Drug store management and inventory control

IMPORTANCE AND OBJECTIVES OF PURCHASING

The objective of purchasing is not only to procure the raw material at the lowest price but also to
reduce the cost of the final product.
The following points are taken into consideration while purchasing the materials:
Right source
Right quality
Right quantity
Right price
Right time
Right place of delivery
Right mode of transportation
 PURCHASING PROCEDURE

The purchasing procedure generally involves the following stages:

1. Purchase requisition

2. Selection of the suppliers

3. Placing the order

4. Receiving and checking of material

5. Checking of invoice or bill

6. Recording of bills in books

7. Releasing the payment to the supplier

 Storage

The drugs stored by any one of the following methods:

1.According to manufacturers
2.According to pharmacological action
3.Alphabetically
CODIFICATION OF VARIOUS ITEMS OF DRUG STORE

Codification is the process of assigning of code symbol or a number to a

particular material for easy identification.

Codification of various items of material is essential for good system of store-

keeping

Advantages of Codification
1. Ambiguity in description is avoided
2. The length in description is minimized
3. The codes ensures secrecy of items lying in the store.
4. Each stored item is easily identified particularly where the same item is
known by more than one name . e.g. acetyl salicylic acid tablet is also
known as aspirin tablet.
 Methods of Codification

1. Alphabetical method
2. Mnemonic method
3. Numerical method
* Decimal system
* Block system
4. Combination method
 INVENTORY CONTROL

Inventories be maintained at a level lying between the excessive and

the inadequate.This level is known as “ the optimum level of inventories”
Objectives of Inventory Control
The main purpose of having an inventoery control is :
1. Maximum customer service
2. Minimum inventory investment
3. Low cost plant operation

Functions of Inventory Control

 To keep the inventories as low as possible consistent with the market conditions.
 To minimise “ out of stock” danger
 To maintain a suffiencient stock of finished product to meet the reasonable
expectations
 To maintain proper records so as to suply accurate and regular material reports to
the management.
 To forecast market and economic conditions of supply as regards availability of
materials.
 TECHNIQUES OF INVENTORY CONTROL

The following are different techniques commonly used to control the

inventory:
1. EOQ:
This technique is used to find out how much of the inventory is to be ordered.

The correct quantity to buy is the quantity at which the ordering cost and the
inventory carrying cost will be the minimum.

The ordering cost consists of the cost of paper-work involved in placing an

order , like use of paper, typing , posting, filling , cost of salaries of staff
involved in this work, the cost of placing the order etc.

The inventory carrying cost is represented by items like rent of storage , cost of
insurance and taxes, salaries of store keeper and losses in stores due to
wastage , breakage etc.
 METHODS FOR DETERMINATION OF ECONOMIC ORDER
QUANTITY

A . Tabular determination of EOQ

A tabular arrangement of data relating to items of material helps in the determination of
an approximate EOQ. This arrangement may help the company to find out the number of
orders that need to be placed weekly, quarterly, monthly or yearly.
B. Graphic presentation of EOQ
EOQ can also be determined graphically. If a graph is plotted between order quantity and
cost to order and carry, the ideal order size is the point where the sum of both the costs is
the minimum.
C. Determination of EOQ by algebraic formula:
EOQ can also be computed by using the following formula:
EOQ= square root of (2*a*b)/ c*s
where a= Annual consumption
b= Buying cost per order
c= cost per unit of material
s= storage and other inventory carrying cost
 VED ANALYSIS

This system is based on the utility of the material. In a drug store , VED analysis is very
useful in controlling and maintaining the stock of various types of formulations of a
particular group of drugs.
Classify the different brands of drug formulation into any one of the following categories:
V= vital items
E= essential items
D= Desirable items
Eg. Acetyl salicylic acid is available as disprin tablets, anacin tablets, micropyrine tablets
Grt demand of disprin tablets : classified as vital items followed by micropyrine tablets
comes under essential items due to its less demand than disprin tablets.
Anacin tablets may be considered as desirable items because there are hardly a few
prescriptions of it.
So in a drug store, there should be maximum stock of disprin tablets, followed by
micropyrin tablets and then of anacin tablets.
ABC (ALWAYS BETTER CONTROL ANALYSIS

In this technique, the materials are divided into three groups A, B and C according

to the cost of the materials and money value of consumption.

A items: Covers 10% of the total inventories and consumes about 70% of total

budget. requires strict control. Needs maximum follow up. Must

be handled by senior officers.

B items: Covers 20 % of the total inventories and consumes 20 % of total budget.

Requires moderate control. Needs periodic follow up. It can be

handled by middle management.

C items: Covers 70 % of the total inventories and consumes 10% of the total

expenditures of inventories. Require loose control.

Need close follow up. Handled by any official of the management.

 SETTING OF VARIOUS LEVELS

Important to decide various levels of materials.

Maximum stock level: represents the upper limit beyond which the quantity of any item
is not normally allowed to rise
Formula:
Maximum level= Re-order level + Re-order quantity- Minimum consumption
Minimum stock level or safety stock: this is the lower limit below which the stock of any item should not
normally be allowed to fall. known as buffer stock.
*Lead time is the total time consumed between the recognition of the need of an item ,till the time it is
received for use.
Formula:
Minimum level=Re-order level- [ normal consumption per week* normal re-order period]
Re-order level: is fixed between the minimum and maximum stock levels .slightly more than minimum
stock level to guard against abnormal use of item and abnormal delay in supply.
Formula :
Reorder level= Minimum consumption during the period* Maximum re-order period
Danger level: this is generally below the minimum stock level. Normal stock level should never be allowed
to fall below the minimum level. Urgent action must be taken to prevent stock out
if it reaches the danger level at any point of time.
 ADVERTISING

Advertising is an art, used to familiarizes public with the product by

informing of its description, uses, its superiority over other brands,

sources of its availability and price etc.

Objectives of Advertising
 To create a demand for a new product by explaining its utility.
 To increase its sales by attracting new customers.
 To maintain the existing demand by fighting competition
 To assist the salesmen in their selling efforts.
 To warn the public against imitation of the products of the firm.
 To enhance goodwill of the firm.
ADVERTISING CONT……

*Essential features of Good Advertisement

Window display
Medium of advertisement and sakes promotion
The main aim of window display is to attract customers and thus to
promote sales.
Advantages of Window display
 Acts as a silent salesman for promoting sales
 Good method of advertisement
 Makes a drug store more decorative and attractive
 Attracts the customers or passers-by
 Creates good impression on the customer when he enters the drug store.
Thank You