INTRODUCTION:

Material management is a scientific technique, concerned with planning, organizing and

controlling the flow of materials from their initial purchase through internal operations to the
service point through distribution. The material management in the health care system is
concerned with providing the drugs. supplies and eqipment needed by health personnel to deliver
health services. About 40% of the funds in the health care systen are used up for providing
materials. It is of great importance that materials of right quality are supplied to the consumers.
Material mangement integrates all material functions.

 Planning for materials

 Demand estimation

 Purchasing

 Inventory management

 Inbound traffic

 Warehousing and stores

 Incoming quality control

Material planning:

Definition:

Material planning is the scientific way of determining the requirements that goes into meeting
production needs within the economic investment policies.

- Gopalakrishna $ sunderan

It is done at all stages and all levels of management. Material planning is based on certain
feedback information $ reviews.
Aim of material management planning:

To get

 The right quality

 Right quantity of supplies

 At the right time

 At the right place

 For the right cost

Purpose of material management planning:

 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

Objectives of material management planning:

Primary objectives:

right price

high turnover

low procurement aand storage cost

continuity of supply

consistency in quality

good supplier relations

secondary objectives:

development of personnel

good information system

forecasting

inter-departmental harmony

product improvement

standardization

make or buy decision

new materials and products

favorable reciprocal relationships

Basic principles of material management planning:

Effective management and supervision depends on managerial functions of

 planning

 organizing

 staffing

 directing

 controlling

 reporting

 budgeting

 sound purchasing methods

  skillful and hard poised negotiations

 effective purchase system

 should be simple

 must not increase other costs

 simple inventory control programme

Techniques of material planning:

Bill of material technique:

BOM is the simplest technique of material planning

Explosion of bill of materials refers to splitting the requirements for the product to be
manufactures in to its basic components.

Eg: In health care the drugs are manufactured in the pharmacy.

This technique is ideally suited to engineering industries.

This technique is based on demand forecasts.

Requirements for various materials are listed with their complete complete specifications.

Post consumption analysis technique:

In this technique future projection is made on the basis of the past consumption data,which is
analysed taken in to consideration the past nad future plans.

Statistical tools like mean,median,mode and standard deviation are used in analyzing the past
consumption.

Elements of material management planning:

Demand estimation

A large number of items are used in the hospital. The advisory committee for development of
surgical instruments, equipments and appliances(1963) identified 3200 items of
instruments,eqiupments and appliances being used in the hospital.

Identify the needed items

Need for variety reduction – less number of materials, less will be problems of planning.

Lying down proper specification based on ISI or other standards.

Calculate from the trends in consumption

Review past the consumption in the past

Review with resource constraints

Availability of funds

Procurement process planning

Problems affecting material planning:

Corporate/ government objectives and plans

Technology available

Market demand

Lead time and rejection rates

Working capital available

Nature of inventory required

Capacity and its utilization of organization

Seasonal variations

Information and data available

Overall material policy

 PROCUREMENT

INTRODUCTION:

Provision of adequate and timely supply of material to departments is of prime importance for
carrying out various activities to render the patient care as well as for meeting its needs.

Procurement is very important step in material management. Usually hospital has central store
and procurement /store officer under the control of medical superintendent is required, who
manages the materials.

Definition :

Procurement is the sourcing and purchasing of goods and services for business use. It is the
acqisition of goods or commodities by a company, organization, institution or a person. This
simply means the purchase of goods from suppliers at the lowest possible cost.

It is also defined as the process odtaining goods and services from preparation and processing of
a requsition through to receipt and approval of the invoice for payment.

According to defence acqusition university, it is the act of buying goods and services for the
government.

Procurement process:

Procurement process is a method by which items are purchased from external suppliers. It
involves manging the ordering, receipt and approval of items from suppliers.

A procurement process also specifies how the supplier relationships will be managed, to ensure a
high level of service is received.

