Why is inventory management a priority for the pharmaceutical industry?

Introduction

Whenever you think about the pharmaceutical industry, what image comes to your mind? It tends to be a large warehouse unit full of drugs with distinct expiry dates, inventories, and prescriptions. Inventory Management is the most essential aspect of any type of industry. Especially in the pharmaceutical sector, it becomes an absolute necessity due to the huge product range. There is a saying that a pharmacy can be as successful as its inventory. It doesn’t matter what the size, location, or type of a business is. No pharma company will reach its utmost potential unless its inventory is well optimized. Let’s understand in depth why pharmaceutical inventory management is such a priority.

Importance of pharmaceutical inventory management

Whenever you hear the word “inventory”, what is it that you imagine? Is it a disordered day where all the medicines are counted or scanned once or twice a year? If your answer to this question is “yes”, then it's best to reconsider your inventory management plan.

The once or twice a year approach has its set of benefits, but there are also a lot of downsides to it. Especially in the case of a small or standalone business, where frequent & active management of inventory will help identify issues better.

With the emergence of advanced medical tech, the expenses occurring on the delivery of healthcare have increased. More than one-third of the company’s budget is spent on purchasing materials and supplies. This necessitates effective and efficient inventory management. One needs to keep a close eye on drugs, prevention of filching, and proper distribution of stock.

One of the most common issues faced by pharma companies is stockouts. A lot of other issues go hand in hand with this issue. Some of them are as below:

• Foregone revenue

• Loss of profits

• Loss in market share

• Loss of consumer trust and reputation

Demand for medicines has been at its highest, especially ever since Covid-19 happened. Thus, pharma companies need to put efficient inventory management practices in place. It is best to invest in a pharma inventory management system to ensure flexible stock movement, and keep a track of stock levels, and other issues.

Efficient inventory management can be pivotal to saving costs. It also improves customer experience and builds a successful company.

Challenges related to inventory management in pharmaceutical companies

1) Improper warehouse management

Most warehouses don’t have enough facilities that can support large amounts of inventories.

Most companies rely on random third-party logistics which might not always be effective due to poor organization.

There is not enough area for different functions to take place. Such as receiving, shipment, and storage for damaged and expired products.

2) Temperature conditions and control

Various factors, particularly environmental conditions, affect the shelf life of drugs.

Failure to provide the correct temperature during the storage and shipment process of drugs could result in major wastage issues.

Ensuring and monitoring the right temperature is a very essential part of the inventory management process.

3) Unstructured order management

It’s important to have data about the availability of products and demand in the different stages of the supply chain.

Without that, order management would be a process solely conducted on assumptions and experience.

Orders may arrive incomplete, inaccurate, or delayed, which can affect inventory management.

4) Inadequate visibility of shipment

Once the product is sent out for delivery, it would be strenuous to track its status during different stages of the supply chain.

It would also assess the exact date when the products would arrive for both, the manufacturer and the recipient.

5) Manual Documentation

Maintaining data manually in the form of paperwork is a monotonous and insecure process.

It doesn't scale easily across multiple warehouses with huge amounts of pharmaceutical stock.

6) Complexity of supply chain

Globally, supply chains shift daily which may place a burden on the inventory planning and operations of the company.

Manufacturers and distributors can offer unpredictable lead times.

7) Overstocking

One of the biggest problems pharma companies have is keeping too much stock in hand.

Overstocking impacts business cash flows and leads to problems such as storage or loss.

8) Inefficient production planning

Appropriate production planning is crucial to avoid deferred manufacturing and cost overflows.

This can impact sales forecasts and scheduling projects.

9) Insufficient inventory management software

To support your company's logistics and integrate them with your current business process platforms, well-scaled inventory management software is required.

It's important to understand the features of the software and accordingly train the staff.

10) Perishable and fragile stock

Stocks that are decomposable and breakable need special care and storage.

It's necessary to have loss-prevention strategies in hand whenever required.

What is a Pharmaceutical Inventory Management System?

An inventory management system comprises a flexible and powerful set of features that may help you manage and report your inventory information. It makes the process of maintaining an appropriate stock level in a warehouse easy. Activities such as inventory identification, demand forecast, replenishment, and target setting can be done. It is also possible to check individual item usage and report inventory status.

Whether it’s a big company or a small one, the need to manage inventory is equally important for all. Top players in the pharma industry are already doing a high–grade job by investing in an inventory management system. A countless number of internal mix-ups and errors can be potentially avoided if companies invest in effective inventory management software.

Automating the supply chain of a company may always seem hard. Yet, an outdated inventory management strategy can lead to more problems than solutions. This is especially true in pharma companies as human lives are at stake. Can you imagine people consuming expired drugs due to bad inventory management practices?

This is why proper management of pharmaceutical drugs is required. This is only possible with a well-structured inventory management system.

Benefits of the pharmaceutical inventory management system

• An efficient inventory management system can sync the company’s POS system and automatically update when the products are sold.

• It updates the ongoing level of inventory present on the shelf. It helps prevent it from becoming empty.

• It helps to keep the prices up to date and eliminates any chances of pilferage.

• You can get a detailed report of high selling products as well as the slacking ones.

• Checkout and order processes can be reviewed thoroughly.

• The possibility of waste is reduced altogether because the products will be always counted.

• The movement of products will be efficient as the system will detect products as per expiry date and ensure it sells.

• The system will make it easier to find products that have been asked which will lead to a faster process.

• Productivity will be boosted as strenuous manual tasks will not be required.

• Employees can focus on tasks that are important and need more attention.

• Inventory costs will be reduced due to the proper information available. Conditions of overstock or understock will be avoided.

• It would be easy to maintain customer and business data in an organized manner.

• Data and information available through stock management will help you to expand your pharma business venture.

• Effective pharma inventory management is the core of a well–defined supply chain. This will help reduce complexities and enhance your global scope.

• An optimized inventory management strategy will ensure your customers’ demands are met at all times. This, in turn, will lead to customer retention in a long term.

• Pharma inventory loses its value as it ages. It means carrying excess inventory leads to the risk of losing a ton of money. One can avoid this with the help of an intelligent system in place.

• Lastly, a great inventory management system will enhance the work environment of the company.

Conclusion

Pharmaceutical inventory management is useful for simplifying all warehousing activities of the company. An effective inventory management system will help a pharma company to reduce waste, prevent pilferage, and make the entire experience flawless for both customers as well as employees. It is a must to have high–quality storage units, cabinets, and an efficient system in place to manage inventory effectively. It is also a valuable tool for maintaining the working capital need. Companies can access and determine their stock and inventory efficiently to smoothen business operations.