Buffer Stock and Safety Stock are often used interchangeably. However, this often creates confusion. Buffer Stock and Safety Stock are different from each other. Buffer stock distinguishes it from Safety stock. Buffer Stock protects the Provider from the Supplier when there is delay in receiving supply. On the other hand, the Safety Stock protects the Provider from Consumer in probabilities like an abrupt change in the demand for a particular product or uncontrollable delay in the delivery of the material from supplier

1. November 3, 2022 1
Inventory Management and Prevention of
Stock-out

2. The problems of stock-out, inadequate or excess stock can be avoided
if a Minimum or Maximum inventory control system is
implemented. Forecasting of the requirement of drugs and
consumables is done by using scientific methods.
1. Cyclic or Fixed Order method
Stock of various items are checked
with certain periodicity and orders are placed at
Fixed Interval (indent cycle) to bring up the
stock to the desired level.
Ex- District Drug Store, Hospital Main Drug Store,
2. Two Bin system
The drugs which are indented can be kept in two bins
i.e. 1st bin for working stock and 2nd bin for
Minimum stock. Orders are placed when the
stock of the item reaches a certain
predetermined level or Reorder Level.
Ex- Departmental Drug Store
Two Methods of Indenting/Ordering and Stocking : The order level or the number i
s
predetermined and indents are placed accordingly. Both methods should be a
dopted to prevent stock-outs at every level

3. Two-Bin System & Bin Card
 Two-bin system is an inventory control method used to determine when drugs or items or
materials used should be replenished.
 When items in the first bin have been depleted, an order is placed to refill or replace them.
 The second bin is then supposed to have enough items to last until the order for the first bin
arrives.
 In short, the first bin keeps Working Stock or working material, and the second bin keeps
Reserve Stock or Minimum Stock or Remaining material.
 When items in the first bin have been depleted, an order is placed to replace them. During
the Waiting period or Lead Time, items from the second bin are used.
 Bin card is prepared and maintained separately for each item. Large stores or Warehouses
maintain and track stock by Bin Card Method. Bin cards and Store ledger cards are used to
record the inventory.
 A Bin Card is a record of Receipt, Issue and Stock-at-hand.
 On verification: No difference between the stock recorded in the Bin Card and physical stock.

4. Inventory Terms : Order Levels and Stocks
• Working Stock
• Buffer Stock
• Safety Stock
• Maximum Stock or
• Maximum Order Level (MxOL)
• Minimum Stock or
• Reorder Level (ROL)
• Safety stock
• Safety Order Level (MnOL)
Read Operational definitions and observe the indent register carefully given in next slide
• Indent Cycle
• Maximum Daily Consumption (MDC)
• Average Daily Consumption (ADC)
• Lead Time (LT)
• Maximum Lead Time (MLT)
• Average Lead Time (ALT)

5. Operational Definitions
Indent Cycle (in days) Defined as a fixed time period when stock of various items are checked,
and orders are placed at fixed interval
Maximum Daily Consumption
(MDC)
The highest number of daily consumption of any item which is recorded
during a week/month/quarter/ year
Average Daily
Consumption(ADC)
(in Number/in ampules/in KG)
[Total Monthly Consumption ÷ (Number of days in a month/week ─
Number of stock-out days in given month/week)]
Maximum Lead Time (MLT)
(in days)
Longest time interval recorded between date of placement of order and
date of receipt of any item
Average Lead Time (ALT)
(in days) Average of all Lead Times recorded in a year
Working Stock (WS)
Amount of stock used between two cyclic orders.
WS = Average daily Consumption X Cycle interval in days
Buffer Stock (BS) Average daily Consumption X Max Lead time
Safety Stock (SS)
It is the Exigency stock or Cushion stock or Least stock against emergencies,
SS = (Max Daily Cons X Max LT) Minus (Avg Daily Cons X Avg LT)
Reorder Level or
Minimum Stock (MnS)
It implies the Minimum amount that you should have in your stock, or the level
which, when reached initiates a re-order (MnS=Buffer Stock + Safety Stock)
Maximum Order Level or It is the Minimum stock plus amount of the stock used between two

