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Inventory Management Techniques to Prevent Drug Shortages

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The last two years have been difficult on industries far and wide, but previously unimaginable obstacles have been overcome by pharmaceuticals in that time. It’s come with significant difficulty not only in development and production but distribution as well. Cold storage space is at an all-time premium, and a lack of resources can mean a loss of life when it impacts healthcare. Drug shortages are not yet a thing of the past, but there’s a lot your supply chain partners can help with to prevent them. Here’s how:

ABC Priorities

Most businesses experience the Pareto principle with their inventory, in which 20 percent of their products account for 80 percent of their sales volumes. This top 20 percent in logistics becomes the top (or A) priority, with other products falling into lower tiers (B,C). This is true for pharmaceutical businesses as well, but a comprehensive logistics plan for them should also include more nuanced data when selecting an ABC priority designation. Considerations such as the shelf life, temperature sensitivity, threat of theft, and level of care should be taken into account. This ensures that ABC priority designations are reflecting the best order of operations when complications arise before they compound and hurt vulnerable patients.

The Importance of FIFO

Most warehouses operate under the basic principle of first in, first out to ensure customers are getting access to current product quickly while minimizing risk for the business. But the importance of FIFO is very different when you’re selling vacuum cleaners v. medical devices. There’s much more on the line in a pharmaceutical warehouse, because the process must move smoothly. If not, product could be lost to expiration or someone could get hurt. A pharmaceutical warehouse should operate similarly to one for fresh produce with a constant flow of product. This is why we suggest pharmaceutical companies work with a supply chain partner with experience in the food industry. The stakes and needs of each can be met with exceedingly similar systems.

Safety Stock

One of the best ways pharmaceutical supply chains can minimize drug shortages is by having adequate safety stock on hand. Safety stock is the minimum amount of product a business has on hands at all times before reordering. It exists as a stopgap in case there are issues with manufacturing or there is a sudden spike in demand. This is especially prudent in periods of uncertainty like the global logistics network has been experiencing in recent years. The best news is that this number isn’t static. Safety stock numbers vary depending upon the reliability of your supply chain partners, fluctuations in demand forecasts, seasonality and more. You don’t have to stockpile more product than you’re going to be able to move to keep your customers safe.

Reorder Point

Simply put, a reorder point is the amount of stock at which you need to order more from the manufacturer. Typically, a reorder point is determined by your preferred level of safety stock plus projected demand for the amount of time it will take for the manufacturer to ship your new stock. By having a set order point, it’s possible to reorder automatically without human interference. This decreases the possibility of reordering slipping through the cracks, thereby preventing a shortage.

Contingency Plans

Let’s face it: at some point or another, everything is going to go wrong. And when lives are on the line, failure simply isn’t an option. Pharmaceutical logistics have particular challenges purely because of their high stakes. But most of these can be covered with a robust contingency plan for every variable of the supply chain. A protected supply chain has more than one or two avenues to deliver product, communicates fluctuations regularly, has multiple temperature control stopgaps, reevaluates in advance based on changing regulations, and more. Make sure you’re covered, and your supply chain will keep running on time every time.

Drug shortages have been a part of pharmaceuticals for hundreds of years, but the older our population grows, the deadlier they can be. At MWCold, we’re working to prevent drug shortages today while creating systems that will eliminate them entirely in the future. Come be part of the work we’re doing.

Tags: Cold Storage, Supply Chain, Warehousing

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