MODULE 5: Stocking and Restocking
Processes
Learning Objective:
• Summarize stocking, restocking, and inventory management
processes.
Understanding Stocking and Restocking Processes
Inventory is a listing of the entire stock of pharmaceutical products on
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hand at any given time in a pharmacy location. A pharmacy’s
inventory is typically its largest asset (possession).
Inventory management focuses on procurement of this stock.
Procurement is the action of obtaining, storing, controlling
(inventory), distributing, and disposing of used and unused
pharmaceutical products. Too much inventory can mean less profit,
but too little inventory can mean lost sales as customers and clients
go to another pharmacy to obtain prescription medication.
The purposes of inventory management are:
• To provide an adequate stock of pharmaceutical products
• To reduce unexpected stock
outs and temporary shortages
• To reduce carrying costs (the
total cost of holding inventory)
• To minimize time spent on
purchasing tasks
Stock Categories
Pharmacy stock is often broken into two categories:
• base stock and,
• Safety stock.
Base stock is the part of inventory that is replenished (restocked) as it
is sold. Typically, prescriptions are filled from base stock, and
pharmacies keep an “adequate” supply at all times.
Safety stock is held to protect against unexpected needs (“just in
case”). Pharmacies keep as little safety stock on hand as possible. A
counting of the items in stock (inventory) is usually taken once each
year. For example, when inventory is counted:
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• Unopened bottles receive full credit.
• All opened bottles are assumed to be half full for inventory
purposes.
Controlled substances are drugs whose manufacture,
possession, or use is regulated by the government. These substances
have a special procedure for inventory counts. A complete inventory
of controlled substances must be taken every two years. An exact unit
count (number of tablets or capsules) is required for controlled
substances.
Stocking and restocking protocols
Stock is the supply of goods and pharmaceuticals on hand for sale to
customers and/or patients—typically a supply for future use. Stocking
is placing drugs and other items onto shelves, into cabinets, under
refrigeration, etc. as required for safe storage.
Restocking is replenishing inventory levels as set by the pharmacy
type. Inventory levels must be adequate but not excessive, with a
rapid turnover of drug stock on the shelf to minimize the cost of doing
business. According to the World Health Organization (WHO), proper
drug storage techniques:
• Avoid contamination or deterioration
• Avoid disfiguration of labels
• Maintain package integrity
• Prevent or reduce pilferage, theft, and losses
• Prevent infestation of pests and vermin
Stock by Pharmacy Type
Hospital
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The hospital pharmacist is an expert on medicines as well as a supply
manager who ensures that medicines are available to patients. The
hospital’s formulary is the foundation of medication management in
that setting. The formulary is a list of drugs approved for use, and the
cost will be reimbursed by an insurance carrier.
❖ In an open formulary, any medication may be purchased by the
hospital.
❖ In a closed formulary, medications prescribed may not be
purchased or covered unless they are on a restricted list of
medications selected by a committee.
Private or Proprietary
A closed-door pharmacy is a facility unavailable to the general public.
It provides medications to patients residing in various settings—most
commonly long-term care settings (e.g., skilled nursing and assisted
living facilities). A closed-door pharmacy must have a separate license
from an existing retail pharmacy and must keep separate inventory.
Telepharmacy
A telepharmacy is pharmaceutical care through the use of
telecommunications and
information technologies to
patients at a distance. A
telepharmacy enables any
pharmacist to connect to any
pharmacy and offers patients in
rural or remote communities
access to the professional care they may otherwise not receive. A
telepharmacy operates like a traditional pharmacy, except the
pharmacist reviews and verifies prescriptions from a remote location.
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Recordkeeping
Every pharmacy must maintain records of all drugs and other supplies
purchased and sold to know when to reorder and adjust the inventory
levels of each item. Most pharmacies have a computerized inventory
software program. When an item is sold, the software adjusts the
inventory record automatically. Smaller pharmacies may keep records
in a book to determine when products need to be reordered.
Pharmacies usually establish an inventory range for each item. An
inventory range is a set maximum and a set minimum number of units
to have on hand for each item.
Issues to consider when ordering stock are availability, demand, and
projections.
❖ The time needed to order, the time needed for delivery, and the
reliability of the supplier all impact the availability of an item.
❖ The clients’or patients’ needs, medicines that are fast moving,
seasonal diseases, and medicines that take long to be
replenished all impact item availability due to demand.
❖ The ability to estimate how much medicine to order, how long
the medicine will last in stock, and how long it takes for
medicines to be delivered all impact item
availability and projections.
