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  • Title: Computer-assisted inventory control utilizing ABC inventory analysis and EOQ in a hospital pharmacy.
    Author: Murphy J, Yemen S.
    Journal: Can J Hosp Pharm; 1986 Dec; 39(6):159-63. PubMed ID: 10301177.
    Abstract:
    In this paper, a project whose purpose was to develop and implement a workable inventory control system is discussed. Specific objectives of the project included the avoidance of out-of-stock situations, minimization of total inventory costs, and increased efficiency of the purchasing power. The initial step in the project was the determination of both fixed and variable ordering and carrying costs. Then a micro-computer was enlisted to print an inventory listing according to the total cost based on usage of the item for the past year and the inventory was subsequently classified into A, B and C categories. The economic order quantity (EOQ) was calculated for items in class A, while B and C items were purchased on a min/max basis. Also, a weekly ordering schedule for class A items was developed based on frequency of ordering. Following this schedule, all items to be ordered on a particular week are printed by the computer. The computer maintains a perpetual inventory, and a list of B and C items below minimum quantity is printed upon request. The efficiency of the inventory control increased dramatically (50%) after project implementation. Although cost savings were found, they were not substantial compared to our previous system (less than $5,000). Out-of-stock situations for B and C items occurred almost as frequently as before project implementation. This study demonstrated that the EOQ concept in conjunction with ABC inventory analysis may be an effective inventory control system in hospital pharmacy. Increased efficiency and cost savings were achieved. Protection against unpredictable demand and avoidance of out-of-stock situations can be achieved by closer adherence to stated ordering procedures for B and C items.
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