What are inventory par levels?

An inventory par level is a minimum quantity of a given item that a business must keep on hand. When the actual quantity falls below the par level, a new order is placed. The purpose of a par level is to prevent shortages while avoiding holding excess goods.

The par level of a given product is often the minimum required to meet short-term demand, such as one day or one week, depending on the operation. A par-level inventory system has advantages in concept, but it is sometimes difficult to manage. A company may have more or less in actual inventory than its computer shows. This challenge may lead to rushed or delayed orders.