Bakery Inventory Software & Management Best Practices [2025]

Managing inventory effectively is one of the most critical—and often overlooked—aspects of running a successful bakery. From tracking perishable ingredients to maintaining optimal stock levels for your best-selling items, inventory management plays a vital role in ensuring profitability, reducing waste, and keeping customers happy.

In fact, Netstock reports that reducing stockouts and overstocks can reduce inventory costs as much as 10%, and 72% of retailers plan to makeover their supply chain leveraging real-time data with automation and analytics.

To help you keep up with the growing number of bakeries implementing the latest stocking technology, in this article we’ll explore how you can make the most of bakery inventory software, as well as best practices for effectively managing your inventory.

Key takeaways

• Bakery inventory software automates tasks like ordering, tracking ingredient usage, and managing stock levels, saving time and reducing errors.

• By accurately tracking costs and minimizing waste, inventory software helps protect your bakery’s profit margins and improve cash flow.

• Features like automated ordering and demand forecasting help ensure you always have the right amount of ingredients, keeping customers happy and reducing spoilage.

• Integration with POS systems provides real-time sales data, enabling informed decisions on purchasing, menu planning, and pricing.

• Techniques like regular inventory counts, FIFO, and tracking waste are key for optimizing your bakery’s inventory management.

What is bakery inventory software?

Bakery inventory software is a digital tool designed to automate and optimize the inventory process for bakeries. 

While generic inventory tools might suffice for other businesses, bakery-specific software is designed to address critical challenges like managing perishable ingredients, tracking recipe components, and navigating fluctuating ingredient costs.

This software streamlines the entire inventory lifecycle—from procurement and storage to usage tracking and data analysis. With real-time updates on ingredient levels, you can make smarter decisions about purchasing, menu planning, and pricing. 

By improving inventory efficiency, this software helps reduce food costs, enhance cash flow, boost profitability, and ultimately improve overall customer satisfaction. For instance, a bakery using inventory software can quickly spot patterns of waste, optimize ordering quantities, and ensure best-selling items remain in stock.

Why is inventory management important for bakeries?

Efficient inventory management is essential for achieving profitability with your bakery, as poor inventory practices can result in stockouts, waste, and dissatisfied customers. Meanwhile, a well-managed system can improve cash flow, reduce costs, and enhance profit margins. 

Here’s why it’s critical:

• Cash flow optimization: Over-ordering ties up capital in unsold stock, while under-ordering risks lost sales and disappointed customers. Proper inventory management ensures your bakery maintains a balanced cash flow by aligning inventory levels with actual demand.

• Controlling food costs: Ingredient prices can fluctuate significantly, impacting profitability. Accurate tracking can help you adapt by adjusting recipes, prices, or sourcing from alternative suppliers. For instance, if egg prices spike, inventory software can identify more cost-effective options or alert you to update menu pricing.
  
  Example: Egg prices peaked at $4.82 per dozen in January 2024, but as of October 2024 sit at $3.37.
  
  

• Preventing stockouts: Few things frustrate customers more than finding their favorite item unavailable. By using inventory software to forecast demand and maintain optimal stock levels, your bakery can reduce sellouts and keep customers coming back.
  
  Example: Beth Weinberg, co-chair of the annual Bubbe’s Bakery Sale in San Marco, FL, said, “We sold out of everything so early last year that we upped our inventory three to four times… We don’t want to run out like we did last year.”

Investing in inventory management is about more than minimizing waste—it’s about delivering consistent quality, delighting customers, and ensuring the long-term success of your business.

Key terms in bakery inventory management

Before you can start optimizing your bakery’s inventory processes, it’s important that you have an understanding of a few key terms:

1. Cost of goods sold (COGS):

   • What it is: COGS represents the direct costs of ingredients used in making your baked goods. The amount left over is your gross profit margin, while your net profit margin is the amount left after deducting all expenses.

   • Why it matters: Accurately tracking COGS allows your bakery to set appropriate menu prices and protect profit margins. For instance, if the cost of flour suddenly increases, knowing your COGS helps you decide whether to adjust prices or absorb the increase.

2. Par levels:

   • What it is: Par levels are predefined stock levels that trigger reordering. Establishing par levels ensures you always have enough ingredients to meet demand without overstocking.

