LOGISTICS (MATERIALS) MANAGEMENT IN HEALTHCARE

Fundamentals of Logistics Management in Healthcare Institutions

1. Dr. S. A. Tabish FRCP, FACP, FRCPE, FAMS, MD (AIIMS ) PostdoctoraL Fellowship, University of Bristol (UK) Doctorate in Educational Leadership (USA) LOGISTICS [MATERIALS] MANAGEMENT IN HEALTHCARE

2. LOGISTICS MANAGEMENT Logistics  is the management of the flow of  goods ,  information  and other resources between the point of origin and the point of consumption in order to meet the requirements of consumers. Logistics involves the integration of information , transportation ,  inventory ,  warehousing , material handling, and  packaging , and occasionally  security . Logistics is a channel of the  supply chain which adds the value of time and place utility.

3. Logistics Management Logistics management is that part of the  supply chain  which plans, implements and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customer and legal requirements.

4. Supply Chain Management It is a chain of interconnected businesses and business processes. Every time a requirement is communicated, order is placed and inventory is stocked, there is a potential opportunity of value addition, waste reduction and process standardization .

5. Logistics Management in Hospital Supply Chain: Medicinal supplies have a limited shelf life and many drugs are expensive. This call for a specific method of provisioning, storing and administering such medicines which starts with storing them in a temperature/ humidity controlled atmosphere and issued on a First Come First Served (FIFO) order.

6. MATERIALS MANAGEMENT Planning  and  control  of the  functions  supporting the complete  cycle  ( flow ) of  materials , and the  associated  flow of  information These functions include (1) identification, (2) cataloging , (3)  standardization , (4)  need  determination, (5) scheduling , (6)  procurement , (7)  inspection , (8)  quality control , (9)  packaging , (10)  storage , (11)  inventory control , (12)  distribution , and (13)  disposal

7. Objectives of MM Material selection Low operating costs Receiving material safely & in good condition Issue material upon receipt of appropriate authority Identification of surplus stocks & taking appropriate measures to reduce it. Providing economy in purchasing & minimizing waste To purchase items of best quality at the most competitive prices.

8. Functions Material planning Purchasing Receiving Stores Inventory control Waste management

9. MM Functions Material planning and programming Purchasing and outsourcing Inventory control Storekeeping and warehousing Codification Standardization and evaluation of all products Transportation and material handling Inspection and quality control Cost reduction through value analysis Disposal of surplus / obsolete material Distribution

10. Basic Principles of MM Right quality, Right quantity, Right prices, Right source and at Right time to the Right place Centralize the purchase system Back up of good systems management

11. Mat Purchase & Planning Processing the requisition: communicate to the purchase dept. the requirements for various items by requisition form which contains the details of quality & other necessary info. about items & is to be signed by competent authority. Proper Specification Right Quantity

12. Inventory Management Inventory means stock of raw material, semi finished & finished goods maintained by organization Inventory control-the tool of maintaining the size of inventory at some desired level keeping in view the best economic interest of org.

13. Objectives of Inv Control Protection against fluctuation in demand Better use of 5 M’s Protection against fluctuation in output Control of stock volume Protecting against quality problems To ensure reliable delivery to customers Reducing input costs (purchase in advance of price increases)

14. Inventory Costs Costs associated with ordering too much (represented by carrying costs) Costs associated with ordering too little (represented by ordering costs) These costs are opposing costs, i.e., as one increases the other decreases The sum of the two costs is the total stocking cost (TSC) Carrying (or holding) costs: sum of all costs that are proportional to the amount of inventory physically on hand at any point in time Cost of capital (opportunity cost) Breakage, spoilage, deterioration, obsolescence, loss, insurance etc. Physical storage, handling, book-keeping, refrigeration, utility etc.

