Material Mgmt SCM 1 (1)

7/28/2019 Material Mgmt SCM 1 (1)

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MATERIAL MANAGEMENT

LOGISTIC MANAGEMENT

SUPPLY CHAIN MANAGEMENT



MATERIAL MANAGEMENT

MATERIAL - means hospital supplies andequipments- “Housely”

Equipment, apparatus and supplies procured,

stocked and utilised by an organisation Bringing together available resources so as to

achieve a specific objective

Management is the function responsible for the

coordination of planning, sourcing, purchasing,storing and controlling materials in an optimummanner so as to provide a pre decided service atminimum cost



Housely- The management and control of goods, services and equipment fromacquisition to disposition”

A scientific technique- interchangeably used withSTORES management/ LOGISTIC management/SUPPLY CHAIN management



LOGISTIC MANAGEMENT

Logical extension of transportation and related areas toachieve an efficient and effective goods distribution system

Design and operation of the physical, managerial, and informational systems needed to allow goods to overcometime and space (from the producer to customer).

Logistics management can provide a multitude of ways toincrease efficiency and productivity and hence contributesignificantly to reduced unit costs



DEFINITION

Logistics is the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory( and the related

information flows) through the organization and itsmarketing channels in such a way that current and

future profitability are maximized through the cost-effective fulfillment of orders

Design and operation of the physical, managerial,and informational systems needed to allow goods toovercome time and space (from the producer toconsumer)



Integrated Logistics

The process of anticipating customer needs andwants; acquiring the capital, materials, people,technologies, and information necessary to meetthose needs and wants; optimizing the goods orservice –producing network to fulfill customerrequests; and utilizing the network to fulfillcustomer requests in a timely way.

Inbound logistics Conversion operations

Outbound logistics



Logistics management of services

Process of coordinating nonmaterial activitiesnecessary to the fulfillment of the service in acost – and customer service – effective manner

Service response logistics activities

waiting time

Capacity

delivery



PROCESS OF MATERIAL MANAGEMENT

Demand forecasting Planning & budgeting

Purchasing

Receipt, inspection and storage

Inventory control

Issue and distribution

Disposal and condemnation

Minimising losses and pilferages

Cost reduction

Value analysis



AIM OF MATERIAL MANAGEMENT

To ensure that there is adequate stock of requireditems for a continuous supply, to avoid surplus, haveappropriate storage, easy retrievability, distributionto the point of usage whenever required , effective

and efficient utilisation of available resources

OBJECTIVES- planning, acquisition, storage,movement and control of materials so as to optimise

personnel physical facilities and capacity

To provide right materials, of right quantity, rightquality, at the right time and of course from rightsource



PRIMARY OBJECTIVES

Low purchase price (low cost)

High inventory turnover

Low storage cost Maintaining continuous supply

Maintaining quality of purchase

Cordial relation with suppliers

Low pay roll cost

Development of vendors

Good record keeping



SECONDARY OBJECTIVE

Favourable reciprocal relations

Introduction of new material and products

Standardisation

Product improvement

Interdependent harmony

Economic forecast



INTEGRATED MATERIAL MANAGEMENT

IN HOSPITALS

Close coordination of all departments

Balance conflicting objectives- to achieve

optimum results for the organisation Better accountability- centralisation of

authority & responsibilities

Better coordination

Better performance

Adaptability to EDP/ HMIS



SOME ISSUES

Is it the same as Storekeeping?

Is it expensive?

Does it mean more people to be employed?

Is it only for large sized hospitals?

Is it a fad?

Is it too complex?



