Cost-containment activities have become particularly important to hospital operations managers, stimulated by major revisions in health care reimbursement policies and significant growth in marketing activities by private sector health care organizations. Recognizing that poor inventory control policies reflect ineffective use of organizational assets, many hospital managers have sought to institute more systematic approaches to the control of supply inventories.

At Margate Hospital, analysts collected data of 20 disposable SKUs in a pulmonary therapy unit. These data are shown in Exhibit 12.27 (these data are available in the worksheet Margate Hospital Case Data in MindTap). Three of the SKUs are designated as critical to patient care. The hospital administrator wants to develop better inventory management policies for these items.

Margate Hospital Study Data

SKU	Total Annual Usage	Average Unit Cost
1	212	$24.00
2	210	$2.00
3	117	$50.00
4	77	$28.00
5	60	$58.00
6	48	$55.00
7	33	$73.00
8	27	$210.00	Critical
9	19	$74.00
10	18	$45.00	Critical
11	12	$33.00
12	7	$65.00
13	4	$41.00
14	4	$20.00
15	3	$72.00	Critcal
16	3	$61.00
17	3	$8.00
18	2	$134.00
19	1	$34.00
20	1	$29.00

1. Using the case data, propose a breakdown for an ABC analysis, and clearly outline how each category of items might be managed by the hospital. (Use the Excel ABC template in MindTap.)

2. How do you recommend managing these ABC and critical inventory categories?

3. Can you think of any other inventory management systems besides health care where some SKUs might be defined as "critical"?