Logistic Control For Medicine Supplying Facility

Series-1: Stock Planning Process

Stock is important factor to manage medicine supplying facility. If it is too little, consumers may be not served well, but if it too much will need huge funds for purchasing goods and warehouse capacity which is sufficient to store goods. How much stock needed? What factors should be considered in determining stock availability.

Mainly, stock planning process has input in the form of data of sales covering: data of quantity and name of goods. In simple manner, parameter that should be stipulated in the process covering: designated stock level target, allowed stock-out tolerance. Output of stock planning process is total goods ordered.

Simple description of the process is as follows:
Some theories of supply chain planning much used in a number of industries with different applications, for example new goods demand is made if there is order (made to order), or for supply management at plant which covers raw materials, half finished goods and finished goods.

For stock planning at medicine supplying facility, we can use simple methodology to determine stock level and order plan.
A stock is total stock of goods available to serve consumer demand. Therefore, the decisive factor of stock level in coming period is forecasting of purchasing by consumer and uncertainty factor attributed to purchase fluctuation by consumers or demand fulfillment fluctuation by distributor.

With assumption order will be carried out in weekly period, and then we can calculate:
Stock level in early week = Estimated sales in such week + Safety
(Numbers mentioned above calculated for each item in unit, not price)

A. Determining Forecasting Weekly Sales
To determine estimated sales in such week, there are some forecasting theories which can be used either quantitatively (linier regression, seasonal trend, etc) or qualitatively (based on experience and analysis of relevant factors). The most effective and simple method is combining both.

With appropriate computer system assistance, we can obtain monthly sales data for each item, and then finds average value. After obtain average value, we can make adjustment the numbers based upon following factors:
– Disease appears recently
– Age group strata those living in around area
– Habits in purchasing medicine at the local area
– Promotional activities for consumer goods
– Other factors.

Goods Name 3rd month 2nd month 1st month Average Estimated Monthly sales Estimated weekly sales
a b c d e f g
Item A 20 15 19 18 15 4
Item B 5 8 1 5 6 2
Item C 218 192 234 215 220 55

B. Determining Safety Stock

Safety stock is stock used to give protection toward uncertainty demand or supply, therefore safety stock figure shows total stock which must be available any time, cannot be divided into weekly period as estimated sales. Safety stock will be used if actual demand is bigger than those which are estimated.In the previous section, we have understood that we should firstly determine stock level in serving consumer. The higher stock level, the higher safety stock figure should be provided.
Factors that determine safety stock figure are:
– Purchase fluctuation by consumer
– Supply fluctuation from distributor (if it is small, this factor can be regardless)
– Stock level in serving consumer

Statistically, safety stock can be counted using: SS = Z x Sd

Goods Name 3rd month 2nd month 1st month Standar Deviation Z Safety Stock (SS)
a b c d h i j
Item A 20 15 19 2.645751 1.645 4
Item B 5 8 1 3.511885 1.645 5
Item C 218 192 234 21.19748 1.645 31

Therefore, in every early week, total stock which shall be available to serve consumer purchasing with 95% service level is:

Goods Name 3rd month 2nd month 1st month Estimated monthly sales Estimated weekly sales Safety Stock (SS) Stock level in early week
a b c d f g j k
Item A 20 15 19 15 4 4 8
Item B 5 8 1 6 2 5 7
Item C 218 192 234 220 55 31 86

C. Worker Factor in determining Stock
Other than calculation method using supporting facility in the form of computer application, the more important thing is analysis activity when conducting review as well as future planning.

For example, prior to commence new period (for example: at the end of month), the facility management together with warehouse manager and purchase manager should perform analysis toward estimated sales figure and stock level in the previous period, whether it has been proper, lacking stock or over stock, including factors which can cause uncertainty. For planning subsequent period, it is required to discuss adjustment to average sales in previous period based on factors mentioned above.

If this analysis is carried out routinely, the facility managers will become sharper in planning stock to result proper stock planning, efficient working capital and optimal stock availability in serving consumer. In the next series, we will discuss in determining frequency and order number which is continuation of this process at logistic control cycle at medicine supplying facility. See you! (Rosariwaty)

1. Supply Chain Management, I Nyoman Pujawan, ITS, 2005

Logistic Control For Medicine Supplying Facility