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153
Chapter
Drugstore Management
and Inventory Control
Drugstores in hospitals are responsible for managing continuous supply of drugs in a
sustainable manner. In addition, drug stores also distribute various other essential items
like necessary drug kits and family planning products. To carry out the various activities
mainly related to distribution of items, efficient management of drugstore is required.
INTENTION OF DRUG STORE MANAGEMENT
These are as follows:
1. Tomanagethesufficientstockofalldrugsandaccessoriesrequiredinthehospital.
2. Toprocurequalitydrugsfromdifferentsourcesinanefficientandeconomicalway.
3. Totimelysupplydrugstotheconsumingdepartments.
4. Tostoreandsupplydrugsrequiredinresearchwork.
5. Tomaintaintherecordsofreceiptandissueofdrugs.
6. Tokeeprecordsofreceiptandissueofdrugsforaccounts.
7. Tocarryoutalloperationsincosteffectivemannerrelatedtodrugstosaverevenue
forotheractivities.
DESIGN, LAYOUT AND SPECIFICATION
General design and layout of drug store take into consideration of the type of
functional strategy in the hospital. Predicted number of personnel and inventory
movement, work processes and type of activities decide the size and location of store
in a hospital. Provision for storage of bulk supplies, drugs including controlled drugs
and psychotropic substances, portable medical gas cylinders, and thermolabile items.
Drainage and sewerage system should be fixed exterior to the main store building.
STRUCTURAL DESIGN
a. Wall: Thewallsshouldbeplasteredfrombothsides,washableandpaintedwith
antifungalcoating.
b. Ground floor: To withstand theheavy loads and traffic, the floor shouldbe
concretizedand plasteredsmoothly, providedwith non-slippery heavy-duty
material.Theheightfromgroundtoroofshouldbeintherangefrom15to30feet,
whichdependsonthetypeoffunctionalregion,toolandequipmentsused.
19
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Textbook of Pharmacy Practice
c. Inside surface of room (ceiling): Theinsidesurfaceofroomshouldbeprepared
fromfire-retardant,asbestos-free and non-shedding materialsor mineral fibers.
Thereshould beacoustic balance, preferably strengthenwith sound absorption
andattenuation.Attenuatorpadsoradaptersareusedtolowertheamplitudeof
thesound.
d. Top surface of room (roof): Topreventdamagefromheavyrain,topsurfaceof
roomshouldbepitchedorasloped.Properdrainagesystemshouldbeprovided
inroom.Thereshouldbea provisioninroofandceilingtopreventtheftand
break-in.
e. Entrance door: Fire-retardantmaterial should beusedfor construction ofall
entrancedoors. The doors should bebroad enoughto allow free and easy
movementofsuppliesandhandlingbig-sizedequipmentandstackers(kindof
wheeledvehicle).Dockingdoorprotectorsshouldbeprovidedtokeepalldoors
andgatessafe.Electronicaccesscontrolsystemshouldbeinstalledindoorsto
allstorageareas.
f.Window: Thereshouldbenowindowsshallinstorageareabutitisadvisableto
keepwindows,fixedwithmetal grills, at working,staff,andofficeareas.Either
slidingorswingtypeofwindowshouldbefixedatthedesiredplace.
AREA FOR RECEIVING THE ITEMS
a. Bay for loading and unloading bay: Forloadingandunloadingtheequipments,
adequatespaceshouldbeassignedinthestore.Takingintoconsiderationtheheight
ofthevehicle,thebayshouldbeproperlysheltered.Raisedplatform,fittedwith
heavydutyrubberpadatthepointofcontactwiththevehiclesshouldbeprovided.
b. Counter for receiving: Suitablewaitingarea,furnishedwithofficefurnitureand
equipmentshouldbepresentatareceivingcounter.
c. Area for mechanical equipment parking: Parkingareashouldbelargeenoughto
parktruck,trolley,jackandstacker.
d. Area for sorting/unpacking: Spaceforsortingandcheckingofeachitemshould
besufficientinastore.
e. Area for transit/holding the items: Thetransit/holdingareashouldbeadequately
spacedforstoring:
i. Itemswhichrequirefurtherclarification/investigationbeforeenteringinregister.
ii. Itemswhichdonotrequirespecialstorageconditions.
f.Space for disposing junked items: Roomshouldbemadeavailablefordisposing
thejunkeditems(cardboardboxes,wrappersandplasticcovers).
