Inventory has its own vocabulary, but every term describes something simple. PAR level is how much stock you want on hand before the next delivery. COGS is what you spent on products you sold. Usage average is how much you consume per week. Shrinkage is product that disappeared without being sold. These terms are not jargon. They are labels for things you already do.
If you have started counting and you understand why inventory matters and how it connects to your money, you will start running into terms. PAR. COGS. Usage. Lead time. Shrinkage. Reorder point. Someone uses one of these words and you nod along, but the definition is not quite clear.
Here is the good news: every one of these terms describes something you are already doing when you count. The vocabulary is just labels for the pieces of a process you already understand. Once you connect the word to the action, the terms stop being intimidating.
PAR stands for "periodic automatic replenishment," but nobody uses that name. Everyone just says PAR. A PAR level is the amount of stock you want to have on hand to cover usage until your next delivery arrives.
Think of it like a gas tank. Your PAR is the "full" line. When you count and the level is below PAR, you order enough to fill back up. When you are at or above PAR, you do not order. That is the entire system.
Example: If your cafe uses 6 cases of cups per week, and your delivery comes once a week, your PAR might be 8 cases (6 for usage plus 2 for safety). When the count shows you have 3 cases left, you order 5 to get back to 8. When the count shows you have 9, you do not order.
PAR levels are not guesses. They are set from your actual usage data, usually a rolling 3-week average, multiplied by a safety factor (1x, 1.5x, or 2x depending on how much buffer you want). After three to four weeks of counting, you have enough data to set a PAR for every item.
COGS (cost of goods sold) is the total cost of the products you purchased and actually used during a period. It is one of the two costs you can control in a small business (the other is labor).
If you bought $5,000 of product this month and used $4,200 of it, your COGS for this month is $4,200. The remaining $800 is inventory sitting on your shelf. It becomes COGS next month when you use it.
The connection to inventory tracking is direct: your weekly count tells you how much you are actually using, which tells you whether your COGS is accurate or inflated by over-ordering. If you are consistently buying more than you use, your COGS looks higher than it needs to because cash is locked in excess stock.
Usage average is how much of an item you consume per week, calculated from your count data. If you used 6 cases of cups this week, 7 last week, and 5 the week before, your rolling 3-week average is 6 cases per week.
The usage average is the foundation of your PAR level and your reorder decision. When the average says 6 per week and you have 2 on hand, you order 4 (or more, depending on your PAR). When you do not have a usage average, you are guessing.
TrackItWeekly calculates this automatically from your weekly counts. You do not need to do the math. But it helps to understand what the number means: it is your actual consumption pattern, not a target or a guess.
A reorder point is the stock level at which you should place an order. In most weekly counting systems, the reorder point is the same as your PAR level: when stock falls below PAR, you order.
In more complex systems, reorder points account for lead time (how long it takes for the delivery to arrive after you order). If your supplier takes 3 days to deliver, you need to order when you have at least 3 days of stock left, not when you are empty. But for most small businesses that count weekly and order weekly, the PAR level serves as the reorder point.
Lead time is the gap between placing an order and receiving the delivery. If you call your supplier on Monday and the truck arrives on Wednesday, your lead time is 2 days.
Lead time matters because you need enough stock to cover the gap. If your lead time is 3 days and your weekly usage is 6 cases, you need at least 3 days of stock (about 2.5 cases) when you place the order. PAR levels account for this automatically if you set them based on your actual delivery cadence.
For small businesses with one weekly delivery, lead time is usually simple: order on the same day every week, delivery comes 1 to 3 days later, and PAR covers usage for the full week plus the lead time gap.
Shrinkage is product that left your inventory without being sold. It includes theft, spoilage, breakage, and administrative errors (receiving the wrong quantity, miscounting, mislabeling). Basically, anything that makes your actual stock lower than what your records say it should be.
Shrinkage is why counts matter. If you never count, you never know your shrinkage rate. If you count weekly, shrinkage shows up as a discrepancy between what you expected to have and what you actually have. A sudden spike in shrinkage for one item is a signal: possible theft, possible waste, or possible supplier short-shipping.
The count does not prevent shrinkage. It reveals it. And once it is visible, you can investigate the cause.
Counting is the act of physically looking at what you have and writing it down. Tracking is the system of comparing counts over time to see patterns and make decisions.
You can count without tracking: walk the stockroom once and write down numbers. That is a count. But if you do not compare it to last week's count, you are not tracking. You are just recording a moment.
Tracking requires consistency: same items, same day, same process, every week. The comparison between weeks is what creates the data. The count is the input. The tracking is what turns the input into ordering decisions.
| Term | Plain Meaning | Example |
|---|---|---|
| PAR level | How much stock you want on hand before the next delivery | 8 cases of cups = full tank |
| COGS | Cost of products you purchased and used this period | $4,200 in product used this month |
| Usage average | How much you consume per week, based on count data | 6 cases of cups per week |
| Reorder point | Stock level that triggers an order | Below 8 cases = order now |
| Lead time | Days between ordering and delivery | Order Monday, delivery Wednesday = 2 days |
| Shrinkage | Product that disappeared without being sold | Theft, spoilage, breakage, errors |
| Count | Physically checking what you have | Walking the stockroom with a phone |
| Tracking | Comparing counts over time to see patterns | Week 1 vs Week 2 = usage rate |
Now that you have the vocabulary, here is where to use it:
In most weekly counting systems, they are the same thing. PAR is the stock level you want to maintain. The reorder point is the level at which you place an order. When stock falls below PAR, you order. In more complex systems with long lead times, the reorder point might be slightly above PAR to account for the delivery gap. For small businesses counting weekly, PAR and reorder point are effectively identical.
Usage average is calculated from your weekly count data. If you used 6 cases this week, 7 last week, and 5 the week before, your rolling 3-week average is 6 cases per week. The rolling average smooths out one-time spikes and gives you a realistic baseline for ordering. TrackItWeekly calculates this automatically from your counts.
Shrinkage includes any product that left your inventory without being sold: theft, spoilage, breakage, administrative errors, and supplier short-shipping. It shows up as a gap between what your records say you should have and what you actually have when you count. A weekly count reveals shrinkage quickly so you can investigate the cause before it compounds.
No. You can start counting with zero vocabulary. Walk your storage area, write down what you have, repeat next week. The terms become useful after you have three to four weeks of count data, because that is when you start making ordering decisions. Learn the terms as you need them. The count comes first. The vocabulary comes second.
PAR level. It is the one concept that turns a count into an ordering system. When you know your PAR for each item, the ordering decision becomes simple: below PAR, order the difference. At or above PAR, do not order. Everything else, usage averages, lead times, reorder points, supports the PAR calculation. But PAR is the number you use every week.