Drug Store Management

& Inventory Control

 Introduction

 Drug stores in hospitals are responsible for ensuring continuous distribution

of drugs in a financially viable and sustainable manner.

 In addition, drug stores distribute various other items like Essential Drug Kits
and Family Planning Products
 OBJECTIVES OF DRUG STORE
MANAGEMENT

The following are the principal objectives:

 Efficient and economic procurement of medicines and certain other medical
supplies of good quality at reasonable rates primarily to the public health
services.
 Secure safe and efficient storage, administration, distribution and supply of
goods in question in accordance to the National Drug Policy.
 Establishment and maintenance of systems to ensure the quality of goods
supplied.
 Estimation of current and future needs as a basis for procurement, planning and
budgeting by the corporation itself and the Ministries concerned.
 Advantage of Autonomous Centralize
Drug Supplier

1. Cost effectiveness: Central procurement of essential drugs is the most

cost-effective method for the public sector because the discounts
attained through bulk procurement are translated into affordable prices
to the ultimate user.
2. Quality assurance: Under central procurement there are fewer chances of
importing substandard drugs and in rare cases, there should be some
mechanisms to ensure immediate recall.
3. Financing: After the initial one-time capital investment the system
becomes self sustaining.
 DESIGN, LAYOUT AND SPECIFICATION

 The general design and construction take into consideration of the

functionality of drug store in a hospital.

 The location and size accommodate anticipated personnel and inventory

movement, work processes and activities.

 There should be consideration for storage of bulk supplies, drugs including

dangerous drugs and psychotropic substances, portable medical gas
cylinders, and thermolabile items. Drainage and sewerage system shall be
located outside the building
 Structural design

(a) Wall : The walls should be plastered both side, painted (antifungal) and
should be washable.
(b) Floor: The floor should be constructed of concrete and plastered
smoothly, finished with non-slippery heavy-duty materials to withstand the
heavy loads and traffic. Floor to ceiling height should range from 15 feet to
30 feet depending on the type of functional area and equipment used
(c) Ceiling: The ceiling is made of fire-retardant, asbestos-free and non-
shedding materials or mineral fibers. The ceiling offers acoustic balance and
control for the room or space, preferably enhanced with sound absorption
and attenuation.
 Cont……

(d) Roof : A pitched, or a sloped roof is designed for preventing heavy rain
damage. Roof is appropriately guttered with proper drainage system. The
roof and ceiling is designed to prevent theft and break-in.

(e) Door: All doors are constructed of fire-retardant material. The doors have
two leaves, broad enough to allow free and easy movement of supplies and
handling equipment such as fork lifts and stackers. All doors should be
protected with trolley guard. Doors to all storage areas should be equipped
with electronic access control system.
 Cont…..

(f) Window: There are no Windows shall in storage area. Windows are
available at workstation, office and staff areas. Window should be either
sliding or swing type. All windows are fixed with metal grill.
 Receiving area

1. Loading and unloading bay: There should be adequate space for loading
and unloading. This bay should be properly sheltered, taking into
consideration the height oft he vehicle. Raised platform should be provided
and equipped with heavy duty rubber pad at the point of contact with the
vehicles.
2. Receiving counter: A receiving counter should be provided with adequate
waiting space. The area is equipped with appropriate office furniture and
equipment
3. Mechanical equipment parking area: Parking bay for truck, trolley, jack
and stacker should be provided.
 Cont….

4. Sorting/unpacking area: Space should be sufficient for goods sorting and

checking.

5. Transit/holding area: Ample space should be made available for:

❑ Items requiring further clarification/investigation before receiving.
❑ Transit items which do not require special storage conditions.

6. Disposal room: Disposal room should be made available for discarded

items (used boxes, wrappers and plastic covers).
 Storage area

1. General storage requirement: The area should have 24 hours air-

conditioning facilities. There should have effective temperature control
(between 16°C to 25°C).
2. Drug store: Adjustable, modular, heavy duty open racks should be
provided for storage of packages of different sizes. Adequate, designated
storage area for bulk items should be provided. Designated area for
cytotoxic drugs should be equipped with cautionary signage.
3. Dangerous drugs/psychotropic: substances store Dangerous
drugs/psychotropic substances should be kept under lock and key in
special room/cabinewith alarm system in drug store.
 Cont…..

4. Cold room/pharmaceutical refrigerator/freezer bay: These facilities should

be provided based on functionality of the hospital. This room should be
provided within the drug store for storage of drugs requiring low storage
temperature, which includes vaccines, antisera and other biological
products. Every cold room/pharmaceutical refrigerator and freezer should
have computerized temperature recorder system.

