Basics of logistics and inventory management

Basics of logistics and inventory management

1. Basics of logistics and inventory management Vignesh L Junior resident CCM, AIIMS Delhi

2. Logistics / Logistics management The Council of Supply Chain Management Professionals defines logistics management as: "[The] part of supply chain management that plans, implements, and controls the efficient, effective forward and reverses flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customer's requirement.” Process of getting goods through the supply chain from the point of origin to the point of consumption

3. Goal of logistics Much more than just simply making sure a product gets where it needs to go Commodity security – “Every person...to choose, obtain, and use quality health supplies whenever they need them”

4. Framework with concepts in Commodity Security – 7 Cs’

5. Impact of logistics on health programs Increases program impact by providing a reliable supply of commodities Enhances equality of care Improves cost efficiency and effectiveness by reducing product losses due to overstock, waste, expiry, damage, or pilferage. Extends Limited Resources

6. Key terms & definitions in logistics

7. Logistic cycle A model to illustrate the relationship between various interdependent logistics activities

8. Logistic cycle > Serving customers Ultimate purpose of logistics Informed customer service e.g. contraceptive use Understanding the needs and demands of the customer Commodity Security

9. Logistic cycle > Product selection Chosen to best fit the public health needs of the country and meet program goals based on local policies and guidelines Medicines and related medical supplies - based on therapeutic efficiency and safety, standard treatment guidelines, quality, cost-effectiveness, and ease of use Essential Medicine Lists Responsibility of the national formulary and therapeutics committee or another government appointed group Other things: Product registration in the country, storage requirements & requirement of other products / drugs along with it

10. Logistic cycle > Quantification Quantities needed in the short and long term are determined Not a one-time process Supply plan Estimate with quantity and cost of the products required for an uninterrupted supply, with details of when to procure and distribute Procurement is the process in which commodities are obtained via international, regional, or local sources of supply Leverage the sources, amounts, and timing of funding commitments

11. Steps of Quantification Forecasting - determines the quantities of products that a program will dispense to users for a specific period of time in the future. Sources of data: Demographic, morbidity, service and consumption data Use as many data sources as possible A supply plan is developed utilizing data from: • Forecasts • Available budget • Stock on hand • Previous quantities ordered • Losses expected • Transfers • Desired stock level • Storage capacity

12. Logistic cycle > Procurement Process followed when products are purchased A procurement plan: Identifies all items needed for procurement Defines procurement requirements based on the forecast, supply plan, desired stock levels, and amounts already in stock or on order Creates a sound financial justification for procuring them

13. Logistic cycle > inventory Inventory management: Process of overseeing and controlling ordering, receiving, storage, and distribution of commodities Objective: Provide uninterrupted delivery of commodities at the minimum cost An important asset Inventory mismanagement - significant financial problems (overstock, understock, or expiry) Inventory control system

14. Min-Max inventory control system  Quantities in stock within established range (between minimum and maximum level) Max stock level - level above which inventory levels should not rise Min stock level - lowest level of stock considered acceptable Types of Min-Max system: Forced-ordering system: Supply chains using this system require that facilities always restock all commodities to the pre-set maximum level at the end of every review period no matter how much or little is in stock. Continuous review system: Review stock levels each time stock is issued . If the stock level is at, or has fallen below, the minimum stock level, enough stock is ordered to bring the levels up to the maximum stock level. Standard system: Supply chains using this system restock replenishment commodities at the end of the review period for only the commodities that are at the minimum level.

15. System of Analyzing stocks ABC analysis – Based on cost: Method: List of drugs showing the expenditure incurred on purchase for previous year is made Drugs are arranged in decreasing order of cost Cumulative cost is calculated Categorized into 3 groups (A, B & C) Group A - high priority and managerial attention given as these account for the bulk of expenditure. Item group Item (%) Cost (%) A 10 70 B 20 20 C 70 10

16. System of Analyzing stocks VED analysis – Critical importance in patient care V ital items - ~10% of total >> Absence unacceptable E ssential items - ~ 40% of total >> Absence tolerable for short period D esirable items – 50% of total >> Absence tolerable for long period At whatever cost, out of-stock position for any of vital items is avoided Essential items – made available in a day or two

17. System of Analyzing stocks Combination of ABC & VED analysis: Category ABC analysis or VED analysis Action 1 Expensive or Vital items Maximum attention Management by exception Stock continuously monitored Safety stock kept low to reduce the carrying cost 2 Average cost or Essential items Moderate control 3 Inexpensive or Desirable items Managed at lower level of management

18. System of Analyzing stocks SDE analysis: Scare items - imported items or which are known to be frequently in short supply Difficult items - difficult to obtain in adequate quantity or quality immediately Easily available - no difficulty to purchase or procure FSN analysis: Fast-moving Slow-moving Non-moving – lock up space and fund, identified & disposed of

19. Assessing stock status To assess stock status, two data elements are required: Stock on hand: this is quantities of usable stock Average monthly consumption: this is quantities of a commodity used on average over a given period of time

20. Storage After a commodity has been procured and received, it must be stored until it is needed Storage is more than just shelving products, Ensures the physical integrity and safety of products and their packaging, maximizing shell life Basic storage procedures: Clean and disinfected Dry, well-lit, and well-ventilated storeroom and out of direct sunlight Protection from water penetration Fire safety equipment available Latex products away from electric motors and fluorescent lights Maintain cold storage (e.g. cold chain for vaccines)

21. distribution Distribution systems: Push (or allocation) systems,: the issuing facility determines the quantity of commodities to distribute to the lower level facilities. Pull (or requisition) systems, the receiving facility determines the quantity of commodities it will receive. Combination systems, some levels in the supply pipeline may be pushed, others pulled. When commodities are not in full supply, the higher level must determine how to fairly distribute what is available. This is called rationing. It should be avoided.

22. Logistic management information system (lmis) Essential data items required: Stock on hand Losses and adjustments Consumption Consumption data is from: Dispensed-to-user data: the quantity of commodities administered to a client. Issues data: quantities of products that are sent from upper level facilities to lower level facilities. Used when dispensed-to-user is not available .

23. LMIS - Records Stock keeping records - commodities in storage (e.g., bin cards, stock cards, stores ledgers) Transaction records - commodities being moved (e.g., issue vouchers and receipt vouchers, packing slips, waybills) Consumption records - commodities that are consumed or used (e.g., daily activity registers, dispensing logs)

24. LMIS - reports Facility-level reports - essential data items at a given facility level Summary reports - at the end of a reporting period Aggregate reports (aggregate summary reports) Combined report - track transaction data between facilities and levels. Feedback reports - Communicate mistakes, appreciate, as for more information

25. Mobile Technology Benefits Health - m Health Report inventory levels Receive diagnostic support Track fuel consumption, engine and driver performance, hours of work per week Consult with colleagues Communicate with clients Enhance their skills Gather, analyse, and transmit data (i.e. LMIS data, fuel usage, managing scheduling or distribution routing)

26. thank you..