Why is Inventory Management Important for a Pharmacy?

What is inventory in pharmacy?

Inventory is the biggest asset of any pharmacy. Pharmacy inventory refers to the contents of medicine containers and all prescription drugs. How you handle pharmacy inventory decides whether you maximize revenue or yield losses.

Pharmacy inventory management is the life of business operations. Unopened, partially opened, in processed drugs are all part of the pharmacy inventory processes. How you track the movements of every product from every step is one way to minimize losses and maximize efficiency in handling your inventory.

There are various types of pharmacies, but the retail pharmacy and hospital pharmacy are the two most common. Both serve almost the same market (generally, patients in need of medications), but their inventories are commonly handled differently.

What is the difference between Hospital Pharmacy and Retail Pharmacy Inventory Management?

Retail Pharmacy

In a retail pharmacy setting, pharmacy technicians fill prescriptions written by doctors. They provide medicines that the consumer can handle independently and occasionally make substitutions based on availability. In terms of inventory, retail pharmacy inventory has a more expanded list of products, they have an open medication inventory and are always ready to cater to the majority of consumers who requires them.

Hospital Pharmacy

Hospital pharmacy, on the other hand, deals with more complicated cases. Pharmacy technicians at hospitals do the same duties as those in retail pharmacies, but their job is quite more complex because they also handle compounding medications. Inventory management in hospital pharmacy is a little different, hospitals keep a close inventory of drugs regularly used to treat more complicated medical cases.

Challenges in Pharmacy Inventory Management

Whatever type of pharmacy you handle, the problem you may always encounter is related to the inventory.

Problems and solutions in the pharmaceutical industry vary based on location, demand, and budget.

Pharmacy inventory management, especially in hospitals, deals with a different level of pressure. This is because drugs are being used by patients and having stockouts because of an improper way of handling inventory may result in big trouble.

To achieve a streamlined pharmacy inventory, you must first address the following questions:

  • What items do you have in stock?
  • Where are they being kept?
  • (For hospital pharmacy) Is the inventory on hand match what each department (compounding, dispensing, packaging, etc.) should have?
  • Are any items about to, or already expired?
  • Are there any missing items?

Every question above has answers that fall onto areas supposedly covered by inventory visibility and control. If some of the questions are not answered, problems might pile up in the long run.  

If you can confidently answer all of the above questions, you’re probably doing well with your inventory. If you’re having trouble doing so, you may need to review your inventory management system and protocols.

How Can Pharmacy Improve Inventory?

One of the solutions for the physical inventory you have is to invest in a high-quality medical storage unit. Modern storage containers offer benefits for organizing your inventory, making the most of your available space, and optimizing your workspace.

In addition to medical storage for your physical inventory, you must invest in a quality inventory management system that can help you streamline your daily operations. Using pharmacy inventory management systems, you may prepare and examine reports to analyze your stock, build plans to improve inventory control, keep track of the number of drugs in your inventory, and avoid stockouts and overstocks.

Most pharmacies these days rely on a rudimentary system that solves only the basics and often missed other inventory challenges. The following are some of the typical challenges pharmacy technicians face on a daily basis, as well as the solutions offered by pharmacy inventory management systems:

Inability to access operations data

Hundreds of medications and multiple locations (shelves, drawers, cabinets, etc.) must be managed in a pharmacy. It’s easy when you have a bird’s eye view of the entire process in this situation. Today’s technology allows everyone to view the status of each location, whether to evaluate the need for replenishment or to just do some routine auditing.

Tracking movements and inventory levels

Inventory levels refer to the number of goods or supplies you have on hand across your whole distribution network. Pharmacies establish minimum stock levels that must always be met in order for a drug item to be dispensed. The system will notify the management when an item drops below the threshold, triggering them to make an immediate order for replenishment.

This seems like a basic principle, but with a manual inventory system, this involves significant time investment. With inventory management systems, you can easily keep track of everything you take out and even the items that are moved from one location to another.

