INVENTORY

MANAGEMENT AND
PURCHASING
 INVENTORY MANAGEMENT

• Refers to the sum of all activities necessary for

ACQUISITION, STORAGE, SALE, DISPOSAL
OR USE OF MATERIALS
 FUNCTIONS OF INVENTORY
MANAGEMENT:
• OPERATIONAL
• assuring adequate supply of drugs; hospital turn over at
reasonable rate without excess quantities
• FINANCIAL
• optimizing inventory investment at a given time,
avoiding losses, pilferage, deterioration etc..
 INVENTORY

• The total amount of goods and/or materials

contained in a store, factory or any business
establishment ( e.g. drugstore, hospital pharmacy)
at any given time
• ITEMIZED LIST OF GOODS WITH THEIR
ESTIMATED WORTH
•
It also pertains to SUPPLY
and
MERCHANDISE
 INVENTORY CONTROL

• considered as the pharmacy’s LARGEST

ASSET
• Effective inventory control results in:

• smaller investment / minimize total investment

• satisfaction on the demands of patients through right mix
of products.
 PHARMACY INVENTORY
CONTROL SYSTEM

• A system that manages the

inventory of the pharmacy on a
day to day basis for taking care
of the inventory accurately and
efficiently through
computerization.
• The system keeps track of
the purchases, stock,
reorder levels, billing and
expiry of drugs
 Advantages of PICS:
• Better planning
• Controls pilferage
• It provides efficient control of
inventory
• Improves customer satisfaction
 POOR INVENTORY CAN BE
ATTRIBUTED TO:
• INEFFECTIVE PURCHASING
• OVERSTOCKING
• poor storage facilities
• UNDERSTOCKING
• problem of availability
• TRANSPORTATION AND DELIVERY PROBLEMS
• GEOGRAPHICAL AND CLIMATIC CONDITIONS
• TIME LAG BETWEEN REQUISITION AND
PURCHASE
TYPES OF INVENTORY
CONTROL
 INTUITIVE METHOD

• aka: WANT BOOK or

ORDER BOOK
• the most common method in
practice but least effective
• like making a grocery lists
 PERPETUAL INVENTORY
METHOD
• most accurate and effective method of inventory
control;
• this method can be facilitated either thru manual
system(INDEX CARDS) or by means of an
electronic data system
• it can show the cost of goods sold and sales figures
(monetary values) for individual products and are
updated constantly as purchases and sales are made.
 PAR LEVEL SYSTEM

• Individual drug inventory that use falls with a

predictable range or “par level”
• range is identified and minimum and maximum
order quantities are set
 OPEN – TO – BUY BUDGET
SYSTEM
• simplest and easiest inventory control system

to
• the rationale underlying this method is simply

adjust each month’s purchases

based on the increase or
decrease in the sales of the
previous month
 CONTROL ON PURCHASE
• MUST CONSIDER THE FF:

• BALANCE OF STOCK
• ESTABLISHMENT OF ORDERING POINT OR
REORDER QUANTITY LEVEL (RQL)
• DEAD INVENTORY
• DETERMINATION OF ECONOMIC ORDER
QUANTITY (EOQ)
• ABC STRATIFICATION OF STOCK ITEMS
 INVENTORY COST

• The cost of holding goods in stock

• it includes capital, warehousing, depreciation,
insurance, taxation, obsolescence, and shrinkage
costs.
FOUR TYPES OF INVENTORY
COST

• Acquisition Cost
• Carrying Cost
• Procurement Cost
• Stock out cost
 ECONOMIC ORDER
QUANTITY
• deals with both how
much to
purchase and the appropriate
reorder point or when to buy; it is the
order size that minimizes the total inventory cost.
• BUFFER OR SAFETY STOCK AKA reserve
inventory; this must be maintained for the reason
that it is utilized whenever there are unforeseen
emergencies like in the consumption and demand
of a certain drug or in the expected or actual
delivery time.
How much attention should an item
receive?

• Pareto ABC inventory

analysis
– a system that determines which
products needs frequent
monitoring and which require
less monitoring
 A

• represents 20 % of items in inventory and 70 % in

sales
• includes fast selling products, high demand, fast
moving ;
• account for the majority of the pharmacy’s sales
• must be monitored weekly
 B

• represents 30% of items in

inventory and 20 % in sales
• has average sales and inventory
turnover
• B items should be monitored /
checked every 2 weeks
 C

• represents 50 % of items but only

about 10% in sales
• Slow moving products and least
demanded
• C items must be monitored
monthly
• Products can be classified
as A,B or C items through
analysis of Product
Movement Reports