6.3 Par-Level & Reorder Calculations

Sections 6.1 and 6.2 explain how to measure inventory once it is on the shelf. Section 6.3 answers the operational question that follows: how much should be on the shelf, and when do I reorder? This is the calculation that drives day-to-day purchasing in a par-based or min-max pharmacy system.

Par Level

Par level is the target on-hand quantity for a given item — the stock level that should be sitting on the shelf under normal conditions. It is the anchor for nearly every routine reorder decision in a pharmacy using a par-based or min-max system.

The core formula:

Par Level = (Average Daily Usage × Lead Time in Days) + Safety Stock

Where:

• Average Daily Usage — how many units of the item the pharmacy dispenses per day, averaged over a representative period.
• Lead Time — the time from placing an order with the wholesaler to receiving it on the shelf, in days.
• Safety Stock — extra units held to buffer against demand spikes and lead-time variability.

The reorder point is typically the same as par: when on-hand stock drops to or below par, place a reorder. Some systems separate the two (reorder point slightly below par), but for the exam treat them as equivalent unless told otherwise.

Safety Stock Rationale

Why hold safety stock at all? Because both demand and lead time vary. A par level computed from averages alone will, by definition, leave you short about half the time — averages are exceeded half the time. Safety stock covers:

• Demand variability — a sudden prescription surge (flu season, local outbreak, prescriber preference shift).
• Lead-time variability — wholesaler delays, weather, product shortages, recalls.
• Order cycle buffer — if you order weekly, you need enough stock to cover the gap until the next order lands.

The more variable demand or lead time, the higher the safety stock. Stable, high-volume items need less safety stock relative to usage; erratic, low-volume items need more.

Worked Example

A community pharmacy wants to set a par level for a common statin.

Step 1 — Demand during lead time: 10 units/day × 5 days = 50 units

Step 2 — Add safety stock: 50 + 15 = 65 units

Par level = 65 units. Reorder when on-hand stock drops to 65 or below. With a lead time of 5 days and daily use of 10, the 50 units of cycle stock will cover demand until the order arrives; the 15 units of safety stock absorb a demand spike or a late delivery.

What Happens If You Skip Safety Stock?

Par = 10 × 5 = 50. If demand is exactly 10/day and lead time is exactly 5 days, you receive the order just as the shelf hits zero. Any spike (say 12 units on day 3) means a stockout before the order lands. Safety stock is the insurance against that. On the exam, never compute par without safety stock unless the question explicitly says safety stock is zero.

Step-by-Step Reorder Walkthrough

A pharmacy uses a min-max system with par = min = 65 and max = 130 for the statin above. Average daily use is 10 units. Lead time is 5 days.

1. Day 0: Shelf = 90 units. Above par — no action.
2. Day 2.5: Shelf drops to 65 (= par / min). Trigger a reorder.
3. Order quantity: Max − On-hand = 130 − 65 = 65 units. Place a 65-unit order.
4. Day 7.5 (5 days later): Order arrives. Shelf = (65 − 25 used during lead time) + 65 received = 105 units. Above par again — cycle repeats.

This shows why max is set above par: between reorder and receipt, the shelf keeps drawing down, and max must be high enough that the shelf does not immediately hit par again. If max were set at par, the pharmacy would order every single day.

Seasonal Demand Shifts

Par is not set once and forgotten. Seasonal items need their par recalculated for the season:

The right approach is to compute average daily usage over the comparable season last year, not the trailing 12 months, so the par reflects the demand you are about to face — not the demand you just left behind. A par for oseltamivir set from July data will stock you out in December.

Min-Max Ties

A min-max system uses two thresholds:

• Min — the reorder point (typically = par, or par minus safety stock depending on the system). When on-hand drops to min, reorder.
• Max — the order-up-to level. The order quantity is Max − On-hand, so the shelf tops up to max after the order lands.

Par and min-max connect cleanly: par answers "how much should be on the shelf under normal conditions?" and min-max answers "when do I reorder, and up to what level?" Many pharmacy systems set min = par and max = par + one order cycle of usage, so the shelf refills to a level that covers the next cycle plus safety stock.

Formula Summary

This table collects every formula in the chapter for quick exam-day reference:

Memorize this table. The PTCB Supply Chain exam will give you a scenario with three of the four inputs and ask you to solve for the fourth — usually par level, turnover, or fill rate. Recognize which formula applies, plug in the numbers, and check that your units match.