6. Name of Drug Inj Oxytocin
Maximum Order Level = WS + BS + SS 639
Reorder Level = Buffer Stock + Safety Stock 279
Buffer Stock (BS) 168
Date
Opening Balance
(Closing Balance +
Number Received)
Number
Issued
Closing
Balance
Remark
1-Jan 231 20 211 Indent
order
placed for
639
2-Jan 211 22 189
3-Jan 189 24 165 Reminder
4-Jan 165 28 137 given
5-Jan 137 33 104 Reminder
6-Jan 104 20 84 given
7-Jan 84 22 62
8-Jan 701 26 675 Indent
Received
9-Jan 675 32 643
10-Jan 643 16 627
11-Jan 627 30 597
12-Jan 597 18 579
13-Jan 579 29 550
14-Jan 550 19 531
15-Jan 531 23 508
16-Jan 508 25 483 Indent order
placed for 156
17-Jan 483 20 463
18-Jan 463 22 441
19-Jan 441 24 417 Indent of 156
20-Jan 417 28 389 Received
21-Jan 389 33 356
22-Jan 356 20 336
23-Jan 492 22 470
24-Jan 470 26 444
25-Jan 444 32 408
26-Jan 408 16 392
27-Jan 392 30 362
28-Jan 362 18 344
29-Jan 344 29 315
30-Jan 315 19 296
31-Jan 296 23 273 Indent order
Cyclic
Method
of 15
days by
LR dept.

7. Calculate Order levels and Stock amounts from Indent-Stock
register given in previous slide
Name of the Drug Inj Oxytocin Calculation
Duration of Indent Cycle (in days) 15 Indent is placed on 1st and 16th January
Maximum Daily Consumption (in number) 33 Recorded on 5
th
January
Average Daily Consumption (in number) 24 (20+22+24+28+33+20+22) ÷ (7-0)= 24.14
Maximum Lead Time (in days) 7 Interval between 8th Jan and 1st Jan
Average Lead Time (in days) 5 (7+ 3) ÷ 2 = 5
Working Stock (WS) 360 24 X 15 = 360
Buffer Stock (BS) 168 24 X 7 = 168
Safety Stock (SS) 111 (33X7) – (24X5) = 111
Reorder Level 279 168 + 111 = 279
Maximum Order Level 639 360 + 168 + 111 = 639

8. Working Stock = Quantity of inventory required for use in one Indent Cycle
 To calculate working stock we need two variable s e.g. Average Daily
consumption of an inventory and the interval of placing the indent in
days
 For example, a Labour Room/Departmental store places regular indent
in every 15 days to Hospital Main Store
 Working Stock = Average Daily Consumption X Interval of Indent Cycle
in Days
 Working Stock of Inj Oxytocin = 24 (Average Daily Consumption) X 15
(Interval of Indent Cycle in Days) = 360 ampules
* It is important that the indenter and supplier should understand and agree

9. LEAD TIME
• Time interval between the date of placement of order for supply of
an item and the date of receipt of the item
• If Lead time is less than 24 hours, consider lead time as one day for
calculation purposes
• Lead time may be Maximum and Average. In our example Max LT =
7 days and Avg. LT = 5 days. For simplicity of calculation, one can
consider Maximum Lead Time and ignore Minimum LT

10. Buffer Stock / Lead-Time Stock : Amount of stock which is
used in the time between placing and receiving an order
 Also called Lead-Time Stock / Buffer Stock = Average daily
consumption of the item X Maximum lead time in days
 Here average daily consumption of Inj Oxytocin = 24 ampules
 Maximum Lead time = 7 days
 Buffer Stock = 24 ampule per day X 7 days = 168 ampules

11. Safety Stock – Extra quantity of inventory required beyond
average demand
• In addition to the Buffer Stock, we need to have something
in extra to meet out any exigency or unexpected rise in
consumption or sudden increase in demand or
uncontrollable delay in the delivery of the material.
• Safety stock = (Maximum daily consumption X Maximum
Lead Time in days) – (Average daily consumption X
Average Lead Time in days)

12. Safety Stock
In our example for Inj Oxytocin
 Maximum daily consumption = 33 ampules
 Average daily consumption = 24 amp
 Maximum Lead time = 7 days
 Average Lead Time = 5 days
 Safety stock = (33 X 7) – (24 X 5) = 231 - 120 = 111 ampules
#At any time, stock must not go below Safety Stock