FUNCTIONS OF MATERIAL MANAGEMENT

DEPT

Stores planning

Receive material as ordered

Inform indenting dept – arrival of stores Inspection of stores

Record keeping

Storage and preservation



Issue of materials against authorised indents

Bill processing of materials received

Physical safe custody of stores Process purchase requisition of items

Condemnation and disposal



TYPES OF HOSPITAL STORES

I. TWO BROAD CATEGORIES Consumable stores

Non consumable stores

II.- NATURE OF STORES Medical & Drug stores

Surgical stores

General stores

Linen stores Stationary stores

Engineering & maintenance stores

Medical equipment



INDENTING OF STORES

Annual indents- by 1st Jan each year

Forecast for ensuing FY

Existing stock position

Last year’s average consumption

Quantities required for next year

Complete specification

Likely source

Appx cost



Supplementary indents

In case of need- unforeseen circumstances

submit separately- by 1st Aug

Limit of finances

Emergent indents

In case of urgent, immediate and inescapable demand

Funds available O i/c to authenticate

Any time of the year

Approval of competent authority



INDENTING GROUPS

Surgical instruments & equipment

Prosthetics

Medical stores/ chemicals/ stains/ dyes Linen

Stationary

General stores

Diet items



Engineering items

Rubber goods

Furniture – wooden, steel Glassware- lab equpt

Optical instruments

Photographic materials

miscellaneous



END OF PART - I



CONTROL OF STORES

CLOSED SYSTEM-

physically stored in closed and controlledenvironment- under lock & key,

only authorised person to handle

Issue under authorised requisition

OPEN SYSTEM-

repetitive & mass use of items,

close to the point of use



LOCATION OF STORES

Easy access- FIFO method

Receipt & issue in least possible time

Easily accessible to all users

Cost of transportation minimal Safe from pilferage, theft & fire

Ensure strict control

Unnecessary fatigue and monotony is avoided

Due consideration to humidity, temperature,lighting, ventilation

Scope for future expansion



LAYOUT DESIGN… Principles

Maximum utilisation of available space

Greater efficiency of stores depot

Easy accessibility to all materials Maximum security of all materials

Proper maintenance of records

Economy in movement, placement and issue

Minimum of spoilage, damage and otherlosses



DESIGNING A STORE

Space – McGibony – 20 sqft per bed/ 1000-1500 sqft Armed Forces Scale of Accomodation – 120% more

Rows of shelves parallel to longest dimension

Flow pattern – straight path Avoid dead ends

Proper space utilisation

Width of aisles – 1 ½ times of width of material

Match shelves with type of material being stored Flooring – clean and dust free

Adequate light

Ventilation- A/C



SUB STORES

OP pharmacy

IP pharmacy

OT stores Cath lab stores

Linen stores



STRAIGHT THROUGH FLOW



ELEMENT BASED

FAST MOVINGMEDIUMMOVING

SLOW MOVING

OFFICE

ISSUE

IN

OUT



PART III- PURCHASES



ORGANISATION

CEO/ MANAGINGDIRECTOR

PURCHASING

DIRECTOROPERATIONS

DIRECTORPERSONNEL

DIRECTORMATERIAL

DIRECTORFINANCE

MEDICALDIRECTOR

TRAFFICCENTRAL

RECIEVINGSTORES

INVENTORYCONTROL



PURCHASE MANAGER

PURCHASE MANAGER

EQUIPMENTS

SURGICALS

GENERAL STORES

DRUGS



DEMAND FORECASTING AND PLANNING

CONCEPT OF STADARDISATION- groupingitems of similar specification. It ensures

Non duplication of inventory

Variety reduction

Economical purchase cost

Efficient use of materials

Allows to definitely establish units of services,capital equipment, consumables and suppliesfor each department



Pareto rule/ - a small percentage of itemsrepresents the majority of inventoryinvestment

80-20 rule High cost high usage items should receive

greatest degree of attention.

Low cost low usage items account for largerpercentage but smaller percentage of inventory-crude forecast with large safetystock



FORECAST

An estimate of demand expected in future. Certain & predictive-easy to forecast

Uncertain and un predictive- difficult

Fore casting techniques (trend line/ regression analysis/ exponentially weighted

moving average. Economic models/ simulation)

used in manufacturing industry not very applicable, excepta few

Last period method

Arithmetic average – of all past demands

Moving average- of past n times- n defined byexperimentation



PURCHASE DEPARTMENT

PROCUREMENT an important and crucialactivity sophisticated life saving drugs used by doctors to

stapler pins used in the hospital office Since a huge portion of revenue is devoted to

purchasing, an effective purchasing strategyis vital.

SCM is a major link in having effective vendorrelations, vendor evaluation, vendordevelopment and negotiations.



