The term inventory is defined as the systematic

control and regulation of purchase, storage and usage of

materials in such a way so as to maintain an even flow of
production and at the same time avoiding excessive
investment in inventories.
Small in number, but consume large
amount of resources
Must have:

Tight control

Rigid estimate of requirements

Strict & closer watch

Low safety stocks

Managed by top management


Intermediate

Must have:

Moderate control

Purchase based on rigid requirements

Reasonably strict watch & control

Moderate safety stocks

Managed by middle level management

Larger in number, but consume lesser
amount of resources

Must have:

Ordinary control measures

Purchase based on usage estimates

High safety stocks

6- STEPS USED TO PERFORM AN ABC

ANALYSIS

1st step Identify the objective and the analysis criterion.

2nd step Collect data about the analyzed population.

3rd step Sort out the list by decreasing impact.

4th step Calculate the accumulated impact and the

percentage.

5th step Identify the classes.

6th step Analyze the classes and take appropriate decisions.

-ABC Analysis in APOLLO HOSPITAL Medical Stores Inventory Control
Background: The basic principle of inventory control is ABC based on cost
criteria . Methods: Based on ABC matrix, economic analysis of drug
expenditure of priced vocabulary of medical stores (PVMS) section 01 for the
year 2003 of a 190 bedded service hospital was under taken. Result: Out of
493 drugs in PVMS section 01, only 325 drugs were being used in the
reference hospital. The total cost of drugs used was Rupees 55,23,503 . Of
these 325 drugs, 47(14.4%) drugs were Category A , consuming 70% of total
expenditure, 73 (22.46 %) drugs Category B consuming 20% and rest 205
drugs (63.7%) Category C drugs cost only 10% of expenditure.
The ABC analysis can be also be useful in several
steps of the Sourcing Value Chain: Demand
Identification, to gather the annual spend of a site.
Demand Aggregation, to gather the annual spend of
several sites. Opportunity Assessment, to identify
leveraging opportunities.

The ABC tool is used to identify the vital few from the
trivial many, according to a defined set of criteria.

Different decisions may be taken from the result of

the ABC analysis.
 CONTROL : stocking a better mix of right inventory allows a company to
ADVANTAGES OF ABC

control over -supply and under supply for important SKUs.

COST : Once a company has determined which items fall into each ABC
category it can establish cost reduction initiatives at the SKU level.
IMPROVED SERVICE : Improvement in customer service level and order
fulfilment. ABC analysis provides a company with information to stock the
right -mix of inventory.
WAREHOUSING: ABC inventory extends to warehouse management has
well. Companies utilizing ABC analysis in the warehouse give priority
space to faster moving SKU.
 It gets harder to do correctly the longer you do them.

Needs to be completed in the moment for the most accuracy.

Still might reflect the biases of the data collector.

At last we conclude that ABC analysis is a
vital method for control the Inventory.