13. Buffer Stock and Safety Stock are different from each
other
• Buffer Stock and Safety Stock are often used
interchangeably. However, this often creates confusion.
Buffer stock distinguishes it from Safety stock. Buffer
Stock protects the Provider from the Supplier when there
is delay in receiving supply. On the other hand, the
Safety Stock protects the Provider from Consumer in
probabilities like an abrupt change in the demand for a
particular product or uncontrollable delay in the delivery
of the material from supplier

14. Reorder Level = Buffer Stock + Safety Stock = Minimum Stock
Here for Inj Oxytocin, Reorder Level = 168 (Buffer Stock) + 111 (Safety Stock) =
279 amp. An indent should be placed when Oxytocin stock touches 279.
• Reorder Level or Point is set in such a manner when the stock of material
reaches this point or level in normal circumstances, order is placed for fresh
supplies to come to the store just before the level falls down safety level.
• It is the amount of stock which will be used in the time between placing and
receiving the order, plus the Safety stock. The Minimum stock level is the level
below which stock should never drop without having placed an order.

15. Maximum Stock (Maximum Order Level)
= Working Stock + Minimum Stock
= Working Stock + Buffer Stock + Safety Stock
• It implies the largest amount of the stock that one should have. It is the
minimum stock plus amount of the stock used between two cyclic orders.
• The problems of stock-out, inadequate or excess stock can be avoided if a
minimum/maximum inventory control system is implemented.
• This system ensures that the quantity in hand should be less than the
Maximum Stock to avoid excess stock and unwanted expiry
• This system ensures that the quantity in hand should be aways more than the
buffer stock to avoid stock-out
• Under this system, quantity –in-hand must not touch or go below Safety Stock

16. Graphical Presentation of Order Levels and Stocks
Buffer Stock
Working Stock
Safety Order Level
Maximum Stock
Minimum Stock
Working Stock = Maximum Order Level – Reorder Level
Buffer Stock = Reorder Level – Safety Order Level

17. Name of Drug Inj Oxytocin
Maximum Order Level = WS + BS + SS 639
Reorder Level = Buffer Stock + Safety Stock 279
Buffer Stock (BS) 168
Date
Opening Balance
(Closing Balance +
Number Received)
Number
Issued
(Bin 1)
Closing
Balance
(Bin 2)
Remark
1-Jan 231 20 211 Indent
order
placed for
639
2-Jan 211 22 189
3-Jan 189 24 165 Reminder
4-Jan 165 28 137 given
5-Jan 137 33 104 Reminder
6-Jan 104 20 84 given
7-Jan 84 22 62
8-Jan 701 26 675 Indent
Received
9-Jan 675 32 643
10-Jan 643 16 627
11-Jan 627 30 597
12-Jan 597 18 579
13-Jan 579 29 550
14-Jan 550 19 531
15-Jan 531 23 508
16-Jan 508 25 483 Indent order
17-Jan 483 20 463 Placed for 156
18-Jan 463 22 441
19-Jan 441 24 417
20-Jan 417 28 389
21-Jan 389 33 356
22-Jan 356 20 336 Indent of 156
23-Jan 492 22 470 Received
24-Jan 470 26 444
25-Jan 444 32 408
26-Jan 408 16 392
27-Jan 392 30 362
28-Jan 362 18 344
29-Jan 344 29 315
30-Jan 315 19 296
31-Jan 296 23 273 Indent order
1-Feb 273 25 248 placed for 391
Cyclic
Method
of 15
days by
LR dept.

18. Name of Drug Inj Oxytocin
Maximum Order Level = WS + BS + SS 639
Reorder Level = Buffer Stock + Safety Stock 279
Buffer Stock 168
Date
Opening Balance
(Closing Balance+
Number Received)
Number
Issued
Closing
Balance
Remark
1-Jan 231 20 211 Indent order
placed for 639
2-Jan 211 22 189
3-Jan 189 24 165
4-Jan 165 28 137
5-Jan 137 33 104
6-Jan 104 20 84
7-Jan 84 22 62
8-Jan 701 26 675
Indent of 639
Received
9-Jan 675 32 643
10-Jan 643 16 627
11-Jan 627 30 597
12-Jan 597 18 579
13-Jan 579 29 550
14-Jan 550 19 531
15-Jan 531 23 508
16-Jan 508 25 483 Indent order
placed for
639*
17-Jan 483 20 463
18-Jan 463 22 441
19-Jan 441 24 417
20-Jan 417 28 389
21-Jan 389 33 356
22-Jan 356 20 336
23-Jan 975 22 953 Indent
Received
24-Jan 953 26 927
25-Jan 927 32 895
26-Jan 895 16 879
27-Jan 879 30 849
28-Jan 849 18 831
29-Jan 831 29 802
30-Jan 802 19 783
31-Jan 783 23 760 Order is not
1-Feb 760 25 735* Placed*
Cyclic
Method
of 15
days

