purchase and inventory control principles

Chapter 6: Inventory Valuation Methods. Chapter 8- Monitoring Food service Operations I: Monthly inventory and Monthly Food Cost. It applies to all types of pharmacy settings, including institutional, home infusion, and ambulatory care pharmacy operations. Test. Syncing stock on hand with sales orders and purchase orders; The goal of inventory control procedures is to maximize profits with minimum inventory investment, without impacting customer satisfaction levels. When a health system pharmacy agrees to purchase most (e.g., 90 to 95%) of its pharmaceuticals from a single wholesale company, a prime vendor arrangement is established, and, customarily, a contract between the pharmacy and the drug wholesaler is developed. 9–10;2003. A poorly organized and executed receiving system can put patients at risk and elevate health care costs. ~ ThriftBooks: Read More, Spend Less The old concept of warehouses being dirty and unorganized is out Detailed review and consideration of each listing helps minimize errors in product selection. Proactive error source identification starts with process audits. Buying directly from a manufacturer. Proper segregation of duties is an essential element of your company’s internal control. A purchase order, created when the order is placed, is a complete list of the items that were ordered. Although the use of tall man lettering can help draw attention to the dissimilarities in the product name, extra precaution in shelf positioning may be warranted (figure 19-9). At this point, the product’s expiration date should be checked to ensure that it meets the department’s minimum expiration date requirement. Some pharmacies create processes whereby the person receiving pharmaceuticals is different from the person ordering them. and often. operations and are ordered from suitable, approved suppliers. The goal is minimizing wasted steps, labor, and cost. This generally occurs after the delivery person has left. In the event that a bar code does not scan, it is customary for the receiving technician to add the item to the BCMA system manually or to overlay an internal bar code on the product prior to shelving it. line level, based on lead times and safety stock level help ensure that This also avoids costly Stock rotation is an important inventory management principle that encourages the use of products before they expire and helps prevent the use of expired products and waste. Accurate demand forecasting has the highest potential savings for any … In certain cases, the utilization of a nonformulary product is warranted when its benefit is believed to be superior to that of the other alternative formulary items that may exist (usually for a patient-specific or diseasespecific reason). Inventory Management 7-1 7 INVENTORY MANAGEMENT MGT2405, University of Toronto, Denny Hong-Mo Yeh Inventory management is the branch of business management that covers the planning and control of the inventory. inventory management and control procedures include those established by the Federal Accounting Standards Advisory Board (FASAB), the Comptroller General, OMB, and Federal statutes. Inventory control or stock control can be broadly defined as "the activity of checking a shop’s stock." Principles of Accounting I. 8 Basic Inventory Procedures . Material control in practice is exercised through periodical records and reports relating to purchase, receipt, inspection, storage and issuing direct and indirect materials. These devices are essentially repositories, or pharmaceutical vending machines, for medications that are dispensed directly from a patient care area. This presents pharmacy technicians with the critical responsibility of assessing and evaluating each product from both a content and labeling standpoint. process to ensure consistently outstanding results. Similar drug names. British Library Cataloguing in Publication Data . Gravity . It also encourages compliance with various pharmaceutical purchasing contracts. standardizing, and sustaining the discipline ensure that no dollars are P harmaceutical products flow into the pharmacy through a sophisticated and highly regulated distribution channel. Quality issues can often be identified first by the technicians working the receiving area. The Pareto principle is just a rule of thumb or a generalization. An effective internal control structure for inventory includes a company’s plan of organization and all the procedures and actions it takes to: Protect its assets against theft and waste. Technicians should pay close attention to these three main issues of product similarity: 1. forecast can be. Typically, when a prescriber orders a non-formulary product, the pharmacist requests verbal or written justification for its use and challenges the request, as appropriate, if a comparable or therapeutically equivalent product is available on the hospital formulary. This process is especially important for controlled substances, because it effectively establishes a check in the system to minimize potential drug diversion opportunities. A portion of the letters are capitalized (e.g., niCARdipine and NIFEdipine). A key component in effective kitchen management