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.

(ABC = Always Better Control) This is based on cost criteria. It helps to exercise selective control when confronted with large number of items it rationalizes the number of orders, number of items & reduce the inventory. About 10 % of materials consume 70 % of resources About 20 % of materials consume 20 % of resources About 70 % of materials consume 10 % of resources

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 ABC analysis does not stress on items those are less costly but may be vital

6- steps used to perform an ABC analysis

1st step 2nd step 3rd step 4th step 5th step 6th step

Identify the objective and the analysis criterion.

Collect data about the analyzed population. Sort out the list by decreasing impact. Calculate the accumulated impact and the percentage. Identify the classes.

Analyze the classes and take appropriate decisions.

- In shoes leather forms A grade materials , sole forms B grade materials and shoe lace forms C grade materials, this is ABC analysis in inventory management -ABC Analysis in 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.

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 I conclude that ABC analysis is a vital method for control the Inventory.