Inventory Management or Inventory Control
drmandar5
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May 17, 2024
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About This Presentation
Inventory is an essential part of every organization/business/manufacturing unit
Slide Content
INVENTORY
MANAGEMENT
Dr. MandarChandrachood
Associate Professor
Community Medicine
DVVPF’s Medical College, Ahmednagar
1
MANAGEMENT
Dr. MandarChandrachood
Associate Professor
Community Medicine
DVVPF’s Medical College, Ahmednagar
1
INVENTORY CONTROLINVENTORY CONTROL
WHAT IS IT???WHAT IS IT???
Inventory is a essential part of every Inventory is a essential part of every
organization/business/manufacturing unit.organization/business/manufacturing unit.
WHAT IS IT???WHAT IS IT???
It is the method of maintenance of stock at a It is the method of maintenance of stock at a
level at which purchasing and stocking costs level at which purchasing and stocking costs
are the lowest possible without interference are the lowest possible without interference
with supply.with supply.
2
WHAT IS IT???WHAT IS IT???
Inventory is a essential part of every Inventory is a essential part of every
organization/business/manufacturing unit.organization/business/manufacturing unit.
WHAT IS IT???WHAT IS IT???
It is the method of maintenance of stock at a It is the method of maintenance of stock at a
level at which purchasing and stocking costs level at which purchasing and stocking costs
are the lowest possible without interference are the lowest possible without interference
with supply.with supply.
2
INVENTORY CONTROLINVENTORY CONTROL
WHAT IS IT???WHAT IS IT???
Inventory control means keeping track of your Inventory control means keeping track of your
stockstock
Knowing Knowing how much was sold and how much is how much was sold and how much is leftleft
Knowing Knowing how much was sold and how much is how much was sold and how much is leftleft
Let’s Let’s you keep records of losses and you keep records of losses and gainsgains
Gives Gives you consumption rates of high demand and you consumption rates of high demand and
low demandlow demand
3
WHAT IS IT???WHAT IS IT???
Inventory control means keeping track of your Inventory control means keeping track of your
stockstock
Knowing Knowing how much was sold and how much is how much was sold and how much is leftleft
Knowing Knowing how much was sold and how much is how much was sold and how much is leftleft
Let’s Let’s you keep records of losses and you keep records of losses and gainsgains
Gives Gives you consumption rates of high demand and you consumption rates of high demand and
low demandlow demand
3
INVENTORY CONTROLINVENTORY CONTROL
HOW DO I KEEP INVENTORY???HOW DO I KEEP INVENTORY???
∂∂
By using inventory data By using inventory data sheetssheets
Daily ReadingsDaily Readings
∂∂
Daily ReadingsDaily Readings
∂∂
Daily Daily inventory balance inventory balance recordrecord
∂∂
Monthly SummaryMonthly Summary
4
HOW DO I KEEP INVENTORY???HOW DO I KEEP INVENTORY???
∂∂
By using inventory data By using inventory data sheetssheets
Daily ReadingsDaily Readings
∂∂
Daily ReadingsDaily Readings
∂∂
Daily Daily inventory balance inventory balance recordrecord
∂∂
Monthly SummaryMonthly Summary
4
OBJECTIVEOBJECTIVE
To maintain To maintain optimum stockoptimum stock––i.e. not excessive i.e. not excessive
but not likely to be completely exhausted.but not likely to be completely exhausted.
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To maintain To maintain optimum stockoptimum stock––i.e. not excessive i.e. not excessive
but not likely to be completely exhausted.but not likely to be completely exhausted.
5
METHODS
Following are the methods which are in
common use in inventory control:
ABC analysis
HML analysis
HML analysis
VED analysis
FSN analysis
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Following are the methods which are in
common use in inventory control:
ABC analysis
HML analysis
HML analysis
VED analysis
FSN analysis
6
ABC ANALYSIS
ABC (Always Better Control)
It is based on the concept, “Thick on the best and Thin
on the Rest.”