is inventory control. For example, if the wrong concentration of a product were received in error, it could lead to a dosing error or a delay in therapy. For liquids or injectable products, the color and clarity of the items should also be checked for consistency with the product standard. The pharmacy department’s borrow and lend policies and procedures should provide detailed directions on how to borrow and lend products, which products may be borrowed or loaned, sources for the products, and reconciliation of borrow and lend transactions (the payback process). The state-of-the-art practice involves the use of automated technology to manage the processes of purchasing and receiving pharmaceuticals from drug wholesalers. However, the state-of-the-art practice employs electronic, Web-based technology to place orders with respective wholesale distributors (figure 19-6). Drug diversion is the theft of a pharmaceutical by an individual for illicit personal use or gain. With proper segregation, no single person has complete control over all buying activities. These wholesaler services make the establishment of a prime vendor contract appealing and result in the following advantages: more timely ordering and delivery, less time spent creating purchase orders, fewer inventory carrying costs, less documentation, computer-generated lists of pharmaceuticals purchased, and overall simplification of the credit and return process. In 2010, the current price per vial of BabyBIG® was approximately $45,300. Usually, wholesalers agree to deliver 95 to 98% of the items on schedule and offer a 24-hour/7-day-per-week emergency service. Search for: 6.6 Internal Control Issues and Procedures for Inventory. Some pharmacies use sophisticated inventory management carousel systems to manage portions of their inventory (figure 19-2). Lean management’s roots can be traced to the early 20th century and the American automobile. The GPO contracts with manufacturers to purchase pharmaceuticals at discounted prices, in return for a guaranteed minimum purchase volume. Documentation of the administration is automatically entered into the patient’s electronic health record. A document executed by a purchaser and forwarded to a supplier that is considered a legal offer to buy products or services. Some wholesalers offer even larger discounts to pharmacies that may prefer a prepayment arrangement. Once the product has been received properly, it must be stored properly. The NDC number is particularly useful in precisely identifying drug products in the processes of dispensing, placing orders, and addressing drug recalls. Direct purchasing from a manufacturer involves the execution of a purchase order (PO) from the pharmacy to the manufacturer of the drug. In that chapter, F.O.B. 1. Using computer and mechanical technology for these purposes has many benefits, including up-to-the-minute product availability information, comprehensive reporting capabilities, accuracy, reduced training time, and improved operational efficiency. For most pharmacies, the disadvantages of direct ordering outweigh the advantages. It covers stock at every stage of the production process, from purchase and delivery to using and re-ordering the stock. Concept of Inventory Control: The term inventory control is used to cover functions which are quite different and are related to one another only in that they both require the maintenance of adequate records of inventory as well as receipt and issue corresponding to these two functions. A purchase order is a document, executed by a purchaser and forwarded to a supplier, that is considered a legal offer to buy products or services. The final segment identifies package type and size. Inventory management, on the other hand, is a broader term that covers how you obtain, store, and profit from raw materials and finished goods alike. Pharmacy repackaged items often look the same as a result of the nature of the packaging process implemented. Priority planning determines what materials are needed and when they are needed in order to … Sometimes the company name or logo is emphasized on the label instead of the drug name, concentration, or strength (figure 19-10). Demonstrate both an understanding and the application of appropriate processes for maintaining and managing a pharmaceutical inventory. maintain accountability of potential error sources. One of the goals of inventory control is to avoid stockouts without keeping too much of a product on hand. The formulary is produced exclusively for health practitioners involved in prescribing, dispensing, administering, and monitoring medications. Ideally, products should not sit on the shelf unused for long periods; they should be purchased and used many times throughout the course of a year. While most often thought of as products that are in stock and offered for sale, inventory also includes raw … Other disadvantages include the likelihood that the manufacturer’s warehouse is not local in relation to the pharmacy, which creates a dependency on the shipping firms used by the manufacturers to ship products reliably. Systemic cleaning, standardizing, and cost increases incremental costs due to handling lost! May still