CONCLUSION
Inventory management is crucial for most companies, but it is especially crucial for small businesses like MDC because when compared with large companies, they usually have limited resources and bargaining power, which have negative effects on the way the inventory can be managed.
This thesis is trying to propose an enhanced inventory control system for a small organization like MDC. Establishing policies and procedures is the major step in starting an inventory control. These policies and procedures must be implemented and the management must see to it that everyone in the organization complies with it. A good inventory system does not need several employees to implement segregation of duties and avoid conflict of interests. Proper documentation and supervision of transactions should be given more focus.
Friday, August 20, 2010
Enhancement of Pharmacy Inventory Control System Thesis: RECOMMENDATIONS
RECOMMENDATIONS
From the information given from the previous chapter, it was observed that there were a limited number of employees in MDC. Also, it was observed that these employees have limited knowledge in accounting. The researchers propose a simple yet effective inventory control system to be adopted by the pharmacy.
The researchers recommend the following policies and procedures for the enhancement of pharmacy inventory control system:
Purchasing
ROP system and EOQ model. The researchers suggest the management to establish ROP for each items classified under the ABC analysis and also the implementation of EOQ model in purchasing inventory. This is to resolve the issue of overstocking and/or understocking of inventory that leads to inventory loss or customer dissatisfaction. Once established, the management must update this regularly.
Pre-numbered Purchase Orders (PO). Due to the limited number of employees, the pharmacist could be the one to prepare the PO to be approved by the manager. Purchases must be in sequential order. The researchers also recommend the management to require the following information in each PO:
1. Complete description of each item (i.e., brand name, generic name, and other specifications)
2. Quantity required
3. Date required
4. Recommended vendor or source
5. Shipping requirements
Criteria for selecting vendor/supplier. To minimize the problems occurring in purchasing goods, the researchers advocate the following criteria in selecting their suppliers:
1. Have you ever reviewed existing purchasing procedures to see if they meet your needs?
2. Do you have specific policies and procedures regarding who is authorized to purchase goods or services? Receive salespersons’ calls? Place requisitions? Process records?
3. Have you ever discussed your purchasing function with other pharmacies or with professional organizations to obtain suggestions or techniques?
4. Have you ever visited or investigated your existing or potential vendors to verify that they can meet your requirements in terms of price, quality, quantity, and service?
5. Does your volume of purchasing for any particular item warrant you’re dealing directly with its manufacturer?
6. Do your vendors have regular and competent sales personnel?
7. Have you had problems with suppliers in regard to shortages? Backdoor selling? Delivery delays? Unsolicited favors and gifts?
Receiving
Reject deliveries not having purchase order support. The receiving manager should reject all supplier deliveries for which there is no authorizing purchase order, or for which there is not a sufficient authorized quantity to cover the unit quantity of the delivery.
Inspect and count the goods received. Once goods are received, the pharmacist should inspect the goods to see if requirements are complied with and count the goods to see if goods ordered are actually received.
Blind Copy Purchase Order. The manager should provide the pharmacist with a blind copy of purchase order. This blind copy provides the list goods ordered excluding the quantity. The pharmacist needs to fill up the blanks and submit back to the manager. This is another control for securing the inventory count.
Receiving Report. The receiving staff must prepare a receiving report to document the receipt of goods.
Storage
ABC analysis. The researchers propose that the pharmacy use the ABC analysis for their inventory classification. This will determine the importance of items and the level of control placed on the items. This gives a close control to fast moving and items with high value.
Class A items or the items with the highest value should be given more level of importance. To follow this theory, the researchers propose that the management conduct a semi- monthly physical count for Class A items. Class B items should be physically counted monthly. While Class C items being given the lowest importance should be counted every three months. A thorough explanation of the ABC analysis is included in Chapter 2.
Stock rotation. This is an important inventory management principle that encourages the use of products before they expire and helps prevent the use of expired products. Under this method, expiration date of newly ordered products should be compared with that of the existing stock. Products that have already expired should be removed. Products that will expire in the near future should be highlighted and placed in the front of the shelf or bin.
Segregate items subject for disposal. Obsolete inventory should be segregated from the current stock. Those items that requires disposal should be transferred to another room. The manager may decide to return the goods to original supplier.