STORAGE AREA
a. General storage requirement: Theareashouldbeinstalledwithair-conditioning
system,which can provide 24 hours facilities, toprovide effectivetemperature
control(between16°Cand25°C).
b. Drugstore: Space should have adjustable heavy dutyopen racks for storage of
packagesofdifferentsizes.Tokeepbulkitems,adequateareashouldbedesignated.
Cytotoxicdrugs should be stored in designated areahaving cautionarysign
information.
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Drugstore Management and Inventory Control
c. Storing room for dangerous drugs/psychotropic substances: Separatespecialroom
forkeepingdangerousdrugs/psychotropicSubstanceswithaprovisionoflockand
keyfacilityshouldbeprovidedindrugstore.Thereshouldbeanalarmsystemin
thisroom.
d. Cold room/pharmaceutical refrigerator/freezer bay: Coldroomshouldbeprovided
withinthedrugstoreforstorageofdrugsrequiringlowtemperatureforstorage.For
example,vaccines,antiseraandotherbiologicalproductsarerequiredtobestored
atlowtemperature.Itisbettertohavecomputerizedtemperaturecontrolsystem
ineverycoldroom/pharmaceuticalrefrigeratorandfreezer.
e. Intravenous fluid store: Foraccommodatinghemodialysis,peritonealdialysisand
intravenoussolutions,amplespaceshouldbemadeavailableinthestore.
f.Surgical store: Adequate, designated storage areafor surgical/consumable/
disposableitems/X-ray filmsshould be provided,especially for bulk items like
cottonpackets.
g. Non-drug bulk store: Adjustable,modular,heavyduty open racks should be
providedtostoredispensingbottles,containers,labelsandenvelopesinadesignated
areaalongsufficientspaceavailableformovements.
STORES WITH SPECIAL STORAGE REQUIREMENT
a. Inflammable store: Inflammable items shouldbekeptina separate storeroom,
equippedwith fire-fightingequipments, smokedetectors and exhaust fans for
adequateventilation.Itshouldbepresentatleast10feetawayfromtheadjacent
building.Thewall,roof,ceilinganddoorsofroomshouldbemadeoffire-retardant
material.Toavoidconcentration offumes or gases, location and design should
ensuremaximumaircirculation.
b. Corrosive items store: Corrosiveitems likephenols, hypochlorite’sare keptin
corrosiveitemstore.Itisprovidedwithspecialplumbinganddrainagesystem.
c. Medical gas store: It ismeant forkeeping medical gas cylinders, having same
specifications,whicharefollowedforinflammableitem.Ithasstrongflooringin
ordertowithstandtheweightoftheheavygascylinders.Thebayshouldbeprovided
tofacilitatedirectloadingandunloadingofcylinder.
d. Quarantined item store: Quarantineditemshouldbeprovideddistinctlylabeled
designatedarea/cabinet.
e. Non-conformance/condemned item store: Designatedstore/cabinet should be
providedto keep for expired, obsolete or damaged items prior todisposal in
accordancewithdrugcontroldepartment.
ISSUING AREA
a. Area for temporary holding: Thisareaismeantforsupplyofitemstothevarious
departments.Items,requestedbydifferentdepartments,arearranged,madeready
andkeptinthisareauntilcollected.Thisareaisgenerallykeptclosertotheissuing
area.
b. Counter for issuing counter: (i)Thereshouldbewaitingareaattheissuingcounter,
equippedwithappropriateofficefurniture.Sufficientspaceformaterialhandling
equipmentmayalsobekept.
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Textbook of Pharmacy Practice
ADMINISTRATIVE AREA
a. Pharmacy in-charge office: For administrative work for the chief pharmacist/
directorof pharmacystrategicallylocatedroomshouldbeprovidedfor theeasy
supervisionofofficework.
b. Pharmacist working area: Areafor working of pharmacist mustbe designated
withproperfacilityandfittedwithcomputerterminals.Forbettersupervision,it
isadvisabletohavehalf-glasspaneledwindow.
c. Office area: Thereshouldbeofficeareaforassistantadministrativeofficersalong
withcomputerterminalsforworkingofcomputersystem.
d. Meeting/discussion room: Ample space shouldbe providedfordiscussion and
routineadministrativemeetings.
e. Document room: Tostorethefilesandrecordsrelatedtopharmacyoffice,adequate
space/roomshouldbemadeavailable.
f.Stationery store: Thereshouldbeastationerystore,variousstationeryitemswill
beissuedfromthere.
g. Reception counter: Receptioncountershouldbewellmaintainedwithwaitingarea
forsufficientnumberofcustomers.Waitingareashouldbeequippedwithaudio-
visualfacilities,waterdispenserandsettee.
