selective inventory control

1. SELECTIVE INVENTORY CONTROL AND ITS APPLICATION IN APOLLO HOSPITAL

2. Operations Himani Chowhan 13031 Hetanshi Desai13030 Palak Aggrawal-13047 Isha a ggawal-13033 Anubhav Lal 130007 Sayalee Deore 13061

3. What is inventory? Inventory refers to stock of raw materials , work in progress and finished goods Can be stored for future use. Inventory possess value. Objective of inventory is to ensure continuous supply of goods at reasonable cost.

4. Needs of inventory To make bulk purchase and get advantage of discount To maintain customer service level To maintain continuous flow of supply through supply chain To achieve economy of scale in transportation

5. What is inventory control Its planning, ordering and scheduling of raw materials Right quality of raw materials available at right time Systematic control over purchasing, storing and using of material.

6. Functions of inventory control Effective use of financial resources Protection against all material losses Proper calculation of cost of production Keep the ball of production bouncing Economies in purchasing Eliminates redundant inventory Keeping prompt delivery to the customers

7. Scope of inventory control Formulation of relevant policies Determining economic order quantity Determining lead time Minimization of material-handling and storage cost Ascertaining Safety Stock 

8. Main techniques in selective inventory control ABC Analysis GOLF Analysis SOS Analysis HML Analysis SDE Analysis FSND Analysis

9. Classification of inventory Classification Full form Criterion employed ABC Analysis Always Better Control Usage Value (i.e. Consumption per period x price per unit) GOLF Analysis Govt, ordinary, local, foreign Source procurement SOS Analysis Seasonal off seasonal Seasonality HML Analysis High Medium Low Unit Price i.e. does not take consumption into account FSND Analysis Fast, slow, non-monetary , material demands Issues from store SDE Analysis Scarce, difficult, easy Procurement difficulties

10. Hml ANALYSIS The cost per item (per piece) is considered for this analysis. High cost items (H), Medium Cost items (M) and Low Cost item (L) help in bringing controls over consumption at the departmental level . Uses and application To assess storage & Security Requirements High priced items in cupboards e.g. bearings, worm wheels To keep control over consumption at the departmental head level Authority to indents of High & Medium priced items to departmental head after careful scrutiny To determine the frequency of stock verification checking frequency: more for high priced items and less for L category To evolve buying policies to control purchases Excess supply: Not accepted in case of H & M category, Acceptable in case of L category To delegate authorities to different buyers to make petty cash purchase H & M by senior & L by junior buyers

11. FSN ANALYSIS : This analysis is to help control obsolescence and is based on the consumption pattern of the items. The items are analyzed to be classified as Fast-moving (F), Slow-moving (s)and Non-moving (N) items. The Non-moving items (usually not consumed over a period of two years) are of great importance. Scrutiny of non-moving items is to be made to determine whether they could be used or be disposed off. The fast and slow-moving classifications help in arrangement of stock in stores and their distribution and handling methods.

12. SDE ANALYSIS : This analysis is based on spares availability of an item – S - refers to Scarce Items, especially imported and those which are very much in short supply. D - are Difficult items which are procurable in market but not easily available. For example, items which have to come from far off cities or where there is not much competition in market or where good quality supplies are difficult to get or to be procured. E - refers to Easy items – Items are those which are easily available; mostly local items. It is normally advantageous to consider A, V & S items for selective control

13. SOS ANALYSIS SOS analysis is based on seasonality of items and it classifies all the items into two categories ‘Seasonal ‘And ‘Off seasonal ‘ The analysis helps in: Identifying items that are available only during a limited period of the year .For e.g. Raw mangoes are only available only during a summers Identifying items that are seasonal but available throughout the year however their costs in offseason are relatively high. SOS analysis can be selected when we want to determine the seasonality of items and the right season for procuring them.

14. Abc Analysis Classifying inventory according to annual value of consumption of the items A - very important B - mod. important C - least important Annual $ value of items A B C High Low Few Many Number of Items

15. Cont.. When a large number of items are involved, relatively few items account for a major part of activity, based on annual value of consumption of items. It is based on the principles of ‘ vital few and trivial many ’ .

16. A-items : 15% of the items are of the highest value and their inventory accounts for 70% of the total. B-items : 20% of the items are of the intermediate value and their inventory accounts for 20% of the total. C-items : 65%(remaining) of the items are lowest value and their inventory accounts for the relatively small balance, i.e.10%.

17. POLICIES FOR A Develop class “A” suppliers more Purchasing dpt makes maximum efforts to expeditade and delivery of these items The stock is maintained say in at least once in 15 days

18. Policies for B Order quantities, re-order stocks and safety stocks should be fixed and revised for B items say once in 4-6 months Should be ordered less frequently in comparison to A items

19. Policies For C Large quantities can be bought as the cost involved will be least Paper work is reduced if the stock is maintained and ordered once or twice in a year The source of their supply can be based on their reliability

20. Advantages Control Cost Improved service warehousing Allows a company to control over- supply and under- supply of important SKUs Once the company has decided which items fall into ABC category it can establish cost reduction initiatives at SKUs level. Improvement in customer service level and order fulfilment. provides a company information to stock the right mix of inventory. extends to warehouse management as well Companies utilizing ABC analysis in the warehouse give priority space to faster moving SKUs

21. Or

22. Advantages Control Cost Improved service warehousing

23. Control: Stocking a better mix of right inventory allows a company to control over- supply and under- supply of important SKUs Cost: Once the company has decided which items fall into ABC category it can establish cost reduction initiatives at SKUs level.

24. Cont ... Improved Service: Improvement in customer service level and order fulfilment. ABC analysis provides a company information to stock the right mix of inventory. Warehousing: ABC inventory extends to warehouse management as well Companies utilizing ABC analysis in the warehouse give priority space to faster moving SKUs

25. Apollo Hospitals The basic principle of inventory control used by Apollo hospitals is ABC based on cost criteria Based on ABC matrix, the method that they use is economic analysis of drug expenditure of prised vocabulary of medical stores (PVMS)

26. Out of 493 drugs in PVMS section 1, only 325 were being used in reference hospital. The total cost of drugs used was rupees 55,23,503 Out of these 325 drugs 47 (14.4%) drugs were category A consuming 70% of total expenditure 73 (22.46%) drugs were category B consuming 20% of the expenditure Rest 205 drugs (63.7) were category C drugs consuming only 10% of the expenditure

27. Implemented Midland Bank Group British Aerospace Swiss Automobile Association London Underground Gardner Merchant Vending Services Dervo Inc- Division of Johnson and Johnson