If you own or manage a restaurant, you know that maintaining the right inventory level is critical to your business’s success. Too little inventory can lead to stock-outs and disappointed customers, while too much inventory can tie up restaurant capital and take up valuable storage space. One tool that can help you strike the right balance is PAR inventory.
In this blog post, we’ll take a closer look at PAR inventory, including what PAR level (Par Stock) means, how to calculate them, and when it’s appropriate to exceed par levels. Whether new to PAR inventory or looking to optimize your existing system, this blog will provide you with valuable insights and tips.
So, Let’s get started!
PAR Level Meaning: What Are PAR Levels?
PAR Levels (PAR stock) are inventory management principles used in the restaurant industry. The term "PAR" is short for "Periodic Automatic Replacement." It indicates the minimum amount of stock you should always keep on hand. PAR levels help avoid shortages and overstocking, ensuring a consistent supply level while also reducing waste.
These levels are calculated by considering order frequency, past sales data, supplier lead times, seasonality, and other factors. For instance, a restaurant might keep lower par levels for slow-selling items during their off-(slow season) but increase them for more popular items when business picks up. In addition to helping optimize costs, having an accurate PAR system helps reduce food safety risks, ensuring that fresh ingredients are always on hand.
What Is PAR Inventory?
PAR inventory is a method of inventory management. It involves setting predetermined levels for each item in the inventory, called the PAR level. When the inventory of an item falls below the PAR level, it is automatically replenished to bring it backup to the PAR level.
The PAR system helps ensure that a restaurant always has the necessary supplies to meet customer demand while minimizing waste and excess inventory. It can be particularly useful for perishable items, as it helps ensure food is used before it spoils.
PAR Level Inventory
PAR-level inventory is a widely used restaurant management strategy that helps ensure restaurants are always stocked with the necessary ingredients and supplies. This method sets realistic minimum and maximum levels for each item in a restaurant’s inventory based on demand, sales trends, usage rates, and cost. By closely monitoring these stocks, restaurants can avoid overstocking or running out of products and materials to run their business operations smoothly.
A well-planned PAR-level system helps maintain an efficient flow of operations and reduces waste from expired or unused items. With the right restaurant equipment in place, such as barcode scanners, RFID readers, or even mobile apps to monitor stock levels, it’s easy to keep track of everything and adjust orders accordingly. Implementing a PAR level inventory system can help restaurant owners and managers ensure their restaurant operations run smoothly, reduce restaurant food waste, and save costs.
PAR level inventory is a relatively simple concept to understand, but it requires close monitoring and alertness on the part of staff members to keep it running well. You must keep accurate sales records to track each item’s minimum and maximum levels. If PAR levels are set too low or too high, there could be a negative impact on profitability due to overstocking or running out of items.
It’s also important to stay up-to-date with changing demand trends so that appropriate adjustments can be made as needed. With efficient tracking tools such as POS systems or ERP software, it’s easier to stay on top of inventory levels and make changes as required.
How Is PAR Determined
Par levels are the minimum number of items that should be in stock in a restaurant at any time. Calculating par levels is an important part of managing restaurant inventory, as having too few or too many items on hand can lead to waste and lost profits.
Fortunately, calculating par levels doesn’t have to be complicated. Following the steps outlined below, restaurant owners and managers can accurately determine par levels for their inventory.
1. Establish a Time Frame
The first step in determining par levels is to set a time frame. Depending on the size of your establishment, it might make sense to adjust par levels weekly or biweekly.
2. Identify Popular and Slow-Moving Items
After establishing a timeline, it’s important to identify popular and slow-moving items. These will be the primary focus when determining par levels, as popular items should be kept in higher supply than slower-moving ones. It’s also helpful to create sales history reports to track item trends.
Once you’ve identified popular items, the next step is to calculate usage. This is where sales history reports are especially useful in determining how often certain items are purchased and consumed. Knowing the usage rate for each item can help determine appropriate par levels, as it’s important to ensure there is enough stock on hand to satisfy customer demand.
4. Compare Usages and Set Par Levels
Finally, it’s time to compare usage and set par levels for each item in the restaurant’s inventory. Break down items into categories, such as cold food, preparation items, and beverages. Then calculate the par levels for each category based on the average amount of usage. It’s also important to consider potential customer demand when adjusting par levels, as having too few items can lead to dissatisfied customers and lost revenue.
By following these simple steps, restaurant owners and managers should be able to accurately calculate par levels for their restaurant’s inventory.
Par levels are important in managing restaurant inventory, as they can help reduce waste while ensuring customer satisfaction. With careful consideration and accurate calculations, par levels can help optimize a restaurant’s overall performance.
Inventory PAR Level Calculation
Creating a PAR level aims to ensure that you have the right amount of inventory on hand at any given time. That way, you can maintain optimal stock levels without overstocking or running out too often.
To calculate your PAR level, you need to know three key pieces of information:
- The amount of inventory used each week.
- The safety stock that needs to be kept in reserve
- The number of deliveries that come in each week.
