The influence of proper inventory management upon operating costs and profits is often underestimated in the fiscal operation of a hospital pharmacy. Significant savings can be realized through proper management of inventory levels and order quantities. The primary purpose of this paper is to review the use of the Economic Order Value concept and the ABC classification of inventory as it applies to hospital pharmacy. This system is relatively new to hospital pharmacy, offers economical advantages over the traditional maximum-minimum system and achieves greater financial control. The intent of this overview is not only to show the importance of inventory management but to serve as a stimulus to pharmacy administrators to become more efficient through the use of sophisticated inventory management techniques.