We cannot deny that, regardless of the process and technology used, anyone working on food inventory monitoring may experience a variety of challenges. Despite the difficulties, inventory tracking and controlling costs is one of the most significant responsibilities in your restaurant operation.
Many restaurant businesses choose to employ an inventory management solution integrated with a POS system, while others are still doing the manual process by using pen and paper. One useful way to utilize an inventory usage report is to set a restaurant par level inventory using spreadsheets.
In this blog, we'll teach you the basic method of taking inventory with the use of restaurant inventory par levels and discuss its importance. And we’ll show you how to set up your par inventory management using spreadsheets for your restaurant.
How to Create a Par Inventory Sheet
The restaurant industry's highest operating expenditure is food, and on average, restaurant operators spend 25 to 40 percent of their sales on inventory. To manage a successful restaurant, it is a best practice to keep an adequate inventory level needed to meet demand from your customers while providing a cushion in case of unexpected spikes. A par inventory sheet can help you maintain a minimal quantity of items on hand at all times.
What is a Par Inventory for your restaurant inventory management?
Par inventory is a restaurant inventory management approach that involves always keeping a minimal quantity of inventory in your restaurant, also known as a par.
Par stock is not the same as actual stock. The par level is the ideal amount of each raw ingredient that you set as the par level. Setting pars notifies you when stock levels for a particular item need to be reordered.
Par inventory sheets are a spreadsheet that helps you acquire these minimums and determine how much food or bar inventory to order from your vendors. This spreadsheet can be maintained digitally or on paper.
Is there a difference between par levels for restaurants and par levels for bars
A few components are needed to begin determining your restaurant's par level inventory for each ingredient.
- Schedules for each item's delivery
- Each item's customer demand (sales report)
- Inventory on average
To get a better perspective of an item's demand, we suggest calculating its inventory turnover rate first to determine how many days it takes to sell your inventory.
What you need to consider to calculate your par stock levels
Once you've acquired an item's inventory on hand ratio and sales report, you'll be able to calculate how much goods are used between deliveries and how quickly you go through inventory (turnover).
Meanwhile, to calculate accurate pars for your bar, you have to consider some factors such as:
- Looking at the Historical Usage- Counting how many times each item has been utilized in recent months. A 5-month period would require 546 bottles of Hiatus tequila.
- Calculating the Average Weekly Usage-In order to get your weekly usage, multiply your historical data usage by the number of weeks. For example, 546 Hiatus Tequila bottles divided by 21 weeks = 26 a week.
- Seasonality needs to be clarified- Adjust this average usage. Consider the implications of a busy season if you used data from your slow season. Your season may be 50% busier than usual. 26 bottles x 1.5 = 39 bottles weekly minimum.
- Setting a Target Goal- Estimate the average inventory usage you'll need. Set a two-week goal to avoid stock-outs, but be realistic. Adjust the seasonality on a weekly inventory of 39 bottles per week and double it by two weeks of inventory for a two-week target par. The total number of bottles in your par is 78.
How to calculate the par level?
The following is the general formula for estimating par level:
Normal Inventory Used Per Week + Safety Net = Par Level
Let's have an example here.
In your snack house business, burger buns are major ingredients for you. Every Monday, it gets restocked. As a result, your set par level will be your weekly consumption plus safety net stock in case of an emergency or special occasions.
Let's assume you use 200 bags of burger buns every week and you also want to keep a 10% safety net. And you would always want enough buns to cover 220 orders of buns after each inventory. If one bag is enough to provide 10 orders, your par level will be the 22 bags of burger buns. Check the breakdown below:
Normal Inventory Used Per Week + Safety Net = Par Level
20 bags + (10% x 20 Bags) = Par Level
20 Bags + 2 Bags = Par Level
22 Bags = Par Level
With this approach, you'll know how to set the par level for any of your raw ingredients. When your actual stock falls below the par level, you'll know it's time to re-order.
What is safety stock in the par inventory system?
Safety stock is the additional stock that you keep to maintain on hand above and beyond your typical use level as a safety net in case of an emergency.
As a general rule of thumb, 10% of your average inventory usage should be regarded as a safety stock in a single item.
Inventory Tracking System
To set a par level, the first step is to establish an inventory tracking system so that you can keep track of your actual stock levels. This will help you stay on top of your inventory and never run out of goods again.
How is a Par Inventory Level Established?
If your long process involves multiple vendors for your restaurant, you've probably already had an inventory tracking of this. Re-examine your order slips and supplier receipts. Decide how much food costs are consumed between deliveries to decide the par order amount. Priority is given to delivery frequency when calculating par level inventory.
How to make a par inventory sheet for your restaurant?
Creating a par inventory sheet for your restaurant inventory management is pretty simple, you just need to understand what goes into each column. You can use tools such as Microsoft Excel and Google Sheets. To create a par inventory sheet, add a table with the six columns listed below:
- Item - Enter the name of the raw inventory item or food product that needs to be ordered. It is also ideal to take note of the item's volume if it's in bulk. (e.g. 1 lb pack of ham, 2 cans of Del monte Tomato sauce, 1 ltr of orange juice
- Par level - This is where you record the par or the minimum amount of this item that you need to have on hand every time you restock your restaurant or bar inventory. This column can only include a number, weight, or volume.
