There are generally two methods of inventory control: the periodic review system and the continuous (or perpetual) review system. In the periodic review system (also called the fixed-order interval system), the inventory position is reviewed at regular intervals (usually at the time of a scheduled reorder). The inventory is counted and the order quantity is calculated by subtracting the amount of stock on hand from the desired maximum inventory. A manager using this system determines the resupply schedule by establishing a reorder interval (the number of months between orders), and places orders based on this schedule.

In the continuous or perpetual review system (also known as the variable order interval system), the inventory level is reviewed on an ongoing basis for every transaction in which stock is dispensed. When the amount of stock reaches a predetermined reorder level, an order is initiated. Each time the stock is replenished, it is for a standard quantity (usually for that amount which will raise the stock level backup to the desired maximum level). This system is based on stock levels rather than on time intervals.

Many periodic review systems use minimum and maximum levels. In this system, the manager determines a basic time interval for reviewing stock levels and determines minimum and maximum inventory levels. When the stock level is reviewed, if the inventory level is at or below minimum, an order is initiated to bring the stock level back up to the maximum level. No order is initiated, even at the scheduled reorder time, if stock levels are above the minimum level. This method helps to prevent frequent orders of small quantities.

Setting minimum and maximum stock levels

In order to establish stock levels which are adequate to survive fluctuations in demand and inconsistencies in delivery, managers can establish a minimum and maximum inventory level. This is called the "Min-Max" inventory control system. The minimum stock level is the level below which stocks should never drop without having placed an order. It is the amount of stock you will use in the time between placing and receiving an order plus the reserve or "safety" stock that is kept for emergencies and unanticipated demand or delivery delays. The maximum stock level is set to guard against oversupply which results in losing contraceptives to expiration before they can be dispensed. It consists of the minimum stock plus that amount of stock which is normally used between orders.

The safety stock is the reserve stock used to protect against stockouts due to delivery delays, product shortages at the supplier level, or when stock is dispensed at an unexpectedly high rate. The level of safety stock required is

usually different for each program and should be based on past consumption data. If the data are not available, start with the amount of stock at least one review period, and make adjustments to the safety stock as the program gains experience.

To estimate the minimum supply level, add the amount of stock you will use between placing and receiving an order to the mount of safety stick and make adjustments to this figure to take into account program growth and any possible increase or decrease in the average monthly use of contraceptives. Once you have estimated your minimum stock level, you can estimate the maximum stock level. The box below explains how to set the minimum and maximum stock levels.

Tools and Techniques - Setting a Minimum Stock Level

Calculating the number of months of supply on hand

Stock records are not very useful when the information is presented as raw numbers. For example, knowing that there are 620 cycles of Lo-Femenal oral contraceptives in stock at the end of the month does not tell you when the stock will run out. However, if stock records are expressed in terms of the number of months' supply on hand, it is clear how urgently supplies need to be reordered. For example, if the 620 cycles are instead expressed as 3.25 months', then you know you must arrange to be resupplied within three months in order to avoid falling below your "minimum stock" level.

The number of months' supply remaining in stock is calculated by dividing the balance on hand by the amount used in one month. Since the amount used will vary from month to month, it is common to use an average of the past six months' consumption, rather than just the last month's amount, in the calculation.

Min-Max stock levels depend on the average monthly consumption, the order interval, the lead time, and the level of safety stock you have set. The Min-Max levels in terms of months of supply will therefore vary from program to program, but typical Min-Max levels might be as follows:

Type of facility	Minimum number of months supply	Maximum number of months supply
Central warehouse	2-6 moths	6-12 months
Intermediate warehouse	2-3 months	4-6 months
Outlet facility	1-2 months	3-5 months
Total	5-11 months	13-23 months

The maximum stock levels may also be affected by the size of the storage facilities. If the outlet storage facilities are inadequate, it may be necessary to have more frequent deliveries.

