PAR level is an order-up-to stock target. In a periodic review system, the buyer compares that target with inventory position and buys the shortfall, subject to supplier packs, minimums, timing and capacity. PAR is a planning target; it does not guarantee that stockouts cannot occur.
Define the coverage period first
If orders are reviewed every R days and replenishment takes L days, a conventional periodic-review target covers the review interval plus lead time, R + L. A business using “PAR” for stock required at receipt may use a different horizon. State the convention so the receiving-day target is not confused with the order-day target.
Target stock = expected demand over coverage period + safety stock
Order quantity = max(0, target stock − inventory position)
Inventory position = usable on-hand + relevant inbound orders − committed demand
Count each commitment once and assess inbound dates. Stock arriving after it is needed does not cover an earlier shortage. See reorder point for a continuous-review trigger.
Worked example
Assume 18 units of average daily demand, weekly review, a three-day lead time, independent stable daily demand with standard deviation four units, and a selected 90% cycle-service target. These are illustrative assumptions, not recommended settings for every item.
Coverage period = 7 + 3 = 10 days
Expected demand = 18 × 10 = 180 units
Safety stock = 1.28 × 4 × sqrt(10) = 16.19 units
Order-up-to target = ceil(180 + 16.19) = 197 units
If usable on-hand is 70 and relevant confirmed inbound is 40, with no other commitments, inventory position is 110. The shortfall is 87 units. With a 12-unit supplier pack, the buyer might order eight packs (96 units), after reviewing capacity and the extra nine units.
The z-score represents a model's cycle-service target. It is not an observed fill rate or a promise about the next order.