In our recent article, we highlighted the significant, often hidden, costs associated with inefficient inventory management in Long-Term Care (LTC) pharmacies. Now, let's explore practical and proven approaches that your pharmacy can implement to gain control, optimize your stock levels, and enhance overall operational efficiency. 

Inventory Management Options for LTC Pharmacy

Read below for a breakdown of common inventory approaches and developing strategies that your pharmacy could implement to maintain a leaner and more streamlined stock room.

Perpetual Inventory: Real-Time Visibility for Optimal Control 

Perpetual inventory, a system that continuously tracks stock levels to automatically trigger medication order requests, is becoming increasingly prevalent in pharmacies aiming to maintain a lean inventory. Studies indicate that pharmacies utilizing digital tracking systems for every dispensed or received medication achieve greater accuracy compared to manual methods. The adoption of pharmacy management software with real-time inventory tracking is a key enabler of perpetual inventory, and its use is growing as LTC pharmacies recognize the need to minimize stockouts and overstocking. FrameworkLTC comes equipped with robust inventory approaches including perpetual inventory, allowing for real-time tracking, reducing risks and improving anticipation of future needs. 

Benefits of Perpetual Inventory: 

• Accurate Stock Levels: Provides an up-to-the-minute count, minimizing discrepancies. 

• Reduced Stockouts: Proactive reordering prevents running out of medications. 

• Improved Ordering Efficiency: Data-driven decisions prevent overstocking. 

• Better Identification of Discrepancies: Quickly identifies and investigates issues like theft or errors. 

ABC Analysis: Prioritizing Control Based on Value 

ABC analysis, categorizing inventory by value, is a well-established method. The 80/20 rule, a common principle in inventory management, suggests that roughly 80% of drug costs come from about 20% of the medications carried, aligning with the focus of ABC analysis on high-value "A" items. While specific LTC pharmacy usage statistics for ABC analysis are less common, its foundational logic of prioritizing high-cost items makes it a consistently recommended strategy in pharmacy management literature. McKesson recommends applying drug spend analysis to identify and focus on these "A" items. 

Benefits of ABC Analysis: 

• Focused Resource Allocation: Concentrates effort on the most financially significant medications. 

• Optimized Inventory Levels: Tailored control strategies for each category. 

• Improved Negotiation Power: Understanding the value of "A" items aids wholesaler negotiations. 

FIFO, LIFO, and LEFO: Choosing the Right Stock Rotation Strategy for Your Pharmacy 

Effective inventory management isn’t just about how much stock you carry—it’s also about how you rotate it. In LTC pharmacy, where expiration dates, regulatory compliance, and patient safety are critical, choosing the right stock rotation method is essential. Three commonly referenced methods—FIFO, LIFO, and LEFO—each offer different advantages depending on your goals and inventory profile. 

FIFO (First-In, First-Out) 

FIFO is the most widely used method in healthcare and pharmacy settings. It ensures that the oldest stock is dispensed first, reducing the risk of expired medications and minimizing waste. 

Why it works for LTC pharmacies: 

• Aligns with expiration date management and compliance standards 

• Reduces medication spoilage and write-offs 

• Works seamlessly with automated dispensing and packaging workflows 

LIFO (Last-In, First-Out) 

LIFO is less commonly used in pharmacy due to regulatory and safety concerns but may be relevant in specific financial reporting contexts where inventory costs are high and prices fluctuate. 

Why it’s generally avoided in pharmacy: 

• Increases risk of dispensing expired or near-expired medications 

• Not aligned with best practices in medication safety 

• Less compatible with most pharmacy software and automation systems 

LEFO (Last-Expired, First-Out) 

LEFO, or Last-Expired, First-Out, is an adaptation of FIFO that prioritizes dispensing the product with the closest expiration date, regardless of when it was received. 

Why it's gaining traction: 

• Especially useful in high-turnover, short-shelf-life categories 

• Optimizes shelf life usage across batches 

• Supported by many modern inventory systems that track expiration dates digitally 

Choosing the right approach depends on your software capabilities, product mix, and regulatory considerations. Most LTC pharmacies benefit from a hybrid model, where FIFO is the standard, but LEFO principles are applied to high-risk medications with varied shelf lives. 

Economic Order Quantity (EOQ): Finding the Optimal Order Size 

The Economic Order Quantity (EOQ) is a more theoretical model that calculates the ideal order quantity. While the underlying principles of balancing ordering and holding costs are timeless, its direct application in the dynamic LTC pharmacy environment might be less straightforward due to fluctuating patient needs and dispensing patterns. However, the concepts of minimizing total inventory costs and optimizing order sizes remain relevant, and software solutions often incorporate algorithms that consider these factors in their reordering suggestions. 

Benefits of EOQ: 

• Reduced Total Inventory Costs: Balances ordering and holding expenses. 

• Optimized Order Quantities: Data-driven approach to prevent extremes. 

• Improved Cash Flow: Better management of capital tied up in inventory. 

