Minimum-maximum

STOCK
REPLENISHMENT
TECHNIQUES

Just-in time
Economic ordering quantity (EOQ)
Economic ordering point (EOP)

Optimal reorder time (ROT)

STOCK REPLENISHMENT TECHNIQUES
• Minimum-maximum: needs to establish a set point
(minimum) at which an inventory is to be recorded and
“reorder to” (maximum) level to be maintained.

MINIMUM
3 BOXES OF
GLASS SLIDES

MAXIMUM
10 BOXES OF
GLASS SLIDES
STOCK REPLENISHMENT TECHNIQUES

• Just-in time: is a japanese model. Here the commitment by

the supplier is to guarantee delivery of an item at the exact
moment of need. This limits the financial costs associated with
stocking and storing inventory items.
STOCK REPLENISHMENT TECHNIQUES
• Economic ordering quantity (EOQ)- answers of how much to
order at one time.
• Economic ordering point (EOP)- also referred to as the
reorder point (ROP), which provides the base or safety level
for reordering inventory.

• Optimal reorder time (ROT)- which helps establish the best

time to order to take advantage of the EOQ and EOP
INVENTORY MANAGEMENT METHODS:
• Annual usage: determining the level of inventory needed is
based on the workload of the laboratory.
• Average daily usage: this information can be obtained by
dividing the amount of supplies ordered in a year by 365
days.
INVENTORY MANAGEMENT METHODS:
• Cost of ordering: directly tied to the number of purchase
orders placed and the associated work involved with keeping
track of inventories as products are shipped & received.
Formula:
Cost of ordering= expenses of the purchasing section
# of purchase orders issued
INVENTORY MANAGEMENT METHODS:

• Annual holding cost: involves decisions based on bulk orders,

space utilization, & whether it is better to have the product on
hand or at the supplier’s warehouse. When the vendor is
holding the stock, the institution’s money is available for other
purchases
INVENTORY MANAGEMENT METHODS:
• Cost per unit: purchase price/container size
• Lead time : the amount of lead time or advance notice
needed between placing the order and is arrival is an
especially important consideration.
Assign
responsibility

STEPS FOR
IMPLEMENTATION OF
INVENTORY
MANAGEMENT
PROGRAMME

Establish the minimum

stock needed for
appropriate time
period.

Establish a system
for receiving,
inspecting, and
storing supplies

Analyze the
needs of the
laboratory

Develop needed
forms and logs

Maintain an inventory
system in all storage
areas, & for all reagents
and supplies used in the
laboratory
ANALYZE NEEDS
• A laboratory needs a process for analyzing its needs for materials
and for determining how many kits for a particular test should be on
hand.

• The laboratory should make a list of all the tests it performs and
identify all the supplies and reagents that are needed for each test.
THE INFORMATION NECESSARY FOR ANALYZING
NEEDS INCLUDES:
• a complete description of each item used;
• the package count or number of units in which the item is supplied;
• approximate usage per month (QUANTIFICATION);
• the priority or importance level the item has in doing the work of the
laboratory;

• length of time required to receive a delivery; and

• storage space and conditions
QUANTIFICATION
• It is a very important process that can help calculate how
much is required of any item for a given period of time, and
it is an essential part of a successful inventory management
programme.
QUANTIFICATION METHOD
• Consumption method – which uses data about actual use or past
consumption to calculate what quantities will be required in future.
• Morbidity data method – which uses data about prevalence and
incidence of disease and health problems, and the standard
treatments for these, to estimate future needs.
CALCULATE USAGE/CONSUMPTION
STEP 1. SELECT THE TIME PERIOD FOR CALCULATING CONSUMPTION
Calculate the quantity of syringes required for a 12 month period for
10,000 patients.

DATA:
Opening stock balance
Stock received
Closing stock balance
Wastage
Stockout

100 syringes
1000 syringes
200 syringes
0
2 months
STEP 2. CALCULATE THE CONSUMPTION FOR EACH ITEM DURING THE TIME
PERIOD.

FORMULA
RECORDED CONSUMPTION= OPENING STOCK BALANCE + STOCK RECEIVED –
CLOSING STOCK BALANCE

RECORDED CONSUMPTION= 100 + 1000 – 200 = 900 SYRINGES

STEP 3. ADJUST CONSUMPTION FIGURES FOR WASTAGE OR STOCKOUTS.

FORMULA: WASTAGE
REAL CONSUMPTION (RC) = RECORDED CONSUMPTION – WASTAGE (AVOIDABLE
LOSSES)
REAL CONSUMPTION = 900 – 0 = 900
STEP 3. ADJUST CONSUMPTION FIGURES FOR WASTAGE OR STOCKOUTS.