Restrict access to stockrooms. The management should determine as to which employee can have access to the stockroom. In the researcher’s subject, it is the pharmacist. Other employees should be prohibited in entering the stockrooms.
Regular check of the facilities. It is important that the facilities, especially the stockrooms, are checked regularly for any possible cause of inventory loss like fire or water leaks. It should be ensured that all are in proper condition.
Issuing
Stock cards. The researchers advocate the use of stock cards to keep record of transactions for each item. This card shows the receipt and issuance of the item including the quantity and cost. This is to complement the implementation of perpetual inventory system.
Perpetual inventory system. This requires continuous recording of every transaction that relates to inventory. This would minimize errors in determining the number of inventory at hand.
Reporting.
Inventory valuation. The management should determine the valuation of inventory to prevent misreporting. Without this, inventory may either be understated or overstated. Researchers suggest the use of FIFO method. Elaborate discussion of this method is included in Chapter 2.
The researchers also provided a flow chart which illustrates the recommended duties of each staff and the flow of the inventory system of MDC. This flow chart is shown on the next page, Figure 4.
From the information given from the previous chapter, it was observed that there were a limited number of employees in MDC. Also, it was observed that these employees have limited knowledge in accounting. The researchers propose a simple yet effective inventory control system to be adopted by the pharmacy.
The researchers recommend the following policies and procedures for the enhancement of pharmacy inventory control system:
Purchasing
ROP system and EOQ model. The researchers suggest the management to establish ROP for each items classified under the ABC analysis and also the implementation of EOQ model in purchasing inventory. This is to resolve the issue of overstocking and/or understocking of inventory that leads to inventory loss or customer dissatisfaction. Once established, the management must update this regularly.
Pre-numbered Purchase Orders (PO). Due to the limited number of employees, the pharmacist could be the one to prepare the PO to be approved by the manager. Purchases must be in sequential order. The researchers also recommend the management to require the following information in each PO:
1. Complete description of each item (i.e., brand name, generic name, and other specifications)
2. Quantity required
3. Date required
4. Recommended vendor or source
5. Shipping requirements
Criteria for selecting vendor/supplier. To minimize the problems occurring in purchasing goods, the researchers advocate the following criteria in selecting their suppliers:
1. Have you ever reviewed existing purchasing procedures to see if they meet your needs?
2. Do you have specific policies and procedures regarding who is authorized to purchase goods or services? Receive salespersons’ calls? Place requisitions? Process records?
3. Have you ever discussed your purchasing function with other pharmacies or with professional organizations to obtain suggestions or techniques?
4. Have you ever visited or investigated your existing or potential vendors to verify that they can meet your requirements in terms of price, quality, quantity, and service?
5. Does your volume of purchasing for any particular item warrant you’re dealing directly with its manufacturer?
6. Do your vendors have regular and competent sales personnel?
7. Have you had problems with suppliers in regard to shortages? Backdoor selling? Delivery delays? Unsolicited favors and gifts?
Receiving
Reject deliveries not having purchase order support. The receiving manager should reject all supplier deliveries for which there is no authorizing purchase order, or for which there is not a sufficient authorized quantity to cover the unit quantity of the delivery.
Inspect and count the goods received. Once goods are received, the pharmacist should inspect the goods to see if requirements are complied with and count the goods to see if goods ordered are actually received.
Blind Copy Purchase Order. The manager should provide the pharmacist with a blind copy of purchase order. This blind copy provides the list goods ordered excluding the quantity. The pharmacist needs to fill up the blanks and submit back to the manager. This is another control for securing the inventory count.
Receiving Report. The receiving staff must prepare a receiving report to document the receipt of goods.
Storage
ABC analysis. The researchers propose that the pharmacy use the ABC analysis for their inventory classification. This will determine the importance of items and the level of control placed on the items. This gives a close control to fast moving and items with high value.
Class A items or the items with the highest value should be given more level of importance. To follow this theory, the researchers propose that the management conduct a semi- monthly physical count for Class A items. Class B items should be physically counted monthly. While Class C items being given the lowest importance should be counted every three months. A thorough explanation of the ABC analysis is included in Chapter 2.
