ABC inventory analysis and economic order quantity concept in hospital pharmacy purchasing

ABC inventory analysis and the economic order quantity (EOQ) concept were studied as alternatives to the cyclical ordering system used by the pharmacy in a 558-bed general hospital. The inventory was divided into A, B or C groups according to the annual dollar value of the items. Two samples were selected to be studied (the first consisting of 10% of the total inventory and the second consisting of 10% of the A, or high cost, items). For each item in both samples the EOQ was calculated to estimate the proposed annual inventory cost as compared to the actual cost as determined from past inventory records. In the first sample, there was a statistically significant mean annual savings of $4.13 +/- $0.36 (S.E.) using the proposed annual cost. In the second sample there was a mean savings of $2.42 +/- $0.60 (S.E.) using the proposed method, which was not statistically significant. Most of the savings with the proposed ABC-EOQ system would occur with the low dollar value items (B and C items) which were being purchased too frequently.