A par inventory definition can be best summed up as an inventory method that is specific to restaurants and other food service-based businesses. Variations in naming around par inventory, such as standard par, can also be commonplace.
But these will all meet the same basic definition: par inventory is the inventory quantity that is expected to be on hand on any given day. Establishing a par value will vary, typically due to the changing of seasons, holiday events, or the day of the week. Understanding what par inventory is and the best practices around it can help you decide how to best implement it in your restaurant.
How Does the Par Inventory Definition Affect a Restaurant?
Par inventory is a restaurant necessity. As a tool, par inventory directly impacts your overall food costs and your ability to use only the freshest of ingredients in the meals you serve. Utilizing par inventory will not only introduce improvements in how you handle product inventory, but it will give you access to different inventory control functions that streamline—if not automate—many of the tasks associated with inventory management in your restaurant.
Restaurants that use par inventory as their inventory foundation do so because of its contribution to the widening profit margins. Instead of worrying about wasted inventory due to overordering, they instead focus on maintaining a minimum level of food and ingredients by ordering less but on increased occasions. Also referred to as the just-in-time strategy, these lower levels of inventory introduce a few important advantages.
Food spoilage or ingredients exceeding use-by dates rarely occur in a par inventory strategy. These items will likely be completely used almost immediately, eliminating costly and wasteful uses of revenue. It also presents the opportunity to keep inventory turnover rates in check as well as to ensure that your menu is constantly evolving. These empower you to become more proactive in building a customer experience that improves the overall reputation of your restaurant.
How Are Par Levels Calculated?
The creation of a par inventory strategy has two requirements. First, you must understand exactly how to most accurately calculate par levels. Before you begin the calculation process, you need to know your frequency of product delivery and to have an accurate analysis of ingredient usage. The tools for obtaining this information will be covered more in-depth in the next section, so for now we will assume that you have both pieces of information at your disposal.
The information from both of these will be applied into the below industry standard formula that is used for determining par levels:
PAR level = (Inventory used each week + safety stock buffer) / number of deliveries
But before we continue, you may be wondering how the safety stock buffer number is derived. This number represents the amount of inventory needed to handle an unexpected surge of customers. Its value typically needs to be about 20-25% of your inventory used each week.
Once you have your par level calculated, you can now begin to order at the levels indicated by this number. When executed correctly, the risks of lost revenue due to product wastefulness and over-ordering will largely disappear. However, to properly execute a par inventory strategy, you need backup; and this backup must be technology-based.
What Steps Are Required to Align Inventory Controls to Par Levels?
The second step of creating a par inventory strategy is to introduce technology that helps to manage everything. The technology utilized for the most efficient management of par inventory is rich in data management and presents its user with multiple options for automation. It must integrate data from all of its sources and make this data accessible and discoverable to create the level of data analytics necessary to maximize the benefits of par-level inventory management.
But not all data is good data, especially when it comes to building the controls and monitoring necessary for the automation par-based inventory. Consider this example: Would you rather track the number of one-dozen egg cartons in your refrigerator, or the number of eggs in each carton in each of the one-dozen egg cartons in your refrigerator?
Tracking inventory in a par inventory strategy will require you to go down to the specific unit amount to be effective. Is this something that your current POS system can provide?
Partner With a POS Provider That Invites Innovative Customization
Par inventory is a great idea for restaurants to dive into. However, to do so successfully, you must have a sound understanding of what goes into building and maintaining this solution over the long run. Innovative POS solutions present restaurateurs with the ability to effectively manage their par inventory strategy, and an innovative POS provider will take this technology further by branching it out to help you become more efficient in all areas of your business.
We at talech would love to help you take your restaurant go beyond understanding par inventory definitions and best practices, and introduce the technology to implement it in your business. We work with you to build a robust POS platform that automates your inventory while introducing efficiency gains into all of your processes.
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