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How to Calculate EMS Supply Par Levels

Basic guidelines for setting min par and max par levels

Introduction

The most effective way to hold consistently optimal stock levels is to use a par level range as the high (stock) and low (order) point for each individual item. It takes some research, a few judgement calls, and a bit of math, but the effort pays off.

Par levels define your ideal inventory counts. Below the minimum par you risk a stockout; above the maximum par you are carrying more than you need. The goal is to stay in the optimal band between them.

Note
These calculations work whether you track inventory on paper, in a spreadsheet, or in software. ESO Inventory can hold your par levels once you have set them and flag items as they reach the reorder point.

Calculating minimum par level

For this calculation you need historical inventory usage and item lead times, plus safety stock for the peak periods you see through the year.

Lead time demand+Safety stock=Min par

Written out in full:

Avg daily usage×Avg lead time in days+(Max daily usage × max lead time)–(Avg daily usage × avg lead time)=Min par
Minimum par
The number of an item in stock that should trigger a reorder. Some people call this the reorder point.
Lead time demand
An estimate of how much you will normally use between reordering an item and receiving it.
Safety stock
Buffer stock that keeps you from running out if demand spikes or delivery is delayed. It is tempting to skip this step, but the consequences of running out of critical medical supplies make it worth determining an appropriate level for each item.
Average lead time
The number of days it usually takes to receive an item, measured from the day you ordered. The longer the lead time, the more stock you need to hold. Some vendors take longer to process orders than others, and their location and delivery methods affect transit time. Orders for controlled substances may take longer because of documentation requirements.
Maximum daily usage and maximum lead time
Think of the worst cases you have faced: holidays, spring breaks, winter storm or summer flood season, bad weather slowing deliveries, or supplies on backorder.
Average daily usage
Use rig stocking, inventory count, and purchasing data to arrive at this figure.

Calculating maximum par level

Working out the minimum par gives you a head start here, leaving two of the four components to determine.

Min par+Reorder quantity–Low lead time demand=Max par
Maximum par
The most units of an item that should be in inventory at one time. Stock enough that you are not reordering constantly and can take advantage of volume discounts, without overstocking beyond what your agency can tolerate.
Reorder quantity
A set number of items to order once the minimum par level is reached. This is the most subjective part of any par level calculation.
Minimum daily usage
Unlike the minimum par calculation, the maximum par formula asks you to estimate the smallest amount of an item that might be used in a day.

The starting point for reorder quantity is a price at which some volume or delivery discount kicks in. If you can order bandages in packages of 10 at $2.17 each, a box of 50 at $2.17 each, or a carton of 200 at $1.98 each, all things being equal you would take the carton. Few agencies have endless shelf space or limitless budgets, though, so weigh these factors:

  • If shelf space is limited, buying in bulk may cause problems, especially with larger items
  • If the item has a shelf life, check your usage statistics so you do not buy more than you can reasonably use before it expires
  • Grouping orders for the same vendor can save on shipping and handling

Putting it all together

With sample numbers in place, the minimum par calculation looks like this:

(4 × 2.5)+(4 × 6) – (2.5 × 4)=10 + 14=Min par 24

And the maximum par calculation, using a reorder quantity of 60:

24+60–(1 × 3)=Max par 81

Conclusion

Whether you rely on traditional processes or are moving to inventory software, there is no avoiding the research and the first manual pass at setting par levels. It is also unlikely that your initial numbers stay optimal, since usage patterns, item availability, and call volume all shift over time.

Evaluate your par levels at least once a year. It often makes sense to do this while reviewing purchase histories and forecasting expenses for the annual budget. Either way, the long-term benefits make par levels worth setting for just about any EMS agency.

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