This column is dedicated to keeping stock on hand. Bestsellers often sell through. When you’re sold out of a bestseller, that can dramatically affect your store’s overall sales.
Periodic Automatic Replacement (PAR) is an inventory control system that tells you what levels of inventory you should have in stock in order to fulfill demand.
The PAR level determines the optimum amount of inventory stock needed on hand after each order delivery. If you place orders monthly and you sell 50 units of an item per month, you should order enough to always be “in stock,” perhaps 50 to 60 of that particular item.
PAR level fundamentals
There are some fundamentals related to setting PAR levels. For order placement:
- Take a look at your item sales reports for last year, especially for your store’s bestsellers.
- Determine how many units of each item you sold in a year.
- Find your average monthly unit sales of that item by dividing the total number of units sold in a year by 12.
"PAR levels are a tried-and-true formula for making sure you have a stock of your bestsellers for your customers."
Additionally, if you place orders for that item on a recurring monthly basis, you would set your PAR level to the number of units sold in a month plus backup of about 10% to 20%.
Manage your in-store stock levels
Now that you know how many items to order, each time you place an order of these items, let’s talk about how many will go on the floor versus in a stockroom or warehouse.
First, take your yearly unit sales of an item and divide that by 365. This figure is your daily unit sales for that item.
The PAR level for your store is based on how often you restock that item in your store, whether that’s daily, weekly, monthly, et cetera.
If you restock your store daily, set your store PAR level to be the average unit sales per day plus a few extra.
If you stock your store weekly, set your store PAR level to be the average unit sales per day multiplied by seven plus a few extra.
The key here is that PAR levels are a tried-and-true formula for making sure you have a stock of your bestsellers for your customers at all times.
The formula is as simple as “order as many as you would sell before the next order plus a few extra.”