Update pricing and put proper costing information

When updating pricing manually in an excel sheet is very time-consuming and prone to human error. Inventory management solutions offer search fields where you can search for specific drugs and update not only the pricing but also other product information. This boosts tracking revenue by properly getting expense data.

Expiration dates

Expired items lead to huge capital losses.  The common strategy is to rotate stock on the shelves. The sooner the product expiration dates should be rotated to the front and the later the expiry date should be put to the rear. 

Even though it’s a straightforward procedure, human error can cause it to fail. Some pharmacy inventory management systems have a function that allows you to adjust each product’s expiration date and receive a signal when that date approaches. This way, you’ll know which things to distribute first.

Everything is manual

It’s great when a pharmacy distributor provides an inventory system as a reward for purchasing from them, but most distributors don’t, and pharmacies must figure out how to manage their inventory as efficiently as possible on their own. Many pharmacy managers spend weeks or even months experimenting with inventory solutions to see if they can help them with even the most basic issues. Worse, they have to manage manually while waiting for the optimal solution, which means they end up roaming around, manually counting items, and checking their status.

Even simple tasks like moving items from one location to another sometimes require a long process just to keep track of every change made. But with a pharmacy inventory management system, you may effortlessly drag and drop things between places, use barcode scanners to search for items and locations, and update quantity and pricing information.  You won’t have to worry about losing track of every item because everything is recorded, including who moved them, when they were moved, and where they went.

Shrinkage in Pharmacy

Before the pandemic, there are already challenges in every inventory management. But when COVID spread, even the uncommon problems now add up and became frequent.

One of the biggest challenges right now in pharmacy inventory management is shrinkage. Because of the strong demand for pandemic-related commodities and the limited supply, most pharmacies may have attempted to buy in bulk. If this is the case, pharmacy inventory technicians must strengthen their monitoring of those items because people may act inappropriately in pandemic scenarios, resulting in employee theft and shrinkages. Unrecorded losses are frequently detected only during routine inventory audits or, even worse after the item has already been declared as out of stock (when it shouldn’t have been).

Shrinkage concerns can now be resolved with the help of modern technology. Pharmacy inventory management systems keep track of everything from purchase through repackaging, storage, and putting items on shelves for sale. Every product movement is recorded, including who last touched it, when it happened, and where it was located. Aside from that, pharmacy inventory management systems provide centralized data management, allowing you to check if inventory is still at its optimal level and that you can alert the distributor quickly if it isn’t. Shrinkages and employee theft are less likely to occur when everything is accounted for in a system like this.


Each pharmacy is unique. They are comparable only because of the common processes they use to optimize management. What keeps the business running is knowing what your minimum/maximum order is, what the suggested order is, what you actually ordered, what you have on hand, what to place on the shelf, and how much they cost. It is critical that all these are answered based on accurate data from your inventory management system.

The ideal inventory management doesn’t stop with knowing what and how much inventory you have. It should extend to knowing where everything is located at any given moment.

Inventory control guarantees that the proper amount of inventory is on hand. The most significant features are demand planning and shrinkage minimization. To make the best business decisions possible, inventory control requires reliable data all of the time.

The bottom line is that whatever the issue is, it usually boils down to visibility and control challenges, so if you’re having trouble optimizing your stocks and demand planning, you might want to dig a little deeper into these two critical areas and see if your current inventory practices or solutions address these two important aspects of pharmacy inventory management.

Published by Claude.Rivera

I have a passion for new things. It excites and challenges me. Reading and writing take me to different worlds. Literally, escape. I'm a dancer wannabe and a not-so-pro gamer.

One thought on “Why is Inventory Management Important for a Pharmacy?

  1. Healthcare providers are continually looking to improve patient care experiences, and e-prescription is one great way of enhancing patient safety. E-prescription systems help healthcare providers to create and send prescriptions electronically to pharmacies for processing and delivery.

    We develop customized pharmacy management software architectures that maintain secure communication of e-prescriptions between the patients, their relative pharmacies, and claims agencies. The e-prescribing software simplifies the entire process flow of the pharmacy’s system, and error-free dispensing and billing increases patient satisfaction.

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