Drug procurement processes and inventory control methods MCQs With Answer

Introduction

Drug procurement processes and inventory control methods are essential competencies for M.Pharm students preparing to manage medicines within hospital and community pharmacy settings. This set of MCQs explores procurement cycles, vendor selection, tendering, legal and ethical considerations, and modern e-procurement approaches, together with inventory techniques such as EOQ, ABC, VED, FSN analysis, FIFO/LIFO, reorder levels, safety stock, and two-bin and JIT systems. The questions are designed to deepen conceptual understanding, reinforce calculation-based decision-making, and foster practical application to ensure reliable, cost-effective, and compliant supply of pharmaceutical products.

Q1. Which procurement method involves suppliers retaining ownership of stock at the healthcare facility until it is used, reducing the buyer’s working capital burden?

• Centralized purchasing
• Consignment inventory
• Spot purchasing
• Framework agreement

Correct Answer: Consignment inventory

Q2. What is the Economic Order Quantity (EOQ) formula commonly used in inventory management?

• EOQ = (2 × Demand × Ordering Cost) / Holding Cost
• EOQ = sqrt(2 × Demand × Ordering Cost / Holding Cost)
• EOQ = Demand / Reorder Level
• EOQ = Reorder Level − Safety Stock

Correct Answer: EOQ = sqrt(2 × Demand × Ordering Cost / Holding Cost)

Q3. In ABC analysis, items classified as ‘A’ are characterized by which of the following?

• High consumption value but low monetary value
• Low consumption value and low monetary importance
• High monetary value and relatively small proportion of total items
• Non-moving or obsolete status

Correct Answer: High monetary value and relatively small proportion of total items

Q4. Which inventory classification prioritizes items based on criticality to patient care rather than monetary value?

• ABC analysis
• VED analysis
• FSN analysis
• EOQ analysis

Correct Answer: VED analysis

Q5. The reorder point (ROP) formula that accounts for lead time and safety stock is correctly expressed as:

• ROP = Lead time × Safety stock
• ROP = Demand during lead time + Safety stock
• ROP = EOQ + Safety stock
• ROP = Annual demand / Number of orders

Correct Answer: ROP = Demand during lead time + Safety stock

Q6. Which tendering procedure invites any qualified supplier to submit bids and is often used to maximize competition?

• Selective tendering
• Single-source procurement
• Open tendering
• Two-stage tendering

Correct Answer: Open tendering

Q7. In FSN analysis, which category indicates items that are seldom used or have very low movement?

• Fast-moving
• Slow-moving
• Non-moving
• Critical-moving

Correct Answer: Non-moving

Q8. Which inventory costing method assumes the earliest purchased items are the first to be issued and valued?

• LIFO
• FIFO
• Weighted average cost
• Specific identification

Correct Answer: FIFO

Q9. What is a primary objective of using the ABC-VED matrix in pharmaceutical inventory management?

• To compute EOQ for each item
• To combine value and criticality for priority control
• To identify storage temperature requirements
• To estimate annual consumption variance

Correct Answer: To combine value and criticality for priority control

Q10. Which of the following best describes the two-bin inventory system?

• Continuous electronic monitoring of all SKUs
• Keeping two storage locations: one in use and a reserve that triggers replenishment when emptied
• Allocating two financial budgets for purchasing
• Using two suppliers alternately to reduce supply risk

Correct Answer: Keeping two storage locations: one in use and a reserve that triggers replenishment when emptied

Q11. Which procurement risk mitigation tool requires bidders to deposit money to guarantee their bid and discourage frivolous offers?

• Performance bond
• Advance payment guarantee
• Bid security / Earnest Money Deposit (EMD)
• Insurance certificate

Correct Answer: Bid security / Earnest Money Deposit (EMD)

Q12. In just-in-time (JIT) inventory systems applied to medicines, the main advantage is:

• Maximized buffer stock to avoid stockouts
• Reduced holding costs through minimal on-hand inventory
• Guaranteed lower unit purchase price for all items
• Elimination of supplier lead time variability

Correct Answer: Reduced holding costs through minimal on-hand inventory

Q13. Which indicator measures the proportion of items that are expired or obsolete relative to total stock and helps assess inventory quality?

• Stock turnover ratio
• Expiry rate
• Fill rate
• Service level

Correct Answer: Expiry rate

Q14. For perishable cold-chain vaccines, which procurement consideration is most critical beyond price and quality?

• Supplier proximity only
• Storage and transport cold-chain integrity
• Length of product insert
• Number of suppliers globally

Correct Answer: Storage and transport cold-chain integrity

Q15. Which of the following best describes perpetual inventory systems?

• Manual cycle counts performed yearly only
• Continuous real-time record of stock balances updated at each transaction
• Stock records updated only at the end of an accounting period
• Inventory valued only by physical inspection

Correct Answer: Continuous real-time record of stock balances updated at each transaction

Q16. In procurement evaluation, which criterion assesses a supplier’s ability to meet delivery timelines and maintain consistency?

• Financial bid price only
• Technical compliance only
• Delivery performance and reliability
• Packaging aesthetics

Correct Answer: Delivery performance and reliability

Q17. Safety stock is primarily held to protect against which two uncertainties?

• Price fluctuations and tax changes
• Demand variability and lead time variability
• Storage damage and insurance costs
• Supplier mergers and currency exchange

Correct Answer: Demand variability and lead time variability

Q18. Which inventory performance metric indicates how many times inventory is used and replaced over a period?

• Carrying cost percentage
• Stockout frequency
• Inventory turnover ratio
• Average lead time

Correct Answer: Inventory turnover ratio

Q19. Electronic procurement (e-procurement) in hospital pharmacy offers which major advantage?

• Guaranteed lower prices from all suppliers
• Improved transparency, faster processing, and better record-keeping
• Elimination of the need for supplier qualification
• Automatic prevention of all stockouts

Correct Answer: Improved transparency, faster processing, and better record-keeping

Q20. When calculating total annual inventory cost, which three cost components should be combined for decision-making?

• Purchase cost, advertising cost, and insurance cost
• Ordering cost, holding (carrying) cost, and purchase (procurement) cost
• Depreciation, tax, and salary cost
• Transport cost, licensing fees, and customs duties

Correct Answer: Ordering cost, holding (carrying) cost, and purchase (procurement) cost

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