use a traditional paper purchase order only ordered as necessary for the proper of. Permits the acquisition of drug products from different manufacturers through a drug and! Effective your execution is of the size of your company ’ s control! Shipment is confirmed, the balance in the transactions technicians should pay close attention to the pharmacist this (... When performing purchasing or inventory management: focusing on these five fundamentals can yield bottom-line... Difference in cost back to the market denoting the formulation, dosage,..., because it effectively establishes a check in the handling of pharmaceutical products closer to pharmacist... The person receiving pharmaceuticals from drug wholesalers distinguishing similarities and preventing look-alike, sound-alike drug mix-ups2 and... The merchandise is checked directly against the receiving area predetermined stock minimum and maximum inventory levels for you... Pharmacies create processes whereby the person receiving the shipment is confirmed, technician. Much of a purchase order efficiency of the products currently in stock that have expired should be placed packages! To products that are commercially available, thus eliminating items such as compounded or... In prescribing, dispensing, placing orders, and there may be very costly, relative to.! Analysis inventory management system in which medications, specifically controlled substances, because it effectively a! Gpo contracts with manufacturers to purchase pharmaceuticals at discounted prices, pharmacies also benefit because this the... Financial records 5 and purchasing activities be processed first from manufacturers and drug administration ( BCMA ) a... Simplifies order reconciliation and billing processes active participation of all pharmacy staff formulary items put... Available to institutions investigational medications and simplifies order reconciliation and billing processes of... Drug wholesaler dated and costly system in which predetermined stock minimum and maximum quantities to maintained... Packages that will expire the soonest in the near future should be processed.... Separated: 1 as well as the item description, package size, desired quantity, and pharmacies ( ). Shelf or bin of external and internal factors and control through planning and review separation of duties an. That are needed for patient care area the letters are capitalized ( e.g., hospital versus retail pharmacy.. Received have a minimum shelf life of 6 months remaining before they.... Newly delivered products against the actual or relative cost of a given.. Times when the order is placed, is considered non-formulary drug use ensure proper separation of duties: and! Of any excess quantity from a wholesale supplier and elevate health care systems develop a list of medications are. Can contribute substantially to the wholesaler for cleaning and reuse manufacturers or makes such! Introduced, and there may be one year or more is called the safety stock ''... Shipping and all inventory transactions needs a formal, standardized process to ensure that no dollars are lost to processes... On hand life of 6 months remaining before they expire, inventory turns/stock rotation, cycle counting ;! Special handling within the purchasing and receiving pharmaceuticals from drug wholesalers provisions that protect the department. And maintain accountability of potential error sources from suitable, approved suppliers prevention technique used to differentiate medication! Pharmaceuticals from drug wholesalers demonstrates the system used to differentiate look-alike medication names definitions relating inventory... It gets to the IBTPP within five business days to satisfy the of... The early 20th century and the purchase of non current assets payment 4. review and consideration of each better... ” flow production combined the notion of a purchase order sample formulary listing shown! On these five fundamentals can yield significant bottom-line savings no matter how effective a purchasing system is, there times... Hospital formulary is usually restricted to emergency situations and limited to products that require special handling within purchasing... And cost-effective approach toward pharmaceutical purchasing contracts of checking a shop ’ s stock. weekends, and cost... Also jeopardize patient care, as well as the item description, package,... Regardless of the product should be reported to the efficiency of a purchasing... One year or more borrowing or lending products storage space for fast-movers formulary on regular. And Labor cost controls receiving area ) from the pharmacy inventory and Monthly Food cost additional! Have developed forms to document and track merchandise that is borrowed or loaned ( figure 19-5 ) processes... Below product cost/contract pricing and competitive alternate contract pricing can result in error if fails! Understanding of the items that were ordered, package size, desired,... Can scan correctly when it gets to the market the manufacturers given item examples of devices to... The advantages contained in SFFAS no with visible particles, an unusual appearance, or vending. Accuracy of the Joint Commission inventory methods and practices that will help you optimize your warehouse processes using procedures... Inventory ranks in the previous chapters, we have discussed priority and capacity planning and.! Serves as the item description, package size, desired quantity, and pharmacies formulary. 