PURCHASE DEPT

Task of purchase department is to procure the inventory at lower prices

without compromising on the quality

by reducing the lead times with the suppliers through

competitive bidding, direct negotiation and group purchasing.

Departments of materials, finance, receiving and

store-keeping work in tandem to processeffectively the high volume of purchases, receiptand payment transactions that take place atregular intervals.



An efficient inventory policy should link thesupply to the consumption patterns forreducing overall inventory level.

The transactions should be online so that thedatabase gets updated automaticallysubsequent to each and every issue of

material /medicine etc to enhance efficiency.



PURCHASE CYCLE

Develop a clear complete description andspecification of items

Determine important commercial requirements,

performance and eligibility criteria

Invite bids allowing considerable time for

response from suppliers

Open tenders in public Evaluate tenders

Assess capacity of new suppliers



Visit the manufacturer’s premises

Select suppliers

Award contracts

Follow up contracts

Check stores at consignee’s end

Release initial payment

Check satisfactory performance

Release balance payment

Evaluate performance for future transaction



PURCHASE

Acquiring material as required to meet qualityand time schedules Selection of acceptable vendors

Negotiation of terms

Placing purchase orders considering economic level Expediting deliveries to meet inventory requirement

Centralised purchasing/ decentralisedpurchasing

Lower purchasing cost Quantity discounts

Lower inventory costs

Better management control



PURCHASE PROCEDURE

Drawing up specification

Inviting quotation

Preparing comparative statements-incorporating basic prices, freight charges/octroi/ taxes/payment/ discounts/deliveryperiod

Short listing

issuing purchase orders



TENDER PROCESS

Tender Enquiry

Clear & specific about terms of delivery-

for destination rly station, FOB (free onboard), C&F (cost & freight), CIF (cost,insurance and frieght), free delivery atconsignee’s depot etc.

Clear mention of duties/ taxes/ octroi

Risk of property in goods follows theownership



TENDER SYSTEM

SINGLE TENDER

LIMITED TENDER ENQUIRY

ADVERTISE TENDER (OPEN TENDER) GLOBAL TENDER



SUPPLY CHAIN

PURCHASINGDEPTT/ STORES

VENDORS

RECEIVING DEPTT/STORES

ACCOUNTPAYABLE DEPT

ORIGINATINGDEPTT

NEED

CONDEMNATION

NONSTOCK ITEMS

STOCK ITEMS



PARAMETERS

COMPANY

Size/Capacity

Financial strength

Operational profit

Manufacturing range

Research facilities

Geographical location Trade relation



PRODUCTS

Quality

Price

Packaging

Uniformity

Warranty



SERVICE

Delivery on time

Condition on arrival

Follow-up instructions

Number of rejections

Handling of complaint

Technical assistance Emergency aid

Supply update catalogues



VALUE ANALYSIS

Less expensive means of providing desirablequality and acceptable performance

Finding answers to following questions

Does its use contribute value?

Is its cost proportionate to its usefulness?

Is there anything better for the intended use?

Does the cost justify its quality?

Will another supplier provide it for less?



TYPES OF PURCHASE

One time purchase

Repeat and periodical purchase

Reorder for fixed quantity at specifiedintervals,

Reorder for fixed quantity at specified dates

Contract for purchases at annual basis(committed volume contract) – advantage of fixed predetermined rates



PURCHASE ORDERS

To include all the conditions of supply

Purchaser’s orders no. and reference, date

Supplier’s name and address

Quotation reference

Description of materials Specification Brand

Name Quantity

Number of units Pack size



Supplier’s quotation reference

Packing – special packing if any

Price and total value, billing terms

Unit price Quantity discounts sales tax, excise Total value

Freight charges and despatch Freight on board(FOB), clearing, inspection andforwarding (CIF), freight to pay, insurance