5. Intravenous fluid store: Sufficient space should be made available to

accommodate all hemodialysis, peritoneal dialysis solution and intravenous
solutions
 Cont..

6. Surgical store: There should be adequate, designated storage area for

bulk surgical/consumable/disposable items/Xray films. Adjustable, modular,
heavy duty open racks should be provided for storage. Sufficient space
should be made available to accommodate bulk items.

7. Non-drug bulk store: Dispensing bottles, containers, labels and envelopes

should be kept in a designated area. Adjustable, modular, heavy duty open
racks should be provided. Sufficient space should be made available for
movements
 Stores with special storage requirement

1. Inflammable store: Inflammable items (ethanol, methanol, acetone, etc.) should

be kept in a store sited at least 10 feet distance away from other adjacent
buildings and should be equipped with fire fighting equipments, smoke
detectors and exhaust fans for adequate ventilation. The location and design
should ensure maximum air circulation to avoid concentration of fumes or
gases. The wall, roof, ceiling and doors should be made of fire retardant
materials and comply with Fire Control Department.
Specifications:
Wall- 14" thick brick
Roof- 9" concrete thickness
Door - Iron 0.25" thickness
 Cont…..

2. Corrosive items store: Corrosive items (phenols, hypochlorites) shall be

kept here. Special plumbing and drainage system should be considered.

3. Medical gas store: Portable medical gas cylinders should be kept here.
Specifications of the medical gas store should follow that of the inflammable
item. Flooring must be reinforced in order to withstand the weight of the
heavy gas cylinders. Loading and unloading bay should be made available
and sheltered. The bay should be built to facilitate direct loading and
unloading of goods
 Cont….

4.Quarantined items store: Designated area/cabinet should be provided and

distinctly labelled.

5. Non-conformance/condemned items store: Designated store/cabinet for

expired, obsolete or damaged items should be provided prior to disposal in
accordance with drug control department.
 Issuing area

1. Temporary holding area: Supply to the various departments is carried out

here. Indents from various departments are processed and prepared for
supply and kept in this area until collected. Designated secured area should
be provided close to the issuing area.

2. Issuing counter: An issuing counter should be provided with adequate

waiting space. The area is equipped with appropriate office furniture and
equipment. Sufficient space for material handling equipment is required.
 Administrative area

1. Pharmacist in-charge office: Room for the chief pharmacist or director of

pharmacy to perform administrative work should be provided. It shall be
strategically located to allow supervision.

2. Pharmacist work station: Designated area for pharmacist should be

provided.It should be half-glass panelled to allow supervision.Work stations
and computer terminals should be made available.
 Cont…

3. General office: Designated area for assistant administrative officers and

administrative assistants should be made available. Workstations complete
with computer terminals shall be made available
4. Meeting/discussion room: Space for discussion and routine administrative
meetings should be made available.
5. Document room: Adequate space/room should be available to store files
and records.
6. Stationery store: A dedicated storage area for stationery should be
provided.
 Cont….

7. Reception counter and customer waiting area: The area should be

equipped with appropriate office furniture and equipments. Customer
waiting area should be equipped with audiovisual facilities, water dispenser
and settee. Discussion room should be made available.
 Ancillary area

1. Personnel/staff rest room: A room should be made available for staff rest.
Staff lockers and domestic appliances such as refrigerator, electric kettle,
water dispenser, microwave oven, table, chairs and sofa should be made
available.

2. Washroom: Wash rooms for male and female with separate changing
room, toilets and shower facilities should be provided. A dedicated toilet for
visitor shall be made available.
 Cont…

3. Prayer room: Designated rooms complete with ablution facility shall be

made available.

4. Housekeeping/utility room: The room should have sufficient space for

storing cleaning materials and equipment. The room should have good
ventilation for washing and drying of equipment

5. Security guard post: Security guard post should be made available at the
main entrance of the store. The room should be equipped with necessary
equipments for the security guard's convenience.
 TYPES OF MATERIALS STOCKED AND
STORAGE CONDITION

1. Storage conditions: Drug store is used to store all kind of material like
capsules, tablets, liquid dosage forms, injections, etc. Lock and key system
for narcotics and psychotropic substance, separate tracks for poisons are
arranged. There should be storage of items as per the temperature
requirement like:
1. Cold storage - 2-8°C
2. Cool temperature - 8-25°C
3. Room temperature (RT) – Temperature prevailing in working area.
4. Warm-3D-40°C
5. Excessive heat - Above 40°C
 Cont….

