The par stock method is a trending inventory management process that is being embraced by small business owners across multiple industries. Using the par stock method, businesses of all sizes have proven that costs can be cut while still providing customers with quality service. But is this inventory management trend right for you, and what do you need to best execute it to achieve the maximum possible benefit?
What is the par stock method?
Par stock, or par inventory, is a methodology in which a business only orders enough products to get it through a short period of sales. Although this inventory method has been largely used in the foodservice industry, it has started to gain traction in retail and service-based businesses as well, due to its ability to add agility and space savings to operations. This form of inventory management will be heavily dependent on sales data to ensure the highest degree of ordering accuracy.
Establishing inventory par levels can be determined by using the below formula:
PAR level = (inventory used each week + safety stock buffer) / number of deliveries
Sounds simple, right? Unfortunately, although the math is relatively easy, putting together the necessary data for the formula may not be. This will require you to look at how you presently manage sales and inventory data, and to identify any gaps in sales monitoring.
Do I need improved technical tools for par inventory?
In most cases, the biggest gap that needs to be filled is a lack of congruent data in the business. To remedy this, you’ll need two primary things:
- POS with data management features
- A cloud-driven POS solution
Those of you already using POS tools may not have the necessary data management features required for tracking multiple sources of data and ensuring its compatibility across all aspects of your business. Possessing these attributes within your POS system is a must if the results of a par inventory strategy are to be maximized.
A cloud-driven POS solution will be necessary to fully support the levels of data management that are necessary for building a par inventory strategy. This ensures that the data gathered remains secure, consistent, and is easily accessible from any device, from your smartphone or tablet to your laptop. The consistency of data is maintained regardless of the number of sales channels employed, or the methods used to complete a customer transaction.
Can the par stock method account for a sudden surge of business?
The biggest concern around using par stock methods is their ability to respond to sudden, unexpected changes in business volume, in particular a sudden surge in sales. As much as you long to avoid being stuck with aging, dust-collecting inventory, you most definitely do not want to be caught short-handed, especially during holidays or promotional events. But the risk of running short is very low in a par stock strategy, thanks again to the usage of comprehensive sales data and the following rules-of-thumb:
- Add a 20% ordering buffer to your daily established minimums. This gives you enough leeway to address a sudden surge of business, but not so much that you are stuck with extra items on hand.
- Any unused items of the previous order can simply be removed from your next order, helping to keep products flowing out of your business and not languishing in the backroom gathering dust or slowly rotting away.
Will the customer see any difference in their service experience?
A properly executed inventory strategy using the par stock method will have one noticeable difference on the customer-facing aspects of your business: a highly developed sense of trust that you will deliver. A par inventory strategy also gives you:
- The ability to always have on hand what is advertised, deepening bonds with current customers while improving your reputation and attracting new customers to your business.
- Staff performance will lend a helping hand to the high regard for your brand, thanks to giving them the POS tools needed to craft a personalized experience for every customer.
- The focus will be greatly improved without the need to perform manual, time-consuming inventory tasks that only serve to make staff feel less valued. Instead, your employees will find themselves empowered to help broaden the reach and power that your brand has in the local community and beyond.
The par stock method will embolden your brand voice
Par inventory, via the par stock method, can help eliminate many of the manual tasks your business now performs to stay viable when it is powered by innovative POS technology. This blend of technique and technology will amplify the voice of your brand through its ability to deliver exactly what your customers desire without fail. And, the efficiencies and cost-savings that are a natural result of this mixture will fuel future success.
The consultants at talech have built a strong reputation for guiding businesses towards innovative inventory control strategies. We work with your business to create a par stock method that builds on your operational strengths while eliminating your technology gaps, setting you up for long-term business success. Reach out to us today to sign up for a demo and to learn more about how talech can be your valued POS partner.
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