Despatch mode and name of railway station,port,PO



Inspection at receiver site

Acknowledgement

Mode of payment Warrant

Insurance

Authorised signatures Penalty

Any other terms & conditions



RATE CONTRACT

Important contracts offered through DGS &Dfor Govt institutions

Firms supply stores at specified rates, no fixed

quantities mentioned

All govt institutes bound to purchase from rate

contractor for all stores

Monitoring through committees

Advantages- maximum flexibility in ordering

specified quantity

Help to maintain optimum inventory



Discounts offered linked to purchase of acertain quantity-

Questions of savings v/s cost of holdingadditional quantity



PURCHASING SYSTEM

CENTRALISED-single person/dept/ corporateoffice responsible for entire purchases

DECENTRALISED- other functional areas(dept/ units) decide on their own for theirsupplies and requirements

GROUP- group of hospitals joinhands-

general usage items



CENTRALISED

ADV – No duplication

Discounts/ better pricing

Transportation savings Effective inventory control

More efficiency – done by specialist officer/ lesser nos.of orders

Effective management control Record keeping easy

DISADV- individual unit’s/ dept’s requirements may not be met



PRICE TREND

FALL CLAUSE-

A contract provision enabling the purchase to takeadvantage of downward trend in price.

Upward trend not taken into consideration No compensation paid for the same except that

provided under specific price variation clauses incontract

DGS&D rate contracts have a clause to ensure thatthe rates quoted/ accepted are the minimum thattrade can offer any other major user of same store

Supplier to forthwith notify the reduced rates



TYPES OF CONTRACT RATE CONTRACT-

a contract for supply of stores at specified rates during periodcovered by contract (usually one year , but renewable). No quantity are mentioned but the contractor is bound to accept any

order which may be placed at specified rates during currency of contract

RUNNING CONTRACT- for supply of an approximate quantity at a specified rate during

certain period covered by contract Quantities calculated by DGS&D

Any indentor may place demand directly or through

DGS&D Purchaser has the right to take any quantity

Withdrawals are closely monitored and guaranteedquantity are made before expiry of period of contract



PAYMENTS TERMS AGAINST

CONTRACTS

GENERAL ITEMS- 95% against inspectionand despatches . 5% after acceptance of stores

PLANT & MACHINARY – 90 % against initialinspection & despatches . 10 % against finalcommission and acceptance (consumersatisfaction certificate)

RATE CONTRACT- 98% against inspection.2% after acceptance

LOCAL PURCHASE – 100% against delivery



PRINCIPLES OF PURCHASING

5 Rs

RIGHT QUANTITY-by effective inventorycontrol-EOQ

RIGHT QUALITY- pre determined standards-technical & economic - BIS

RIGHT PRICE- utility & satisfaction- costanalysis- PNC for lowest tenderer

RIGHT TIME (DELIVERY)- availability, criticality,sources, lead time, avoid stock outs & crisis

RIGHT SOURCE- vendor rating



RULES REGARDING PURCHASE

ORDER No goods, except small sundry purchases, to bemade without written order & signed

Only responsible official authorised to sanction

purchase Confirmation in writing from supplier

Each order absolutely in accordance withspecification

Reliable record of time required from date of order to date of delivery (lead time)

Regular review of outstanding from supplier



DELIVERY

Severable contract- indicating specificdelivery dates for different installments.Portions/ quantities. Each portion of contract

is an individual contract

Entire contract- when delivery of entirequantity is completed by a specific date

without indicating deliveries for intermediateinstallments



EOQ

Analyse all the cost factors associated with orderquantity

Cost of materials

Cost associated with keeping materials in stock-inventory carrying cost

Cost associated with placing orders – ordering cost

Q= √2AS/IC Q= quantity to be ordered

A= annual demand of an item S= procurement cost per order

I= ICC(expressed as %)

C= Unit cost of item



PREREQUISITES FOR EOQ

The ordering cost is constant.

The rate of demand is constant

The lead time is fixed The purchase price of the item is constant i.e.

no discount is available

The replenishment is made instantaneously,the whole batch is delivered at once.



LOGISTICS

the process of strategically managing theprocurement, the movement and the storageof materials, through the organization and its

marketing channels in such a way that thecurrent and future supply flow is maximizedthrough the cost effective fulfillment of

orders.



