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Do you want to ensure your bar or restaurant never runs out of stock? To do so, you may want to consider the par level inventory, also referred to as par stock.
What about ensuring that you never have too much stock, prevent it from expiring, and avoid losing money? Not to mention, what happens when alcohol expires?
Then you need par levels and good inventory organization. They’re a best practice in restaurant and bar inventory. And they effectively eliminate the risk of losing sales because of 86’d items or burning money on expired inventory.
So, let’s look into what par levels are, how to set them with a par level formula, and what a good par level policy typically is. We’ve even got a free par level worksheet you can download.
Par Level Definition: What Are Par Levels and Par Level Meaning?
A product’s par level meaning is the minimum amount of a product a bar or restaurant should have on-hand to meet that product’s demand—until additional inventory is delivered. It’s not quite the same as safety stock.
The right par level inventory ensures two things:
- You don't run out of inventory and miss sales opportunities.
- You don't have too much cash tied up in sitting inventory in your warehousing or wasted on expired inventory.
How to Determine Par Levels in Restaurants
Par level inventory is determined by using the average of your past inventory usage numbers.
There are 2 primary ways to do it:
- Calculate the number yourself with the par value formula.
- Use a par stock inventory system.
Here's the formula for par stock:
Par Level = (Average Inventory Usage + Safety Stock) / Number of Deliveries per Time Period
Let’s walk through how to use the par value formula to determine par level.
Step 1
First, look at historical usage. In setting the par level for a certain vodka bottle, look at your bar’s past usage and note that you used 400 vodka bottles over a period of 3 months.
Step 2
Then calculate average usage. Divide the total number of bottles used in a period of time over the number of months. You'll get the number of bottles that your bar uses per month. In our example, 400 vodka bottles divided by 3 months is 133 bottles per month.
Step 3
Factor in safety stock. To account for unexpected spikes in demand, keep a little extra stock as a cushion. The best practice is to carry about 25% of your average inventory usage. In our example, that's another 33 bottles.
Step 4
Consider delivery frequency. The idea is that the right par level will keep the product in stock until the next delivery arrives. That's why setting par level depends on how frequently you get deliveries. Also, on what your inventory turnover looks like. Let's say we get one delivery per week, so 4 per month.
Step 5
Use the par level formula:
Par Level = (Average Inventory Usage + Safety Stock) / Number of Deliveries per Time Period
Par Level = (133 + 33) / 4
Par Level = 41.5
It means your bar needs 41.5 bottles of vodka ready while waiting for a new order to arrive. Moreover, you can maintain inventory levels that meet demand without sitting on the excess stock.
Par Level Inventory
Note that you should not order your par level. You should order enough to restock up to your par level.
Par level doesn't mean your order size. The order size should replenish the inventory back up to par level.
Par Stock Inventory System
Alternately, you can automate the process. Calculating par stock inventory manually is time-consuming and prone to errors. That’s why people use par stock inventory systems.
End-to-end bar inventory software like BinWise Pro knows exactly how much you sell, when, and for how much.
It makes it ridiculously easy to calculate inventory usage and set par levels.
The Benefits of a Par Level Policy
Setting and sticking to a par level policy allows bars and restaurants to:
- Stock your full bar liquor list or restaurant economically
- Avoid tying up cash in sitting or expired inventory. How long does liquor last? Pretty darn long, if it's unopened.
- Avoid 86’ing items, which disappoints guests and necessitates reprinted menus (unless you’ve got a QR code menu)
You can measure the effectiveness with some other useful metrics:
- Inventory turnover ratio is the number of times inventory is sold and replenished during a given period. To calculate turnover, use the inventory turnover formula.
- Days on hand is how many days' worth of inventory a business has at any given moment.
- Inventory shrinkage. Also called variance. The amount of inventory that slips through the cracks and isn't sold.
The above numbers will shine a light on how effectively you’re stocking and using inventory to meet demand.
Par Level Worksheet
Sales patterns change frequently—think of seasonality, holidays, etc.—par levels change frequently. Setting par inventory levels monthly is ideal, then. But you can get away with quarterly.
Below you’ll find two versions of a par level inventory sheet template.
One is a downloadable PDF that can be printed out. You’ll find an inventory sheet template example right below it to illustrate how it’s used.
The other is a par level worksheet calculator that will make the calculations for you. It’s a spreadsheet file that can be opened in Google Sheets or Microsoft Excel. Pairing this with a barcode scanner app for inventory can help speed up the process.
How to Use the Par Level Worksheet Template
Here’s a breakdown of what each column in the restaurant par sheet means:
- Supplier: the vendor you’re purchasing the inventory from
- Item: What the inventory is
- Par level: The par level you set using the process outlined above
- Current inventory: The amount of that item you presently have in stock
- Extra par: Any known events, private parties, or circumstances that require extra inventory. Inputting “1” in this column means you know you’ll need at least 1 more quantity of the item.
- Order amount: The amount you need to order to maintain par level inventory. It’s the par level minus current inventory plus extra par.
Blank Par Level Worksheet Template
Click the below preview to download our printable, blank restaurant par sheet.
Par Sheet Template Example
This is what a filled-out version of the above par level worksheet template looks like:
Par Level Worksheet Template Calculator
You can also download our par level worksheet calculator. It calculates the order amount for you (rounded up to the nearest whole number). Just import the .xlsx file into Google Sheets or Microsoft Excel and input par level, current inventory, and extra par. It’s also sortable by column.
We’ve also got a wonderful (and free) bar inventory spreadsheet and Google sheets inventory template to help with taking inventory in the first place. And liquor cost and beer keg tracking resources to take it a step further.
Set and Observe Par Level Inventory Easily with BinWise
This may sound quick and easy when you only have to do it for one bottle. But what about doing it for thousands of bottles and brands of varying liquor bottle sizes?
Couple that with how frequently traffic and demand change, and manually calculating par level inventory approaches full-time-job status. Not to mention it’s error-prone because you’re human.
Manual bar inventory management isn't easy. That’s where BinWise Pro comes in.
Our bar inventory software allows you to quickly set and adjust the par level inventory based on historical data and high demand products. BinWise alerts you when your inventory is falling below the par levels. It enables you to place orders directly to your distributors right through the platform. There's even a bar inventory app.
It should also be said that this all applies to any product, not just liquor. Food, dry goods, cleaning materials, wholesale products, anything. It's a valuable tool in avoiding issues like excess inventory.
So, whether it's wine inventory or restocking a kitchen, BinWise Pro will do it for you.
Frequently Asked Questions About Setting Par Level Inventory
How is par level calculated?
The formula recognized in the hospitality industry for calculating par level is:
Par level= (the amount of inventory used each week + safety stock)/ the number of deliveries each week.
What is the meaning of par stock in bars and restaurants?
Par stock refers to everything a bar or restaurant should have in stock on a daily basis to fulfill their patrons' needs.
What is par stock or par levels?
Par stock or par levels are estimates for the minimum amount of a certain item that should be kept in stock.
What is the minimum and maximum par level a restaurant should have?
The minimum and maximum par level at a restaurant or bar is set by the business and will depend on how often the business needs to replenish the stock of that item. For example, the par level for a frequently ordered bottle of wine may be higher than the par level for a bottle of wine that is not ordered as often. This is because the business needs to ensure that they always have the popular bottle of wine in stock.