How Using Par Levels in Inventory Will Decrease Your Ordering Headaches

In addition to the many other disruptions the COVID-19 pandemic has caused to the retail industry, stores now find their inventory systems thrown totally out of whack. For many retailers and restaurants, inventory is the largest asset on their balance sheets, potentially tying up much-needed capital in stock.

A restaurant’s success is partly determined by its ability to maintain optimal levels of food inventory. Food and beverage costs are the most expensive budget items for most eateries, along with payroll. Wasting money on excess food can take a considerable bite out of a restaurant’s profits.

According to a survey cited by Finances Online, 46% of small retailers track their inventory the old-fashioned way–by hand. In addition, only 18% of small and midsize businesses use an automated inventory tracking system. Considering the advanced inventory management capabilities built into modern cloud-based POS systems, many businesses miss out on a golden opportunity to bolster their profitability.

In particular, par levels in inventory can be optimized by leveraging other business processes, such as sales analytics and employee management. Here’s how to apply par levels to enhance product orders and inventory tracking for restaurants and other retailers.

How Par Levels in Inventory Management Help Reduce Costs

The par level is the minimum amount of an inventory item that a retailer or restaurant needs to meet demand. It is the amount that will meet the business’s current demand along with a “safety stock” to account for unexpected increases in demand for the item. The goal is to avoid having products spend too much time sitting on stock shelves, taking up space, and cutting into cash on hand. For restaurants, par levels are intended to prevent food waste.

The trick is knowing the most accurate way to calculate the par level for specific products. These are aspects that must be considered when determining an item’s ideal par level:

The delivery schedule for the item (daily, weekly, or on-demand)The customer demand for the item based on analysis of past sales figuresThe average inventory for the item based on analysis of past inventory countsThe inventory turnover rate for the item based on sales analysis

The standard way to calculate a product’s par level is by dividing the average amount sold in a week (or other interval), plus a safety stock that’s typically about 20 percent of the weekly sales, by the number of deliveries you receive per week. For example, if a hardware store sells 20 boxes of 5 penny nails each week and receives two deliveries per week, the item’s par level would be 12 (20 plus 4 divided by 2).

There’s nothing hard and fast about par levels in inventory, however. Stores use the figures as guidelines and adjust their orders based on many factors, such as seasonal events or a potential weather-related disruption in deliveries. 

How POS Systems Help Unlock the Power of Par Levels

Just as no two retailers are identical, the method a store or restaurant uses to maintain optimal inventory levels must account for the unique way the business operates. A full-featured POS system serves as the central hub for keeping tabs on all the products you have on hand, from original purchase order to final sale. These systems let retailers know precisely how much of a product is currently in stock.

Perhaps the greatest benefit of integrating inventory management with other POS functions is improved demand forecasting. Other benefits include the following:

The systems can track inventory items by department or type.They alert managers automatically when inventory levels reach preset thresholds.They can be configured to place reorders automatically.They’re able to track products by price, cost, size, color, style, and other characteristics.

Real-time inventory tracking reduces the chances of a store or restaurant running out of a popular item without extending the average time products spend on the shelf. The ability of a POS system to create, print, and read barcodes improves the speed and efficiency of inventory management. Employees are able to sort, stock, and restock products faster and more simply, reducing errors and freeing time for them to spend attending to customers.

How to Apply Par Levels in Inventory for a Restaurant

Effective inventory management isn’t just helpful to restaurants. It can be the difference between a thriving business and one that’s struggling to keep the doors open. Real-time inventory tracking tops the list of must-have features for a restaurant POS system. These are among the other inventory management functions that make par levels more efficient.

Tracking units and variable pricingIntegrating accounting and other business processesAccessing the system from multiple stations and locations via mobile devicesHandling discounts, bundles, incentives, and refundsCombining online and in-person order tracking to ensure accurate inventory counts at all times

POS systems can track every order and sale from the wait staff, to the kitchen, and through delivery to the customer. This makes it easier to account for spillage, waste, and other costs. In addition, restaurants need to break down bulk items to their unit price and accommodate seasonal and other price changes on the fly.

The systems enhance the dining experience for your restaurant patrons by keeping a record of their past purchases and applying discounts automatically for product bundles, special offers, and loyalty rewards. Par levels in inventory help ensure that the menu items customers return for are in stock when they place their orders, whether they do so in person or online.

Crafting the ideal inventory management system for a retail store or restaurant requires working with a POS vendor who learns about your operation, understands your pain points, and knows the best approach to make your inventory management operations a key contributor to your business’s success.
In a period of change, talech has a number of POS solutions that can help your restaurant or retail business adjust operations smoothly. From reaching new audiences to engaging with your existing customers more often, we give you the tools to adapt quickly and with confidence.