Following a proven step-by-step technique will help management successfully achieve its goal.

Step-1- Need recognition

Recognize the need for procuring the materials for the department either from internal or external
sources. The item may be a new item for the unit.
Step-2 Specific need

Determine specifications for the item required to be procured. Take help of suppliers to visit the
department or from engineering department.

Step-3 Source options:

Determine from where to obtain the product. The hospital might have an approved vendor list. If
not, search for a supplier using purchase orders or research a variety of other sources such as
magazines, the internet or sales representatives etc..

Step-4 price and terms:

Investigate all relevant information to determine the best price and terms for the product. Usually
look for 3 suppliers before it makes a final decision.

Step-5 purchase order

The purchase order is used to buy materials between a buyer and seller. It specifically defines the
price, specifications and terms and conditions of the product or service and any additional
obligations.

Step-6 Delivery

The purchase order must be delivered personally,email or other electronic means. Sometimes the
specific delivery method is specified in the purchasing documents. The receipient then
ackowledges receipt of the purchase order.

Step-7 Expediting or follow up

Expedition of the purchase order addresses the timeliness of the service or materials delivered.

Step-8 Receipt and inspection or purchases

Once the sending supplier delivers the product, the material is checked for quality, quantity as
per order placed.
Step-9 Invoice approval and payment

Three documents must match when an invoice requests payment- the invoice itself, the receiving
document and the original purchase order. Any discrepancies must be resolved before the bill is
paid by the finance department. Usually, payment is made in the form of cash, cheque, bank
transfer, credit letters or other types of electronic transfer.

Step -10 Record maintenance

In the case of audit, the department must maintain proper records. These include purchase
records to verify any tax information and purchase orders to confirm warranty
information.purchase records reference future purchases as well.

Flow of procurement decision:

The following steps are taken for taking decision for procurement of materials.

 Needs assessment

 Finding the budget

 Prioritization of purchase of equipment, machinery etc..

 Standards and specifications department

 Placing of indent by the head of the department

 Consideraion of indent

 Choose procurement method

 Receipt of tenders

 Opening of tenders

 Evaluation of tenders

 Placement of tenders

 Follow up of orders
  Receipt and inspection of materials

 Invoice approval and payment

Needs Assessment:

Assess the need for having the equipment/item in the department.

Finding the budget:

There should be specific budget provision for purchase of materials. However, specific indents
can be made without specific budget provision for the current year with the approval of head of
institution.

Prioritization of purchase of equipment,machinery etc..

Correctly assess the requirement of equipment/ material to be purchased including infrastructure

requirement. A committee can be formulated for this purpose. Depending on the cost of
material/eqipment that can either be purchased by the department or sent indent to the central
store.

Standards and specification development

Get a detailed specification and standard of product as per the requirement before placing
indent.

Placing of indent by the head of department:

Place indent by specifying a detailed description of equipment, specifications including whether

the requirement is fresh or additional or replacement, the estimated cost,its utility and
approximate period of equipment to become operational from the date of arrival.

Consideration of indent:

The indent along with the enclosures will be sent to the store department which will verify its
stock and render a non-stock certificate where applicable. The indent is sent to purchase
department which will check it for its correctness of details and place it before relevant standing
purchase committee. After getting the approval by the purchase committee, the indent item is
considered for purchase.

Choose procurement method:

There are various modes of procurement : open tender, limited tender, negotiated procurement
and single tender.

The open tender method:

This method is followed for all high cost items. The notice inviting tender should be short,
clearly worded. It should give a brief description of the item to be procured, the qualification of
suppliers, the date of receipt of tender, the date, time, venue of opening the tenders. This is public
bidding,resulting in low prices, published in news papers. Term is usually of 4 weeks. Quotations
must be sent in the specific forms that are sold, before the time and date mentioned in the tender
form.