Stock rotation. This is an important inventory management principle that encourages the use of products before they expire and helps prevent the use of expired products. Under this method, expiration date of newly ordered products should be compared with that of the existing stock. Products that have already expired should be removed. Products that will expire in the near future should be highlighted and placed in the front of the shelf or bin.
Segregate items subject for disposal. Obsolete inventory should be segregated from the current stock. Those items that requires disposal should be transferred to another room. The manager may decide to return the goods to original supplier.
Restrict access to stockrooms. The management should determine as to which employee can have access to the stockroom. In the researcher’s subject, it is the pharmacist. Other employees should be prohibited in entering the stockrooms.
Regular check of the facilities. It is important that the facilities, especially the stockrooms, are checked regularly for any possible cause of inventory loss like fire or water leaks. It should be ensured that all are in proper condition.
Issuing
Stock cards. The researchers advocate the use of stock cards to keep record of transactions for each item. This card shows the receipt and issuance of the item including the quantity and cost. This is to complement the implementation of perpetual inventory system.
Perpetual inventory system. This requires continuous recording of every transaction that relates to inventory. This would minimize errors in determining the number of inventory at hand.
Reporting.
Inventory valuation. The management should determine the valuation of inventory to prevent misreporting. Without this, inventory may either be understated or overstated. Researchers suggest the use of FIFO method. Elaborate discussion of this method is included in Chapter 2.
The researchers also provided a flow chart which illustrates the recommended duties of each staff and the flow of the inventory system of MDC. This flow chart is shown on the next page, Figure 4.
Enhancement of Pharmacy Inventory Control System Thesis: Summary
SUMMARY, CONCLUSION AND RECOMMENDATIONS
The study aimed to investigate the current pharmacy inventory control system of MDC. Weaknesses were identified through careful examination of the system. Management and all other people involved were interviewed and given a set of questions to give the researchers a clear view of their system. Non-participant observations were also made to verify the data gathered from the interview and questionnaires.
The inventory control system of MDC was composed of five stages namely, Purchasing, Receiving, Storage, Issuing, and Reporting. In Purchasing, request for replenishment was sent when there was a little buffer inventory left. The management does not use ROP system and EOQ model as part of their purchasing procedures. The manager would simply make a call to their suppliers; no Purchase Order (PO) form was prepared to document the purchase.
In Receiving, the pharmacist would inspect and count the goods delivered. No Receiving Report (RR) was prepared and physical count was not supervised. The goods received would be brought to the pharmacy or stockroom. There were no existing logbooks as to record the receipt and issuance of goods. Also, there was no proper valuation of inventory. Hence, reporting of their inventory is not reliable.
From the gathered data, the researchers assessed that the current pharmacy inventory control system of MDC is relatively weak and lacks control for security. It was also observed that employees in MDC had relatively low knowledge about accounting which convinced the researchers to create a simple and easy to learn enhanced inventory system for the pharmacy.
The study aimed to investigate the current pharmacy inventory control system of MDC. Weaknesses were identified through careful examination of the system. Management and all other people involved were interviewed and given a set of questions to give the researchers a clear view of their system. Non-participant observations were also made to verify the data gathered from the interview and questionnaires.
The inventory control system of MDC was composed of five stages namely, Purchasing, Receiving, Storage, Issuing, and Reporting. In Purchasing, request for replenishment was sent when there was a little buffer inventory left. The management does not use ROP system and EOQ model as part of their purchasing procedures. The manager would simply make a call to their suppliers; no Purchase Order (PO) form was prepared to document the purchase.
In Receiving, the pharmacist would inspect and count the goods delivered. No Receiving Report (RR) was prepared and physical count was not supervised. The goods received would be brought to the pharmacy or stockroom. There were no existing logbooks as to record the receipt and issuance of goods. Also, there was no proper valuation of inventory. Hence, reporting of their inventory is not reliable.
From the gathered data, the researchers assessed that the current pharmacy inventory control system of MDC is relatively weak and lacks control for security. It was also observed that employees in MDC had relatively low knowledge about accounting which convinced the researchers to create a simple and easy to learn enhanced inventory system for the pharmacy.
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