Once these values are known, using the formula below to calculate the PAR level is easy.
PAR Level Formula
PAR level = (the amount of inventory used each week + safety stock) / number of deliveries each week
For example, let’s assume a certain item has an average usage rate of 10 units per week, a safety stock level of 5 units, and one delivery every two weeks. The PAR level for this item would be:
PAR Level = (10 units + 5 units) / 1 delivery every two weeks
= 15 / 0.5
That means you should keep at least 30 of the item in stock at all times to ensure that your inventory levels are always optimal. However, if the usage rate is higher than expected or there are more frequent deliveries, you may need to adjust your PAR level accordingly.
Calculating an accurate PAR level cannot be overstated; doing so will help you maintain adequate stock levels and avoid costly overstocking or running out of items too often. By taking some time to consider usage, delivery patterns, and safety stock levels, you can ensure that your inventory remains well-stocked and organized.
When Should Inventory Exceed Par Levels?
There are a few circumstances in which a restaurant’s inventory may temporarily exceed its par levels, such as:
- Seasonal fluctuations - Depending on the season, some ingredients are more in demand than others. This could lead to a need for a restaurant's inventory to exceed par levels. For example, during fall and winter months, seasonal menus such as pumpkin pies or soups may require additional ingredients that you would not normally stock at regular par levels.
- Special events or promotions - If a restaurant has planned special events or promotional activities that require unique ingredients, they may have to order more than what is listed on their par level list to keep up with customer demands.
- Supplier delays - If a restaurant’s regular supplier experiences a delay in their delivery schedule, it may be necessary for the restaurant to purchase extra stock from another supplier to keep up with customer demand. This may result in a temporary increase in inventory beyond par levels.
In all of these cases, you should anticipate any changes in inventory levels and plan accordingly so that your restaurant business is not disrupted or negatively affected due to unexpected inventory increases. An accurate understanding of how much product is needed at any given time can help you avoid running out of items while managing your cash flow more effectively.
Frequently Asked Questions About Par Inventory
In this section, you will find more answers to common questions about PAR inventory. Whether you are new to PAR inventory or have experience with it, this section will provide the information you need to make informed decisions about your restaurant inventory management strategy.
What Is a PAR Sheet for Inventory?
A PAR sheet is a document containing predetermined stock levels that should be maintained at all times. It lists all of the items that need to be kept in stock, along with the recommended minimum and maximum amounts for each item. This document helps ensure a business always has enough stock, preventing the inventory level in a certain area from falling below an acceptable level.
What Does PAR Stock Mean?
PAR stock is a term used in the restaurant industry to refer to the ideal inventory level of a certain item. To put it simply, PAR stock is the item amount you should keep in the kitchen or bar at any time.
What Is the Difference Between a PAR Level and Reorder Point?
The difference between a PAR level vs reorder point lies in the timing of when an organization orders new inventory.
- A PAR level is the predetermined minimum amount of items that should always be kept in stock. It is typically determined by analyzing past sales data and forecasting how much business will be conducted over a certain period.
- The reorder point is the inventory level at which a new order must be placed in order to maintain the PAR level. It is usually calculated by taking into account lead time, safety stock, and demand variation.
In other words, a PAR level is the target inventory level that needs to be maintained, while the reorder point is the amount of inventory needed to reach said target.
How Often Should You Change Your PAR Levels?
Generally speaking, you should review your PAR levels at least once a month and adjust them according to current sales trends. However, some restaurants may need to adjust their PAR levels more frequently, such as after a large sales event or during the holiday season. It is important to be aware of current trends and adjust your PAR levels appropriately to ensure that your inventory remains current.
How Do You Manage PAR Levels?
PAR levels are a critical tool for restaurant managers when it comes to efficient operations. They allow accurate stock control, reduce waste, and save money. The key is carefully monitoring and adjusting your PAR levels according to changing needs.
Here are five steps you can take to manage PAR levels effectively:
- Set up an inventory system – You should have a system that tracks incoming stock and outgoing goods and what remains in the storeroom or freezer. This will help you stay on top of your inventory and ensure that all items are accounted for.
- Monitor usage patterns – It is important to study the amount of each item used during business hours to accurately determine the correct PAR level. This will help you balance having enough inventory available to meet demand while avoiding overstocking and wasting valuable resources.
- Check stock levels regularly – Regularly check your storeroom or freezer for expired products and items that haven’t been used. This will ensure that all items are being managed correctly and that no wasted money is being spent on unnecessary inventory.
- Set reminders – Implementing an automated system to remind you when to reorder certain items can help ensure adequate stock of each item at all times.
- Evaluate vendors – The quality of goods supplied by vendors can significantly impact your business. When selecting vendors, you must consider their pricing, delivery times, and commitment to supplying quality products.
By following these steps and utilizing an effective inventory system, you can be sure that the PAR levels in your restaurant are managed correctly. This will save you time, money, and resources and ensure customers are always provided with the best service possible.