Objectives of procurement system:

Acquire needed supplies as inexpensively as possible

Obtain high quality supplies

Assure prompt and dependable delivery

Distribute the procurement workload to avoid period of idle ness and overwork

Optimize inventory management through scientific procurement process.

Procurement cycle:

Review selection

Determine needed quantities

Reconcile needs and funds

Choose procurement method

Select suppliers
Specify contract terms

Monitor order status

Receipt and inspection

Methods in procurement process and negotiation strategies:

Open tender

Public bidding, resulting in low prices

Quotations must be sent in the specific forms that are sold, before the time and date mentioned in
the tender form

Technical bid

Financial bid

 Restricted or limited tender

From limited suppliers

Lead-time is reduced

Better quality

Negotiated procurement

Buyer approaches selected potential suppliers and bargain directly.

Fix at a rate acceptable to both parties

Used in long time supply contracts

Direct procurements

Purchased from single suppliers at his quoted price

Prices may be high

Reserved for propriety materials or low priced, small quality and emergency purchases.

Rate contract:

Firms are asked to supply stores at specified rates during the period covered by the contract.

Spot purchase

It is done by a committee, which includes an officer from stores, accounts and purchasing
departments.

Risk purchase:

If supplier fails, the item is purchased from other agencies and the difference in cost is
recovered from the first supplier

Many supplier strategy

Many sources per item

Adversarial relationship

Short-term

Little openness

Negotiated, sporadic po’s

High prices

Infrequent large lots

Delivery to receiving dock

Few suppliers strategy

 1 or few sources per item

 Partnership(JIT)

 Long- term stable

  On-site audits and visits

 Exclusive contracts

 Low prices

 Frequent small lots

 Delivery to point of use

 Contractual services by directorate general of supplies and disposals of government

institutions.

Fixed quantity contract:

Supply firms are called upon to offer to supply a definite quantity of stores by a specified date.
Such contracts are binding both parties.

Running contract:

These contracts are for supply of an approximate quantity of stores at a specified price during
certain period of time.

Rate contract:

Most common contracts in health care institutions, in which firms are asked to supply stores at
specific rates during the period covered by the contracts. No fixed quantity is mentioned. This
system offers maximum flexibility in ordering specified quantity of materials at frequent
intervals.
 PURCHASING

Purchasing means to buy various materials by paying money or is equivalent from

suppliers/vendors. Purchasing is one of the important functions of administration. Like any
process the purchasing process is made up of several steps or activies. Each step takes
information, processess it and turns into output to feed into the next step.

The purchasing process may vary from organization to organization,but the major fundamental
remain the same.In this process, the materials are bought and aquired using some standardized
specification. The act of purchasing is a fundamental function in the supply cycle. Purchasing is
a store responsibility for the needed materials of the right quality,at the right price, for the right
source, at the right time and at the right place in the most economical manner.

Key steps of purchasing

The key steps of purchasing are: request to purchase/requisition, supplier selection, purchase
order, fulfillment, order receipt,supplier invoice/payment.

Purchase /requisition: identify the need, what to buy and how much of it and when it is needed to
delivery.

Supplier selection: identify supplier, price and lead time.

Purchase order: Raise purchase order and send to supplier. The purchase officer identifies the
items to be procured, the quantity required and price being paid.

Fulfillment:supplier procures the items and sends to buyer.

Order receipt: Items are checked for quality and quantity as per the order placed.

Supplier invoice/ payment: The supplier sends the invoice which is processed by the finance
department before supplier is paid.

Principles of purchasing:

Purchasing is based on need assessment

The ultimate aim of purchasing is right quality, right quantity, right prices, right source, and at
right time to the right place with right mode of transportation, right attitude with techniques such
as value analysis, material intelligence, purchase research, SWOT analysis, purchase budget,
lead time analysis.etc..

Centralize the purchase system

Back up of good systems management.

Points to remember while purchasing:

 Proper specification

 Invite quotations from reputed suppliers

 Comparision of offers based on basic price, freight and insurance, taxes and levies.