On the basis of temperature, drugs are divided into two categories.

List A: These are the drugs that require storage at 2-8°C. These include sera
vaccines, whole human blood, normal human plasma, thrombin, thromboplastin,
cobra and viper venom, oxytocin and vasopressin, insulin preparations, posterior
pituitary injection, human gamma globulin injection etc.

List B: These are the drugs that require storage at 8-25°C. It includes antibiotics,
arsenicals, blood preparation, hormone preparations, vitamin preparations and
others
 INVENTORY CONTROL

 Inventory control is the processes employed to maximize a company's use

of inventory. The goal of inventory control is to generate the maximum
profit from the least amount of inventory investment without making
impact on customer satisfaction levels.
 Without giving impact on customers, inventory control is one of the chief
concerns of businesses that have large inventory investments, such as
retailers and distributors.
 Inventory control or stock control helps businesses to calculate all costs
associated with their products and keep track of what they have on hand.
 Cont….

 Inventory control is a crucial part of any business that requires products or

items be kept in stock. On an average, business has 30% of its capital tied
in inventories
 Effective inventory control is founded on the principle that the warehouse
operator must be able to satisfy all demands for material out of inventory
while keeping inventory as low as possible.
 For smooth running of business inventory neither should be excessive nor
inadequate.
 Principles of inventory control
management

Following are key points for effective inventory control management:

1. Accuracy: An accurate inventory control system gives the number of units
of items that are in stock. The systems achieve a high accuracy for the
quantities on hand by counting the number of units that are placed in
inventory and subtracting the number of units taken out of inventory. Check
periodically to physically count the number of units that remain in stock and
compare the amount with the total given by the inventory control system.
While minor deviations are normal, follow-up and find out the reason for all
discrepancies to ensure that the system stays as accurate as possible
 Cont….

2. Security: A key function of an inventory control system that supports the

main principle is to keep material in inventory securely. The system must
control access to the warehouse where the inventory is kept and store the
material under proper storage condition to avoid the damage. When
material is damaged during handling or while in inventory, track the
damaged items through the inventory control system to analyze how the
damage happened and prevent a recurrence. At the same time, make sure
the inventory control system to remove the damaged material from the
quantity that's available for use.
 Cont…

3. Location: An effective inventory control system informs the exact location

of the material needed as well as how many units are present in inventory.
Typical warehouses are organized on a grid with aisles, row numbers and
numbered shelves. When an item is placed in inventory, the system tracks it
to its location and records where it is placed. When the item is needed,
employees can find it by consulting the inventory control system. Tracking
the physical location of material in inventory makes the periodic physical
verification of inventory less time consuming.
 Cont….

4. Demand forecasting: Accurate demand forecasting has the highest

potential saving for any of the principles of inventory control management.
Both, over-supply and under-supply, can have critical effect on the drug
store management. To ensure that the item needed in the hospital should
always be there, inventory control system has to estimate future demand. If
company's situation hasn't changed,the system can project demand based
on historical records. If demand is likely to change, you have to manually
adjust the inventory control system projections and the demand estimates
 ECONOMIC ORDER QUANTITY (EOQ)

❑ In inventory management, economic order quantity (EOQ) is the order

quantity that minimizes the total holding costs and ordering costs. It is one
of the oldest classical production scheduling models.
❑ The model was developed by Ford W. Harris in 1913, but R.H. Wilson, a
consultant who applied it extensively, and K. Andler are given credit for
their in-depth analysis.
❑ EOQ applies only when demand for a product is constant over the year
and each new order is delivered in full when inventory reaches zero.
 EOQ

 There is a fixed cost for each order placed, regardless of the number of
units ordered.
 There is also a cost for each unit held in storage, commonly known as
holding cost, sometimes expressed as a percentage of the purchase cost
of the item.
 Methods for determining economic
order quantity