Safety Stock: Buffering Against Uncertainty 

Maintaining safety stock is a widely adopted practice in pharmacies, including LTC. Given the critical nature of medication availability for LTC residents, having a buffer against unexpected demand or delays is crucial. While specific statistics on the average safety stock levels in LTC pharmacies are not readily available, the principle of ensuring continuous medication availability makes it a standard recommendation. 

Benefits of Safety Stock: 

• Reduced Risk of Stockouts: Protects against demand fluctuations and delays. 

• Improved Patient Care: Ensures timely access to necessary medications. 

• Enhanced Reputation: Builds trust with LTC facilities through reliable supply. 

Cycle Counting: Maintaining Ongoing Inventory Accuracy 

Cycle counting, performing regular partial inventory counts, is gaining traction as a more efficient alternative to infrequent full physical inventories. This method is particularly beneficial in the high-volume environment of LTC pharmacies to maintain accuracy without significant disruption. Implementing a more streamlined inventory management system can lead to significant efficiency gains in cycle counting processes. 

Benefits of Cycle Counting: 

• Improved Inventory Accuracy: Timely identification and correction of discrepancies. 

• Reduced Downtime: Avoids lengthy full physical inventories. 

• Early Detection of Problems: Helps identify root causes of inventory issues. 

• More Reliable Data: Provides accurate data for decision-making. 

The Impact of Facility Type on Inventory Management 

The specific types of Long-Term Care facilities your pharmacy serves can significantly influence your inventory management approach: 

• Assisted Living Facilities (ALFs): ALFs typically have residents who are more independent but still require medication management assistance. Inventory needs might be more predictable, focusing on routine medications for chronic conditions. Dispensing cycles might be longer (e.g., monthly), and the urgency for STAT medications might be lower compared to skilled nursing facilities. Your inventory management could lean towards optimizing levels and minimizing waste from less frequent changes in medication regimens. 

• Skilled Nursing Facilities (SNFs): SNFs provide a higher level of medical care, often with residents who have more complex and changing medication needs. This can lead to more frequent prescription changes, a higher need for STAT medications, and potentially shorter dispensing cycles. Your inventory management in this setting would require a robust system for managing frequent updates, ensuring quick access to a wider range of medications, and potentially a higher level of safety stock for critical items. Efficient communication with the facility's medical staff is also paramount. 

• Home Health: Serving patients in their own homes presents unique inventory management challenges. You might need to manage a smaller stock of frequently used items for initial setups or emergency needs, with a greater emphasis on efficient delivery and tracking of individual patient medications. Inventory management could focus on accurate labeling, secure packaging for transport, and potentially just-in-time ordering for less common medications. 

• Hospice: Hospice care focuses on comfort and palliative care. Medication needs can be highly variable and may include medications for pain management, symptom control, and end-of-life care. Inventory management might prioritize flexibility, quick access to specific medications as needed, and careful management of controlled substances. Waste management of discontinued medications also becomes a critical consideration. 

Understanding the specific needs and regulatory requirements of each type of facility you serve is crucial for tailoring your inventory management strategies to ensure efficiency, minimize waste, and provide optimal pharmaceutical care. 

Implementing Best Practices for Optimal Inventory Control 

Adopting these approaches effectively requires a commitment to key best practices (as previously listed). 

Empower Your Pharmacy with the Right Tools and Expertise 

Implementing and optimizing effective inventory management strategies doesn’t have to be a solo effort. At SoftWriters, we offer tailored consulting services and integrated technology solutions designed specifically for long-term care (LTC) pharmacies. 

Start with a Inventory Audit with a SoftWriters Consultant  

Every pharmacy has unique workflows, challenges, and operational goals. Our consulting team can help you: 

• Review your current inventory practices 

• Identify areas for improvement 

• Recommend technology and process enhancements tailored to your needs 

Schedule a Consulting Discovery Call to explore how your pharmacy can benefit from improved inventory management frameworks. 

Maximize FrameworkLTC's Inventory Capabilities with the Help of One of Our Consultant Experts 

Many pharmacies don’t fully leverage the powerful inventory tools already built into FrameworkLTC. Our experts will help ensure your inventory settings are properly configured for your business model, patient mix, and dispensing patterns. 

We also provide guidance on optimizing wholesaler integrations — such as the Cardinal Inventory Management (CIM) interface — to streamline ordering and reduce carrying costs. According to Cardinal Health, integrated inventory systems can significantly enhance efficiency and improve cost control. 

Make Informed Inventory Decisions with FrameworkInsight 

Looking for deeper visibility into your inventory performance? 

FrameworkInsight is our new business intelligence platform built exclusively for LTC pharmacies using FrameworkLTC. With real-time dashboards for inventory tracking, packaging trends, and operational insights, FrameworkInsight helps you monitor performance, identify risks, and drive process adherence across your team. 

Schedule a consultation to speak with a member of our team about FrameworkInsight
and explore how built-in reporting can revolutionize your pharmacy's decision-making.