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FIFO FEFO

Inventory Control in Pharmacy using FIFO and FEFO Procedure/Method

HOSPITAL PHARMACY

Alok Bains

4/23/20233 min read

Inventory management

FIFO & FEFO

Compiled by: Alok Bains

Time and temperature-sensitive pharmaceutical products need safe storage and distribution practices. There are three strategies to manage pharmaceutical dispensing/distribution from the pharmacy. These are FIFO, FEFO and LIFO. These methods mainly deal with the assessment, accounting and inventory movements.

These are not part of the Good Manufacturing Process (GMP), Good Storage Process (GSP) and Good Distribution Process (GDP). But world health organisation (WHO) GMP under the chapter Storage and Distribution states FIFO (First Expired/First Out) principle should be followed for the appropriate rotation of pharmaceuticals.

However, it has not been made mandatory by the regulatory authorities. Pharmacy management decides to follow FIFO, FEFO or LIFO as per pharmacy conditions. Pharmaceutical products have a shelf life and need to be moved quickly from the pharmacy. Pharmacy management adopts procedures considering this fact.

  1. FIFO Procedure:

    FIFO stands for "First In, First Out". It is based on the principle “Oldest inventory should be dispensed/distributed first so that inventories remain in hand is fresh”. Inventories are arranged on saleable stock so that older stocks are in front of the self and newer on at the backside of the self. This assures the oldest inventories are dispensed first and the minimum risk of obsolesce and wastage.

    FIFO is a perpetual inventory management system in the terms of an inventory accounting model. The perpetual inventory management system provides a supplementary account that

    1. what is purchased,

    2. what is sold,

    3. when sold, and

    4. at what price it was sold.

This method maintains the stock account based on the date (received and sold). This requires a regular and frequent physical inspection to check FIFO process is running efficiently. This system ensures to dispensing/distribution of old stock first and keeping fresh stock in hand. This method is preferred in pharmacies to keep inventory fresh. This is a method for inventory with limited shelf life like pharmaceuticals.

Advantages/Benefits of FIFO

  1.  Reduction in spoilage and wastage: FIFO reduces wastage due to the expiration of the shelf life of pharmaceuticals. It reduces unsold inventories number.

  2. Reduction in obsolete inventories: It reduces the chances of inventories not in use or outdated.

  3. Quality control: FIFO allows easy tracking of the inventory thus it makes quality control of inventories easy.

  4. Minimise cost variation impact: Newer inventory may have low cost than older due to throat-cut competition in the market, new technology etc. This method minimises the cost variation effect.

  5. Inventory values: Shelves will have fresh inventories. This will reflect the cost of goods as per market value.

  6. Reduction in expenditure: It reduces business expenditure by reducing wastage due to the expiration of the shelf life of pharmaceuticals, by reducing additional work and returning cost and consumption of Pharmaceuticals during the remaining shelf life of the product.

  7. Increase in customer satisfaction.

  8. Reduction in dispensing/distribution error due to reduction in inventory numbers and obsolete inventories

Disadvantages of FIFO

  1. Warehouse space: Careful use of space in the pharmacy shall be required. The oldest inventories must be the most accessible. This will require the reworking of physical space arrangements and inventory arrangements regularly.

  2. Inventory tracking: Each inventory shall be tracked individually. Thus pharmacies require a proper tracking system and regular updation of the system.

FEFO Procedure:

FIFO stands for "First Expired, First Out". Characteristics of FEFO and FIFO are almost the same. The only difference is, FEFO consider the expiry date of the inventory, not the date of receiving the inventory. It is most suitable for pharmaceuticals that perish rapidly.

Objectives of both FIFO and FEFO are the same but FEFO guarantees the achievement of maintaining rapid perishable items. In FIFO dispense is decided by the date of receiving. It is possible that inventory purchased recently has less expiry period than the old one.

Thus FEFO is most effective to maintain an inventory with short expiry periods.

But it is a tedious method that requires more labour, frequent arrangement of inventory on the self and recording of purchase receipts depending upon their expiry period.

Building of pharmacy to follow the FEFO method is more complicated than FIFO and much more complicated than LEFO. Especially, it is more complicated in pharmacy because of variations in expiry periods and storage conditions of the pharmaceuticals. But this method is most useful for the pharmacy because it reduces product loss due to the expiration of the shelf life of pharmaceuticals.

LIFO Procedure

LIFO is based on the principle that products moved into the pharmacy most recently is moved out first. It is suitable if the products do not have expiry dates. It helps to relate recent costs with recent delivery. It is not suitable for the pharmacy.

Compiled by: Alok Bains