ADJUVANT AREA
a. Rest room for staff members: Restroomshouldbemadeavailableforstafftorelax
alongwithotherfacilitieslikelocker,refrigerator,electrickettle,waterdispenser,
microwaveoven,necessaryfurniture,etc.
b. Lavatory: Separatetoiletandwashingfacilitiesformaleandfemalestaffmembers
shouldbepartofbuildingofstore.
c. Room for offering prayer: Prayerroomwithablutionfacilityshallbemadeavailable.
d. Housekeeping facility room: The storeshould have separate roomfor storing
washeddressesandotheritems.
e. Guard post for security person: Atthemainentranceofthestore,securityguardpost
shouldbemadeavailable,equippedwithnecessaryequipmentsfortheconvenience
ofsecurityguards.
TYPES OF MATERIALS STOCKED AND STORAGE CONDITION
Storage conditions: Various kinds of drug dosage forms material like capsules, tablets,
liquid dosage forms, injections, etc. are stored in drugstore. Lock and key system for
a room or cabinet, where narcotics and psychotropic substance, and poisons are kept.
There should be storage area for particular items as per the temperature requirement
like:
1. 2–8°C(coldstorage)
2. 8–25°C(cooltemperature)
3. RT(roomtemperature)
4. 30–40°C(warmtemperature)
5. Above40°Creferredtoasexcessiveheat
On the basis of temperatures, drugs are divided into two categories.
List A: List A includes the drugs, which require storage at 2–8°C temperature. Sera
vaccines, whole human blood, normal human plasma, thrombin, thromboplastin, cobra
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Drugstore Management and Inventory Control
Fig 19.1. Layout of drugstore organization
158
Textbook of Pharmacy Practice
and viper venom, oxytocin and vasopressin, insulin preparations, posterior pituitary
injection, human gamma globulin injection, etc., are included in this category.
List B: List B drugs include antibiotics, arsenicals, blood preparation, hormone
preparations, vitamin preparations and others. All of these drugs are required to be
store at 8–25°C temperature.
INVENTORY CONTROL
Inventory control is employed to maximize a company's use of inventory with the aim
to generate the maximum profit from the least amount of inventory investment without
making impact on customer goodwill. Without giving impact on customers, inventory
control is one of the main worry of businesses that have large inventory investments, such
as retailers and distributors. Control of inventory is helpful to businesses in calculation all
costs associated with their products and keep track of what they have in hand. Inventory
control is a crucial part of business which minimizes the blockage of financial resources.
On an average, business has always 30% of its capital tied in inventories.
Steps Involved in Inventory Control
Step 1: Deciding on the Minimum Levels of Inventories
It is advisable for production department to have a good relationship with the sales
and marketing department. Demand or need of particular product, manufactured in
the factory can only be assessed with the help of sales and marketing persons, who are
close to the customer.
Based on the assessments, levels of inventory, i.e. maximum–minimum inventory is
decided. None of the manufacturer would like to take raw materials to go obsolete even
before the production has begun or to stock up raw materials that have very limited
use in the production of a finished product.
Step 2: To Decide on the Re-order Level
The demand for any product is uncertain in the market, especially depends on customers
taste and preferences. If a product, manufactured by company is high selling, it is quite
obvious that you will produce in more quantity to fulfil the customer demand. For
manufacturing more quantity, you have to re-stocking the raw materials, which is used
in the production of the final product. You will not be able to timely deliver a finished
product to the customer, if the restocking time passes beyond the committed time of
the finished product to the customer.
Step 3: Choosing a Sound Inventory Control Method
There are several types of inventory control method available, which can be chosen
depending on suitability in the business. Irrespective of selection of particular method,
it is important that the method should encourage the determination of the minimum
quantity of stock, time, when the stock should be re-ordered and right quantity that
should be ordered.