1. Formula method: Under-mentioned formula is used for the calculation

ofthe economic order quantity.
❑ The quantity to be ordered at one time is known as 'ordering quantity'
and should be determined with good care.
❑ If it is small, a number of orders will have to be placed in a year involving
costs in terms of clerical labor, material handling, etc.
❑ Also there will be loss in terms of price and transport costs. Large orders
avoid these losses and will lead to economy in transport costs and price
concessions
 But costs of items in terms of interest
payments for the money locked-up and
in terms of storing costs increases.
 An order should be large enough to
enable the firm to earn proper discounts
and to take advantage of bulk transport
but it should not be too large to involve where
too heavy payment of interest. A = Consumption of the article concerned (in
units) during a year
 If the price to be paid is stable, the
optimum quantity to be ordered or O = Cost of placing one order including the cost
economic order quantity (EOQ) can be of receiving the goods or ordering cost
determined by the formula
C = Interest payment per unit per year including
other variable cost of storing it (carrying cost
per unit per annum).
2. Graphical method: In this method,
the carrying cost, ordering cost and
total cost are shown on graph.
It is based on the principle that the total
carrying cost increases as the order size
increases.
However, the ordering cost decreases if
the order size increases.
The point at which the ordering cost
and carrying cost intersects each other,
total cost is minimum.
This is the economic order quantity
3. Trial and error method: If the total needs of inventory for a firm are known, the firm
has different alternatives to purchase its inventories.
❑ It can buy its total needs in a single order at the beginning of the year or the
inventories may be purchased in small orders periodically.
❑ If the purchase is made in one order, the average inventory holdings will be
relatively large whereas they will be relatively small when the acquisition of
inventory is in small lots.
❑ High average inventory would involve high carrying cost and low average inventory
holdings are associated with high ordering costs.
❑ According to this method, the carrying and ordering costs for different sizes of orders
to purchase inventories are computed and the order size with the lowest total cost of
inventory is the economic order quantity.
 RE-ORDER QUANTITY LEVEL (RQL)

 Re-order quantity level is fixed between the minimum and maximum stock
levels. When stock of an inventory, reaches at this point, the process for
the purchase of material should be started. The re-order level is slightly
more than minimum stock level to guard against.
1. Abnormal use of item
2. Abnormal delay in supply
The formula for calculating the re-order level is:
Re-order level = Minimum consumption during the period x Maximum re-
order level
 By having a realistic Re-Order Level, it becomes sure
that Drug Store has enough stock when required but
also avoid overstock of particular item. The Re-Order
level is the point at which stock on a particular item
has diminished to a point where it needs to be
replenished .
 The re-order level takes into account the following:
• The ongoing usage of the item.
• The lag time between the point at which stock is
ordered and the time in which it is delivered.
• Optionally, a level of 'Safety Stock' to cover
instances where the normal delivery lead-time has not
been met.
Lead time * usage: This is evaluated from the lead time (in days) multiplied
by the average usage per day.

In its simplest form, this is the Re-Order Level.

For example, item ABC has a supply lead time of 7 days, with a usage of 50
per day would give a Re Order Level of 7 days x 50 = 350 units
Safety stock: It is desirable to have 'Safety Stock' to cover instances where
Supply orders are not received on time, or there is need to keep additional
stock on hand for emergency situations.
The Safety Stock can always be a simple calculation such as having 2 days
worth of stock on hand or a more complex calculation based on short-term
future demand.
By including Safety Stock, the Re-Order Level would now be calculated from:

Re-order level = (Lead time x Demand per day) + Safety stock

 Purchase procedure

 The purchase procedure means the sequence of steps in which a

purchase transaction is carried out.
 The purchase procedure starts with the recognition or realization of the
need of an item.
 The need is written in the purchase order.
 The purchase order is a written authorization from a buyer to acquire
goods or services.
 The document authorizes a supplier to deliver to the buyer at the price,
quality level, delivery date, and certain other terms specified in the
agreement
 A purchase order is legally binding after the supplier countersigns it.
 The sources are identical, and the appropriate supplier is selected as a
result of mutual negotiations.
 The order is placed with the selected supplier.
 The goods are received and then thoroughly checked. Invoice is checked
and forwarded to the finance section for the payment.
 The purchase transaction is recorded.
 Keeping a proper record is very advantage because:

1. It acts as a guide for future action.

2. It provides authentic records about the inventory which is needed for the
inventory control.

3. The purchase order is a legal document which helps in case of any legal
problems.
 In general, every drug store organization prepares its own purchasing
manual which prescribes the purchase policies and procedures.

 The purchase policies differ from company to company because these

are framed keeping in view the objectives of the hospital.

