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Just Other Articles - Do You Hold Too Much Inventory - Check Your Stock Turn Ratio
There are a number of measures that get used for tracking inventory performance. One of the most popular is ‘stock outs’. A ‘stock out’ occurs when there is demand for an inventory item but there is no stock.
It is essent
It is essent
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
ial to measure the availability of stock, after all that is why the investment is made in the first place. However, measuring stock outs can be a limiting way to measure inventory as it only measures one dimension of inven
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
tory, that is, availability. This is limiting because one way to ensure a low number of stock outs is to over invest in inventory so that stock is always available no matter what. This is sometimes referred to as ‘just in
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
case’ inventory.
What is a ‘Stock Turn’?
As inventory requires a significant financial investment and that investment involves significant ongoing
What is a ‘Stock Turn’?
As inventory requires a significant financial investment and that investment involves significant ongoing
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
costs it is also important to measure the financial performance. Tracking the value of inventory is important for cash management. However, an additional financial measure that often gets overlooked is the stock turn rati
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
o.
The ‘stock turn’ is calculated by dividing the annual usage of the inventory (in dollars) by the value of the inventory held (also in dollars).
For example, if a company holds $5M worth of inventory and issues $2.5M w
The ‘stock turn’ is calculated by dividing the annual usage of the inventory (in dollars) by the value of the inventory held (also in dollars).
For example, if a company holds $5M worth of inventory and issues $2.5M w
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
orth of that inventory in a year, the stock turn ratio is 2.5/5.0 = 0.5. That is the company ‘turns over’ its inventory at the rate of one half per year. Obviously, the higher the stock turn ratio the better.
Wha
Wha
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
t ‘Stock Turns’ Tells Us Stock turns measures the efficiency of the inventory investment by telling us whether we have over invested in inventory and whether we have the right mix of inventory. (Note however, that
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
it won’t tell us about specific inventory items.)
For example, if the number of stock outs is low (which is good) and the stock turn ratio is also low (which is bad) it is an indicator that there may be an over investmen
For example, if the number of stock outs is low (which is good) and the stock turn ratio is also low (which is bad) it is an indicator that there may be an over investmen
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
t in inventory.
If the number of stock outs is high (which is bad) and the stock turn ratio is low (which is also bad) this indicates that we may have invested in the wrong inventory. That is, that that our money is tied
If the number of stock outs is high (which is bad) and the stock turn ratio is low (which is also bad) this indicates that we may have invested in the wrong inventory. That is, that that our money is tied
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
up in stock that doesn’t turn over and we hold too little of the stock that is in demand.
Stock Turn Targets An appropriate target for stock turns in your business will be influenced by a range of issues,
Stock Turn Targets An appropriate target for stock turns in your business will be influenced by a range of issues,
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
some within your control and others outside of your control. For example, if you have spares that are imported from somewhere far away or you are in a remote and isolated area then you are likely to hold more safety stock
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
and therefore have a lower stock turn. If your processes don’t adequately control decision making on inventory stocking you are also likely have a low stock turn. The book cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
om/Inventory_Reduction.htm" target="_blank">Smart Inventory Solutions details the 12 reasons why companies may hold more inventory than they really need.
Using ‘Stock Turns’ as a Key Measure The key t
Using ‘Stock Turns’ as a Key Measure The key t
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
hing to remember when using a stock turn ratio is that it must be applied across the entire inventory. You cannot ‘cherry pick’ elements of inventory. The reason for this is that some inventory items will naturally have a
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
high turn over and some will be low. The aim of the ratio is to measure the overall efficiency of the inventory investment.
In one recent case an inventory manager tried to justify the size of his inventory by pointing ou
In one recent case an inventory manager tried to justify the size of his inventory by pointing ou
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
t that one section of inventory had a stock turn of 5 (very good in his circumstance) and that another section had a stock turn of 0.2 (very bad). The justification was that insurance spares caused the low stock turn and t
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
herefore nothing further could be done. This analysis, however, ignored a large component of inventory that could be managed down and it ignored the possibility of consignment stock for the fast movers.
‘Stock turns’ is a
‘Stock turns’ is a
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
lso a great measure to use when you have multiple sites or locations within the one company. As an internal benchmark, stock turns readily shows which sites have better control over their inventory.
‘Stock turns’ is an es
‘Stock turns’ is an es
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
sential measure of inventory performance because it measures the inventory efficiency. When used in conjunction with other measures such as stock outs, the overall performance of your inventory investment can be determined
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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