 Quantity and payment discounts.

 Payment terms

 Delivery period,guarantee

 Vendor reputation

 Short listing for better negotiation terms

 Seek order ackowledement.

Points to remember while purchasing equipment:

Latest technology

Availability of maintenance and repair facility, with minimum down time.

Post warranty repair at reasonable cost

Upgradeability

Reputed manufacturer

Availability of consumables
Low operating costs

Installation

Proper installation as per guidelines

Storage :

Store must be of adequate space

Materials must be stored in an appropriate place in correct way

Group wise and alphabetical arrangement helps in identification and retrival.

First-in,first-out principle to be followed

Monitor expiry date

Follow two bin or double shelf system, to avoid stock outs.

Reserve bin should contain stock that will cover lead time and a small safety stock

Issue and use

Can be centralized or decentralized.

INVENTORY CONTROL

INTRODUCTION:

Inventory control in hospitals is more than just procurement and usage. The proper control and
processes can save millions in health care costs by enabling a hospital to efficiently order and
store just the right amount of supplies needed for pattient cases while tracking cost, tier pricing
and patient charges associated with supplies.

Definition :

Inventory is defined as the blocked working capital of an organization in the form of materials.
As this is blocked working capital of organization, ideally it should be zero. But we are
maintaining inventory.

It is the stock to ensure uninterrupted supplies, the idle resources which have future economic
value and cushion between estimated and actual demand of materials.

Inventory is ‘anything that is bought and help prior to use.

Inventory means all the materials,parts,suppliers,expenses,and in process or finished products

recorded on register/books by an organization and kept in its stocks for some period of time.

Importance of maintaining inventory:

It provides and maintain good customers service.

Enables smooth flow of materials through production process

Provides protection against the uncertainity of demand and supply

Ensures a reasonable utilization of equipment and effort

Possibility of discount, if purchased in bulk.

INVENTORY CONTROL:

Inventory control is the process by which inventory is measured and regulated according to
predetermined norms such as economic lot size for order, safety stock, minimum level,
maximum level, order level etc..

Inventory control means stocking adequate number and kind of stores, so that the materials are
available whenever required. Scientific inventory control results in optimal balance. It is a
scientific system which indicates what to order , when to order, how much to order,how much to
stock.

Inventory control is concerned with minimizing the total cost of inventory. This involves
physical control of materials, preservation of materials, mininization of obsolence and damage
through timely disposal and efficient handling, maintainance of store records, proper location
and stocking.
Store is also responsible for the physical verification of stocks and reconciliation them with book
figures, the inventory ordering quantities,setting stock level, lead time analysis and reporting.

Inventory control is about product availability and balancing the cost of owner ship with the cost
of procuring,which includes purchasing, receiving and paying.

Inventory control is the technique of maintaining the size of the inventory at some desired level
keeping in view the best economic interest of an organization.

Inventory control means keeping a track of inventory,so that the materials are available when
needed.

Inventory control measures and regulates to predetermine the size for order, safety stock,
minimum level of order, and maximum level of order.

Inventory control is concerned with minimizing the total cost of inventory.

Inventory system:

A set of policies and controls that monitors levels of inventory and determines what levels should
be maintained, when stocks will be replenished and how large orders should be:

Inventory management system

Inventory management system provides information to efficiently manage the flow of materials,
effectively utilize people and equipment, co-ordinate internal activities and communicate with
customers. Inventory management does not make a decision or manage operations, they provide
the information to managers who amke more accurate and timely decision to amange their
operations.

Objectives of inventory control system:

 To supply the materials in time

 To give maximum clients service by meeting their requirements timely, effectively,

efficiently,smoothly and satisfactorily

 To reduce or minimize investment in inventories.

  To minimize idle time by avoiding stock out and shortages.