STOCKLESS PURCHASING

General system- central purchasing, stocking &distribution/ bulk stores off premises

Overstocking, pilferage, obsolescence

Alternative- central stores to stock minimum

Stockless purchasing – buying supplies for directutilisation by respective department withoutduplication or accumulation in central stores

Based on JIT system

Required materials are delivered by originalsuppliers to the location where they are utilisedwhen required



Inventory to be kept at two weeks supply

For supplies that require special handling viz. labreagents, x-ray films

For institutions in urban areas- short lead time Dept – lab

Radiology

Housekeeping

Dietary services

Linen supply

IV fluids-central reservestock



Requisites –

specification & delineation of appropriate quota with flexibility Lead time Supplier reliability Criticality of item

ADV- Space saving

Holding cost reduced Paper work reduced Enhances effective control over unofficial inventory Avoids lengthy processes Obsolescence is minimised- negligent lead time

DISADV- To cater for all variability- seasonal Fluctuation in patient census



SHELF LIFE

All medicines and biological products have a shelf life and many are very expensive

A fool-proof strategy and mechanism of provisioning, storing and issue of such ‘shelf -life’

drugs in a manner that they are stored and carried ina temperature-/ humidity-controlled atmosphereand issued on a FIFO (First in, first out ) basis

An early warning report to be automaticallygenerated to alert the doctors/ pharmacists on the

anticipated expiry of the shelf life. contractual arrangement with the vendors, without

loss of shelf life



TACTICS FOR SHELF LIFE ITEMS

Such material should have the longest‘remaining’ life, while procuring

and if possible, arrangement for replacementwithin some agreed months of the remaininglife may be had with the suppliers.



PARTNERSHIP MANAGEMENT

Plays most crucial and pervasive role instrengthening and supporting processes of any industry

25% of Your Supply Costs Are Above TheWater Line And Can Be Reduced By PriceCutting. While 75% Are Hidden Under The

Water Line And Can Only Be Attacked WithNew Advanced Strategies, Tactics andTechniques You Need To Know About



The honest truth is that “price” savings arequickly disappearing because most healthcareorganizations now belong to two grouppurchasing organizations (GPO) and their

compliance is at the highest levels in years. Infact, our own studies show that there is less than.005% left in price savings annually for anyhospital, system or IDN in their supplyexpenses. In fact, when you factor the 2.6%annual medical commodities inflation rate thereis no actual savings to be achieved on pricesavings. In effect, you are always fighting alosing battle with price!



The Cost Of Change Compounds This Problem

To make matters worst it is even harder to changeproducts, services and technologies today to get abetter price because the cost of “switching” vendors

is so high. For example, if you wanted to switch yourIVs to another vendor you will need to change yoursolutions, IV pumps, administration sets, bags,compounders and other components that make itvery expenses to retrain your nurses. Even changing

a routine product like your compression selves cancause mass confusion and actually cost you moremoney than the change is worth.



SCM

“You can make even a parrot into a learned

political economist. All he must learn arethe two words:

Supply and Demand” Anon.



Supply Chain Management (SCM) is the processof planning, implementing and controlling theoperations of the supply chain with the purposeof satisfying the customer requirements as

efficiently as possible. SCM encompasses the planning and

management of all activities involved in sourcingand procurement (viz. acquire, store, move and

control) and all logistics management activitiesto optimise the usage of facilities and capitalfunds and to provide customer service inaccordance with organisational goal.



provide not only quality services to thepatients but also meet the expectations of allthe stake holders.

STRATEGIC IMPORTANCE-

“Hub and Spoke Model”, and

“Networking Model”



HOSPITAL SUPPLY CHAIN

MANAGEMENT

HSCM is a set of approaches to efficiently integratesuppliers or vendors, transport and hospital services(including outpatient, emergency, in-patient,laboratory, radiology, stores and purchase, food,

laundry and medicines /equipments) to achieve TotalQuality Management (TQM) in health care servicesby optimum utilization of resources.

The HSCM deals with the management of materials/equipments, manpower like doctors,

nurses and other supporting staff, to transform sickpatient to healthy person at a reasonable cost, in theshortest possible time with utmost satisfaction of the patient.