The objective of ABC control is to vary the expenses
associated with maintaining appropriate control associated with maintaining appropriate control
according to the potential savings associated with a
proper level of such control.
It is one of the widely used techniques of inventory
control.
7
ABC (Always Better Control)
It is based on the concept, “Thick on the best and Thin
on the Rest.”
The objective of ABC control is to vary the expenses
associated with maintaining appropriate control associated with maintaining appropriate control
according to the potential savings associated with a
proper level of such control.
It is one of the widely used techniques of inventory
control.
7
ABC ANALYSIS
A system of analysis of store items based on their
cost is useful in materials management in general.
It is particularly useful for drug management.
Different items can be categorized into three
Different items can be categorized into three
groups based on the annual expenditure incurred.
The drugs should be arranged in a descending
order according to the amount of expenditure
incurred.
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A system of analysis of store items based on their
cost is useful in materials management in general.
It is particularly useful for drug management.
Different items can be categorized into three
Different items can be categorized into three
groups based on the annual expenditure incurred.
The drugs should be arranged in a descending
order according to the amount of expenditure
incurred.
8
ABC ANALYSIS…...
The cumulative cost should be calculated
beginning from the first item at the top of list.
DrugDrugItemItemBudget consumedBudget consumed
A10% 70%
B20% 20%
C70% 10%
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The cumulative cost should be calculated
beginning from the first item at the top of list.
DrugDrugItemItemBudget consumedBudget consumed
A10% 70%
B20% 20%
C70% 10%
9
ABC ANALYSIS…...
Drugs of category A should get high priority and
managerial attention because though
constituting only small fraction of the total list
these account for the bulk of expenditure.these account for the bulk of expenditure.
There stock, consumption, purchase etc., must
be critically watched.
10
Drugs of category A should get high priority and
managerial attention because though
constituting only small fraction of the total list
these account for the bulk of expenditure.these account for the bulk of expenditure.
There stock, consumption, purchase etc., must
be critically watched.
10
HML ANALYSIS.
The HML classification follows the same
procedure as is adopted in ABC classification.
H = HIGH;
M = MEDIUM;M = MEDIUM;
L = LOW.
Only difference is that in HML, the classification
unit value is the criterion and not the annual
consumption value.
11
The HML classification follows the same
procedure as is adopted in ABC classification.
H = HIGH;
M = MEDIUM;M = MEDIUM;
L = LOW.
Only difference is that in HML, the classification
unit value is the criterion and not the annual
consumption value.
11
HML ANALYSIS.
The items of inventory should be listed in the
descending order of unit value and it is up to
the management to fix limits for three
categories.
For examples, the management may decide
For examples, the management may decide
that all units with unit value of Rs. 2000 and
above will be ‘H’ items, Rs. 1000 to 2000 ‘M’
items and less than Rs. 1000 ‘L’ items.
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The items of inventory should be listed in the
descending order of unit value and it is up to
the management to fix limits for three
categories.
For examples, the management may decide
For examples, the management may decide
that all units with unit value of Rs. 2000 and
above will be ‘H’ items, Rs. 1000 to 2000 ‘M’
items and less than Rs. 1000 ‘L’ items.
12
VED CLASSIFICATION.
VED Classification
While in ABC, classification inventories are classified
on the basis of their consumption value and in HML
analysis the unit value is the basis, criticality of
inventories is the basis VED classification.inventories is the basis VED classification.
The VED analysis is done to determine the criticality of
an item and its effect on production and other
services.
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VED Classification
While in ABC, classification inventories are classified
on the basis of their consumption value and in HML
analysis the unit value is the basis, criticality of
inventories is the basis VED classification.inventories is the basis VED classification.
The VED analysis is done to determine the criticality of
an item and its effect on production and other
services.
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VED ANALYSIS
Classification of drugs according to their criticality in patient
care.