 To avoid shortage of stock

 To minimize the losses due to deterioration, obsolescence, damage of stock

 To meet unforeseen future demand

 To average out demand fluctuations

 To balance various inventory costs such as carrying cost, order cost,etc..

Importance of inventory control:

 To provide maximum supply service, consistent with maximum efficiency and optimum
investment

 To provide cushion between forecasted and actual demand for a material

 To have optimum level of inventory: not too large, not small.

 To eliminate duplication in ordering

 To take care of fluctuations in demand and lead time

 To take care of increasing price tendencyof commodities or rebate in bulk buying

 To increase transportation efficiently

 To minimize the inventory costs

 To minimize waiting time

 To provide a check against the loss of material

 To better utilization of stocks available

 To facilitate cost accounting activities

 To locate and disposes inactive and absolete store items.

Types of inventory costs

The following are inventory costs:

Ordering cost:

It is cost of ordering the item and securing its supply. It includes the expenses for raising the
indents, purchase requisition by user department till the execution of order, and receipt and
inspection of item, the salaries and wages of store personnel employed, the rent of store,
stationary and other consumables used by the store,etc..

Inventory carrying (holding) cost:

This is the cost incurred for holding the volume of inventory and measured as a percentage of
unit cost of an item. It includes capital cost, obsolescence cost, deteriration cost, tax on
inventory, insurance cost, storage and handling cost, the salaries and the wages of store personnel
employed, the rent of store, stationery and other consumables used by the store, etc..

Out of stock/shortage cost

It is a loss which occurs or which may occur due to non availability of materials. It includes
break down or delay carrying out the work, back ordering, loss of good will etc..

How to achieve control:

Inventory control can be achieved through:

Purchasing items at economic price at a proper time and in sufficient quantity.

Provision of suitable nad secured location with sufficient space

Inventory identification system

Up to date and accurate record keeping.

Major activities of inventory control:

 Planning
  Procurement

 Receiving and inspection

 Storing and issuing the inventories

 Recording the receipt and issuing of inventories

 Physical verification

 Follow up functions

 Material standardization and substitution

Factors in inventory control decision making process:

There are three main factors in inventory control decision making process:

The cost of holding the stock

The cost of placing an order

The cost of shortage i.e ..what is lost if the stock is insufficient to meet the demand.

Setting up various stock levels

Stock levels are not fixed permanently. These are liable to revise according to the changing in the
factors determining the levels. These are

Minimum level

Minimum level is the minimum stock to be maintained for smooth production

Minimum level = recorder level – average usage per period x average time to obtain delivery

Maximum level

It is the level of stock, beyond which the stock is not maintained

Maximum level = reordering level – expected minimum consumption in units during the least
time to obtain delivery = reorder quantity
Reorder level

It is the stock level at which an order should be placed.

Reorder level = maximum reorder period X maximum usage

Average stock level = maximum level + minimum level

Reserve stock:

Excess usage requirement during normal lead time

Basic principles of inventory control:

Safety stock SS

It is the stock for usage at normal rate during the extension of lead time

The safety stock is the difference between Worst case scenario and the average weekly usage (ie.
Forecasts) during the lead time period.

SS = (WCS- AWU) LT

Lead time(LT)

It is the time spent between making the decision of stock replenishment, and actual availability
of the goods in the store.

It should be logic,effective, attainable and dependable.

Logic – it must contain all steps including order(PO/MO) processing time,QC

check/quarantine,etc..

Effective-all steps must be as short as possible

Attainable – lets remain reasonable and not too optimistic

Dependable – the reliability of a lead time is the most important characteristic, supplier quality
assessment program could become a prerequisite to inventory management.

Average inventory: INVAVG

The average inventory is the sum of the safety stock and half the re order quantity.

INVAVG = SS + ½ X ROQ

Reorder point:

The re order point (ROP) is the sum of the safety stock and the quantity used during the lead
time

ROP = SS + (AWU X LT)

Items for which annual consumption is high, orders are placed frequently so that inventory level
is as low as possible.