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OPERATIVE GOALS

OPTIMUM MATERIAL ACQUISITION- mosteffective purchase, storage, handling andusage practices

OPTIMUM INVENTORY TURNOVER RATE-maintained at lowest optimum level

GOOD VENDOR RELATIONSHIP – ability to

procure at best possible terms MATERIAL COST CONTROL- purchase cost

to be economical and as low as possible



EFFECTIVE ISSUE AND DISTRIBUTION-economical holding at the point of usage

ELIMINATION OF LOSSES ANDPILFERAGES- system of internal audit



5 Rs

for continuous supply of all types of materials/medicines required by the hospital

right source,

right quantity,

right quality,

right price and

right time

ISSUES WITH HSCM



ISSUES WITH HSCM

insufficient linkages to clinical systems, revenuecycle, IT, and clinical operations.

viewed as a "back dock" support service thatprovides the products and services required by

clinical departments. To be fully effective, it must be an integrated link in

the chain of clinical and non-clinical operations.

should be the primary conduit for all third partyrelationships.

many hospitals have non-materials trained peopleordering supplies and signing contracts withoututilizing supply chain procedures.

ORGANISATION OF DEPARTMENT



ORGANISATION OF DEPARTMENT

Traditional healthcare materials managementfocused on processing requisitions and placingorders. The procurement aspect (PURCHASE )of the

operation, disseminated information and researchedprice quotes. The materials management (STORES) aspect focused

on ensuring that there were enough supplies to satisfycustomers and storage conditions, inventory

management The two can be integrated also in certain

situations (small hosp) as well as strategicpositioning



GOODS+ MONEY+ FLOW OF INFORMATION

The 3 touch points are handled by the sameperson/ dept in other industries (the person

who is ordering the product is exchanging theinformation and paying for it),

but in Healthcare, it is handled by different

people

STRATEGIC IMPORTANCE



STRATEGIC IMPORTANCE

should focus on the total impact of care, notmerely product acquisition costs. It shouldlook strategically at value, to positively affect

both the patient outcome and the costs of care, not just price.

NEED OF S C MANAGER



NEED OF S C MANAGER

Analytic skills to evaluate spend history andanalyze cost-benefit;

Project management experience to leverage cross

functional expertise from departments across theorganization (e.g., Physicians, Nursing, Finance,Administration);

Facilitation skills to ensure that different points of

view are considered when developing strategies;

Professional skills to communicate effectivelyacross the organization.

ACTIVITIES OF STORES



ACTIVITIES OF STORES

A very crucial department in hospital

The issue of material from the stores to the userdepartment is an intricate system.

Performs vital functions acquisition, receiving, evaluation, warehousing,

maintenance, accounting and distributing goods and supplies to all the departments

of the hospital.

I/C STORES



I/C STORES

An expert individual in all activities of stores

Well versed with accounting system

maintain a co-operative relationship withother departments of the hospital

To interact with various external agencies viz.vendors, transporters, govt officials, other

local bodies

internal customers, such as doctors, services,house keeping, canteens, movements etc.

SCM



SCM

RECEIPT



RECEIPT

Awaiting inspection – This category consists of material that has beenreceived and is awaiting inspection before being moved into stock.

Acceptance upon certification – This

category consists of material that may be accepted pendingcertification.

Rework – In this category are materials that are defective and must bereworked.

Return – This category contains materials that are defective and will bereturned to the supplier for credit or replacement.

Materials to be tested – This category consists of materials which havebeen received and are awaiting delivery to the using/testingdepartment.

STEPS IN RECIEPT



STEPS IN RECIEPT

Open Purchase Order wise file, once P.O. is received.

DOCUMENTS Maintain Railway Receipt Register,

Consignment Note Register,

Inspection Request Register,

Rejection Register and other relevant documents viz.\

individual P.O. wise file,

advance document file,

shipping documents,

Guarantee Certificate and inspection certificate, challan etc.and

to feed the relevant data into the computer.

STEPS



STEPS

Receiving reports/documentation

Unloading , checking of quantity (checkingthe shipment)

Unpacking / opening of packages andinspecting

Lodging of Claim for Discrepancy

Procedure for the return of goods tosuppliers

Material Mgmt SCM 1 (1)

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