 Good purchase policies and inventory control are interlinked with each
other. Therefore, such purchasing policies are to be pursued which are
effective in controlling the inventories.
 PROCUREMENT OF DRUGS AND
SUPPLIES

 The method for procuring drugs depends on size of hospitals as well as

type of hospitals.
 Generally, big size hospitals would like to take drugs and supplies directly
from the manufacturer through tendering process.
 Government hospitals take most of the medicines from the central
medical store depot.
 The small size hospitals take the medicines and supplies from distributer or
retailer.
 Whatever the hospital, generally there are four strategic objectives of
procurement
(a) Procure the most cost-effective drugs in the right quantities:
The first strategic objective is that all organizations responsible for
procurement, whether they are public, private non-profit or private for-profit,
should develop an essential drugs list to make sure that only the most cost-
effective drugs are purchased.
Procedures must also be in place that accurately estimates procurement
quantities in order to ensure continuous access to the products selected
without accumulating excess stock.
(b) Select reliable suppliers of high-quality products: The second objective is
that reliable suppliers of high-quality products must be pre-selected, and
that active quality assurance program involving both surveillance and
testing must be implemented.

(c) Ensure timely delivery: The procurement and distribution systems ensure
timely delivery of appropriate quantities to central or provincial stores and
adequate distribution to health facilities where the products are needed.
(d) Achieve the lowest possible total cost: The centralized procurement and
distribution systems must achieve the lowest possible total cost of drugs and
other items
 PROCUREMENT FROM MEDICAL
STORE DEPOT

 Govt. Medical Store Depot (GMSD) is functioning under Medical Stores

Organization which is a subordinate office of Ministry of Health & F.W.,
Govt. ofIndia. Many medical store depots exist in different cities in India
like Delhi, Chennai, Kolkata, Kamal (Haryana), Hyderabad, Guwahati, etc.
The main functions and duties of the GMSDs are as under:

1. To procure and supply medicines, surgical equipments and other medical

stores required by the hospitals and dispensaries etc. run by Central Govt.,
paramilitary forces and CGHS, etc.
2. Receipt, storage and distribution of supplies of drugs and allied items
including vaccines received from WHO, UNICEF, etc. and under the various
international bodies under various agreements entered into by the Govt. of
India
3. Storage and issue of drugs required under various National Health & F.W.
program including Anti-TB, Anti-Leprosy, NMEP, RCH, etc. throughout the
country.
4. Meeting the emergency requirements of lifesaving drugs and other allied
items in the country, arising out of natural calamities such as floods,
cyclones, droughts, riots etc. and other national calamities
 The Government hospitals/CGHS dispensaries usually procure most of the
medicine from medical store depot.

 They quantify their needs and send to the medical store depot in the
indent form in the early financial year.

 The medical store depot does the procuring job and time-to-time send the
medicine to these hospital/dispensaries
 PROCUREMENT FROM
MANUFACTURER/DISTRIBUTORS

 This procedure is applicable when the drugs and supplies have to procure
from the manufacturer or distributer.

 In most of the situation, manufacturer does not supply, they sell their items
through the distributer appointed for India.

 It may be due to involvement of lot of Government formalities.

 The procurement procedure broadly consists of the following steps:

1. Assessment of requirement: Bulk requirement of the stores at state
level/district level should be assessed prior to the beginning of the financial
year to get the competitive prices. The action for procurement should be
initiated in accordance with the purchase procedures.

2. Deciding procurement strategy including technical specifications: It is

important to agree on the procurement strategy before initiating the
tendering. For example purchase of drugs having limited life shall require
different procurement strategy than purchase of say hospital beds
3. Mode of procurement: The methods of procurement normally followed
are:
A. Global tender/International Competitive Bidding (ICB): This method is
generally adopted where the supplies need import and foreign firms are
expected to participate irrespective of the value.
B. Open advertised tender/National Competitive Bidding (NCB): Open
tender is the competitive bidding procedure normally used for public
procurement in the country and may be the most efficient and economic
way of procuring goods or works, by their nature or scope. The procedures
shall provide for adequate competition in order to ensure reasonable prIces.
C. Limited tender (national/international): Limited tendering is nothing but
inviting bids from qualified suppliers as per the approved list and other
known suppliers broad enough to ensure receipt of competitive bids. This
method shall be used only in exceptional circumstances.

D. Shopping: Shopping is a procurement method based on comparing price

quotations obtained from several suppliers, usually at least three to ensure
competitive prices.
E. Single tender/Direct contracting: The single tender system may be adopted in
case of articles including drugs and equipment, which are specifically certified as
of proprietary in nature, or where only a particular firm is the manufacturer of the
articles demanded or in case of extreme emergency.

