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They Don’t Teach This in Pharmacy School – Chapter 1 Part 3: Guide To Perpetual Inventory

Datarithm Team August 05 2021
As we discussed in the last chapter, perpetual inventory is the best and most accurate way in which a pharmacy can maintain an accurate inventory. That is because it tracks your pharmacy’s inventory continuously and in real-time. Without perpetual inventory, pharmacy staff rely on potentially inaccurate information and therefore can make questionable decisions when they configure purchase orders. These inaccuracies can lead to stock-outs, over-stocking, and potentially elevated expired returns. Pharmacies considering a transition to perpetual inventory should be concise in their planning of the necessary steps to make the move.

Recommended Steps:

On-hand Accuracy
  • Zero out on-hands in the pharmacy management system (PMS) – contact your PMS provider for instructions.
  • Physical Count – consider using an outside inventory vendor or organize pharmacy staff for the count. Deploy pill counting technology if available to speed the pace of the count.
  • Upload on-hand results to the pharmacy management system – contact your PMS provider for instructions.
With the above steps completed your emphasis should be on maintaining accurate on-hand positions. This would include on-hand updates upon wholesaler deliveries (automatically through PMS or manually through PMS following confirmation that physical receipt matches wholesaler invoices). Importantly, inventories must be adjusted in associated with return to stocks. Lastly, your PMS will automatically decrement on-hands when scripts are filled.

Re-order Point Management With on-hand positions now accurate, re-order points and quantities for all individual and generic equivalent groups must be established and constantly updated to recognize changes in demand, costs, and management goals. There are two methods for maintaining re-order points.
  • Manual – established and maintained by pharmacy staff.
  • Automated – established and maintained through available software technology
Because typical pharmacies maintain formularies ranging from 2,000 to 5,000+ active inventory items, the manual approach is daunting and nearly impossible for pharmacy staff. As such, leveraging technology provides an automated systematic approach that will with consistent precision and without human emotion, track usage patterns and adjust re-order points accordingly. Automating inventory management will streamline tasks, create a seamless workflow, and make managing Rx inventory an important and core business function.

Benefits of Automation
  • Monthly re-order point optimization—always in lockstep with changing demand and the preferences of management/owners
  • Optimized re-order points coupled with automatic return and transfer recommendations reduce overstock & dead inventory and overall drug spend
  • Reduced ordering time—more time for your patients
  • Improved fill-rates and inventory turns
  • Intelligent cycle counting to maintain on-hand accuracy
Replenishment Now with on-hands accurate and re-order points/quantities established in the pharmacy system a style of replenishment must be determined. There are two options that both utilize the purchase order (PO) available in the pharmacy management system which will include all items in need of restocking because on-hand positions have reached or fallen below the established re-order point.
  • Manual order placement with wholesalers
  • Automated ordering through the pharmacy management system via EDI (electronic data interchange) with wholesalers
Cycle Counting With on-hand positions initially established and because inventory levels can become inaccurate over time (shrink, staff & wholesaler errors, etc.), periodic counting (cycle counting) will assist in maintaining on-hand accuracy throughout the calendar year through real-time corrections when errors are discovered. This precision will help to avoid both overstocking and stock-outs. Additionally, inventory accuracy provides a stronger basis for inventory reports and decisions.

Datarithm®’s inventory management software is the single solution for your pharmacy’s perpetual inventory and so much more. It is easy to implement and engineered to work for pharmacies of all sizes. Datarithm uses algorithms that forecast demand, recognizes trends, automatically resets reorder points, surfaces potential wholesaler returns and store-to-store transfer (chains), and provides an intelligent cycle count functionality. Pharmacies deploying Datarithm typically experience a 20% reduction in inventory, stronger profit, cash flow, inventory turns (4+ points), and customer service. Put perpetual inventory to work for you with Datarithm®. Schedule a free demonstration now and learn how it can optimize your pharmacy’s inventory management.

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