Pharmacy Supply Chain A Structured Approach to Managing Pharmacy Inventory David Stead Chief Pharmacist Royal Bournemouth & Christchurch Hospitals David Owens Supply Chain Development Manager NHS Logistics 1
Stock Categorisation - Background All stock arriving at RBH Stores was handled in exactly the same way We felt that looking at the stock in more detail might enable us to examine the supply route in different ways, to reduce handling and stockholding. 2
Stock Categorisation - Geography Currently nearly all stock arrives at RBH Stores (exceptions e.g. Clozapine direct to St Anns) The stock is then distributed on requisition to : RBH Dispensary RBH Aseptic Unit RBH Manufacturing Unit Christchurch Hospital Dispensary St Ann s Hospital Dispensary (Dorset Healthcare Trust) Dorset Ambulance NHS Trust 3
Stock Categorisation - Approach Define critical items - clinical - cost - volume of use 4
Stock Categorisation Approach Define all stock as - Bulk - Direct to Dispensary - Multiple site use - Single site use - OTC 5
Stock Categorisation - Challenges Different approaches to criticality Does the computer system have the flexibility to handle this? Can our wholesaler (s) handle the change? 6
Stock Categorisation - Progress All stock has been categorised Developing direct to dispensary and bulk deliveries Direct to Aseptic to start shortly Colour coding for Stores staff 7
Formalising the Approach Developing an Inventory Management Policy Why manage inventory? Inventory categorisation Clinical risk Supply chain risk Value Stock holding rules Inventory management reviews Challenges and solutions Benefits 8
Why Manage Inventory? Avoid overstocking and wastage Avoid shortages of critical items Avoid unnecessary financial commitment Improve management information Improve efficiency Improve patient care 9
Step One Do we need to hold stock? Is the item critical to patient care? Is it easily substituted? Is it easy to obtain? Is it used regularly? Is it easy to store? Bulky / Hazardous Is it expensive? 10
Clinical Risk No alternative 4 4 5 6 7 8 Drug moiety from different BNF class available 3 3 4 5 6 7 Available Alternative Drug moiety in same BNF class available Non bioequivalent preparation of same drug moiety available 2 1 2 3 4 5 6 1 2 3 4 5 Bioequivalent preparation of same drug moiety available 0 0 1 2 3 4 0 1 2 3 4 No Morbidity Minor Morbidity Moderate Morbidity Major Morbidity Catastrophic Consequence Consequence of Delay Green Category C Amber Category B Red Category A 11
Inventory Categorisation CRITICALITY STOCKABILITY VALUE MEDIUM TO LARGE HAZARDOUS BUT SCORE Need Substitutability Availability Line Physical Attributes Hazard Rating Speed 3 Clinical Risk A Clinical Risk A MORE THAN 2 2 WEEKS, OR OR FAST MOVER (2) BULKY/HEAVY OR SPECIAL STORAGE & HAZARDOUS PRODUCT WITH NO HIGH VALUE ERRATIC SUPPLY (1) HANDLING REQUIRED SUITABLE STORAGE ON STORAGE SITE ON SITE 2 Clinical Clinical UP UP TO TO 22 WEEKS MEDIUM MEDIUM Risk B Risk B WEEKS MOVER (3) STORAGE VALUE AVAILABLE 1 Clinical Risk C Clinical Risk C UP UP TO TO 48 48 HOURS SLOW MOVER/ SMALL, LIGHT LOOSE LOOSE NON HAZARDOUS LOW VALUE NON MOVER (4) WEIGHTED Score x Score x 25% Score x x 25% Score x Score x 25% Score x 25% Score x SCORE 50% ( b ) ( ( c c ) ) 50% ( e ) ( f ) 100% ( a ) ( ( d ) ) ( g ) GROUP SCORE a + b + c d + e + f g SCORE INVENTORY INVENTORY CATEGORY CATEGORY GROUP (6) CRITICALITY CRITICALITY STOCKABILITY STOCKABILITY VALUE VALUE GROUP A Group score 2.5 or greater Group score 2.5 or greater Group A B Group score 2.5 or greater Group score 1.75 or greater Group score 2.5 or greater Group score 1.75 or greater Group score: 3 score: Group 3 B C Group score 1.75 or greater Group score less than 1.75 Group score 1.75 or greater Group score less than 1.75 Group score: 2 score: Group 2 C Group score less than 1.75 Group score less than 1.75 Group score: 1 score: 1 (5) 12
General Rules for Holding Stock Classification Criticality Stockability JAC Re-Order Setting A Stock & safety stock Stock unless hazardous/bulky B Stock Stock unless hazardous/bulky or or non mover C No stock No stock unless high turn product Fixed re-order level Floating re-order level (automatic) Floating re-order level (automatic) 13
Definitions & Rules Replenishment Frequency Definition Frequency of replenishment reviews to bring managed stocks up to agreed maximum stock level bearing in mind the Replenishment Lead Time (Order entry lead time + Supplier lead time + Receipt processing time) Rule Current frequency is Daily may be extended to reduce order, receipting and invoicing activity e.g for bulk products 14
Definitions & Rules Maximum Stock Level Definition Upper limit that should be held for all stocked items to avoid unnecessary overstocking Rule Default level set at 2 x average quantity of stock consumed between replenishment review plus safety stock or 2 x average quantity consumed during replenishment lead time plus safety stock whichever is greater, rounded up to nearest unit of issue (or pack size) 15
Definitions & Rules Minimum Stock Level Definition Lowest level of stock that should be held to avoid stock outs before replenishment orders are received Rule Default level set at 1 x average quantity of stock consumed between replenishment review plus safety stock or 1 x average quantity consumed during replenishment lead time plus safety stock whichever is greater, rounded up to nearest unit of issue (or pack size) 16
Definitions & Rules Re-Order Level Definition The level at which replenishment action must be taken, bearing in mind the lead-time of the item, to avoid stock falling below minimum levels Rule Default level set at 1 x average quantity of stock consumed between replenishment reviews This may be weekly or at an interval most appropriate for the category of the inventory item eg. Bulk products 17
Definitions & Rules Safety Stock Definition Additional buffer stock for items in Criticality Category A to cover unexpected demand (Spikes), or to meet mandatory requirements Rule Default level set at 100% of minimum stock level Level may be varied to reflect the criticality of certain items and could be increased to 150% or 200% to meet specific circumstances 18
Definitions & Rules Forward Stock Cover Definition Period (expressed in weeks) that current stock will last based on average usage rate over preceding 12 months Rule Target level of 2 weeks maximum 19
Inventory Management Reviews Review Frequency Management by exception Frequency should match category Rolling review programme Group Code Items with 2 or more A s in the group code Items with 2 or more B s in the group code Items with 2 or more C s in the group code Frequency Monthly 6 monthly Annually or Biennially 20
Challenges & Solutions Scale of the categorisation task categorise known critical items first (all locations) set up timetable for remaining items by location incorporate into process for adding new drugs to catalogue Flexibility of JAC to handle inventory categorisation fixed re-order levels for cat A floating re-order level for cat B/ C virtual locations on JAC for specific categories i.e. Bulk items Raise enhancement request through JAC user group 21
Benefits Clear policy for stock management Rules can be altered to meet prevailing circumstances Promotes adoption of automated stock control Less manual intervention for products that do not need it Establishes formal review programme Validate category Assess impact on product availability Monitor stock value 22
Discussion time Any questions? Any comments? Any suggestions or ideas? 23