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What Is Par Level And How To Calculate It

What is Par Level

 

A PAR level is the amount of stock you should always have on hand to operate your restaurant inventory at optimal level. PAR Levels ensure you always have enough stock of a particular ingredient to not experience shortages, and not miss out on sales. 

But how is a PAR Level calculated, and what factors affect it ?  

This article dives into what a PAR level is, how it affects the profitability of your restaurant business, and how to calculate it using a real-life example. 

Table of Contents

  1. What Is A Par Level?
  2. The Benefits Of PAR Levels In Restaurant Inventory Management
  3. How To Calculate A Par Level For A Restaurant Inventory
  4. PAR Levels : Best Practices To Employ
  5. Conclusion
  6. About Supy

1. What Is A Par Level?

The PAR Level, short for “Periodic Automatic Replacement Level,” represents the ideal stock quantity of a given ingredient that a restaurant should maintain at all times to operate its inventory at optimal performance. It’s the metric that ensures you never run out of essential items, yet avoids having excess stock, which can lead to waste

The PAR level of an item combines the quantity in stock plus the quantity ordered. For example, if the PAR level for ketchup is 10 bottles, but you only have 3 in stock, then the order quantity will be 7.

By finding the right Par Level, your restaurant can consistently meet regular demand, with a buffer of safety stock for unexpected surges in customer demand. Setting a Par Level level requires a proactive approach, where you need to consider the shelf life of your ingredients, the frequency of your deliveries, and the way in which you manage your stock. 

A PAR level system is especially important for multi-branch restaurant businesses, where maintaining consistent Par Levels across all locations is crucial to maintain brand reputation and a consistent customer experience.

Setting up Par Levels across your business can lead to several benefits that affect your bottom line and cost savings: 

2. The Benefits Of PAR Level In Restaurant Inventory Management

Benefits of Par Level in restaurant


  • Reduce food waste : by avoiding over-ordering, you limit the amount of surplus in your inventory, helping you deal with a lesser number of items that could perish, and therefore be wasted (such as fresh ingredients).

  • Have a healthy turnover rate : the turnover rate represents an establishment’s ability to control their inventory, or the ability to empty and replenish an inventory over a given period. By not over or under-ordering, your turnover rate will reach a healthy number.
  • Keep customers happy : having enough of an item ensures you do not miss out on potential sales. If a customer keeps coming back for an item that is regularly out of stock, your brand reputation will go down.
  • Increase profits : Yes, setting PAR levels helps you better your inventory, which in turn reduces your risks of wastage and shortage, leading to increased profits.
  • Take data-driven decisions : each one of your ingredients will have a different PAR level based on its expiration date and popularity. Some items may be seasonal, which is why their PAR level may change over the months. Keeping a digital track record of your PAR levels will help you identify trends and patterns, thus enabling you to better manage your inventory, and therefore your costs. 

3. How To Calculate A Par Level

Calculating a PAR Level requires a deep understanding of your menu, customer demands, and seasonality trends. Several metrics need to be known, such as the lead time, the average daily usage, and the safety stock. Having an accurate PAR level ensures a smooth operation, avoids stockouts, and reduces storage costs. Let’s dive into a real-life example to understand how to calculate PAR levels.

  1. Determine Average Daily Usage (ADU)
  2. Determine Lead Time 
  3. Estimate the Safety Stock 
  4. Calculate Par Level
What is par level coffee shop

 

Imagine you run a coffee shop. One of your most popular items is a specialty coffee blend. To ensure you never run out, you need to calculate the PAR level for this coffee blend.

 

Step 1: Determine Average Daily Usage (ADU)

Let’s say you reviewed your sales data for the past month (30 days) and found that you used 300 kg of the coffee blend.

Average daily usage par level formula

 

This coffee shop uses 3 kg of its special coffee blend a day.

 

 

Step 2: Determine Lead Time

 

The lead time is the time it takes to deliver each of your items. The lead time is key to know in order to accurately forecast how long in advance you will need to order your items in order to have them on PAR on any given day, especially during popular days.

 

  • Fresh produce typically has shorter lead times. They may take 2-3 days to arrive, depending on supplier and seasonality. 
  • Specialty items may have longer lead times, as they might need to be imported from abroad and need to go through customs and long shipping journeys.

Let’s say that the coffee beans will take 5 days to arrive given they’re imported from an exotic destination.

 

Step 3: Estimate The Safety Stock 

 

The safety stock accounts for the additional amount of stock you need in case of sudden increased demand. 

 

The safety stock can be calculated using the following formula : 

Safety stock formula

Suppose the maximum amount of coffee beans you’ve ever used in a day is 4 kg, and the maximum lead time experienced was 7 days. The safety stock would be : 

Safety Stock par level formula

 

Step 4: Calculate PAR Level

 

Now, apply these figures to the PAR level formula :

Par level formula and calculation

In this example, the PAR Level for the specialty coffee blend at the coffee shop is 22 kg.

This means you should always have at least 22 kg of this coffee blend in stock to meet customer demand and account for any delays in delivery. 


Calculating the PAR level is essential for efficient inventory management, ensuring customer satisfaction, and minimizing unnecessary costs. It’s a balance between having enough stock to meet demand and not tying up too much capital in inventory. 

PAR level calculations are not a one-time task. Your PAR levels should be revisited regularly to account for changes in demand or supply chain dynamics.

4. PAR Level : Best Practices To Employ

1- Periodic Review and Adjustment

 

We previously mentioned that a PAR level varies based on the seasons, your suppliers, and your customers. This is why it is key to regularly review your PAR levels and ensure your inventory is running at optimal levels. 

 

  • Take the example of Pumpkin Cake. This may be a popular item in the fall, but a refreshing ice cream might take its lead in the summer. You may want to have less of that pumpkin cake in the summer. 



2- Use Technology for Precision

 

In the era of digital transformation, employing technology like an inventory management system can greatly enhance the precision and ease of maintaining Par Level Inventory. These systems offer real-time data analysis and can automate the tracking of Lead Time, Usage Rate, and Safety Stock, making the process of maintaining Par Levels more efficient and less prone to human error.


3- Build Relationships With Suppliers

 

Your PAR level is calculated based on lead times and delivery consistency. These are factors that only your suppliers control. It is therefore key to build trusting relationships with your suppliers to ensure you have a regular incoming stream of products.

5. Conclusion

Embracing the PAR level system in restaurant management is crucial for efficient inventory control and to ensure customer satisfaction. By precisely calculating and maintaining optimal PAR Levels, restaurants can reduce waste, maintain a healthy inventory turnover rate, and ultimately increase.

PAR levels are calculated based on the average daily usage, lead times, and safety stock. The lead time is controlled by your suppliers, which is why you should try to build healthy relationships with them in order to ensure a consistent delivery of products and not experience shortages.

6. About Supy

Supy, an innovative inventory management tool, revolutionizes the way restaurants handle their inventory, especially when it comes to implementing and maintaining PAR Level systems.
With its advanced analytics and user-friendly interface, Supy streamlines the process of calculating Par Levels, taking into account factors like lead time, usage rates, and safety stock. This technology aids restaurants in making data-driven decisions, ensuring they have the right amount of stock at the right time, thereby minimizing waste and maximizing profitability. Integrating Supy into your restaurant’s inventory management strategy can be a game-changer for maintaining efficiency and enhancing customer experience.

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