Achieving cost-efficient management of drug supply via economic order quantity and minimum-maximum stock level

ABSTRACT

Background

A good drug inventory planning system is important for an efficient budgeting, procurement, and cost control of drugs. When stagnant drugs in the inventory are too much, wastage due to expired and spoiled drugs could occur. These will not only cause loss of income but could also jeopardize healthcare service delivery.

Research design and methods

This study aimed to determine the most efficient and effective management of stagnant and shortage drugs by comparing three pharmacy logistic methods; the economic order quantity (EOQ), minimum-maximum stock level (MMSL), and the traditional consumption of drug inventory, at RA Basoeni Hospital, Mojokerto. Drug inventory was analyzed to calculate the opportunity loss, opportunity cost, and proportions of both stagnant and shortage drugs.

Results

We found that EOQ and MMSL performed best for control of stagnant drugs and shortage drugs, respectively. Both methods had proved as effective pharmacy logistic planning. In addition, EOQ produced the lowest opportunity cost for stagnant drugs besides the lowest opportunity loss for shortage drugs.

Conclusion

The study concluded that EOQ is the most effective and efficient method to manage stagnant and shortage drugs at hospital pharmacy.

KEYWORDS:

• Economic order quantity
• opportunity loss
• opportunity cost
• stagnant
• shortage

Article Highlights

• Stagnant condition causes negative impact such as increasing expired drugs, opportunity loss, and revenue loss for the clinical pharmacy.

• Shortage or shortage condition not only leads impact of reducing revenue but also impact of contributing mortality and morbidity for critical conditions.

• The reason behind opportunity loss is occurred due to inventory cost, ordering cost, and handling cost.

• Revenue loss is happened at stagnant condition due to inventory cost, ordering cost, and handling cost. Besides, revenue stock at shortage drugs causes the hospital lost the opportunity to sell the drugs.

• EOQ method showed more efficient inventory management at clinical pharmacy of the hospital than MMSL as it tackles problem of stagnant drugs and shortage drugs, increases efficiency and cost savings, and causes minimum opportunity loss and opportunity cost.

Acknowledgments

We thank RA Basoeni Hospital for facilitating the research and Hanin Dhany for assisting the copyediting of manuscript.

Author contribution statement

EKD, DC, and TNR involved in conception and design of the study. EKD written the proposal of the study, collected and analyzed the data. TNR wrote the manuscript with support from all authors. EKD, DC, and TNR involved in analysis and interpretation of the data and did the drafting of the paper or revising it critically for intellectual content.

MD and TNR involved in final approval of the version to be published. All authors approved the version to be published; and agree to be accountable for all aspects of the work.

Declaration of interest

The authors have no relevant affiliations or financial involvement with any organization or entity with a financial interest in or financial conflict with the subject matter or materials discussed in the manuscript. This includes employment, consultancies, honoraria, stock ownership or options, expert testimony, grants or patents received or pending, or royalties.

Reviewer disclosures

A reviewer on this manuscript has disclosed that although no funds go to them, their employer is a member of a GPO - Vizient. Their division of the department of pharmacy has a contract with Vizient to provide drug shortage information. The funds from this contract are less than 5% of their divisions budget. Peer reviewers on this manuscript have no other relevant financial relationships or otherwise to disclose.

Additional information

Funding

This paper was not funded.