   • Why it matters: A bakery that sells a popular type of croissant can set par levels for butter, flour, and chocolate to ensure these ingredients never run out during peak demand periods.

3. Recipe costing:

   • What it is: This is the process of determining how much each menu item costs to produce. Inventory software can track recipe ingredients, quantities, and costs to give an accurate picture of profitability.

   • Why it matters: Accurate recipe costing ensures that every product you sell contributes positively to your bottom line. It’s especially useful when experimenting with seasonal or specialty items, allowing your bakery to forecast profitability before launching.
     
     Companies like Kerry have provided an Egg Reduction Guide to help bakers save on egg costs by adjusting their recipes, increasing potential profits and decreasing reliance on volatile market prices.

How to leverage bakery inventory software

Using bakery inventory software can improve several key areas of your operations by transforming how you manage your stock levels:

• Automated ordering & replenishment: Software can automatically reorder items when they hit par levels, reducing the risk of stockouts.

• Integration with POS systems: By linking inventory software with your point of sale (POS), you get real-time data on what’s selling, helping you adjust orders based on actual demand.

• Mobile inventory counts: Toast offers mobile, handheld solutions that help staff perform inventory counts.

Manual vs. automated inventory management

While some bakeries still rely on spreadsheets for inventory, software solutions provide significant advantages:

• Manual methods: Spreadsheets are prone to errors, time-consuming, and require constant updates. They may be sufficient for very small bakeries but become unwieldy as operations scale.

• Automated systems: Software solutions streamline processes, reduce errors, and save time. Features like digital invoices, automatic reordering, and integration with accounting software ensure accuracy and efficiency. This allows you to focus on growth and other key elements of running your business.

For example, while Therapie in Manhattan, KS started as a home bakery selling at farmers’ markets, today they have a brick-and-mortar retail location, in addition to several wholesale locations. With that kind of expansion, a scalable POS system with robust inventory management capabilities is essential.

6 best practices for effective bakery inventory management

To really make the most of your bakery’s inventory management, consider implementing these proven strategies:

1. Take regular inventory counts: Consistent inventory checks, whether daily, weekly, or monthly, help catch discrepancies early. Focus on high-cost items like dairy, chocolate, and specialty ingredients. For instance, a daily count of butter ensures your stock aligns with production needs and prevents costly surprises.

2. Organize your storage: A well-organized storage area reduces errors, waste, and inefficiencies. Use clear labeling, designate shelves for frequently used ingredients, and implement proper stock rotation to keep everything accessible and fresh. An organized system saves time and ensures you don’t overlook anything.

3. Improve order verification: Mistakes during receiving can disrupt your inventory data, leading to overstocking or stockouts. Always verify deliveries against purchase orders and address any discrepancies immediately. Your bakery can avoid shortfalls during peak production times by double-checking ingredient deliveries.

4. Train staff on inventory control: Empower your team to understand the importance of accurate inventory tracking and proper handling. Well-trained staff can reduce errors and help your bakery make strides towards waste-minimizing goals.

5. Use the First In, First Out (FIFO) method: This essential technique ensures that you use older inventory first, reducing spoilage and waste. It’s especially important for perishable ingredients like milk, eggs, and fresh fruits.

6. Track and analyze waste: Recording and analyzing waste allows you to refine recipes and adjust future orders. For example, if you notice frequent wastage of a seasonal ingredient like pumpkin puree, you can better plan next year’s orders to avoid overstocking.

Optimize your gross margins with bakery inventory software

Effective inventory management is a cornerstone of running a successful bakery, and the right technology can make all the difference. Bakery inventory software streamlines processes, reduces waste, and ensures you’re always prepared to meet customer demand. 

By automating tasks like ordering, tracking costs, and monitoring ingredient usage, it not only saves time and improves efficiency, but also has the potential to boost profitability.

If you’re ready to take your bakery’s inventory management to the next level, then check out Toast’s POS system for bakeries and cafes. It includes all the powerful inventory management your bakery needs.

With tools to automate inventory, integrate with your sales data, and provide real-time insights, Toast can help you optimize operations and focus on what you do best—baking amazing bread, cakes, cookies, and other sweet treats!