MATERIALS MANAGEMENT

ESSENTIAL PART OF COMMUNITY MEDICINE

1. MATERIAL MANAGEMENT MADHUR VERMA PG JR 1 ST

2. INTRODUCTION Material is defined as “equipment, apparatus and supplies used by an organization for the purpose of rendering services”, The basic objective of management is to optimize the resources, i.e : Men, Money, Materials, Machines& Minutes(time)

3. INTRODUCTION Lack of proper attention to the material management in the health system in the country has been a major problem in effective implementation of various health programs Man fails to realize the fact that material represents money and also there is a lack of perception about the inter- relatonship between money and the material Non availability of drugs and materials supplies– dissatisfaction among health personnel and also community

4. DEFINITION MM is a scientific technique which is concerned with the planning, organizing and controlling the flow of materials from their initial purchase through internal operation to the distribution to the service points

5. BASIC FUNCTIONS OF MATERIAL MANAGEMENT Effective management and supervision Sound purchasing methods An efficient purchase system A simple inventory control programme A result oriented requisition and distribution system Written policies and procedures A practical receiving programme: It denotes the need for accountability and responsibility. For the best results, the purchasing, receiving & paying of invoice should be done by separate persons.

6. AIM for MM To have material in hand when needed To pay the lowest possible price, consistent with quality and value requirement To minimize inventory investment To operate efficiently

7. To gain economy in purchasing To satisfy the demand during period of replenishment To carry reserve stock to avoid stock out To stabilize fluctuations in consumption To provide reasonable level of client services PURPOSE OF MATERIAL MANAGEMENT

8. For delivery of effective health care services it is necessary that- Right material at right time at right place in right quantity and of right quality should be made available to perform the assigned activities in an effective and efficient manner Recurring expenditure of an average hospital – 60%---on salaries of employees 30-35%--- on materials 5-7% ---- on non material resources

9. Stock: The goods kept on the premises of a business or warehouse and available for sale or distribution Inventory –- total quantity of material available in the store Logistics –- defined as function of moving, storing and distributing resources and goods

10. Economy in MM Purchase cost – actual cost of material Carrying cost - cost of using or borrowing money cost of storage space cost of additional manpower cost of obsolescence cost of deterioration cost of pilferage, breakage Carrying cost may be 25-30% of the actual inventory cost How to reduce it? Buy in small quantity. But this increases PC A point/ quantity at which both are minimum called economic order quantity (EOQ)

11. Shortage cost--- deals with the cost of not having a material. It would vary according to the nature of an item Ordering cost--- cost of placing an order to the firm

12. Primary Right price High inventory turnover Low procurement & storage cost Continuity of supply Consistency in quality Cordial relationship with supplier Development of vendors Good information system Low storage cost Good records Objective of material management

13. Secondary Economic Forecasting Inter-departmental harmony Product improvement Standardization Make or buy decision New materials & products Favorable reciprocal relationships

14. Advantages of MM Improved accountability Better coordination Better performance Analysis of data Better team work

15. ELEMENTS OF MATERIAL MAMANGEMENT DEMAND ESTIMATION PROCUREMENT DISPOSAL CONDEMNATION MAINTENANCE & REPAIR ISSUE & USE RECEIPT & INSPECTION STORAGE

16. SELECTION AND DEMAND ESTIMATION Selection of items to be purchased need some basal document, e.g., for medicines as per latest figure sixty thousand formulation of drugs are manufactured and sold in Indian market, while WHO says only three hundred odd number of drugs are sufficient even for a tertiary hospital of developing country. Limited funds available are often ill spent on ineffective duplication or unacceptable dangerous drugs. It is therefore imperative to prepare a list of essential drugs for a hospital & included in HOSPITAL FORMULARY .

17. FORECEASTING OR ESTIMATING DEMAND Forecasting is the method of estimating demand based on time series analysis of past while anticipating the future. Demands for materials could be certain or predictable, and uncertain or unpredictable. Following guidelines: Trends in consumption pattern during last 2-3 years. Objective of the hospital. Morbidity pattern of the community The clienteles Cyclic changes in epidemiological occurrence of disease. Resources constraint. Existing stock position.

18. Methods of forecasting of demands in hospital Last period demand– The arithmetic average & Moving average– it generates the next period’s forecast by averaging the actual demands for the last ‘n’ time periods

19. PROCUREMENT Process of acquiring supplies Three sources : Purchase Donations Manufacturing Objective of well procurement system: Acquire needed supplies as inexpensively as possible. Obtain supplies of high quality Assure prompt, dependable delivery. Distribute the procurement workload to avoid period of idleness & overwork. Optimize inventory management the scientific procurement procedures.