ECONOMIC ORDER QUANTITY (EOQ)
Economic order quantity (EOQ) minimizes the total holding costs and ordering
costs. It is one of the oldest classical production scheduling models, developed by
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Drugstore Management and Inventory Control
Ford W. Harris in 1913. EOQ is applicable only when over the year demand for a product
is regular and on reaching the inventory value at zero level, new order is fully delivered.
Each order has a fixed cost, irrespective of the number of units ordered. Holding cost
is a cost for each unit kept in storage, expressed as a percentage of the purchase value
of the product.
Methods for Determining Economic Order Quantity
Economic order quantity can be determined in the following ways:
1. Formula Method: FormulausedforthecalculationoftheEOQisillustratedbelow.
Orderingquantity(designatedas‘O’)isthequantity,whichistobeorderedatone
time.Itshouldbecarefullydetermined.Numberofordershavetobeplacedina
yearinvolvingcostsintermsofclericallabor,materialhandling,etc.,ifordering
quantityissmall.Italsoincludesthelossintermsofpriceandtransportcosts.Such
typesoflossareavoidedinlargeorders,asthereisrebateintransportcostsand
offeringinpriceconcessions.Butcostsofitemsareincreasedduetothemoreinterest
paymentsforthemoneyinvestedandstoringtheitems(storingcosts).Theorder
shouldbelargeenoughtogetsufficientdiscountonpurchaseofitemsandtoavail
thebenefitsofbulktransport.Atthesametime,itshouldnotbetoolarge,which
involvesheavypaymentofinterest.Ifthepricetobepaidisstable,theoptimum
quantitytobeorderedoreconomicorderquantity(EOQ)canbedeterminedbythe
formula:
=
2AO
EOQ
C
Where
A=Consumptionoftheiteminayear(inunits);
O=Orderingcostincludingthecostofreceivingthegoodsororderingcost;and
C=Interestpaymentincludingstoringcost(perunitperyear)
For example,costofarticle‘A’is`25andtheannualconsumptionis2,000units;the
costofplacinganorderisRs.16andtheinterestis10percentp.a.
The EOQ is:
2 2000 16
25
´´
.
=or160.
ThecalculationofEOQisbasedupontwoelements:
i. Totalinventorycarryingcost
=Averageinventory×Costofcarryingperunitperannum
=
Q
C
2
´ [HereQisorderingquantity]
ii. Totalorderingcost
=Numberoforders×Orderingcostperorder
=
A
Q
O´
Thus,annualtotalcost=
Q
C
A
Q
O
2
×+ ×
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Textbook of Pharmacy Practice
2. Graphic method:Figure19.2illustratesthecarryingcost,orderingcostandtotal
costshowninthismethod.Itisbasedontheassumptionthattotalcarryingcost
dependsontheordersize;increasesastheordersizeincreasesandtheorderingcost
decreasesiftheordersizeincreases.Figure19.2showsthepoint’A’atwhichthe
orderingcostandcarryingcostintersectseachother.Thisindicatestheminimum
valueoftotalcost,whichisknownasEOQ.
REORDER QUANTITY LEVEL
A recorder quantity level or reorder level indicates the specific level, at which business
organisation needs the re-ordering or replenishment of stock. In other words, it informs
when to place an order to avoid the complete run out of stock in a business organisation.
Significance of Reorder Levels
For business organization, it is important, when ordering for getting more stock should
be done. It will lead to extra buildup of stock, if ordering is done, when organization
has a lot of stock on hand. This will enhance the holding costs by buildup of stock. If
ordering is done, when inventory have reached at zero stock in hand, organization will
not be able to supply the required item in market. It will take time to fulfil the demand
of market as long as it receives the order from the supplier. There may a loss to business
due to time gap, in which supplier takes to supply the items. Setting a reorder point
helps to optimize the inventory, replenish the stock of individual items at the right time,
and fulfil the market or customer demand without going out of stock.
How to Calculate a Reorder Level
In the inventory, there is need to know for reordering of each item separately. It is due
to the fact that there is difference in sell through rates of each item in the business. To
calculate the ROP for each item, following undermentioned parameters are required
to know:
Fig. 19.2: Determination of EOQ by graphical method
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Drugstore Management and Inventory Control
Lead time:Itislapseintimebetweenwhenanorderisplacedtoreloadinventoryand
whentheorderisreceived.
Safety stock: Itisextraquantityofitem,keptinstoreorinventorytoavoidoutofstock
situation.
Daily average usage: Thenumbersofparticularitem,thatissoldinanaverageday.
