ABC ANALYSIS

1. ABC ANALYSIS
Submitted to
DR.G.RAMESH
(pharm.D)
Submitted by:
NARISETTI.SINDHURA
15AB1T0018
PHARM.D 4TH YEAR

2. • ABC analysis introduction
• Steps to calculate drugs in ABC analysis
• Uses of ABC analysis
• Performesd ABC analysis of following
drugs
CONTENTS

3. ABC ANALYSIS
• Inventory optimization is critical in order to keep costs under
control within the supply chain. Yet, in order to get the most
from management efforts, it is efficient to focus on items that
cost most to the business
• ABC (Always, Better, Control) analysis is a significant and
well-known analytical tool in inventory management
• ABC analysisis an inventory categorization method which
consists in dividing items into three categories, A, B and C.

4. • A being the most valuable items, C being the least
valuable ones. This method aims to draw managers’
attention on the critical few (A-items) and not on the
trivial many (C-items).
• The Pareto principle states that 80% of the overall
consumption value is based on only 20% of total items. In
other words, demand is not evenly distributed between
items: top sellers vastly outperform the rest

5. • The ABC approach states that, when reviewing
inventory, a company should rate items from A to C,
basing its ratings on the following rules:
• A-items are goods which annual consumption
value is the highest. The top 70-80% of the annual
consumption value of the company typically accounts
for only 10-20% of total inventory items.

6. • C-items are, on the contrary, items with the lowest
consumption value. The lower 5% of the annual
consumption value typically accounts for 50% of total
inventory items.
• B-items are the interclass items, with a medium
consumption value. Those 15-25% of annual consumption
value typically accounts for 30% of total inventory items.
• The annual consumption value is calculated with the
formula: (Annual demand) x (item cost per unit).

7. • The main restriction of ABC analysis is that it depends on
price and the percentage of usage of the products.
• Thus, importance of items cannot be considered entirely.
Therefore, it is not enough for inventory management since
an item which has low capital investment and consumption
may be staminal or life-saving
• The criticality (vitality) of an item should also be considered
for development of management tool for inventory control.

8. • Pharmacy spends a large amount of money for buying
pharmaceutical items. Therefore, pharmacy
management requires planning, designing and
organizing of the medical stores. However, effective
inventory management by keeping a close supervision
may sometimes be challenging, due to huge variety
items and traffics in the pharmacy

9. • ABC analysis is an important and widespread tool used for
ensuring decrease in expenditures and increase in effectiveness
of drug utilization. However, it is not enough for efficient
inventory management as ABC analysis is that it is depends on
price and the rate of consumption of the item
• Inventory analysis plays important role in the management of
pharmacies. The usage of inventory control techniques in the
healthcare provides significant improvement in patient care,
customer relationships and optimal use of resources.

10. Steps to calculate drugs in ABC analysis
• Multiply the annual number of items by the cost per item to
calculate the annual usage value for each product.
• List each product in descending order according to product usage
value.
• Total up the usage value and the number of items.
• Translate each item and its usage value into the fraction or
percentage of the cumulative total.
• Create a chart to connect the number of items and the usage value.
Divide the chart up into A, B, and C at the points where the curve
begins to change sharply

11. USES OF ABC ANALYSIS:
• A. Reduction in investment: under ABC analysis, the
materials from group 'a' are purchase in lower quantities
as much as possible. With this, the effort to reduce the
delivery period is also made. These in turn help to reduce
the investment in material.
• B. Strict control: under abc analysis, strict control can be
exercised to the materials in group 'a' that have higher
value.

12. • C. Minimum storage cost: since, the ,material from group 'a' are
purchase in lower quantities as much as possible, it reduce the
storage cost as well.
• d. Saving in time: since a signification effort is made for
management of the material from group 'A', it helps to save
time as well.
• e. Economy: this method is economical, since equal time and
labor is not needed for all types of materials. gate and manage
the overall inventory/suppliers into three major groups.

13. PERFORM ABC ANALYSIS FOR
FOLLOWING DRUGS:
S.NO DRUG NAME DOSAGE
FORM
UNTIT COST TOTAL COST
1 Cefitoxim Capsule 6 150000
2 Diclofenac Tablet 0.5 50000
3 Diphenhydramin
e
Capsule 0.9 5000
4 Erythromycin Tablet 2.1 2000
5 Gentamycin Ampoule 6.1 120800
6 Glibenclamide Tablet 0.3 80000
7 Hydrocortisone Vial 15.1 1800
8 Insulin injection Vial 120 8100
9 Lidocaine Ampoule 11.8 2150
10 Metronidazole Tablet 0.3 200000

14. ABC ANALYSIS:
S.NO DRUG ASCEN
DIG
ORDER
CUMM
ULATIV
E COST
%TOTA
L COST
%CUM
MULAT
IVE
COST
1 Hydroco
rtisone
1800 1800 0.29039 0.11470
2 Erythro
mycin
2000 3800 0.32265 0.24216
3 Lidocain
e
2150 5950 0.34685 0.37917
4 Diphenh
ydramine
5000 10950 0.80664 0.69780
5 Insulin
injection
8100 19050 1.30676 1.21399

15. 6 Diclofe
nac
50000 69050 8.0664
6
4.4003
3
7 Glibem
clamide
80000 149050 12.906
34
9.4984
7
8 Gentam
ycin
120800 269850 19.488
58
17.196
66
9 Cefitox
im
150000 419850 24.199
4
26.755
6
10 Metron
idazole
200000 619850 32.265
87
39.501
01

16. CATEGORY DRUGS PERCENTAGE
A 0 0%
B 3 30%
C 7 70%

17. ABC ANALYSIS
A
B
C