Have you got your PAR levels under control?
What are PARs and how should I set them?
PAR stands for Periodic Automatic Replenishment. PAR levels (PARs) are essentially a safety stock level intended to ensure you don’t go stock-out and have to call an 86 (i.e. “off menu!”)
PARs are useful for a number of reasons and are best calculated based on historical usage, taking seasonal variations into account.
PARs help to
- Take the guesswork out of ordering
- Remove the dependency on staff intuition (which might be on vacation!)
- Prevent stock-outs and, at the same time, ensure you don’t build-up excess inventory
How do I set PARs?
As mentioned, PARs are best calculated based on historical usage.
Steps to calculate PARs
Decide on a timeframe
The length of time over which you want to have enough stock-on-hand to meet demand. Think of this as the time between deliveries. Most venues choose a week and set their PARs on this basis.
Calculate usage quantities at the product level for the last 3 months or by looking at last years usage, if available. If looking at last years usage take the average over a 3 month period, 6 weeks before and 6 weeks after the current date.
Calculate PARs by dividing usage by the number of timeframes in the usage period (12 in this instance). See Example below.
Adjust for ad-hoc demand
E.g. events, good/bad weather, etc. This is best done using an PAR adjustment factor that can be applied to the PAR level.
Review on a regular basis or avail of dynamic “smart PARs”
- Timeframe: 1 week
- Usage over 3 months: 524 bottles
- timeframes in usage period: 12 (weeks in three months)
- PAR level = 524⁄12 = 43.67 = round up to 44
PARs are essential to running an effective beverage program. Smart PARs, in particular, adjust for changing demand and help to ensure you never go over or under stock. To calculate smart PARs, you need to check-in deliveries, take regular inventories, and keep track of usage.
It is recommended to use a rolling 6–8 weeks of usage data when calculating smart PARs. For new products with no or limited usage data, it is best to set PARs manually based on estimated demand and adjust them often until you have sufficient usage data on-hand.