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Purchase and inventory control

  • Effective purchase and inventory control are essential in pharmacy practice to ensure operational efficiency, cost-effectiveness, and compliance.

Below is an organized overview:

1. Principles of Purchase and Inventory Control

  • Demand Forecasting: Predicting the quantity of items needed based on historical data and future projections.

  • Stock Levels: Managing stock levels to avoid stockouts and overstocking.

  • Maximum Level: The highest allowable stock level.

  • Minimum Level (Reorder Level): The stock level at which new orders are placed.

  • Safety Stock: Extra buffer stock to cover unexpected demand or delays.

  • Economic Order Quantity (EOQ): The optimal order quantity that minimizes the cost of ordering and holding stock.

  • Stock Rotation (FIFO): Ensuring that older stock is used first to minimize expiration-related wastage.

  • Regular Stock Audits: Physical stock counts to verify quantities and conditions.

  • Supplier Relationship Management: Building strong supplier relationships for reliable and timely deliveries.

2. Purchase Procedure

Needs Assessment: Analyze sales data and inventory levels to determine reorder needs.

Supplier Selection:

  • Reputation: Choose suppliers known for quality and reliability.

  • Pricing: Consider cost-effectiveness and available discounts.

  • Price Negotiation: Negotiate terms, including bulk discounts and payment schedules.

  • Order Placement: Issue a detailed purchase order specifying quantities and delivery dates.

  • Order Follow-Up: Monitor order status to ensure timely delivery.

Receiving Goods:

  • Verification: Check received items against the purchase order.

  • Quality Inspection: Ensure products are in good condition and not expired.

  • Payment Processing: Review invoices for accuracy before processing payments.

3. Purchase Order (PO)

A purchase order is a formal document that authorizes the supplier to deliver specified products and serves as:

  • Authorization: Allows suppliers to deliver specified items.

  • Legal Record: Becomes a legally binding document when accepted by the supplier.

  • Tracking Tool: The PO number aids in tracking transactions in financial and inventory systems.

Typical Components of a PO:

  • PO Number: Unique identifier for tracking.

  • Date of Issue: Date the PO was issued.

  • Product List: Detailed descriptions, quantities, unit prices, and total costs.

  • Delivery Date: Expected delivery date.

  • Billing and Shipping Address: Where invoices and goods should be sent.

  • Payment Terms: Specifies payment method and timeline.

  • Terms and Conditions: Includes return policies or late delivery penalties.

4. Procurement and Stocking

Procurement:

The process of sourcing products from external suppliers.

  • Vendor Relationships: Building strong ties with suppliers to negotiate better terms and ensure timely deliveries.

  • Negotiations: Discussing prices, contracts, and delivery terms.

  • Ordering: Placing orders as needed.

Stocking:

  • Proper storage and management of received items.

  • Receipt of Goods: Verifying items for accuracy and quality against the PO.

  • Storage: Ensuring items are stored per requirements (e.g., refrigeration or light protection).

  • Inventory System: Using a digital system to track stock quantity, location, expiration, and other details to support FIFO.

5.Economic Order Quantity (EOQ)

EOQ is a formula to determine the optimal order quantity, balancing ordering costs and holding costs.

This helps ensure that the pharmacy has sufficient stock without excessive holding costs or stockouts.

EOQ Formula

EOQ Formula

Where:

D = Annual demand (units)

S = Ordering cost per order

H = Holding cost per unit per year

6. Reorder Quantity Level

The reorder level, or reorder point, indicates when a new order should be placed to maintain stock availability. It factors in lead time and average daily usage.

Reorder Level Formula:


  • Average Daily Usage: Based on historical data of typical daily usage.

  • Safety Stock: Buffer stock to cover unexpected demand or delivery delays.


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