How To Keep Inventory Costs Down With The Toothpaste Theory

With the toothpaste theory, find out how you can squeeze more out of your current stock levels and save on money by reducing costs.
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Last week we looked at how retail & hospitality businesses can adapt to current trends for success. Now we are moving onto a new topic in our series of themed posts: inventory and storage. We will kick off the series with all matters relating to stock control, and in today’s post we focus on storage. 

The toothpaste theory

Perhaps the most important general point on storage is that it pays to keep stock levels low. Having excess stock levels means that your cash is sitting on a shelf. And so long as it is sitting on a shelf, it is not making you profit. Another reason for keeping stock levels low is that excess stock encourages wastage (and increases the risk of theft). If stock levels are low, staff tend to be more conservative in using ingredients, equipment etc. It’s just human nature … why take care to keep kitchen implements clean and in working order when it is easier to go and get another from the storeroom? Likewise, chefs will be less concerned about portion control if there is plenty of stock.

One of our customers even redesigned the storage space in all of his restaurants so that there was between 20% and 50% less shelving. It instantly discouraged managers and staff from ordering excess goods.

Most important of all, you do not want to have excess perishable stock – but that’s a subject we will deal with under another heading, waste.

Oh, and in case you are wondering why we called this post the “toothpaste theory”. Well, think about it. The end of the tube seems to last almost as long as the rest of the tube. Every time you clean your teeth and think, “I really must buy another tube …” you are saving money!

Of course, there are limits. If you run out of stock entirely, you will disappoint customers and lose money. But we’ll deal with that another time.

Next week we’ll look at the best ways to organise your stock rooms so that everything you need to keep your business going is in its place when you need it.

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