- Current inventory level - This column represents how much of this item you currently have in stock.
- Emergency stock - It's always a good idea to have additional inventory on hand just in case unexpected spikes in demand or something goes wrong. When there are supply chain shortages or interruptions, or when things are difficult to get, consider buffering your par level with emergency stock. This column is completely optional.
- Special usage par - If your restaurant holds special events, pop-ups, or caters, you may need to buy extra stock for these occasions that you would not account for in your daily par level. Make sure you have the supplies you need for these special occasions by using the special usage par column.
- Order amount - After filling out the other columns on your par inventory sheet and completing some calculations (more on that later), you'll get an order amount that specifies how much of each item you need to order to maintain your par inventory level.
You can now arrange this sheet in two ways:
- By raw material type- You may sort your goods by veggies, dairy, grains, etc.
- By various vendors- You can list ingredients ordered and can be divided by the supplier's name on the sheet.
Note that you'll have to manually tally, calculate and update actual stock levels every day or weekly (depending on how fast you use up the stock.)
Par Inventory Sheet Template
To make sure you follow the par inventory sheet template, we've provided you with a few sample rows below as your guide.
How do you maintain par stock levels?
Every ingredient has a specific amount of safety stock. However, a good rule of thumb in the restaurant industry is to keep roughly 20-30% of weekly invoice usage in safety stock. This allows for unanticipated demand. It is critical to analyze your sales data and inventory turnover rate; doing so will help you to better forecast and minimize food waste or stockpiling.
The Benefits of a Par Level Policy
At this point, once you've found the optimal PAR level, you'll be able to ensure that your restaurant business doesn't run out of resources while also not having too much cash wasted and too much cash tied up in unused inventory.
Benefits of having a successful PAR level plan include:
- Food waste is reduced
- Getting a good inventory turnover rate
- Improved inventory ordering control
- Saving money
Other indicators of par level success
Also, you can measure the effectiveness with some other useful indicators:
- Inventory turnover rate - refers to the number of times inventory is sold and restocked within a certain period.
- Days on hand - refers to how many days of inventory a business keeps on hand at any particular time
- Inventory shrinkage - refers to the amount of inventory that falls between cracks and isn't sold.
Ordering From Suppliers Based on Par Levels
When purchasing food, compare your actual amount to your right par level. Unless you run out of stock, your set par level is not your order ideal amount. Your order is for restocking and meeting par stock needs.
Using the buns example, you'll need 22 bags per delivery. Maybe you only used 13 bags last week due to the slow week. To order inventory, start with your par minimum amount (22 bags) and subtract your residual (9 bags), it will be (13 bags).
Par Level - Remaining Inventory = Order Size
22 bags - 9 bags = Order Size
13 bags = Order Size
The daily orders of 13 bags will bring your average inventory consumption up to the set par level of 22 bags.
Should I arrange Par Inventory Sheet based on suppliers or food type?
If you just have one or two suppliers for all of your raw material needs, you can organize the sheet based on the materials. This is because you won't have to keep track of many sources of orders and their specifics; instead, you'll concentrate on the sort of raw materials.
If you have multiple suppliers in your restaurant, it is best to keep the sheet organized by supplier. In this manner, you can keep track of different deliveries and order essential supplies from each source at the same time.
Should par sheets be paper or digitized?
A traditional par sheet is time-consuming; a digital par sheet is more efficient. Keep in mind that you'll need to print par sheets every time you receive a new inventory management order, which could be daily. Every time you order inventory, you may easily update computerized par sheets.
To view the online par sheets while walking around your extra inventory, use a tablet or other mobile device. Whichever system you adopt, stick with it.
But what about situations in which more food is required?
If your customers place orders days in advance or suppliers warn of impending storms, then you can adjust your amount of order.
Are there alternative restaurant inventory solutions than par sheets?
Excel spreadsheets and inventory management system are the two most frequent techniques for maintaining PAR levels:
- An Excel spreadsheet is typically used to create a PAR level worksheet. This strategy involves manually gathering information such as current stock levels.
- Inventory management software keeps an up-to-date and accurate account of how much of each item you've sold or consumed, providing you with real-time data to calculate your PAR level.
While all of these techniques can and are used by businesses to monitor PAR inventory levels, a cloud-based system offers significant advantages.
Your restaurant inventory system automates stock control by linking with your POS software, which eliminates the risk of human error when data is entered and ensures that your data is constantly up to date. It also provides you with improved visibility into long-term and seasonal trends, allowing you to better estimate inventory utilization spikes and troughs.
Can you use software to track pars
When it comes to controlling stock levels, you can use your inventory software to create alerts for low stock and auto-populate purchase orders when it's time to replenish. Furthermore, if you work with more than one supplier, your program will offer you precise lead time information.
Another advantage of inventory software is that it provides complete insight over expiry dates, which is critical in businesses such as food and beverage restaurants, hotels, and pharmaceuticals.