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c 

            
   

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 is a supervision of the supply and storage and accessibility of
items in order to insure an adequate supply without excessive oversupply

It can also be referred as internal control - an accounting procedure or system designed to


promote efficiency or assure the implementation of a policy or safeguard assets or avoid fraud
and error etc

  

There are several techniques a person can use to increase profitability and streamline workflow
via proper inventory control. Through research, competitive analysis and experience, an
effective business leader can balance costs versus benefits to storing and ordering the
necessary supplies to ensure business vitality. The supply chain is made of all materials that
help you to produce, market and supply your product. Inventory control means that you have
identified every facet of your supply chain and its logistics.



1. If you deal in perishable items, FIFO (first in, first out) is an important concept to understand
and maintain throughout the supply chain. If a grocery store did not rotate their stock, new
stock coming in would get taken immediately and older stock would expire, causing great
loss. Stock must be arranged by date received.

 
 

2. For a great deal of stock that needs constant management, consider bar codes or RFID
(radio frequency identification) where hand-held readers can immediately tell you where
valuable merchandise is. Many IT inventory programs on the market provide a wealth of
features including tie-ins to USPS, Fed-Ex and/or UPS to track merchandise and provide
real-time logistics.


   

3. A Business owner must balance space available for extra stock versus speed of product
turnover, fees for storage, cost in bulk versus regular ordering, and whether clients/end
users would be willing to wait.

  

4. Defining your minimum stock level will allow you to set up regular inspections and re-
ordering of supplies. Take into account emergencies and vendors taking longer than
average to replenish stock. This will aid you in arriving at JIT (just in time) ordering, where
stock is held for a minimum amount of time before moving on to the next stage in the supply
chain.

 
 

5. Stock security is a necessary cost. Many experts recommend separating staff that is
responsible for stock management from staff that has financial responsibility. Many times,
shoplifting and thievery is committed by employees rather than a stranger. Security guards,
cameras, bar codes and security devices are used by most businesses since the cost of
security is minimal compared to the millions of dollars that U.S. businesses lose each year
to stolen goods. Training staff in identifying potential security issues and having a clear
method of reporting violations is important in reducing crime. Often, shoplifters and thieves
use standard techniques to distract employees and take stock.

 

6. Having a great deal of stock on hand has both positive and negative consequences. Having
an immediate supply means that end users get their product that much sooner. Speed and
immediate gratification for a client can make the difference not only in a sale, but
recommendations, repeat business and client loyalty. In the modern business environment
where every business is a global business, an emergency or unforeseen circumstance
anywhere in the world can render competition without resources you have on hand. Of
course, one must take into account using capital in bulk buys, management and insurance
costs as well as goods perishing or becoming obsolete

  
 
  

a. Maintain availability of item anywhere anytime in the hospital at optimum cost


b. Optimize cost by analyzing holding cost, ordering cost and stock out cost to have
minimum cost of inventory.
c. Minimize dead stock and obsolesce.

The whole principle is availability of items keeping cost to minimum; hence type of inventory
cost is to be understood by all students.

Process for keeping track of objects or materials. In common usage, the term may also refer to
just the software components.

Modern inventory control systems rely upon barcodes, and potentially RFID tags, to provide
automatic identification of inventory objects. In an academic study[1] performed at Wal-Mart,
RFID reduced Out of Stocks by 30 percent for products selling between 0.1 and 15 units a day.
Inventory objects could include any kind of physical asset: merchandise, consumables, fixed
assets, circulating tools, library books, or capital equipment. To record an inventory transaction,
the system uses a barcode scanner or RFID reader to automatically identify the inventory
object, and then collects additional information from the operators via fixed terminals
(workstations), or mobile computers.


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An inventory control system may be used to automate a sales order fulfillment process. Such a
system contains a list of order to be filled, and then prompts workers to pick the necessary
items, and provides them with packaging and shipping information.

Real time inventory control systems use wireless, mobile terminals to record inventory
transactions at the moment they occur. A wireless LAN transmits the transaction information to
a central database.

Physical inventory counting and cycle counting are features of many inventory control systems
which can enhance the organization.

   



  

The inventory control is a scientific system by which to decide as to how much to order, when to
order and how often to order ensuring availability of vital and essential drugs all the time but
keeping cost minimum. The basic technique to calculate it are ABC, VED and EOQ which are
discussed as follows:-

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This is based on Pareto¶s Law where 20% items may be accounting for 80% of total cost
annually. The analysis focuses on cost of items and need to control these items. There are
significant few require most attention. The ABC analysis states:-

a. 10% of drugs would cost 70% of the total of drugs (Group A)


b. 20% of drugs would cost 20% of total drug cost (Group B)
c. 70% of drugs would cost 10% of total cost ( Group C)

The figure shows percentage of inventory items and percentage of average inventory usage
value. The demand multiplied by unit price giving inventory worth of annual consumption. It can
be seen from the figure 10% items are consuming 70% of annual usage value which are µA¶
class items(significant few) another 20% of items account for 20% annual usage value and
another 70% items account for 10% expenditure on material consumption which constitute
³insignificant money´ are called ³C´ items.



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a. Calculate annual usage value of each drugs.( Annual usages value = Annual
demand X unit cost)
b. Keep in order according to annual usage value. That means most expensive items
to be kept at top and cheapest at bottom
c. A cut off point where there is perceptible sudden change of cost which can also be
found out by a graph and it would approximately be at 10% items,20% items are
where change can be observed, however there may be variation of up to 5%.
Let us imagine medical store of a small hospital has 100 items on its inventory and the total
annual expenditure is Rs. 10, 00,000. The items can be arranged in the descending value of
their annual cost in the following manner:-

Sr.No. Name of the Annual Cumulative Cumulative Category


Items Consumption Total in Rs. Percentage
in Rs.
1. Inj. Ampicillin 91000 91000 9.1
2. Inj. 89000 180000 18
Ciprofloxacin
3. Inj. Dextrose 83000 263000 26.3
5% 540 ml
4. Inj. Normal 81000 344000 34.4
saline 540 ml
5. Inj. Cefatoxim 1 71000 415000 41.5
gm
6 Inj. 65000 480000 48
Streptokinase
7 Tab 63000 543000 54.3
Ciproflaxacin
8 Inj. Haemaccel 63000 543000 54.3
9 Fluothane 51000 653000 65.3
10 Inj. 47000 700000 70 A(70%)
Dexamethasone
2 ml
11 -------- ---------- --------- -------
12 -------- ---------- --------- -------
30 Inj. Urograffin ---------- 900000 90 B( 20%)
100 Acriflavine 300 1000000 100 C( 10%)

The idea of doing ABC analysis is to keep strict financial control and it implies that µA¶ items
have to be under strict control of higher management since it consume 70% of consumption
cost its safety stocks to be low and need high turn over and frequent procurement and
requirement of these items need to audited.

µB¶ items fall in between A and C items and need moderate control by middle management since
consumption cost is 20%

µC´ items are consuming 10% of cost hence need control by lower management, can have high
safety stock and procurement could be less frequent.

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