The term INVENTORY is defined as“the systematic control and regulation ofpurchase, storage and usage of materialsin such a way so as to maintain an evenflow of production and at the same timeavoiding excessive investment ininventories.”
(ABC = Always Better Control)‡ This is based on cost criteria.‡It helps to exercise selective control whenconfronted with large number of items itrationalizes the number of orders, number ofitems & reduce the inventory.‡About 10 % of materials consume 70 % ofresources‡About 20 % of materials consume 20 % of
Small in number, but consume largeamount of resourcesMust have:Tight controlRigid estimate of requirementsStrict & closer watchLow safety stocksManaged by top management
‡Intermediate‡Must have:Moderate controlPurchase based on rigid requirementsReasonably strict watch & controlModerate safety stocksManaged by middle level management
Larger in number, but consume lesseramount of resources‡Must have:Ordinary control measuresPurchase based on usage estimatesHigh safety stocks‡ABC analysis does not stress on items those are lesscostly but may be vital
6- steps used to perform an ABC analysis‡1st step Identify the objective and the analysiscriterion.‡2nd step Collect data about the analyzedpopulation.‡3rd step Sort out the list by decreasing impact.‡4th step Calculate the accumulated impact andthe percentage.‡
- In shoes leather forms A grade materials , sole formsB grade materials and shoe lace forms C grade -ABC Analysis in Medical Stores inventorymaterials, this is ABC analysis in Inventory ControlBackground: The basic principle of inventory control ismanagementABC based on cost criteria . Methods: Based on ABCmatrix, economic analysis of drug expenditure ofpriced vocabulary of medical stores (PVMS) section 01for the year 2003 of a 190 bedded service hospital wasunder taken. Result: Out of 493 drugs in PVMS section01, only 325 drugs were being used in the referencehospital. The total cost of drugs used was Rupees55,23,503 . Of these 325 drugs, 47(14.4%) drugs wereCategory A , consuming 70% of total expenditure, 73(22.46 %) drugs Category B consuming 20% and rest
The ABC analysis can be also be useful in severalsteps of the Sourcing Value Chain:! DemandIdentification, to gather the annual spend of a site!Demand Aggregation, to gather the annual spend ofseveral sites! Opportunity Assessment, to identifyleveraging opportunities.‡The ABC tool is used to identify the vital few from thetrivial many, according to a defined set of criteria.‡Different decisions may be taken from the result ofthe ABC analysis.
It gets harder to do correctly the longer you dothem.Needs to be completed in the moment for themost accuracy.Still might reflect the biases of the datacollector.
At last I conclude that ABCanalysis is a vital method forcontrol the Inventory.