Receiving
Receiving is the physical delivery of an order of
products from a wholesaler or warehouse.
When drugs are received, they must be
carefully checked against the purchase order or
requisition. Once drugs have been verified,
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they are physically maintained in a secure storage area. Drug storage
includes several options.
In automated dispensing devices, drugs are directly scanned and input
into the pharmacy management system according to the type of
substance.
Drugs placed and maintained on pharmacy shelves are subject to
stock rotation procedures, such as last in, first out (LIFO). Newly
purchased drugs with late expiration dates are placed behind drugs
that are already in inventory. This practice helps ensure that expired
drugs are not dispensed.
Drugs are arranged in alphabetical order of generic names.
Each dosage form of drug is arranged in separate and distinct areas.
Retail pharmacies also deal with space constraints. If a variety of stock
items is a priority of the pharmacy, it is important to have enough
empty space to separate distinct merchandise lines.
NOTE: Sufficient empty space should separate one drug or dosage
from another on the pharmacy shelf
INVENTORY MANAGEMENT PROCESSES AND SYSTEMS
Inventory management is managing and controlling the ordering,
storage, and use of stock. It is a critical component of a well-managed
pharmacy. Inventory management processes help to determine when
products need to be purchased and how much of each product to
order. A variety of processes and tools can be used to ensure an
accurate inventory is taken.
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Inventory Types
The manner in which inventory is controlled depends on the type of
pharmacy, location, business, and more.
Just-in-Time (JIT)
Just-in-time (JIT) is an inventory management strategy that orders and
receives a product only as needed and not before—just before it is to
be used. This process minimizes tying up funds for long periods and
reduces the cost associated with inventory management. JIT often
means that a pharmacy does not hold safety stock that lowers the
inventory carrying costs. Justin-time ordering prevents overstock and
out-of-stock conditions. NOTE: This system is best implemented when
supplies are readily available and pharmaceutical needs can be
accurately predicted.
Periodic Automatic Replacement (PAR)
Periodic automatic replacement (PAR) is an inventory management
system in which a set amount of a drug is automatically reordered. In
automatic reordering systems, when a drug falls below a
predetermined quantity (reorder point), it is automatically reordered.
A PAR level system determines the minimum level of inventory
necessary to be on hand for a specific time period and requires
automatic replenishment if the level of inventory falls below that
level. Target levels (reorder points) are usually based on historical
data.
Minimum and Maximum
Minimum and maximum is an inventory management system in which
predetermined numbers (minimum and maximum) of medications are
to be kept on a shelf. The smaller the range, the more accurate the
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quantity to be stocked. This method eliminates guesswork based on
the individual ordering of the medication. The system is based on
historical data for the pharmacy and current trends.
ABC
ABC is an inventory management method that identifies and defines
each item based on its usage. Products are ranked based on their
purchase history and dollar amount of total annual costs. ABC analysis
divides an inventory into three categories:
❖ “A” items are goods for which the annual consumption value is
the highest and typically account for 20 percent of the total
inventory. These items are important because of the high
demand. These are fast-moving items.
❖ “B” items are goods that have a medium consumption value and
typically account for 30 percent of the total inventory.
❖ “C” items have the lowest consumption value and typically
account for 50 percent of the total inventory. These are the fast-
moving products. These items are marginally important and are
usually stocked with low quantities because of the high carrying
cost associated with the stock levels.
The 80/20 Rule
The 80/20 Rule is an inventory management strategy that indicates 80
percent of a pharmacy’s drug costs are derived from 20 percent of the
medicines carried. Most businesses see 80 percent of their sales come
from roughly 20 percent of their customers. This type of inventory
focuses on control of the top 20 percent of the items carried.
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Perpetual Inventory
Perpetual inventory is an inventory management method that
continuously records the available quantity of a particular medication
as prescriptions are filled. After each prescription is filled and
dispensed to the patient/client, the amount of medication used for
the prescription is removed from the inventory to ensure the quantity
on hand is always current on the computer. Deliveries and returns are
recorded as they occur.
It is critical for pharmacies to maintain a thorough understanding of and count of current
inventory. Inventory management processes help to determine when products need to
be purchased and how much of each product to order. To minimize costs, inventory
levels must be adequate, not excessive. Underestimating inventory levels can cause
shortages, which inconveniences customers and can reduce business and revenue. A
variety of different processes and tools are used by pharmacies to ensure an accurate
inventory is taken. Pharmacies need to evaluate which process will be most
advantageous for them.