20. PROCUREMENT Methods of purchase: TENDER BUYING Open tender Restricted tender (selective) Negotiated procurement Direct procurement RATE CONTRACT Most important methods of procurement of drugs as far as the govt. hospitals are concerned. Under these contracts the firms are asked to supply stores at specified rates during period covered by the contact. DGS&D keeps a close watch. Many state govt. & other organizations, like ESI, have preferred to have their own rate contract.

21. RECEIPT AND INSPECTION Supplies offered are received in the store. The inspection policy should enunciate the sampling procedure for inspection and this procedure must be followed. At the point of delivery check each item physically and count against supplier’s invoice The lot thus picked up by a random sampling method should be subjected to physical and chemical inspection. Thus any discrepancy, problem or error in a specific transaction, becomes evident during the receiving operation. Carry out basic documents immediately i.e. day book or inward good register

22. The Receiving Process Submit to Purchasing Department, the user & accounting department The Receiving Clerk In Charge

23. Inspecting the Material Quality Control Head in Charge

24. RECEIPT AND INSPECTION Procedures : Unloading & checking supplies Unpacking & inspecting supplies Goods received notes Delivery of materials to the proper stocking locations Receiving records shows– - - which supplies are consistently late in their deliveries -- which have the maximum number of rejects ---which deliver the greatest no. for split consignments Any of these supplier is costly to the buyer

25. Return Policy If the Material is Rejected

26. STORAGE Medical store should be accessible to supplies as well as indenters. Location of store will, therefore, be guided by the flow activities of the store. Also, light, ventilation, cupboards, shelves should be of adequate size. Items received later from the supplies should be stored behind similar items and the principle of FIFO should be adopted. Refrigerators or cold rooms are necessary. Combustible and non-combustible– should be kept separate Poisonous drugs & narcotics should be stored in locked cupboards Rodent free.

27. MONITORING OF EXPIRY Drugs There are number of checks : Purchased quarterly Ensure sufficient span of time to consume it before expiry date. Arrangement with supplier for replacement Expiry chart NAME OF DRUG 2011 2012 remarks j f m a m j j a s o n d j f m a m j j a s o n d Erythromycin O X

28. STORAGE METHODS The Two-Bin system —stock of each item is physical separated into two bins -– working bin and reserve bin When working bin empty the store keeper changes to the second bin and is alerted that new supplies are needed Double shelf system – modification of two-bin system This system works well only if the supply time is half the purchasing interval

29. ISSUE AND USE Issue should be made after receiving written indents Distribution system can be either by direct supply or through a sub store’ Push method (allocation system) Pull methods (requisition system)

30. Selective inventory control LEAD TIME -- It denotes the average duration of time between placing an order to the supplier and receipt of materials in your medical stores Internal lead time – duration between the moment at which some one is aware of the need for the additional stock and order is placed External lead time— taken by the supplier to supply the materials after it receives the supply order from an org.

31. Working stock – used to satisfy the demand between deliveries Safety stock( Buffer stock)– exits to protect against stock outs which would otherwise occur when either the deliveries are delayed on the working stock is consumed at an unexpectedly high rates Reorder level- stock level at which a fresh order has to be placed. It is equal to average consumption per day multiplied by the lead time

32. Inventory Control If the material passes inspection

33. IDEAL INVENTORY MODEL Demand rate Time Lead time Lead time Order Placed Order Placed Order Received Order Received Inventory Level Reorder point, R Order qty, Q As Q increases, average inventory level increases, but number of orders placed decreases ave = Q/2

34. Economy order quantity Economy order quantity– the quantity most economic to buy EOQ = √2AC A=annual consumption in units H C =cost of placing & receiving an order p =purchase price per unit H =holding cost per unit per year Total annual cost = (purchase cost) + (order cost) + (holding cost) TC=AP +AC/Q +QH/2

35. Holding Costs Ordering Costs EOQ Units $

36. Suppose drug A priced at Rs 1000/- per box of 1000 tablets, with 1000 boxes being used per year. Placement of an order cost Rs 160/- and annual carrying cost after delivery is 20% of the purchase price √ 2CA/H = √ 2(160)A/200 = √ 1.6A = √ 1.6x 1000 = 40 Given the minimum cost order quantities , an order for 40 boxes should be placed on 25 occasions during the year Stock will vary between 0 to 40 boxes averaging 20 The ordering plus carrying cost will thus be 25(160)+ 20(200) = 8000 4000 + 4000

