Inventory 101 for Pharmacists

What is inventory?

The term inventory refers to a complete list of tangible assets such as stock of goods on hand, merchandise, raw materials, equipment and products within an organization for which the ultimate purpose is resale.

However, within a pharmacy, all saleable items are considered inventory. Inventory costs are one of the largest costs within a pharmacy, therefore all pharmacies aim for inventory turnover to occur as frequently as possible. For example, A product or item that sits on a shelf becomes an expenditure if not disposed of before the expiry date.

Inventory management and control are vital within a pharmacy and it is important to have a good inventory management control system in place. Inventory of an organization used to be managed and controlled by methods of maintaining physical paper records. This method can prove to be tedious, inaccurate and inefficient, creating room for error. Healthcare organizations today, turn to far more sophisticated methods of inventory control within the pharmacy. Computerized and digital inventory management and control methods have become extremely popular and more and more pharmacies are adopting these methods. With the introduction and popularity of EMRs and EHRs, digitally managing inventory has become easier and more effective as most EMRs and EHRs consist of an Inventory management tool within it.


Essentially, a good inventory management system must include the following basic aspects of inventory management:

Ordering Inventory: Ordering of inventory must be done carefully based on usage patterns of the pharmacy along with current costs. A digital inventory management system must include tools to record the order levels of an inventory and be able to automatically prepare reports based on usage patterns that determine the current stock requirements of the pharmacy.

Reordering Inventory: Reordering of inventory determines when to reorder an item so that the stock of an item doesn’t reach zero. The purpose of this feature is to be able to prompt pharmacy staff to reorder an item, in order to assure adequate supply to the customer.

Valuing Inventory: Valuing of inventory is done based on three basic methods;

  1. FIFO (First In First Out): The FIFO method considers stock that enters the pharmacy first and is also sold first. This usually occurs when an item is fast-moving due to customer demands.
  2. LIFO (Last in First Out): The LIFO method calculates the oldest inventory item and prompts the pharmacy to dispose of those items first. This method is principally important as it disposes of older stock to avoid loss of stock that may occur due to item expiry dates and to avoid additional costs in case there is an increase in product prices.
  3. Batch: Inventory stock can be sorted by automatic batching that is classified according to characteristics such as shelf life, manufacturing date so on and so forth.

SKU (Stock Keeping Unit): The SKU feature within inventory management acknowledge the location at which the stock is held. Stock may be held at the pharmacy itself, in cases of clinic chains it may be held at the clinic’s headquarters or a centralized warehouse. This helps in the transfer and movement of stock from the place it is held to the counter it can be dispensed at.


A bonus feature would be to allow the stock to be maintained and sorted by:

  • The manufacturer
  • Category/Type: Items can be sorted by category or type such as drug, aesthetic, vaccine etc.
  • Formulation: items can be sorted by their form such as powder, tablet, capsule, injection etc.
  • Generics: the active ingredient and filler of the product can be set.
  • Pack details: the last pack details can be saved for future use of an inventory item.