ABC analysis is an inventory management system that values items using their importance to a business. The system helps organizations manage their inventory levels. ABC stands for the different grades. The segregation determines how much control to administer to products within each segment. The ABC process helps manage risk associated with inventory, which includes expiries. The method is practical because it considers that not all the items you stock at your pharmacy are of equal value to your business. The reality allows you to efficiently allocate time, resources, and effort in inventory management. The framework aligns with the Pareto Principle, stating that 80% of consequences (revenue) come from 20% of effort (stock).

Products in grade A are the most critical for the success of your pharmacy. These should be under tight control. Their records should be accurate and up to date. Follow up on their stock levels regularly. These account for 80% of your revenue and profit. Profit is the bloodline of businesses. High revenues within super-thin margins put your pharmacy business at risk of closure in case of unforeseen circumstances that negatively impact your organization. The products in this segment usually are fast-moving. The items may account for the minimum portion of your inventory levels.

Products in Category B are less tightly controlled than those in grade A. The items in this set are of moderate value as a percentage of the overall value of inventory at your pharmacy. The products account for 15% of your revenue. They may be more in number but less in value to your pharmacy. Your pharmacy may incur higher inventory costs to hold the products in this segment because they sell less often than Category A items. Keep checking the products in this group to determine if they need to move to Category A or C.

Category C items are usually the highest number yet bring the minimum revenue to your pharmacy. Replenish their inventory only when they sell out. Consider whether they deserve restocking. Products in this segment are a common source of expiries. Contemplate ordering them only when a client orders for them. These items may account for 5% of your revenue. Consider putting them up for sale, for example, if they are OTC (Over-the-counter) products. You can also put them up for redistribution. The items may contribute to stock variety. Negotiate with suppliers, whenever possible, to take back these items.

ABC Analysis is a dynamic inventory management framework. Constantly monitor how products are categorized. Keep an eye on Category C, as expiries are more likely to arise from products in this segment. Consider strategies for liquidating Category C items to limit losses due to expiries. We at Renew Rx have a platform through which you can request liquidation. Check out the items up for liquidation at https://liquidate.renewrx.africa/. Help colleagues reduce losses from expiries as you improve access to medicine. Digitize your inventory system to ease the monitoring process. Consider using software that has an in-built ABC analysis system. Such data will help you mini