4. Preparation of tender document

5. Advertisement of the tender
6. Issue of tender documents
7. Opening of the tender
8. Evaluation of the tender
9. Clearance of World Bank/DFID, whenever required
10. Award of contract
11. Notification of delivery to consignee
12. Inspection and testing
13. Receipt of consignment
14. Acceptance and storage of the consignment.
15. Resolution of disputes, if any. The dispute resolution methodology should
be clearly indicated in the contract document.
 PROCUREMENT OF DRUGS FROM
LOCAL MARKET

 The drugs and supplies are procured from the local market in emergency cases
or when the same drug/supplies are not available in the hospital or dispensaries.
 The hospital approves some medical store on the basis of cost comparison.
 Then, particular item which are not available can be procured from the market
 In some cases, the indent forms are prepared in the triplicate; one copy is given
to the patient who can procure directly from that particular medical store.
 In every case, the bill is reimbursed directly to that medical store from the
hospital organization.
 EMERGENCY PURCHASES

 As a general rule, the requesting department will be responsible for

determining product requests which are to be classified as an emergency.
Examples of emergency purchases are:
1. Replacement of an X-ray tube which burns out.
2. Request for a part to repair a piece of equipment which is giving support to
a patient.
3. Request for a product, unavailable from current inventories, which is
needed to treat a trauma patient.
4. Acquisition of a pharmaceutical product deemed necessary to the well-
being of a patient in a traumatic situation
 Since the purchasing department/committee is responsible to provide
procurement support for emergency requests, personnel will be required
to judge the authenticity of an emergency request.
 Emergency purchases which arise during regular working hours are to be
arranged through the purchasing department.
 Once contacted, purchasing department will issue a purchase order to
the vendor who can respond most expeditiously.
 Every Hospital organization has some limit or emergency purchase.
 The limit for emergency purchase depends on size of Hospital or type of Hospital.
 For example, the limit for emergency purchase may be ~ 5000/- for small hospital
but it is more in cardiac caring Hospital.
 All requests exceeding limits processed as emergency purchases must be
followed with a requisition from the requesting department and appropriate
written documentation defining the emergency nature of the request.
 Emergency purchase requests which exceed the limit are to be reviewed and
authorized by the purchasing coordinator or the director of Hospital Purchasing
prior to processing.
 METHODS USED FOR THE ANALYSIS
OF THE DRUGS EXPENDITURE

1. ABC analysis
ABC analysis is followed in a big drug store, large inventory items are
stocked. In order to maintain a proper control of inventories, the ABC
(Always Better Control) technique is used. In this technique the materials are
divided into three groups A, B and C according to the cost of the materials
and money value of consumption.
❑ A-items: In the whole of the inventory, there are a few costly items which
come under this group. These items may not be more than 10% of the total
items, but these consume about 70% of the total budget of inventories. So,
these items require proper storage and handling. Over stocking is avoided
 Only necessary quantities of these inventories are purchased and stock, so
as to minimize the investment on these items.

❑ B-items: The items coming under this group are neither costly and cheap.
These items constitute 20% of the total quantity of the inventories and 20%
of the total expenditure of inventories is spent on these items.

❑ C-items: These items are comparatively cheaper in cost and 70% of the
total quantity of the inventories. 10% of the total expenditure of inventories
is spent on these items
 Cont….

➢ The annual expenditure of individual items was arranged in descending

order.
➢ The cumulative cost of all the items was calculated. The cumulative
percentage of expenditure and the cumulative percentage of number of
items were calculated.
➢ This list was then subdivided into three categories: A, Band C, based on the
cumulative cost percentage of 70%, 20% and lO%, respectively
2. VED analysis
❑ The VED criticality analysis of all the listed items was perfonned by
classifying the items into vital (V), essential (E) and desirable (D)
categories.
❑ The items critically needed for the survival of the patients and those that
must be available at all times were included in the V category.
❑ The items with a lower criticality need and those that may be available in
the hospital were included in the E group.
❑ The remaining items with lowest criticality, the shortage of which would not
be detrimental to the health of the patients, were included in the D group.

❑ The VED status of each item was discussed with justification by a group
comprising of physician, surgeon, pediatrician and pharmacist.
3. ABC-VED matrix analysis :
❑ The ABC-VED matrix was formulated by cross tabulating the ABC and VED
analysis. From the resultant combination, three categories were classified
(I, II and III). Category I was constituted by items belonging to AV, AE, AD,
BV and CV subcategories.
❑ The BE, CE and BD subcategories constituted category II, and the
remaining items in the CD subcategory constituted category III.
❑ In these subcategories, the first alphabet denotes its place in the ABC
analysis, while the second alphabet stands for its place in the VED
analysis.