PHPharmAd | Chapter 8: INVENTORY CONTROL

Inventory

Least liquid asset

Inventory

Constitutes the merchandise which is available for sale but not sold during the year

Inventory

A detailed, itemized list, report, or record of things in one’s possession, especially a periodic survey of all goods and materials in stock

Raw Materials, Goods in process of manufacture, and Finished goods

3 MAJOR TYPES OF INVENTORIES IN MANUFACTURING BUSINESS

Acquisition, Procurement, Carrying, and Stockout or Shortage

4 GENERAL “COSTS” ASSOCIATED W/ INVENTORY

Acquisition, Procurement, and Carrying

• Can be accurately calculated

• If not closely monitored, issues may arise in the business

Stockout or Shortage

• causes loss of sales, and eventually loss of customers and generalization

Poor Forecasting

REASONS FOR INVENTORY: To offer a buffer against variations on supply and demand, often caused by?

Buffer

REASONS FOR INVENTORY: To offer a ______ against variations on supply and demand, often caused by poor forecasting

Buffer

• Safety stocks, aside from current inventory

• Additional inventory

Buffer

• in case the demand of medicine or product increases or when a supplier is not able to deliver the product on time or increases the price

Unavoidable

Price increases are?

Customer Service

REASONS FOR INVENTORY: To provide better?

Efficiency

REASONS FOR INVENTORY: If you can give customers the right products at the right time at the right quantity, better customer service and fosters?

Suppliers

REASONS FOR INVENTORY: To provide a limit against price increase by?

Unavoidable

Price increases are?

direct supplier

Lowest costs and discounts= directly ordering from the?

Purchasing, and transportation discounts

REASONS FOR INVENTORY: To promote what discounts?

strikes, and shortages

REASONS FOR INVENTORY: To protect the firm from contingencies such as?

Expiration

It is very important that the company does not overstock, as overstocking medicine leads to the _________ of the medicine

fast-moving items

Buy these items instead of slow-moving items

Loss

It is better to sell an item at a _____ than let it expire and not getting any money in return at all

Carrying Cost

maintaining cost of a product stored in a warehouse

Statement of Assets, Liabilities and Net Worth

SALN stands for?

Inventory, Cost of Procurement

Minimize amount invested in _______, ___________ while balancing the supply and demand

Supply and Demand

Minimize amount invested in inventory, cost of procurement while balancing the?

Directly Proportional

The relationship of demand and supply must be?

Inventory Control

Coordination and supervision of the supply, storage, distribution, and recording of materials to maintain quantities adequate for current customer needs w/o excessive supply or loss (Webster)

Inventory Control

The pharmacy must have a correct inventory to properly serve its costumers

Inventory Control

Vital importance to all types of pharmacies because inventory is the largest asset

Inventory

INVENTORY CONTROL: Vital importance to all types of pharmacies because ________ is the largest asset

Minimizing total inventory investment, and Carrying the right mix of products to satisfy consumer demand

2 GOALS OF INVENTORY CONTROL

Slow-moving, fast-moving, or nonmoving item

Medicine in the pharmacy must be classified whether they are prescription, over-the-counter as well as considering if they are considered as a?

Fast Moving

order double the quantity

Fast Moving

depending on the time and month as not all fast-moving items are __________ all year round

Slow Moving

order half the quantity

Nonmoving

coordinate with a supplier; put in sales if the supplier is no longer operational

One-Stop Shop

The customer expects the pharmacy to be this shop (customer wants all items they want to buy available in one store)

Suppliers

Companies that make and distribute medicine

Suppliers

Indicated by “Manufactured by’” “distributed for” etc.

Intuitive Method, Systematic Wantbook Method, Open-To-Buy System, Stock Record System, Economic Order Quantity, and Perpetual Inventory Method

INVENTORY CONTROL METHODS

Intuitive Method

Most common method but the least efficient items recorded in the wantbook

Wantbook

INTUITIVE METHOD: Most common method but the least efficient items recorded in the?

Intuitive Method

Number of units reached 1-3, Estimate quantity to be ordered

Intuitive Method

Mostly used on small independent pharmacies

Systematic Wantbook Method

There is wantbook for each direct account & each major wholesaler

Systematic Wantbook Method

Items recorded based on the need as indicated by an order card

Order Card

SYSTEMATIC WANTBOOK METHOD: Items recorded based on the need as indicated by an?

Order Card

Card indicates the minimum/maximum quantities

Order Card

• Quantities & date are recorded

• Strip attached on the end of the shelf

Systematic Wantbook Method

Selling price, cost and code are also indicated in the cards

Systematic Wantbook Method

But it is not advisable for use in large pharmacies

Open-To-Buy System

One of the simplest & easiest

Open-To-Buy System

Adjust each month’s purchase based on the increase/decrease in the sales of the previous month versus the same month sales a year ago

Open-To-Buy System

A purchase budget is established for each month

Stock Record Systen

To determine the optimum number of each product to be ordered. Should have at least 12 columns to record data for each month

12 columns

Should have at least _________ to record data for each month

Stock Record System

Heading shows supplier’s name, address, discount

Name, address, and discount

STOCK RECORD SYSTEM: Heading shows supplier’s?

Stock Record System

The name, size, cost/unit, min.& max. quantity to be stocked are recorded

Stock Record System

• Can be seen by the purchaser only as it is confidential

• Discounts are indicated and coded as it may be leaked to competing pharmacies

Confidential

Can be seen by the purchaser only as it is?

Economic Order Quantity

Deals with how much to purchase & appropriate reorder point, or when to buy

Economic Order Quantity

Amount to buy that will keep total costs at a minimum

Economic Order Quantity

Must maintain a buffer or safety stocks

Economic Order Quantity

COMPUTATION: daily average of sales multiplied by the amount of inventory days

daily average of sales multiplied by the amount of inventory days

Computation in Economic Order Quantity

Perpetual Inventory Method

Most efficient, if necessary technology is available

• Computer, software

Perpetual Inventory Method

System will tell precisely the amount of inventory on hand at any time

Perpetual Inventory Method

Programmed to provide list & quantities of products to be ordered to maintain inventory

Perpetual Inventory Method

Initial data inputted is used all throughout