Inventory Management Flashcards
Issues with High Inventory
Issues:
- Cash flow, Shelf space, Product expiring, Product damaged, theft
- Money is wasted
- Easier to steal (harder to notice)
Issues with Low Inventory
Issues:
- Lost sales, negative patient experience, patient harm
- Patient will not have enough stock and we will have to owe them
Methods to Track Inventory
- Manual
Pen and Paper
Spreadsheets
Methods to Track Inventory
- Barcode Scanning
Unique Product Code
- Inexpensive
- Limited information
Methods to Track Inventory
- Radio Frequency Identification
Quick scanning
Contains more information
Security concerns (Can be forged, private information)
Perpetual Inventory
- Min / Max
- Manually set per item
- Automated based on past purchasing / selling history
Computer will automatically order
Perpetual Inventory
- Scientific Forecasting
Calculated ordering that accounts:
- Inventory carrying costs
- Supplier lead time (shipping)
- Forecasted demand (seasonal)
Perpetual Inventory
- Reorder Points and Safety Stock
Incorporates lead time from order to shelf
Balance safety stock to account for demand changes or replenishment delays
Perpetual Inventory
- Advantages
Helps reduce the time for manual counting by automating the ordering and counting process
Perpetual Inventory
- Disadvantages
Computer does not give you a reason why, just automatically orders
If information is put into the system wrong then the system will lose its capabilities
Perpetual Inventory
- Manual
Should also inspect stock manually to make up for gaps with electronic system
Inventory Turn Over Ratio
- What is it
The number of times the dollar value of inventory is replaced in a year
Lower ratio = less turnover = More stock on hand
Inventory Turn Over Ratio
- What does a Turn Over Ratio of 12 mean
Means that in a year the inventory is sold and replaced 12 times
Inventory Turn Over Ratio
- COGS
Cost of getting the inventory that was sold
- Is matched to the sale of the products
Inventory Turn Over Ratio
- Average Inventory Value
(Starting Value + Ending Value) / 2
- Can fluctuate throughout the week/month depending on demand
Average Community Pharmacy Turn Over Ratio
10.7
Top 25% of Performing Pharmacy Turn Over Ratio
11.7
- Ideal is 12 (pharmacies should have 1 month of stock on hand at all times)
Front of Store Turn Over Ratio Benchmark
8-9
- Generally need more product on the shelf because patients self-select products
Inventory Verification
Comprehensive Annual Physical Count
- Count by location and match to system
Cycle Count
- Count certain sections every month/week/etc.
- Can be used instead of a comprehensive annual physical count
Comprehensive Annual Physical Count
- Use
Corrects pharmacy system values
Accounts for unfilled products and owed products
Caution for Controlled Substances Adjustments
- Higher accountability for these
Inventory Losses
- Causes
AKA: Shrink = Loss of inventory
- Damage
- Theft
- Receiving Errors
- Selling Errors
Controlled Drugs and Substances
- Health Canada Requirements
Comply with the act:
- Security
- Inventory counts / reconciliation
- Purchase records
- Dispense records
- Destruction records
- Reporting: Loss / Theft / Forgery
Controlled Drugs and Substances
- Alberta Standards for the Operation of Licensed Pharmacies
Security of drugs in the dispensary
- Have procedures to identify theft, loss, or diversion
- Maintain perpetual inventory
- Documented audit to verify perpetual inventory
- Investigate any discrepancies
Controlled Drugs and Substances
- How often is the perpetual inventory audited
- At least every 3 months
OR - Any changes in proprietor or licensee changes
Controlled Drugs and Substances
- Discrepancy
Report loss to Health Canada and Police within 10 days
Optimizing Inventory
- Purchasing Decision (Dispensary)
Identify Prescribing Patterns
- Adding new products
- Changes in prescribing patterns
- Outbreaks
- New prescribers
Dealing with new interchangeable products
- Drug shortage
- Formulary changes
Optimizing Inventory
- Purchasing Decision (Front Store)
Identify purchasing patterns
Competition
- Any products that we could/should sell
Support business promotions
Optimizing Inventory
- Product Mix
Identify fast moving (sells well) products
- Make more space for these products
Identify slow moving (sells poor) products
- Discontinue and Discount slow products
–> Order products that match your place and vision in the market
Optimizing Inventory
- Product Quantities
Brick and Mortar = Can not sell a product you do not have in stock
Image on shelf is important
- No empty spaces
- Do not overdue stacking
- Facing shelves
Restocking the same product everyday is inefficient and costly
Optimizing Inventory
- Strategies
Point of Sale System (Front Store) can help determine ideal stock levels
Optimizing Inventory
- Suppliers
- Just in Time Inventory Management
- Wholesalers
- Distributors
- Manufacturers
Suppliers
- Just in Time Inventory Management
Orders are placed based on immediate needs
Suppliers
- Wholesalers
Banners, Independents, Some Chains, Secondary Suppliers
- Same day / next day order delivery
- System to system ordering
- Web based
- Electronic scanning
- Narcotic and controlled drugs
- Negotiated wholesale “mark up” and minimum orders
Suppliers
- Distributors
Owned by pharmacy operators
Suppliers
- Manufactuer
Single Source Product
Longer lead time
No upcharge
Higher minimum order requirements
Who regulates Suppliers
Health Canada regulates wholesalers and distributors under the Foods and Drugs Act
Supplier
- Manufacture Examples
Generic and Brands
Supplier
- Wholesaler Examples
- Mckesson Canada
- Imperial Distributors
- Kohl and Frisch
- Reliepharma
- Unipharma
Supplier
- Distribution Centres
- Jean Coutu
- Loblaws
- Shoppers Drug Mart
- Lawtons
- London Drugs
Drug Shortages
- Reporting
Manufacturer must report shortages and discontinuation
- Based on DIN
