Purchasing and Managing Inventory

Par stock is the inventory of goods an operation must have on hand to continue operating between deliveries. It is important to maintain a proper par stock to avoid running out of essential items. However, it is costly to maintain a larger inventory than necessary. This is partly because some of your operating cash is tied up in unused inventory. Second, excessive inventory of perishable items can lead to spoilage and thus to loss. Accurate forecasting of future business, based on careful study of past business, is key to managing inventory and establishing par stock.