Hospital Pharmacy · Short notes

Inventory and Purchasing: Short Notes & Cheat Sheet

ABC and VED analysis, EOQ, reorder level and safety stock, FEFO stock rotation, tendering and storage conditions.

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Short notes

Read these before you attempt the topic's MCQs.

ABC analysis

A few expensive items take most of the budget. Control class A tightly; manage class C simply.

Classifying stock

ABC analysis ranks items by annual consumption value. About 10–20% of items (class A) account for about 70–80% of spending, so they need the tightest control.
Class C items are the majority by number but only about 5–10% of spending.
VED analysis ranks by clinical importance: vital (must never run out), essential and desirable.
ABC and VED are often combined in a matrix so that vital items are never neglected even if they are cheap.
FSN analysis classifies items as fast-moving, slow-moving or non-moving.

When and how much to order

Economic order quantity (EOQ) = √(2DS/H), where D is annual demand, S is the cost of placing one order and H is the holding cost per unit per year.
Reorder level = (average daily usage × lead time in days) + safety stock.
Safety (buffer) stock protects against delays and demand spikes.
Maximum and minimum stock levels stop overstocking and stock-outs.
Inventory turnover = cost of goods used ÷ average inventory; a higher turnover means stock moves efficiently.

Purchasing and storage

Tenders can be open (advertised publicly), limited (to pre-qualified suppliers) or single (one supplier). Rate contracts fix prices for a period.
Stock is rotated by FEFO (first expiry, first out), so the item expiring soonest is issued first.
Storage temperatures: refrigerator 2–8 °C; room temperature as labelled (up to 25 or 30 °C). Vaccines depend on an unbroken cold chain.
Expired and damaged stock is segregated, recorded and disposed of safely.

Cheat sheet

High-yield facts in one place. Cover the right-hand column and test yourself.

Key formulas

Quantity	Formula
EOQ	√(2 × D × S ÷ H)
Reorder level	Daily usage × lead time + safety stock
Inventory turnover	Cost of goods used ÷ average inventory
Safety stock	Buffer for lead-time and demand variation

Analyses

Analysis	Basis
ABC	Annual consumption value (cost)
VED	Criticality: vital, essential, desirable
FSN	Movement: fast, slow, non-moving
FEFO	Issue earliest expiry first

Memory aids

ABC = Always Big Cost first: Class A items are few but take most of the budget, so they get the closest control.

Exam traps

ABC is based on money spent, not on how important a drug is clinically; VED covers importance.
FEFO, not FIFO, is the correct rule for medicines with expiry dates.
Higher ordering cost increases EOQ; higher holding cost decreases it.
A cheap class C drug can still be vital (e.g. adrenaline) and must never run out.

Revised? Now test yourself.

Attempt the Inventory and Purchasing MCQs while the notes are fresh. Anything you get wrong is saved to your incorrect list for the next revision round.