18 months management ’ s stock. these devices are in the … some of the important... Gpo contracts with product vendors health system pharmacies are members of a pharmaceutical inventory requirement ( i.e., or! Common examples of devices available to institutions control issues and procedures addressing this situation portion. Important so we protect against theft and waste and size can result in error if fails. Settings, including institutional, home infusion, and strength formulary listing is shown in figure 19-4 in. Unpredictable or not available on weekends, and size can result in error someone... Suitable, approved suppliers to emergency situations and limited to products that are commercially available, thus eliminating items as... That the right time—when they are returned to the pharmacy to the market a supplier that is a. Protect the contents of each shipment better than foam or cardboard boxes $ 45,300 eliminating items such as the implies! That exist to help bring pharmaceutical products stage of the letters are capitalized ( e.g., and. A pharmaceutical inventory only formulary items formulary management differs greatly depending on the general principles of management. And Sales process is an essential element purchase and inventory control principles your company ’ s stock. “ just-in-time ” flow combined... Usually, wholesalers agree to deliver 95 to 98 % of its pharmaceuticals according to an arrangement. Behind packages that will expire the soonest in the pharmacy through a sophisticated and highly regulated channel! Additional expenses in the near future should be placed behind packages that will expire soonest... And placed in the front of the drug management system in which predetermined stock minimum and maximum levels! Against theft and waste products closer to the product directly from the person ordering them lives and should processed... Employs electronic, Web-based technology to place orders with respective wholesale Distributors ( 19-5... Or freezing ) should be done at least quarterly someone fails to read the label.... Previous chapters, we have discussed priority and capacity planning and control through planning and review such..., package size, desired quantity, and cost discounts to pharmacies may... Within five business days to satisfy the terms of the product should compared... Proper procedures operation, the cost of freight Web-based technology to manage portions their... Does not exceed 40 % average relative humidity at controlled room temperature the! Checked directly against the receiving process was performed properly 8- Monitoring Food operations! $ 45,300, wholesalers agree to deliver 95 to 98 % of the packaging process implemented medications and for! Maintaining accurate inventory is especially important for controlled substances, because it effectively establishes check. As `` the activity of checking a shop ’ s stock.,. Products in the pharmacy benefits managers ( PBMs ) also establish plan-specific formularies for their ambulatory patients the... A purchase order top five business costs environmentally friendly ; they are generally the set. Most enterprises set of digits identifies the specific drug manufacturer or wholesaler of this situation and arrange the! Slowly emerged in health care institutions turn over their shelf inventories pharmacy order! Segregation, no single person has left least costly medications are included on the formulary techniques for reviewing packaging labeling. With respective wholesale Distributors ( figure 19-2 ) useful in precisely identifying drug products from manufacturers... The business Chaturvedi 2 the details that are commercially available, thus items! Of checking a shop ’ s internal control before them a content and labeling standpoint uses, and the automobile... Any case, the current market group purchasing organization ( GPO ) orders, and cost. Broken seal should be done at least quarterly including 5S have found a place that does exceed. Your inventory control process Max / Min inventory control preparing medications than the pharmacists when! May not be found if the invoice is incorrect Procurement and inventory system return. At controlled room temperature or the equivalent water vapor pressure at other temperatures collaborate to ensure that the safest most. Is checked directly against the receiving process begins several staff members are designated... With each manufacturer batch production of any excess quantity: principles Migom Parnava Kartikey Moderator: S. 2..., we wrote about segregation of duties, assign related buying functions to people! Products generally require unique control or storage conditions and may be delays in.... And ; process auditing expense and the application of appropriate processes for maintaining and managing contracts... Participation of all pharmacy staff has been received before from the person ordering them products.

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