In a community pharmacy, medicines are purchased from licensed wholesalers or distributors and then stocked and dispensed to patients. Although this looks simple, proper procurement and inventory control is essential to maintain:
- Continuous availability of medicines
- Reasonable pricing
- Good customer service
- Better cash flow
- Healthy relationship with suppliers
- Good return on investment
Inventory control ensures that the pharmacy never faces: “out of stock” (medicine not available) or “over stock” (excess stock) situations. Both situations reduce profits and damage customer trust.
Inventory control is defined as the supervision of procurement, storage and availability of medicines to ensure adequate supply at the right time.
Why Inventory Control Is Important
- Helps meet patient needs without delay
- Prevents financial loss due to expiry or damage
- Improves cash rotation and budgeting
- Ensures smooth daily operations
- Supports Good Pharmacy Practice (GPP)
Steps Involved in Procurement
Efficient procurement includes:
- Selecting medicines
- Deciding required quantities
- Checking available funds
- Selecting reliable suppliers
- Negotiating best prices/discounts
- Placing orders
- Verifying received stock
- Adding stock to inventory
- Making payments
Inventory Control Methods
Several methods are used in pharmacies to manage inventory effectively:
- ABC Analysis
- VED Analysis
- EOQ (Economic Order Quantity)
- Perpetual Inventory Method
- Physical Inventory
- Lead Time
- Open-to-Buy Budget System
- Bin Card System
- Safety Stock Method
1. ABC Analysis (Always Better Control)
This method classifies medicines based on their cost.
- A items – High-cost medicines
- B items – Medium-cost medicines
- C items – Low-cost medicines
Budget distribution typically:
- 75% of the budget → Category A
- 20% of the budget → Category B
- 5% of the budget → Category C
Category A items require stricter control to avoid wastage and pilferage.
2. VED Analysis (Vital, Essential, Desirable)
This method classifies medicines based on their importance in patient care.
- Vital – Life-saving medicines (e.g., Atropine injection)
- Essential – Needed for common clinical conditions (e.g., Omeprazole)
- Desirable – Supportive or nutritional medicines (e.g., B-complex vitamins)
3. EOQ (Economic Order Quantity)
EOQ is the ideal quantity of a product to order at one time.
Ordering too frequently increases ordering costs, and ordering too much increases carrying costs. EOQ helps balance both costs.
EOQ Formula:
EOQ = √(2 × Procurement Cost × Annual Demand / Carrying Cost)
Procuring Cost includes communication, processing, receiving, marking and stocking expenses. Carrying Cost includes storage, insurance, interest, deterioration and damage.
4. Perpetual Inventory Method
This is an accurate and effective system where every purchase and sale is recorded immediately in stock cards or software.
- Provides real-time stock levels
- Helps detect mismatches quickly
- Ensures every item is counted at least once in a cycle
- Computer systems make this method easier and more reliable
5. Physical Inventory
Physical verification of stocks on weekly or monthly basis.
Helps identify:
- Non-moving items
- Near-expiry products
- Dead stock
- Pilferage or leakage
Non-moving stocks can be returned and replaced with fast-moving ones.
6. Lead Time
Lead time is the gap between placing an order and receiving the stock.
Lead Time = Ordering Time + Delivery Time + Receiving Time
Pharmacies in rural areas may have longer lead times and need to order extra stock.
7. Open-to-Buy Budget System
Common in hospitals. A budget is fixed based on previous year’s sales. The pharmacy manager orders medicines, and the amount spent is tracked against this budget.
Benefits:
- Prevents over-purchasing
- Controls stock-out conditions
- Helps maintain financial discipline
8. Bin Card System
One of the simplest and most reliable methods.
A separate card is maintained for each product containing:
- Manufacturer name
- Date of supply
- Price
- Stock quantity
- Daily sales
Updated daily, it helps follow FIFO (First In First Out) to clear old stock first.
9. Safety Stock Method
Safety stock is extra stock kept as a buffer against unexpected demand or supply delays.
Uses of Safety Stock
- Helps manage sudden increase in demand
- Useful during supply chain delays
- Prevents stock-outs and maintains customer trust
Calculation
Calculated using average usage rate and demand variability. Formula may vary, but commonly uses average demand and standard deviation during lead time.
Implementation Steps
- Analyse historical data
- Fix target service levels
- Calculate safety stock
- Monitor and adjust based on changing conditions
Benefits
- Prevents stock-outs
- Improves customer satisfaction
- Provides flexibility during disruptions
Challenges
- Increases holding cost
- Risk of expiry for medicines with short shelf life
Final Note
Effective inventory control balances availability of medicines with minimal wastage and cost. It is a key skill for every community pharmacist.
Detailed Notes:
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