FORMULA: STOCKOUT
ADJUSTED RC = REAL CONSUMPTION X PERIOD IN CALCULATION (MONTHS, WEEKS, DAYS)
PERIOD IN STOCK (MONTHS, WEEKS, DAYS)

ADJUSTED REAL CONSUMPTION = 900 X 12 = 1080 SYRINGES

10
STEP 4. ADJUST TO TIME PERIOD OR PATIENT NUMBERS FOR WHICH
QUANTITIES ARE REQUIRED.

FORMULA: TIME PERIOD

ANNUAL CONSUMPTION = REAL CONSUMPTION X 12 MONTHS ____

MONTHS IN STOCK
ANNUAL CONSUMPTION = 900 X 12 = 1080 SYRINGES
10
STEP 4. ADJUST TO TIME PERIOD OR PATIENT NUMBERS FOR WHICH
QUANTITIES ARE REQUIRED.

FORMULA: PATIENT NUMBERS (10, 000)

CONSUMPTION PER 1000 PATIENTS = ADJUSTED REAL CONSUMPTION X 1000
TOTAL NUMBER OF PATIENTS

CONSUMPTION PER 1000 PATIENTS = 1080 X 1000 = 108 SYRINGES

10,000
SO FOR 10,000 PATIENTS YOU NEED: 108 X 10 = 1080 SYRINGES
STOCK LEVEL
• The stock level is the quantity of an item that is available for use in a
given period of time

• The reserve stock (sometimes also called safety stock or buffer stock)
is the lowest level of stock for each item, and quantities should not be
allowed to fall below this level.
• Reserve stock→ average monthly consumption and the lead time.
AVERAGE MONTHLY CONSUMPTION
• Is the average quantity of an item that is issued each month over a period of
months. It takes account of seasonal variations in demand and is calculated
using the following formula:

Average monthly consumption = total quantities issued in the time period

number of months in the time period-(Dos/30.5)
AVERAGE MONTHLY CONSUMPTION (AMC)

FORMULA:
Average monthly consumption = total quantities issued in the time period

number of months in the time period-(Dos/30.5)

Within 12 months (Jan 1 to Dec 31), 220 boxes of glass slides were consumed.
There were 92 days that the slides were out of stock.

FORMULA:
AMC= total quantities issued in the time period
number of months in the time period - (Dos/30.5)

AMC= _______220____________________
12 – (92/30.5)
AMC= 24.5 boxes
MINIMUM SAFETY STOCK

• The minimum stock level (sometimes called the re-order level) is the
stock level that indicates you need to place an order to avoid running
short of supplies.
• Safety stock is necessary to protect the storeroom from stock-outs; it
also provides a safety net for variation within the procurement system.
Example: If stock is normally distributed every month and the laboratory wishes
to have sufficient safety stock for 2 months to account for the slower than normal
delivery. AMC= 24.5 boxes of glass slides

FORMULA:
Minimum stock level = 2 X AMC
Minimum stock level= 2 x 24.5
Minimum stock level= 49 boxes

When stocks are depleted to this level, the item must be reordered
STOCK CARD
STOCK CARD
FORMS
AND LOGS

Good tools for

managing the stock
include:
• Standardized forms
• Card systems
• Logbooks
INFORMATION THAT SHOULD BE RECORDED:
Date

Date reagent or set of supplies are received

Lot

Lot numbers for all supplies, reagents and kits

Pass or fail

Pass or fail acceptance criteria

Date

Date the lot number or box of supplies was put into service or, if not usable, the

Date

Date and method of disposition

Name & signature of the receiver of materials

Date of receipt

OTHER
INFORMATION
THAT SHOULD
BE NOTED:

Expiration date

Quantity of the material received

Minimum stock that should be on hand

Current stock balance

Labelling shelves is a useful tool for storing
inventory and will help to systemize and
organize storage space.

STORAGE
OF
SUPPLIES

1. Assign a number (or name) to different

areas of the shelves.

2. Record in the logbook what shelves are

used for which reagents and supplies.
LABELLING REAGENTS

• It is important to label reagents with the date they are

opened and to make sure the expiration date is clearly
visible.
Stock & inventory

FLOW IN THE
MATERIAL
MANAGEMENT

Request to purchase (purchase

requisition form)

Purchase order will be placed

Receipt and storage of supplies

Purchase order form will be signed

and sent to purchasing department
REFERENCES
•

Chen, J. (2020). Requisition. Retrieved from

https://www.investopedia.com/terms/r/requisition.asp ,
on 11/13/2020

Encyclopedia (2020). Purchasing. Retrieved from

https://www.inc.com/encyclopedia/purchasing.html, on 11/13/2020

Definitions.net (2020). Storage. Retrieved from

https://www.definitions.net/definition/storage, on
11/13/2020

Kenton, W. (2019). Supply. Retrieved from

https://www.investopedia.com/terms/s/supply.asp, on
11/13/2020.
REFERENCES
•

Kenton, W. (2020). Inventory. Retrieved from:

https://www.investopedia.com/terms/i/inventory.asp,
on 11/13/2020.

Sortly INC. (2020). What Is the Difference Between Inventory and Stock?. Retrieved
from
https://www.sortly.com/blog/what-is-the-difference-between-inventory-and-stock/, on
11/13/2020.

Accounting Tools (2018). Supplier. Retrieved from

https://www.accountingtools.com/articles/2017/5/16/supplier, on 11/14/2020.