only other option is to be such a small business that one person can track most of it in their own head and have really good intuition.
That leaves me with periodic inventory, which I don’t mind except that Quickbooks seems to handle it poorly. So I’m currently in a bit of a chasm between what I’m able to do with Excel pivot tables and what we know how to do in Quickbooks.
I do see a purpose for the oft taught “reorder point” setting even in our small-inventory setting. It would help us generate the weekly shopping list. I’m also discovering an inventory challenge I didn’t learn about in business school – how to construct a minimum order. As a very small business we are challenged to meet vendors minimum orders – in some cases to order at all, in other cases to get at least a first level price break. For example: as a coffee shop we order all our flavored syrups and some other products from a single vendor. We’re running out of our most-used syrup so we need to make an order. Just ordering a case or two of that syrup doesn’t meet their minimum order, so what else should we order, and in what relative quantity? I’d like to analyze the relative consumption of goods that we order from that vendor and construct an order to the minimum amount that matches our needs. Anyone know of a quickbooks plugin (or other inventory package) that can do that?
Another challenge – like any good business we work to keep our inventory thin. Well, we don’t have to work too hard at it, we have neither the physical space nor budget to get too fat. However it seems to be a fairly common occurrence (every other week maybe?) that some item we use is not in stock when we go to purchase it. I’m learning that Cash & Carry seems to be a sort of discount supplier that will always have some variant of a product available, but it will vary: IE sometimes the napkins will be bleached and sometimes they’ll be recycled. Ditto for the paper bags of the size we like. That is a problem I’m sure larger businesses deal with as well, perhaps by padding inventory, or by getting big enough to have better relationships with their suppliers.
Another suffering of the very small business – data entry. To track all this requires hours of typing in numbers from paper receipts. Where’s the EDI interface for Cash & Carry or Costco? No wonder so few business owners do it, but without it you’re missing a key advantage. I’m beginning to think that broad support for data and analysis for small business owners would be a huge support for economic development. It amazes me what a lock QuickBooks seems to have on the market. Small suppliers don’t seem to offer much in the way of Electronic Data Interchange, but I’m just beginning to look.