The term PAR (Periodic Automatic Replenishment) level is used to indicate the target stock level for fixed-period replenishment. It is a quantity that is used to facilitate regular orders, based on a level that is calculated according to the needs of a particular period of time, the delivery delay and to avoid shortages of an item.
Determining a reasonable PAR level on which to base our orders has several advantages, such as:
saving time (need I mention money? 💸)
waste reduction
focus on other tasks for a manager
saving time (yes, I repeat myself!)
better customer experience
How to determine the PAR level required for an inventory item?
What quantity should be set in order to be able to order strategically, that is to say to have a sufficient quantity on site and avoid the risk of ordering too much or not enough?
Typically, you'll need the item's purchase history (Piecemeal helps you with that, thanks to the Purchases per item for a period report 📊) and how often the item can and that you want it to be delivered.
At the same time, but depending on the nature of the item (if it is more perishable than others) and the flexibility relating to the deadline for receiving it, you will want to consider a "buffer" quantity to be added to compensate for the vagaries of the demand. This is the concept of safety stock.
Let's summarize with this equation, translated over a period of one week:
PAR level = (Quantity used in the last weeks / Number of weeks
in the period) + Safety stock
Take the example of a weekly delivery of fresh eggs. 🥚 If we see the total purchase of 40 dozen in the last 5 weeks and we regularly keep 2 dozen (25%) on hand to deal with the unexpected, how high would the target level be?
(480 eggs / 5 weeks) + 24 eggs = 120 eggs
Attention! In this example, it does not mean that you will order 120 eggs each week, because the PAR level is subtracted from the quantity in hand at the time of your order (you will find more details below about the preparation and the sending the order).
If our weekly order is delivered 2 days later, here is how the whole thing would be illustrated:
Where:
🟠 = order day
🟩 = delivery day
🔺 = day below safety threshold
Notes (otherwise it would be too simple!):
The level should be reviewed periodically, as with a change of menu or season for example, or when supplying with a new supplier.
The level will be established according to the smallest unit of measurement of a purchase format. If we buy cases of 24 bottles, we will determine the level in number of bottles, not in cases.
The level will be the same across all vendors the item can be purchased from. Whether salmon fillet is purchased and sold by the kilo at Fishmonger A, or packed in a standardized 10 kg box at Fishmonger B, the fixed quantity will be identical (according to the smallest unit of measurement; here, per kilo) because it is the rate of consumption of the item that takes precedence, regardless of where it comes from.
How to save PAR levels in Piecemeal?
From the main inventory items page, choose "Manage PAR levels" from the additional options (the three small dots ( ⋮ ) to the left of the green "New Inventory Item" button).
Navigate through the list or use one of the filters to find the item to indicate the desired level in the last column.
Don't forget to save! 💾
And now, how to use PAR levels to automate your orders?
👉 This other article explains where and how to put the filled levels into action.
Determining the right PAR levels can sometimes feel like a trial and error process. If this strategy is new and little historical data is available, it may be easier to start with a single item category or vendor and gradually add new PAR levels as time goes on and we ensured that inventory quantities are neither too low nor too high to meet demand! 🎯
Feel free to contact us via the chat to ask for more advice.