15. Inventory Costs Ordering cost: Sum of all costs related to the amount of inventory that is ordered for replenishment. Fixed cost: incurred independently of the size of the order as long as it is not zero, e.g. book-keeping and paper work, mailing, etc., associated with the order Variable cost: incurred on a per unit basis Penalty cost (or stockout or shortage costs): cost of not having sufficient stock on hand to meet demand when it occurs

16. Inventory Decisions ABC (ALWAYS BETTER CONTROL) analysis- Class A –constitutes 10% of total items & accounts for 75% of total money spend on inventories. Class B – constitutes 15% of total items & accounts for 15% of total money spend on inventories Class C - constitutes 75% of total items & accounts for 10% of total money spend on inventories

17. VED Analysis This analysis represents the classification of items based on the criticality. The analysis classifies the items in 3 groups called vital, essential & desirable. Vital items are those items the unavailability of which will stop the production Essential items are those items whose stock out costs are very high. Desirable items will not cause any immediate production stoppage & their stock out costs are nominal

18. Buffer Stock Buffer stock The min. level of inventory to cover some unforeseen & uncalled for situations is called safety or buffer stock Factors affecting choice of buffer stocks- Uncertainty in demand Uncertainty in lead time Size of batch Larger the uncertainty associated with any factor, larger should be the buffer stock.

19. Finding the Right Source Supplies catalogue Print media :Trade directories, trade journals , news papers, yellow pages Salespersons: many advantages Trade exhibition , fairs , conferences Colleagues in similar field Internet

20. Negotiations Possible because of huge margins Pass on to patients Not at the cost of quality Win-win situation for all Maintain relationship Not to purchase on listed price Negotiate bulk price Always ask for discount Price protection Credit

21. Receiving Establish written protocols, assign responsibility Checking of goods for quality, expiry etc Cross check with purchase order & invoice / delivery chalan Proper record in designed registers Signature of receiver & delivery person Periodic checks

22. Distribution From store to user An intricate process Right item at right time at right place 2 methods: Requisition: as and when required Par level: periodic replenishing to a certain fixed level

23. Scope of MM Every health care organization requires a continuous stream of material and supplies for providing quality care to patient. There are numerous individual items of materials required for running a hospital, larger the size of the hospital, greater the number of items required The efficiency of a hospital partly consists in maximizing the quantity of patient care per unit of cost while maintaining satisfactory levels of quality and consumer satisfaction

24. Purchasing Purchasing is one of the important functions of administration and the goals of purchasing are to purchase at a right price, right quality, right quantity, right contractual terms, right time, right source, right material, right place, right mode of transportation, right attitude, with techniques such as value analysis, material intelligence, purchase research, SWOT analysis, purchase budget, lead time analysis, etc.

25. Procurement Procurement of the material depends on prioritization of purchase of material fixing the price calling for tenders/quotations evaluation of the tenders/quotations placement of orders ensuring receipt of material making the payment.

26. Negotiation Procurement by negotiation is a battle of wits and art of embodying sophisticated tactics and maneuvers by both the buyer and the suppliers. It is an art of arriving at common understanding through bargaining on the essential points for the contract such as delivery, specification, price and payment terms, etc. It is a difficult art and requires the exercise of executive judgment, tact and commonsense and the bargaining power will definitely be influenced by the preparedness of the buyer as well as the place and time of negotiation.

27. Status of Supplies Carrying the discussion about the volume and cost of medicines used in a typical hospital scenario, we can safely recommend: “Class – A” status to the critical/life saving drugs. “Class – B” status to the important drugs that are used by different departments. “Class – C” status to the routine drugs and medical supplies

28. Automation A fully automated medication administering process provides tools and guidance that assist in ensuring the “Five Rights” of prescribing and administering a medicine: ✔Right Drug ✔Right Dose ✔Right Patient ✔Right Route ✔Right Tim

29. Benchmarking the hospital logistics process Improved operations should provide better cost control, while maintaining the quality of care delivered to the public. Support processes are excellent targets because they don't necessarily have a direct impact on the quality of care provided. Hospital logistics is one such process, the goal of which is to efficiently deliver medical supplies and pharmaceutical products to the final consumer, the patient