ABC, VED, HML Analysis in Material management

  • In health care system, material management is concerned with providing the drugs, supplies and equipment needed by health personnel to deliver health services.
  • The right drugs, supplies and equipment must be at the right place, at the right time, and in the right quantity in order that health personnel deliver health services.
  • Inventory control it is an important aspect of material management.
  •  Inventory control is a scientific system which indicates as to what to order, when to order, and how much to order, and how much to stock so that purchasing costs and storing costs are kept as low as possible.

Objectives of Inventory Control
  1. To keep the investment on inventories to the minimum.
  2. To minimize idle time by avoiding stock outs and shortages.
  3. To avoid carrying cost.
  4. To improve quality of care with lesser inventory.
  5. To avoid obsolescence of inventor
Techniques in Inventory Control
  • ABC Analysis (Always Better Control)
  • VED Analysis (Vital, Essential, Desirable)
  • HML Analysis (High, Medium, Low)
  • FSN Analysis (Fast, Slow moving and Non-moving)
  • SDE Analysis (Scarce, Difficult, Easy)
 ABC Analysis
  • ABC analysis is the analysis of the store items cost criteria.
  •  It is a simple approach, which avoids being money wise.
  • The cost of each item is multiplied by the number used in a given period and then these items are tabulated in descending numerical value order.
  • It will be seen that first 10% of items approximately account for 70%, the next 20% for 20% of value and the last 70% account for 10% of value.
  • It has been seen that a large number of items consume only a small percentage of resources and vice- versa.
  • A – Items represent the high cost centre, B items represent the immediate cost centres, and C- items represent low cost centres.
  • A very close control is exercised over A items while less stringent control is adequate for those in the category B, and less attention for category C.
A-    Items
  1. Tight controls
  2. Rigid estimates  of requirements
  3. Strict and close watch
  4. Safety stocks should be low
  5. Management of items should be done at top management level.
B-    Items
  1. Moderate control
  2. Purchase based on rigid requirements
  3. Reasonably strict watch and control
  4. Safety stocks moderate
  5. Management be done at middle level
C-    Items
  1. Ordinary control measure
  2. Purchase based on usage estimates
  3. Controls exercises by store keeper.
  4. Safety stocks high
  5. Management be done at lower levels..
Class            Number of items                     Rupee value in items
A                     10% of total items                                             70%
B                      20% of total items                                             20%
C                     70% of total items                                             10%
FSN Analysis
  • It is based on rate of consumption.
  • The items can be classified into:
    1. Fast moving
    2. Slow moving
    3. Non- moving
    4. Obsolete
An understanding of the movement of items helps to keep proper levels of inventories by deciding a rational policy or reordering. This method is based on the fact that some stock items have a much higher annual usage value than others. This after doing a cost analysis, stock items are separated into three classes with the following characteristics
The stores when subjected to analysis based on their criticality can be classified into vital, essential and desirable stores. This analysis is termed as VED analysis.
  1. Vital: items without which treatment comes to standstill: i.e. non- availability can not be tolerated.
  2. Essential: items whose non availability can be tolerated for 2-3 days, because similar or alternative items are available.
  3. Desirable: items whose non availability can be tolerated for a long period. Although the proportion of vital, essential and desirable items varies from hospital to hospital depending on the type and quantity of workload, on an average vital items are 10%, essential items are 40% and desirable items make 50% of total items available.
Although not included in scientific VED analysis, in some public organizations which are static or inefficiently managed, there is a peculiar category of ‘U’ items which can be grouped as unnecessary. These unnecessary items get purchased due to the following reasons.
a)      Thoughtless continuation of previous purchase.
b)      Indifferent attitude towards hospital formulary
c)      Fear of change
d)      Poor supervision and control
e)      Unfair practice due to vested interest.
  • The vital items are stocked in abundance; essential items are stocked in medium amounts, and desirable items we stocked in small amounts.
  • By stocking the items in order of priority, vital and essential items are always in stock which means a minimum disruption in the services offered to the people.
SDE Analysis
  • Unit value is the basis of this analysis and not the annual consumption value.
  • H - Unit value > 1000 (Sanctioned by higher officials)
  • M - Unit value 100 to 1000
  • L - Unit value < 100
ABC & VED Analysis (Matrix module: criticality Vs cost)
It is possible to conduct a two dimensional analysis taking into consideration cost on one hand , i.e. A,B,C categories, and critically VED on the other. Findings of ABC and VED analysis can be coupled and further grouping can be done to evolve a priority system of management of stores:
Coupling matrix model
                                                Cat I                Cat II                           Cat III
                                                  V                      E                                   D
                        A                       Av                   Ae                                Ad
                        B                        Bv                    Be                               Bd
                        C                       Cv                    Ce                                Cd
An example for the coupling matrix model for equipment between criticality and cost

X-ray machine
Air- curtains
Electric cautery
Ultrasonic wash machine
Oxygen regulator
Patient trolley
Electronic BP machine
  •  Cell 1 contains vital and high cost items like defibrillator. It must be noted that a material manager has to comprehensively supervise category 1 items since an item may be a low cost one but critical for patient care. ( oxygen regulator)
  • Category I items: these items are the most important ones and require control by the administrator himself.
  • Category II items: these items are of intermediate importance and should be under control of the officer in charge of the stores.
  • Category III items: these items are of least importance which can be left under the control of the store keeper.
  • The grouping will essentially depend upon the strategy of management and the environment of functioning. However these simple techniques can be effective in material management system.
  •  Items with high criticality (V), but required in small quantity (A) should receive highest priority. Items with low criticality (D) and which are required in big quantity should receive least priority.
  • A thorough understanding and use of the techniques of materials management would help in ordering the supplies when needed, controlling their use, keeping them safely and in working order.
  • This also prevents chances of non availability of equipments and drugs as being out of stock of these reduces the usefulness of the hospital system.
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  2. Ghei P N. Selected reading in hospital administration. New Delhi: Indian hospital association. 1990.
  3. Pai P. Effective hospital management.( 2 nd edn).  Mumbai: the national book depot; 2003
  4. Kumar R& Goel SL. Hospital administration and management. Vol 1 ( first edn).New Delhi: Deep & deep publications;
  5. Gupta S& Kanth S. Hospital stores management, an integrated approach.( First edn). New Delhi: Jaypee brothers; 2004.
  6. Basavanthappa B T. Nursing administration. ( Ist edn). Newdelhi: Jaypee brothers medical publishers (p) ltd; 2000


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