Transcript What Makes an Effective Drug Inventory Management System

What Makes an Effective Drug Inventory
Management System
Drug Accountability Conference
May 12, 2010
Goal
• Explore the importance of effective
inventory management
Inventory
• Product
• Single largest expense
• Poor management negatively effects
– Service
– Morale
– Patient lives
Inventory Management
Minimizing
Cost
Supply and
demand
Inventory Management
• Purchasing
– Right product
– Right time and amount
– Right price
Inventory Management
Space
New
Initiatives
Past Usage
Right
Product
Industry
Changes
Seasonal
Factors
Formularies
Other factors?
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Accountability
Theft reduction
Reduce waste
Budget analysis
Inventory Management
Right time and
amount
Inventory Management
• Ordering Process
– ABC inventory method (Manual)
– Perpetual inventory (Automated)
ABC Inventory Method
• Classifies inventory items to determine
level of control needed
• Rank items by annual purchases cost
• A = 70% (10% of all products) - tight control
• B = 20% (20% of all products) - mod. control
• C = 10% (70% of all products) - least control
Inventory Cost
• Ordering Cost: The costs of placing and
receiving and order.
Examples: clerical costs and documents
• Carrying Costs: The costs of keeping inventory.
Examples: space costs, expiration, damage,
shrinkage
• Out of Stock Costs: The cost of not having
sufficient inventory.
Examples: Cost of expediting, taxi, cost of
alternate therapy
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Safety Stock
• Variability of demand
• Lead time (Delivery Schedule)
• Importance of therapy
Demand Forecasting
• Demand Forecasting – Weighting
factors are applied to past purchases to
calculate trends.
• Reorder Point (ROP) = Safety Stock
• Reorder Quantity (ROQ) = Economic
Order Quantity
The Inventory Cycle
Profile of Inventory Level Over Time
Q
Quantity
on hand
Usage
rate
Reorder
Quantity
(ROQ)
Reorder
Point or
Safety
Stock
(ROP)
Receive
order
Place Receive
order order
Lead time
12-14
Place Receive
order order
Time
Ordering Intervals
• A items will be inventoried and ordered
a minimum of 2 times weekly.
• B items will be inventoried and ordered
a minimum of weekly.
• C items will be inventoried and ordered
once every 14 days.
• Do no overlook efficiencies from being
organized.
McKesson Inventory Management
Shelf Tag System
• A, B, C items are identified based on
your ordering history (Orange-A, Blue-B, Yellow-C)
• ROP (Reorder Point)
• ROQ (Reorder Quantity)
• System also calculates ROP and ROQ
based on your ordering history
Mean Absolute Deviation Percentage
 Mean Absolute Deviation Percentage (MADP) can be
used as an indication of the accuracy.
 Range of MADP
 0.01 - 0.25
Very reliable
 0.26 - 0.5
Reliable
 0.51 - 0.75
Irregular but useful
 >0.76
Unreliable due to variance in purchases
 Facilities should look for products that have a MADP
under 0.5 and a low turn. These would be prime
suspects for improvement.
*Found in 12 month Inventory Turns Forecast Report Detailed
Inventory Turn
Measured by dividing
total cost of products
purchased by inventory
value. Lower inventory
turnover is a sign of
inefficiency and
inflexibility. Upward
trends in inventory
turnover can be indicative
improved inventory
management.
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Diversion Issues
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VAMC pharmacist was arrested after an OIG investigation and charged
with stealing 10,000 tablets of non-controlled prescription medication from
the pharmacy over a 2-3 year period.
Defendant Pleads Guilty to Pharmaceuticals Theft at VAMC: A coconspirator involved in a scheme to steal VA pharmaceuticals pled guilty
to misbranding of drugs. An OIG investigation determined that the
defendant was involved with two other subjects in a conspiracy to steal
drugs estimated at $250,000 from the VAMC pharmacy and resell them at a
retail pharmacy. The primary conspirator, a former VA pharmacist, was
previously sentenced in this case.
VAMC Pharmacy Technician Indicted for Drug Theft: Pharmacy technician
was indicted for acquiring a controlled substance by fraud and using the
U.S. Mail to unlawfully distribute controlled substances. An OIG and VA
Police investigation determined that the defendant, who worked as a
prescription refill telephone operator, used the pharmacy profiles of
unsuspecting Veterans to steal prescription narcotics by mailing the
prescriptions to himself or family members’ residences.
Comments
• Use math to settle most disputes.
• Remember all inventories systems are
frequently incorrect.
• We still need intelligent workers to
make the process work.
• We are here to serve the patients.
Inventory Management
• Questions