19. Name of Drug Inj Oxytocin
Reorder Level=Buffer Stock + Safety Stock 279
Buffer Stock (BS) 168
Date
Opening Balance
(Closing Balance +
Number
Received)
Number
Issued
Closing
Balance
Remark
1-Jan 231 20 211 Indent order
placed for
279
2-Jan 211 22 189
3-Jan 189 24 165 Reminder
Given
4-Jan 165 28 137
5-Jan 137 33 104
6-Jan 104 20 84
7-Jan 84 22 62
8-Jan 341 26 315 Indent
Received
9-Jan 315 32 283
10-Jan 283 16 267
Indent order
placed for
279
11-Jan 267 30 237
12-Jan 237 18 219
13-Jan 219 29 190
14-Jan 190 19 171
15-Jan 171 23 148 Reminder
Given
16-Jan 148 25 123
17-Jan 402 20 382 Indent
Received
18-Jan 382 22 360
19-Jan 360 24 336
20-Jan 336 28 308
21-Jan 308 33 275 Indent order
placed for
279
22-Jan 275 20 255
23-Jan 255 22 233
24-Jan 233 26 207
25-Jan 207 32 175
26-Jan 175 16 159 Reminder
Given
27-Jan 159 30 129
28-Jan 329 18 311
Indent
Received
29-Jan 311 29 282 Indent order
30-Jan 282 19 263 placed for
ROL Method
of indent by
Point of
Care

20. BIN CARD (At Labour Room Store)
Drug Name Oxytocin Maximum Order Level (MS) 639
Drug code Working Stock (WS) in Bin-1 360
Reorder level (BS + SS) in Bin-2 279*
Received Issued (to Bin 1 or crash
cart)
Balance (in Bin
2 in LR store)
Date GRN
No
Qty Batch
No.
Expiry
date
Date Reques
t No.
Qty Date Qty
07/1/2022 62
08/1/2022 A12 639 Def/68 4/2023 08/1/2022 A111 26 08/1/2022 675
23/1/2022 B12 156 Xyz/65 6/2023 23/1/2022 B222 22 01/4/2022 470

21. BIN CARD (At Labour Room Store)
Drug Name Oxytocin Maximum Order Level (MS) 639
Drug code Working Stock (MS) in Bin-1 360
Reorder level (BS + SS) in Bin-2 279
Received Issued (to Bin 1
or crash cart)
Balance (in Bin 2
in LR store)
Date Qty Batch No. Expiry date Date Qty Date Qty
07/1/2022 62
08/1/2022 639 Def/68 4/2023 08/1/2022 26 08/1/2022 675
09/1/2022 32 09/1/2022 643
10/1/2022 16 10/1/2022 627
11/1/2022 30 11/1/2022 597

22. BIN CARD (Hospital Main Store) _Quarterly Indent
Drug Name Oxytocin Working Stock (WS) 2160
Drug code Reorder level (BS + SS) 279
Buffer stock (BS) 168
Received Issued (to Bin 1) Balance (in Bin 2)
Date Qty Batch No. Expiry date Date Qty Date Qty
31/12/2021 279
01/1/2022 2200 Abc/67 4/2022 2479
08/1/2022 639 08/1/2022 1840
19/1/2022 156 17/1/2022 1684
08/2/2022 391 08/1/2022 1293
23/2/2022 700 11/1/2022 593

23. District Central Store (Inj Oxytocin) for 10 hospitals
• Working Stock : 240 per day X 90 days =
21,600
• Buffer Stock : 24 per day X 10 days = 2400
• Safety Stock: (330 X 10) – (240 X 5) =
2100
• Maximum Stock = WS + BS + SS
= 21,600 + 2,400 + 2,100
• Maximum Order Level (MxOL) = 26,100
• Minimum Stock or Reorder Level (ROL) =
BS + SS = 2,400 + 2,100 = 4,500
Read Operational definitions and observe the indent register carefully given in next slide
• Indent Cycle : 90 days
• Maximum Daily Consumption
(MDC) : 33
• Average Daily Consumption
(ADC) : 24
• Maximum Lead Time (MLT): 10
days
• Average Lead Time (ALT): 5 days