Example from Kenya - "Min/Max" Inventory Control System

Manufacturers of contraceptives test their products to determine how long they can be expected to provide contraceptive protection after the time of manufacture. Each product should be stamped with an expiration date after which that product should no longer be considered to be fully effective. Manufacturers, however, are not consistent with labeling boxes with product expiration dates. Some show the date the product was manufactured while others mark the expiration date. If the expiration date is shown, record it on the box. If the manufacturing date is shown, you should determine the expiration date based on the product's shelf life and clearly mark the expiration date on the box. Expiration dates should be the standard point of reference.

The expiration date is based on the assumption that the product will be stored according to adequate warehousing conditions before it is dispensed to the client. Dates are generally stamped on all cartons of contraceptives as well as on each individual piece, but the date marked on cartons can be small and difficult to read if the products are stored on high shelves. Therefore, clearly label all cartons in large numerals showing the product's expiration date.

The length of time a contraceptive can be stored without losing its contraceptive protection (which is called its shelf life) varies with each product. Storage conditions such as temperature, humidity, and ventilation will affect the shelf life of contraceptive products. Sunlight and exposure to ozone (from ultraviolet light or electrical sparks from electric motors) will also reduce the shelf life of condoms. To avoid damaging contraceptives, commodities staff must maintain optimum warehousing conditions at all times.

Routine quality assurance inspections should be performed to ensure that the contraceptives are neither expired nor damaged. To do this, a random selection of contraceptives should be inspected. This selection should be made based on lot numbers. All contraceptive cartons are marked with a lot number in addition to the expiration date. The lot number refers to each different production batch at the time of manufacture. A random sample of each lot number should be inspected for quality if possible.

It is extremely important that quality assurance be conducted routinely, along with physical inventories, in order to minimize the danger of distributing damaged or expired contraceptives. If, during a quality assurance inspection, an item is found to be of questionable quality, all of the items from that lot number should be set aside until that item can be tested more rigorously. Commodities managers should establish specific procedures and standards for testing items that have been found to be of questionable quality. Quality control testing must be documented. When contraceptives are found to have deteriorated, they should be destroyed. All managers should develop protocols to dispose of unusable or expired contraceptives. Destruction of any products should be fully documented.

The following quality assurance and shelf life guidelines should be used for each contraceptive method.

Tools and Techniques - Contraceptive Shelf Life and Quality Assurance Guidelines

Conducting a physical inventory to prevent product loss

A physical inventory is a count of all the contraceptives in stock. It is conducted in order to verify that the quantity actually on the shelves is the same as the quantity listed in the stock-keeping records, and to correct the records if necessary. Commodities staff should conduct physical inventories at least once a year at all program levels. However, if frequent discrepancies occur between the actual number of contraceptives in the warehouse and the quantity on the stock record, then inventories should be conducted more frequently to maintain accurate stock levels to determine why the counts do not match.

When each contraceptive method is stored in one location within a single facility, the summary sheet may be used to record the count and to summarize the data. In this case the item description, location, expiration date, and quantity for each item counted are listed directly on the summary sheet.

If contraceptives are stored at more than one location or if the same inventory item is stored in more than one place within the same facility, the Physical Inventory Count Sheet should be used to record the count. Once all the items have been recorded on the physical inventory count sheets, they can be transferred to the Physical Inventory Summary Sheet by grouping and listing all entries for each inventory item.

Whether you have used the summary sheet for recording the count directly or have transferred this information from the physical count sheets, you now have a list that groups each inventory item on the summary sheet. Draw a line under the last entry and write the description of the inventory item counted under "item description." Total the quantities for this inventory item and record the total under "per count." Then go on to the next page and repeat the process for the next inventory item until all the items have been totaled.

Once totals for each inventory item have been recorded and checked, the amounts on the Inventory Control Cards (ICC) are entered on the summary sheet and the difference between the "per count" and "per ICC" are recorded in the column "difference." If there is a significant discrepancy, a recount should be performed for the inventory item in question and the ICC should be rechecked. The recount amount should be recorded on the summary sheet in the column "recount."

When the reconciliation activity has been completed, the physical inventory count sheets and/or the physical inventory summary sheet should be grouped together, dated, and filed to provide a permanent record of the physical inventory process.

Physical Inventory Count Sheet

Physical Inventory Summary Sheet