37. If 100 boxes ordered: 10(160) + 50(200) 1600 + 10000 = 11600 If 20 boxes are ordered: 50(160)[phone]+2000=10000

38. Reorder Point Quantity to which inventory is allowed to drop before replenishment order is made Need to order EOQ at the Reorder Point: ROP = D X LT D = Demand rate per period LT = lead time in periods

39. SELECTIVE INVENTORY CONTROL Effective manager should isolate those items that require more precise control from those that do not Items are classified into groups based on different criteria ABC analysis of drugs-- based on annual cost of the items. Also known as Always Better Control

40. ABC Classification Class A 5 – 15 % of units 70 – 80 % of value Class B 30 % of units 15 % of value Class C 50 – 60 % of units 5 – 10 % of value Copyright 2006 John Wiley & Sons, Inc. 12- 40

41. VED ANALYSIS Based on critical value of an item and its effect on patient care. V  vital item E  essential D  desirable Without which institution cannot function. Should always be present in sufficient quantity and sufficient safety stock should be maintained to ensure 100% availability. Controlled by top manager levels. Those items whose shortage can be tolerated for short period only. But if not available over a long period…adversely affect patient care and hospital functioning. Controlled by middle manager level. Whose shortage will not adversely affect the patient care or hospital function, even if they are not available for longer periods.

42. COMBINATION OF ABC & VED ANALYSIS V E D A AV AE AD Cat I (15%) B BV BE BD Cat II (40%) C CV CE CD Cat III (45%)

43. SDE ANALYSIS Based on availability position of items in market. S  scarce in market (imported drugs) D  difficult to obtain E  easily available Used to avoid out of stock position of items. FSN Based on rate of consumption F  fast moving S  slow moving N  not moving

44. Equipments Management Equipments play a major role in a hospital. Medical equipments aids the treating physician in providing efficient health care in diagnostic and therapeutic areas and make the patient stay comfortable Effective management and efficient maintenance of health care delivery and are vital for the smooth functioning of every health facility from PHC to the most sophisticated hospital in every country

45. Problems- wide variety of equipments at various level of sophistication level but without adequate maintenance support Even less sophisticated equipments lead to high maintenance cost by local agents Lack of technically qualified manpower A hostile environment A developing country will seldom have about 50% of its equipments in usable condition at a given time

46. Before ordering an equipment hospital should ensure Latest technology is being purchased Full repair and maintenance facilities exist with a minimum of down time Availability of post –warranty repair of reasonable cost Purchased from reputed manufacture Consumables are readily available Operating cost should be low

47. RECORDS NEEDED FOR MAINTENANCE HISTORY SHEET: Identification data  make model and date of purchase Source of details of supplies and its spares Purchase cost and detail of purchase procedure Details of breakdowns and repair undertaken Expenditure incurred on repair LOG BOOK FOR EQUIPMENT: Records for its maintenance should be kept, i.e., warranty period & servicing/repair done, annual service contract, expenditure incurred. Details of preventive maintenance Whether in working condition or not.

48. RECORDS NEEDED FOR MAINTENANCE PERFORMANCE RECORD OF EQUIPMENT: Essential to recommend for condemnation Period since working Level of utilization in terms of output Periods when not working, with reasons If beyond economic repair, a certificate from the engineering unit should be procured.

49. CONDEMNATION & DISPOSAL Minimum criteria to be followed for condemnation. Non-functional and beyond economical repair Non-functional and obsolete Functional but obsolete Functional but hazardous Functional but no longer required A CONDEMNATION COMMITTEE should be constituted for assessing whether or not an equipment should be condemned and disposed of based on the history sheet & recommendations of the user department.

50. CONDEMNATION & DISPOSAL This committee should meet periodically at regular intervals, at least twice an year. However, for condemnation of costly hospital equipment, a SPECIAL CONDEMNATION BOARD may be constituted as per rule of the organization.

51. CONDEMNATION & DISPOSAL PROCEDURES: Circulate within the hospitals, wards, OPD Return to vendor if he is willing to accept Sell to other hospitals Sell to scrap dealers Local destruction By Auction: normally 10% of book price is accepted as reserve price for auction

52. CONCLUSION Material management is an important management tool which is very useful in getting the right quality & right quantity of supplies at right time. Provides good inventory control & helps in adopting sound methods of condemnation & disposal, and therefore improves the efficiency of the organization, whether it is Private, Government, Small organization, Big organization or Household. All these makes the working atmosphere healthy. Even a common man must know the basics of material management so that he can get the best of the available resources and make it a habit to adopt the principles of material management in all daily activities.

53. Thank you….