Inventory control

Introduction:
The items are recognized, stored, used, transferred and replaced. If the inventory is
done properly, details of the items will be clarified, viz., what is used, stocked and what more
is needed.
Definition:
Inventory control is the process of maintaining the optimum needed that is sufficient
for the smooth operation of the organization.
Inventory management can be viewed as the process of maintaining an adequate
supply of something so that the demand pattern can be satisfied without hiccups.
Objectives:
1. Control of stock volume
2. Control of stock distribution.
3. If an offer of discount comes for a bulk purchase, to decide whether to go for it or not.
4. To minimize losses due to obsolescence, pilferage.
Steps in Inventory control:
1. Creating stores accounts, which will control the store room
2. Arranging a method for allocation of material and orders which are in process.
3. Fixing minimum quantities for ordering points and maximum quantities to order, for
all materials.
Advantages of Inventory control:

1. Time Saving:
Inventory management is a great time-saving tool. We can save the time by
doing inventory recounts to make sure that records are accurate.
2. Inventory Balance:
Good inventory management helps that how much inventory you need. This
makes it easier to prevent product shortages and keep inventory on hand
without having too much.
3. Delivery in time
4. Possibility of discount for bulk purchases.
Disadvantages:
1. Charges of damage, pilferage etc.
2. Increase in insurance charges.
3. More space required.
4. Increased charge for obsolescence.

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Method of Inventory control:
1. ABC Analysis:
 ABC analysis is a basic technique of material management.
 ABC analysis is one of the important elements used in inventory control and
management, popularly known as "Always Better Control" is a very useful
approach to material management based on Pareto’s principle
 This technique can be used in any aspect of business or individual problem to
control the cost.
 The origin of ABC analysis is PARETO’S 80-20 rule.
Principles of ABC Analysis:
1. The analysis does not depend upon the unit cost of the items but only its annual
consumption value
2. It does not depend upon the importance of the item
3. The limit for ABC categorization are not uniform but will depend upon the size of the
undertaking, its inventory as well as number of items controlled
4. Follow the Broad ABC Policy Guidelines once ABC analysis has been done

Procedure for ABC Analysis:

 Make the list of all items of inventory.
 Determine the annual volume of usage of each item.
 Multiply each item’s annual volume by its rupee value.
 Percentage of the total inventory in items of annual usage in rupees.
 Select the top 10% of all items which have the highest rupee percentage and
classify them as “A” items.
 Select the next 20% of all items with the next highest rupee percentage and
designate them”B”.
 The next 70% of all items with the lowest rupee percentage are “C” items.

Steps of ABC Analysis:

1st step – Identify the objective and the analysis criterion
In this step, the objective is clearly understood. The maximum savings are
generated. Therefore, we choose to undertake an ABC analysis of the purchasing
category.

2nd step – Collect data about the analyzed population

Arranging all these items in the descending order of their individual dosage in
rupees. That means the first item in the list will now show the maximum annual usage
in rupees, the second item the second maximum, the third item the third maximum
and so on. After having done this the total of annual usage in rupees is put at the
bottom of the list. Placing of the orders on the basis of this classification.

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 Example: The Company has 10 items mentioned in the table.

Table: 1 A-B-C analysis usage in rupees

3rd step – Sort out the list by decreasing impact and 4th step – Calculate the
accumulated impact and the percentage
In this step, sort out the list of equipment, in decreasing order, according to our
criterion of analysis, i.e. annual spend. In 4th step, accumulate the annual expense and
calculate the percentage of the accumulated spend compared to the total. Those items which
together form about 70% of the total annual usage may be total annual usage may be
categorized as A items. Similarly. Items which contribute the next 20 to 25 % of the
aggregate are listed as B items. The rest which contributes 5 to 10% of the total percentage of
annual usage are called C items.

5th step – Identify the buy classes

In this step, separate the categories into three different classes (A, B, C)

6th step – Analyze the classes and make appropriate decisions

 In this final step, do a final analysis to determine next steps. The decisions out of this
analysis could be placing of the orders on the basis of this classification.

Importance’s of ABC Analysis:

A- Items: on

1. Tight controls
2. Rigid estimates of requirements
3. Strict and close watch ( monitoring)

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4. Safety stocks should be low
5. Management of items should be done at top management level.

B- Items

1. Moderate control
2. Purchase based on rigid requirements
3. Reasonably strict watch and control
4. Safety stocks moderate
5. Management be done at middle level

C- Items

1. Ordinary control measure

2. Purchase based on usage estimates
3. Controls exercises by store keeper.
4. Safety stocks high
5. Management is done at lower levels.

Advantages:
 Investment in inventory can be maintain.
 Easy to control the wastage of costly item.
 Easy to maintain stock.
 Easy to maintain stock.
Disadvantages:
 Proper standardization and codification of item is required.
 Periodic review becomes difficult if only ABC analysis.

2. VED ANALYSIS:

Introduction:

The stores when subjected to analysis based on their criticality can be classified into
vital, essential and desirable stores. This analysis is termed as VED analysis.

The vital items are stocked in abundance; essential items are stocked in medium
amounts, and desirable items we stocked in small amounts. By stocking the items in order
of priority, vital and essential items are always in stock which means a minimum disruption
in the services offered to the people.