Formula for Calculation of Recorder Point
Calculation is based on the presence or absence of safety stock
With Safety Stock, Determination of Recorder Level
In this method, extra stock on hand, to avoid the out-of-stock situation, is taken into
consideration. To determine a reorder point with safety stock, the daily average usage is
multiplied by lead time and amount of safety stock on hand is added to resulting figure.
Formula for Recorder level = (average daily usage multiplied by lead time) + Safety stock
Example: Suppose pharmacy businessman vends 220 cough syrup pack in a day. The
supplier takes one week time to replenish the stock of cough syrup, after placement of
order. Pharmacy businessman keeps extra quantity for 5 days to avoid out-of-situation,
in case of unpredicted problems. Calculate the retailer reorder point of pharmacy
businessman.
Lead time = 7 days
Safety stock = 5 days × 220 cough syrups = 1200 cough syrup
ROP = (220 × 7) + 1200 = 2740 cough syrups
It means, there should be reordering for cough syrup, when inventory is reduced to
2740 level.
Graph
Relationship between reorder point, stock level, and safety stock over a period of time
is illustrated in simplified reorder point graph (Fig. 19.3). It helps in visualization of
dependency of reorder point on the sales pattern.
The maximum level (3400 bottles), which is the sum of the safety stock and the order
quantity. Once the stock reduced to 2400 bottles (recorder level), retailer should reorder
Fig. 19.3: Recorder level graph
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Textbook of Pharmacy Practice
for making the inventory with the vendor. The minimum level (1400 bottles) shown in
the figure, fulfil the need of customers until ordered quantity reaches to warehouse. Once
the order quantity is received, the stock level returns to 3400 bottles (maximum level).
Without Safety Stock, Determination of Recorder Level
Businessman, who do not have safety stock, stick to lean inventory practices or a
just-in-time management strategy. To determine reorder point in this situation, daily
average sales is multiplied by the lead time. Typically, there is higher reorder level and
the frequency of the orders, when businessman do not have safety stock.
ROP = Daily average sales × lead time
Taking the above example without including safety stock, ROP should be:
ROP = 200 × 7 = 1400 bottles
Therefore, businessman should place an order for the replenishment of stock,
inventory reduced to 1400 bottles.
Difference of Re-order Level and Re-order Quantity
Reorder quantity and reorder point varies like:
• Reorderlevelimpliesthelevelatwhichnewordershouldbeplacedforthepurpose
ofrestorationofstock.Ontheotherhand,reorderquantityisthenumberofunitsto
beorderedinanewpurchaseorder.
• Reorderlevelisrelatedtotime;indicateswhenarequestforthenewstockissubmitted
andreorderquantityisrelatedtoquantity;thenumberofitemstoorder.
• Reorderlevelinvolvesfactorslikeutilizationofgoodsduringtheleadtime,security
level,and renewalperiod, while reorder quantity involves annualcarrying cost,
orderingcost,quantumofdiscount,etc.
PROCUREMENT OF DRUGS AND SUPPLIES
Method for procuring drugs depends on size of hospitals as well as type of hospitals.
Generally big sized hospitals like to take drugs and supplies directly from the
manufacturer through tendering process. Government hospitals take most of the
medicines from the central medical store depot. The small sized hospitals take the
medicines and supplies from distributer or retailer. Irrespective of types of hospital,
generally four strategic objectives for procurement are considered:
a. Procurement of most cost-effective drugs: Development of essentialdrugs listis
firststrategicobjectiveofprocurementinallorganizations,whethertheyarepublic,
privatenon-profitorprivatefor-profit.Theobjectiveofeachhospitalistobuymost
cost-effectivedrugs in right quantities.It also includes accurately prediction of
sufficientquantitiesinordertoensurecontinuousaccesstotheproductsprocured
withoutaccumulatingextrastock.
b. Selection of reliable suppliers’ quality products: Thesecond objectiveis the
selectionofreliablesuppliers,whocansupplyqualityproductsinsufficientnumbers.
Itisdonethroughactivequalityassuranceprogramthroughbothsurveillanceand
testingmethods.
c. Make sure on-timely delivery: Theprocurementanddistributionsystemsmake
sureon-timedeliveryofrequireditemsinquantitieswhichisordered.Italsoensures
adequatedistributiontovarioushealthfacilities,wheretheproductsareneeded.