ABC/XYZ Analysis for Kanban System Implementation in Pharmaceutical Supply Chain: A Case of Ethiopian Pharmaceutical Supply Agency

Abstract

The purpose of this study is to show how the implementation of the Kanban system based on ABC/XYZ analysis helps in improving the inventory management system in the supply chain where there is a lack of proper inventory management. Ethiopian pharmaceutical supply agency's distribution network is taken as a case to show the significance of the Kanban system. Monthly data for one year is collected and is accompanied by primary data obtained from direct observation and discussion with the company's management staff. ABC, XYZ, and ABC/XYZ matrix analyses were performed to determine items to be considered in Kanban implementation. By analysis, it is shown that the Kanban system can improve inventory-related costs by about 75%. While the Kanban system is rarely implemented in the pharmaceutical sector so far, it is understood in this study that it can bring improvements in the sector if properly implemented. Though it is shown by analyzing data on how the Kanban system can improve inventory-related costs, it is imperative to practically implement it for validation of its effectiveness.