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Definition:
VED analysis is based on the criticality of an item. “V” is for vital items without
which a hospital cannot function, “E” for essential items without which an institution can
function but may affect the quality of the services and “D” stands for desirable items,
unavailability of which will not interfere with functioning.

1. Vital: items without which treatment comes to standstill, without which a hospital
cannot function l: i.e. non- availability cannot be tolerated.
2. Essential: items whose non availability can be tolerated for 2-3 days, because similar
or alternative items are available, without which an institution can function but may
affect the quality of the services
3. Desirable: items whose non availability can be tolerated for a long period,
unavailability of which will not interfere with functioning.

Example:

 “v” is for vital items without which a hospital cannot function,

Ex. Oxygen supply.
 “E” for essential items without which an institution can function but may affect
the quality of the services.
Ex. Antibiotics, intra venous fluid.
 “D” stands for desirable items, unavailability of which will not interfere with
functioning because they can be easily purchased as and when required.
Ex. Cough syrup, B complex etc.

Advantages of VED:

 It is useful for monitoring and control of stores by classifying them into 3 categories.
 Useful in controlling and maintaining the stock of various types.

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3. Other Analysis:
(I). HML Analysis:
Meaning:
The items under this analysis are classified based on their unit prices. They are
categorized in three type High, Medium and Low.
Ex. The management may decide:
All units with unit value of Rs. 2000 and above will be H items,
Rs. 1000 to 2000 will be M items.
And less than Rs. 1000 will be L items.
Objectives:
- Determine the frequency of stock verification
- To keep control over the consumption at the department level
- To delegate the authority to different buyer.

(II). FSN Analysis:

Meaning:
Classification depends on the pattern of issues from stores.

F- Fast moving
S- Slow moving
N- Non moving

Analysis:
For analysis, the issues of items in past two or three years are considered.
If there are no issues of an item during the period, it is “N” item.
Then upto certain limit, say 10-15 issues in the period, the item is “S” item.
The items exceeding such limit of number of issues during the period are “F” items.

Advantages:
 Helps in investment in non-moving.
 Timely control.
 Useful in controlling obsolescence.

(III). SDE Analysis:

Meaning:
SDE classification is a system where material are sorted out as scare to obtain,
difficult to obtain and easy to obtain.
S means generally imported, and those which are in short supply.
D means which are available indigenously but are difficult items to procure.
E means which are available in the local market.

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 They include all those items that are produced according to commercial standard,
items which are available to be procured locally without any difficulty, etc.

Advantages:
 To determine the method of buying and to fix up the responsibilities of buyer.
 Vital to the lead time analysis.

(IV). XYZ Analysis:

Meaning:
XYZ classification is based on the value of the inventory stored.
X items are those stock value is high.
Y items are fall between the two categories.
Z items are those with low value.

Advantages:
 Helps to take steps for reduction.
 Identify those item which account for large amount of money locked up in the
stock.

(V).GOLF Analysis:

In this system, classification is based on the availability and nature of supplies.

GOLF stands for Government supplies, ordinary supplies, local supplies and foreign
supplies.

(VI). SOS Analysis:

Raw material can be classified into seasonal or off seasonal items.
- Seasonal, but available only for a limited period.
- Seasonal, but available throughout the year.
- Off seasonal items whose quantity is determined on different consideration.

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 Summary:
So, today I had completed the topic Inventory control in that I had completed
the Definition, objective, Method of Analysis, advantages and disadvantages.

Conclusion:
Material management is the methodical technique of planning, systemizing
and controlling the procurement of material flow from acquiring the items till its
destination.

Bibliography:

1. B.T Basvanthappa, “NURSING ADMINISTRATION”,3rd Edition 2014, Jaypee

Brother Medical Publisher Pvt. Ltd., New Delhi, India, Page no. 230
2. B.T Basvanthappa, “NURSING ADMINISTRATION”, 1st Edition 2014, Jaypee
Brother Medical Publisher Pvt. Ltd., New Delhi, India.
3. Deepak.K, “A COMPREHENSIVE TEXT BOOK ON NURSING
MANAGEMENT”, 2ND Edition, 2015, Emmess medical Publishers,
Mahalkshmipuram, Bangalore, India, page no. 300
4. I.Clement, “MANAGEMENT OF NURSING SERVICES AND EDUCATION”, 2ND
edition 2016, Elsevier Reed elsevier India Pvt.Ltd. New delhi, India, page no 230
5. Jogindra vati,” PRINCIPLES AND PRACTICE OF NURSING MANAGEMENT
AND ADMINISTRATION FOR B.SC & M.SC NURSING”, 1ST Edi; 2013,
Jaypee publication, Daryaganj, New Delhi (India), page no-558-562.
6. TNAI, “NURSING ADMINISTARTION AND MANAGEMENT”, 1ST edition
2007, the trained nurses association of India, New delhi, India.

Net Referrances:

1. MUKESH-KUMAR-BURNWAL, ABC-Analysis, available from

http://www.scribd.com/doc/13025160/, date of citation 5-11-17.
2. Drisya V.R., material management, available from
https://www.slideshare.net/drisyavr1/material-management-in-nursing, date of
citation 7-11-17.
3. Abhilasha Chaudhari, inventory control, available
from,https://www.slideshare.net/abhilashachaudhary4/inventory-control-in-nursing,
date of citation 8-11-17.