24. BIN CARD (At District Central Store)
Drug Name Oxytocin Maximum Order Level (MS) 26,100
Drug code Working Stock (MS) in Bin-1 21,600
Reorder level (BS + SS) in Bin-2 4,500*
Received Issued (to Bin 1) Balance (in Bin 2)
Date Qty Batch No. Expiry date Date Qty Date Qty
01/1/2022 27000 Abc/67 4/2022 08/1/2022 7000 08/1/2022 20000
4/2023 08/2/2022 7000 17/1/2022 13000
4/2023 08/3/2022 8500 08/1/2022 4500*
01/4/2022 17000 Def/68 4/2023 01/4/2022 27,500
6000 Xyz/65 4/2023 08/4/2022 7000 20000
01/5/2022 7000 13000

25. Summary of 15 Days’ Cyclic method
Sl
No
Name
of the
Drug
Duratio
n of
Indent
Cycle
(in
days)
{A}
Maximu
m Daily
Consump
tion {B}
Average
Daily
Consump
tion {C}
Maximu
m Lead
Time (in
days) {D}
Average
Lead
Time (in
days) {E}
Working
Stock
(WS)
{A X C}
Buffer
Stock
(BS)
{C X D}
Safety
Stock
(SS)
{(BXD) –
(CXE)}
Reorder
Level
(BS + SS)
Maximu
m Order
Level
(WS+BS+
SS)
1
Inj
Oxyto
cin
15 33 24 7 5 360 168
231 –
120=
111
168 +
111=
279
360+168
+111=
639
2
Tab
Parac
etam
ol
15 200 150 7 5 2250 1050
1400 –
750=
650
1050 +
650=
1700
2250+
1050+
650=
3950
3

26. November 3, 2022 26
# Name of
Medicine
Balance
Quantity
Consumption** Stock
out
days
Total
Consumption
Average daily
consumption
Maxim
um
Lead
Time
Maxm
Daily
Consu
mption
Jan-
2020
Feb-
2020
Mar-
2020
A B C D E F G H=D+E+F I J K
1 Gentamy
cin
200 200 210 220 30 630 630/60=10.5 7 30
Requirement
for next 3
months by
adjusting stock
out days
Buffer stock
(Avg. Daily
Consumption X
Max Lead Time)
Safety Stock (Max. Daily Cons X
Max Lead time) – (Avg. Daily
Cons X Avg. Lead Time)
* Maximum lead time is taken
as Average Lead Time here
Total
projected
quantity
Total
quantity
for indent
Round off
quantity
L = I X 90 M = I X J N = KX7 – I X 7 O = L + M + N P = O – C Q
10.5 X 90=945 10.5 X 7 = 73.5 (30 X 7) – (10.5X7) = 136.5 945+73.5 +
136.5= 1155
1155-200=
955
1000
Essesntial drugs क
े मात्रा की गणना क
ै से करें (for a Hospital Drug Store)
**यदि दकसी िवा का उपयोग दपछले क
ु छ दिनोों या महीनोों से ना हुआ हो हो तो भी
प्रसव कक्ष में सभी Emergency िवाओों की दमदनमम स्टॉक हमेशा रखना है
Cyclic
Method of
3 Months

27. Tips
• Hospital Main Store and District Drug Store should follow cyclic method and
should calculate Maximum Order Level and always maintain stock at
Maximum Stock level.
• When they will place indent, they should ask for Maximum Stock minus Stock-
in-hand to prevent excessive stocking.
• Hospital Main Store and District Drug Store should also practice two bin system
of stock management. While practicing Bin method, FEFO rule must be
followed to prevent wastage of short expiry drugs.
• Departmental stores like LR, OT, Medicine IPD, etc who have little space for
storing drugs should calculate Reorder Level and always maintain Minimum
Stock at that level so that there should not be excess stock.
• Departmental store with little space for stocking should follow ROL method of
indent In both cases, stock level must not go below Safety Stock Level
• At point of care like Labour Room, OT, etc for easy calculation 7 days’
consumption can be maintained as Safety Stock to prevent complete stock out.