Transcript INVENTORY CONTROL

INVENTORY CONTROL
The Core of All We Do
An omission is as bad a medicines error (if not worse) than a
wrong dose or wrong drug.
You can have a clinical impact on patients as well as a
financial impact on the trust!
See paper on stock control fundamentals.
INVENTORY CONTROL
Dependent and Independent Demand
Dependant demand (E.g. 4 wheels on a car, hip prostheses)
•Requirements for components dependant on the number of
finished products required.
•Forecasting demand and therefore ordering is simple.
•Bill of Materials lists the required component parts for the
finished product
•Production schedule indicates when they are required.
Independent demand. (E.g. most drug usage!)
•Have no direct and consistent relationship with any other.
•Demand for these items may be erratic or relatively consistent.
• Historical data used to assess ordering requirements.
•Accurate forecasting is impossible and holding stock is essential.
INVENTORY CONTROL
Order methods and systems
A) Order-only-on request.
B) Fixed order quantity systems.
Based on:
•Historical usage information.
•Stock holding.
•Supplier lead-times.
Drawbacks
Reliance on consistent supplier lead times
Inability to cope with significant increases in demand at short
notice.
INVENTORY CONTROL
Stock
Level
Minimum
Safety Stock Level
Time
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C) Periodic Review
Stock “topped up” at review period
Stock
Level
Review
Review
Period
Period
Time
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D) The Economic Order Quantities method.
Minimises cost of acquiring and holding stock, by balancing between
few and large orders
Limitations to EOQ:
•It involves over-simplified assumptions
•Costs difficult to quantify.
•EOQ may be greater than storage facilities.
• No consideration of supplier's capabilities.
•No consideration of the shelf life of the goods.
•Factors affecting ordering quantities may not be included in the
calculation e.g. 'safety stock', bulk discounts and outers.
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Economic Order Quantity (EOQ)
Stock Holding
Costs
Costs
Overall Costs
Ordering Costs
EOQ
Order Size
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Key performance indicators
A) Stock service level
‘A measure of the achievement of success in satisfying demand for
stock during a predetermined period’ (BSI 5191).
service level % = demands fully satisfied x 100
demands made
B) Stock turn rate
Theoretical number of times your stock turns over per year.
Stock Turns =
Annual Spend Figure
Average Stock Value
A typical value for stock turns is 8-10.
A figure less than this means you may have too much stock.
A figure over this means you may be generating too many orders.
INVENTORY CONTROL
Tools for Stock Analysis
Pareto Analysis
'80:20 rule'.
ABC analysis
A = highest value, risk or stock turn items.
B = medium value, risk or stock turn items.
C = lowest value, risk or stock turn items.
Kraljic Matrix (modified)
high
Leverage products
Strategic products
e.g. generics
e.g. dose banded chemotherapy
Routine products
Critical products
e.g. sundries
e.g. Ergometrine
Purchasing's
impact
on cost
low
low
supply risk
high
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ABC Analysis
90
Value of
Stock
60
A
B
10
C
40
No of Lines
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Task
For the following products estimate a minimum stock level. Assume you
have not stocked this product before. Your system holds 7 days wholesaler
stock and 30 days direct supply.
Projected usage
Logistics Channel
(annual)
Abciximab Injection 10mg
240
Direct
(14 days lead time)
Abciximab Injection 10mg
2400
Direct
(14 days lead time)
Yellow Soft Paraffin 30g2400
Direct
Yellow Soft Paraffin 30g2400
Wholesaler
(14 days lead time)
Ondansetron Tabs 8mg x10
2400
but increasing fast
Direct
Ondansetron Tabs 8mg x10
2400
but increasing fast
Wholesaler
(14 days lead time)
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Answers
1. Lead time 14 days = 10 packs = Safety Stock Level. So say 20 packs
for Minimum.
2. Safety stock = 100 packs ? Fridge space?
Also expensive.
3. Safety stock = 100. Only want to order once a month (cheap) so Min
300.
4. Safety Stock = 1 day = 20. Minimum 120. But do you want it every
day so perhaps order bigger quantities less often.
5. Usage unpredictable so set (and fix a higher minimum).
6. As above but don’t have to worry so much as will sort itself out quickly
and respond to changes.