Items for which annual consumption is not high, sufficient stock are maintained and orders are
placed less frequently.

Techniques of inventory control

Various techniques are available to decide in inventory control

Items quality: value analysis, standardization, codification

Quantity: purchasing balancing of inventories EOQ

Price: cost price value analysis

Source: market research, purchasing technique selection

Delivery: procurement technique, follow up PERT/ operational research

Methods: work study system analysis: ABC analysis etc..

People : organization analysis.

INVENTORIES CLASSIFICATION:

The following analysis and classification techniques are available for inventory control:

ABC analysis (always better control)

VED analysis(vital, essential, desirable)

FSN analysis (fast, slow moving and non- moving)

SDE analysis (scare, difficult, easy)

HML analysis (high,medium,low)

XYZ analysis

There are thousands of items required in the hospitals. The administrator is to identify these vital
few from trivial many and exercise tight control on them to achieve the basic objective of
reduction in the cost of inventory.items in the hospitals can be analysed into number of
classifications is ABC and VED analysis.

Summary:

Till now, we have discussed regarding planning and procurement procedures in material
mangement. Its introduction, definition, aim of material planning, purpose, objectives, basic
principles, techniques of material planning, elements of material management, problems
affecting material planning. Procurement introduction,definition,objectives, procurement cycle,
methods in procurement process, flow of procurement decision. Purchasing its introduction, key
steps of purchasing, principles of purchasing, points to remember while purchasing,points to
remember while purchasing equipment. Inventory control its introduction, definition, importance
and inventory control system,management, objectives, types of inventory costs,major activities
of inventory control, factors in inventory control decision making process.

Conclusion:

I conclude the topic by telling that material management is a scientific technique, concerned with
planning, organizing and controlling the flow of materials from their initial purchase through
internal operations to the service point through distribution. The material management in the
health care system is concerned with providing the drugs, supplies and equipment needed by
health personnel to deliver health services.

BIBLIOGRAPHY:

BOOK REFERENCES:

BT, BASAVANTHAPPA, TEXT BOOK OF NURSING ADMINISTRATION, 2 ND EDITION,

JAYPEE PUBLISHERS, 2009, PAGE NO- 477-480

ELAKKUVANA BHASKAR RAJ, TEXT BOOK OF NURSING ADMINISTRATION ,2 ND

EDITION,EMMESS PUBLISHERS, PAGE NO- 125-128.

NEELAM KUMARI, TEXT BOOK OF MANAGEMENT OF NURSING SERVICES AND

EDUCATION, PEEVEE PUBLISHERS 2009, PAGE NO-138-140

“DEEPAK.K,SARATH CHANDRAN.C,MITHUN KUMAR.B.P”. A COMPREHENSIVE

TEXT BOOK OF NURSING MANAGEMENT , EMMESS PUBLISHERS,PAGE NO-220-225

JOGINDRA VATI, TEXT BOOK OF NURSING MANAGEMENT AND ADMINISTRATION,

1ST EDITION, PAGE NO-542-550.

NET REFERENCES:

WWW.GOOGLE.COM

WWW.HEALTH.COM

WWW.PUBMED.COM
 OBJECTIVES

GENERAL OBJECTIVES:

By the end of the seminar, students will be able to gain knowledge regarding planning and
procurement procedures in material management and able to apply this knowledge in their
practice.

SPECIFIC OBJECTIVES:

By the end of the seminar, students will be able to:

Define material planning

Discuss the aim, purpose of material management planning

Enlist the objectives of material management planning

Describe the principles,and techniques of material planning

Define procurement

Enlist the objectives of procurement system

Discuss the procurement process

Describe the flow of procurement decision

Define purchasing

Explain principles of purchasing

Discuss the points to remember while purchasing

Define inventory

Discuss the importance of maintaining inventory

Enlist the objectives of inventory control

Discuss the principles, techniques and classification of inventory control