GroupGroupItemItem CriticalCriticalStatusStatus
VV 10%
VitalVital
•Life saving drugs
VV 10%
•Life saving drugs
•No substitute available
•At every cost, to avoid out-of-stockposition
EE 40%
EssentialEssential
•Absence can be tolerated for short stretch of time
•Alternativemedicines may be available
DD 50%
DesirableDesirable
Non-availabilitycan be tolerated for longer
periodof time
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Classification of drugs according to their criticality in patient
care.
GroupGroupItemItem CriticalCriticalStatusStatus
VV 10%
VitalVital
•Life saving drugs
VV 10%
•Life saving drugs
•No substitute available
•At every cost, to avoid out-of-stockposition
EE 40%
EssentialEssential
•Absence can be tolerated for short stretch of time
•Alternativemedicines may be available
DD 50%
DesirableDesirable
Non-availabilitycan be tolerated for longer
periodof time
14
FSN CLASSIFICATION
FSN Analysis
Here, classification is based on the pattern of
issues from stores and is useful in controlling
obsolescence. obsolescence.
F = Fast moving
S = Slow Moving;
N = Non Moving.
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FSN Analysis
Here, classification is based on the pattern of
issues from stores and is useful in controlling
obsolescence. obsolescence.
F = Fast moving
S = Slow Moving;
N = Non Moving.
15
FSN CLASSIFICATION.
To carry out an FSN analysis, the date of receipt
or the last date of issue, whichever is later, is
taken to determine the number of months, which
have lapsed since the last transaction.
The items are usually grouped in periods of 12
months.months.
FSN analysis is helpful in identifying active items
which need to be reviewed regularly and surplus
items which have to be examined further.
Non-moving items may be examined further and
their disposal can be considered.
16
To carry out an FSN analysis, the date of receipt
or the last date of issue, whichever is later, is
taken to determine the number of months, which
have lapsed since the last transaction.
The items are usually grouped in periods of 12
months.months.
FSN analysis is helpful in identifying active items
which need to be reviewed regularly and surplus
items which have to be examined further.
Non-moving items may be examined further and
their disposal can be considered.
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DEMAND FORECASTING
Demand forecasting is a process of
estimating future demand or value of future
events, based on the past.
Database Required for Demand forecasting Database Required for Demand forecasting
1.
Inventory levels and shelf life for various items
2.
Investment on inventory
3.
Record of transactions
4.
Maintenance
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Demand forecasting is a process of
estimating future demand or value of future
events, based on the past.
Database Required for Demand forecasting Database Required for Demand forecasting
1.
Inventory levels and shelf life for various items
2.
Investment on inventory
3.
Record of transactions
4.
Maintenance
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FACTORS INFLUENCING DEMAND
Average demand
Seasonal variations
Cyclical variations
Random variations
Random variations
Auto correlation
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Average demand
Seasonal variations
Cyclical variations
Random variations
Random variations
Auto correlation
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PROCUREMENT OF MATERIALS
Centralized Procurement
Decetralised Procurement
Rate contract system
Sources for procurement in the Health sector
1.
Directorate General of Suppliers & Disposals ( DGS&D)
1.
Directorate General of Suppliers & Disposals ( DGS&D)
2.
Medical Stores Depots
3.
Public Sector Units, Small Scale Industries, And
Cooperatives
.
4.
Local Purchase Committee
5.
Import
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Centralized Procurement
Decetralised Procurement
Rate contract system
Sources for procurement in the Health sector
1.
Directorate General of Suppliers & Disposals ( DGS&D)
1.
Directorate General of Suppliers & Disposals ( DGS&D)
2.
Medical Stores Depots
3.
Public Sector Units, Small Scale Industries, And
Cooperatives
.
4.
Local Purchase Committee
5.
Import
19
IN CONCLUSION
Keeping good records will help you manage your
inventory.
Don’t be intimidated by the numbers
Look for the pattern.
Look for the pattern.
20
Keeping good records will help you manage your
inventory.
Don’t be intimidated by the numbers
Look for the pattern.
Look for the pattern.
20
THANK YOUTHANK YOU
21
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