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Unit VI.

Pharmacy Operations
Management
A. Objectives in purchasing and inventory
control
Objective
• target signifying what should be accomplished and when.
• provide measurable reference points for corrective action.
Purchasing
• “Purchasing is the procuring of materials, supplies, machines, tools
and services required for equipment, maintenance, and operation of
a manufacturing plant” – Alford and Beatty.
Purchasing
• First phase of Materials Management
• The object of purchase department is to arrange the supply of
materials, spare parts and services or semi-finished goods, required
by the organization to produce the desired product, from some
agency or source outside the organization.
• The purchased items should be of specified quality in desired quantity
available at the prescribed time at a competitive price.
Objectives of Purchasing
• Maintaining continuity of supply
- must ensure the continuous availability of material, supplies and
equipment ---- to maintain production schedule or to avoid disruption
in production

- also requires investments in reserve inventories


• Maintenance standards quality
- must ensure that the material purchased must be of required quality
in order to produce the goods according to specifications and to
maintain quality standards.
• Avoidance of duplication, waste and obsolescence
- have the accurate knowledge of the items in hand and the
requirements of materials for a particular period
- proper decision in view of long and short range plans
• Maintenance of company’s competitive position
- necessary to make sure that his company’s quality standards are
neither higher nor lower than those of close competitors and to
maintain his company’s position in the industry
• Maintenance of company’s good image
- this will help him in purchasing operation and to discover new ideas
and materials besides lowering its cost or improving products
Alternative sources of supply
- should be exposed for increasing the bargaining power of the buyer
and minimizing the cost of purchase
Objectives of Inventory Control
Inventory control
• coordination and supervision of the supply, storage, distribution, and
recording of materials to maintain quantities adequate for current
needs without excessive oversupply or loss
Objectives of Inventory Control
• To minimize capital investment in inventory by eliminating excessive
stocks;
• To ensure availability of needed inventory for uninterrupted
production and for meeting consumer demand;
• To provide a scientific basis for planning of inventory needs;
• To tiding over the demand fluctuations by maintaining reasonable
safety stock;
• To minimize risk of loss due to obsolescence, deterioration, etc.;
• To maintain necessary records for protecting against thefts, wastes
leakages of inventories and to decide timely replenishment of stocks.
Minor New Purchase
• these purchases represent something new to a consumer but in the
customer’s mind is not a very important purchase in terms of need,
money or other reason
B. Major Purchasing Decisions
Minor Re-Purchase
• these are the most routine of all purchases and often the consumer
returns to purchase the same product without giving much thought
to other product options
Major New Purchase
• most difficult of all purchases
• the product being purchased is important to the consumer but the
consumer has little or no previous experience making these decisions.
• requires the consumer to engage in an extensive decision-making
process.
Major Re-Purchase
• these purchase decisions are also important to the consumer but the
consumer feels confident in making these decisions since they have
previous experience purchasing the product.
C. Pricing Pharmaceutical products
PRICE = INGREDIENT COST + SERVICE COST +
PROFIT
• Focus on value

• Value depends on:


a. Consumer perceptions
b. How well service is provided
c. How convenient service is
d. How well benefits are explained

• Value depends on all elements of marketing mix


• Consider value to consumer
• Cost affects pricing primarily as it affects value
• Non-cost factors equally important (Time)
D. Sources and uses of Cash
Cash
• used to acquire goods and services or to eliminate obligations.

• Items that do not fall within the definition of cash are post-dated
checks and notes receivable
Sources of Cash
Operating Activities
• day-to-day activities
• receivables, payable, credit cards, lines of crest, etc
• Does not include loan principal payments and purchases of
depreciable assets
Investing Activities
• all the purchases of depreciable assets that you make.
• funds received when those assets are sold
• use of cash when you buy an asset and can provide cash when you
sell them.
Financing Activities
• a major source of cash from financing activities is the money received
from a long-term loan, which is used to buy an asset
Financial planning process
F. Improving cash flow
Cash
• legal tender or coins that can be used to exchange goods, debt or
services
• it also includes the value of assets that can be converted into cash
immediately
Cash flow
• net amount of cash and cash-equivalents moving into and out of a
business
• used to assess the quality of a company's income, that is, how liquid
it is, which can indicate whether the company is positioned to remain
solvent.
How to improve:
a. Collect Accounts Receivables
b. Decrease liabilities
c. Increase sales

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