materials management ii (2)

8/7/2019 MATERIALS MANAGEMENT II (2)

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DR.P .S .N

MATERIALS MANAGEMENT/INVENTORY MANAGEMENT


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Introduction

Material is defined as THINGS required for doing ormaking something

y Inventories are vital to the successful functioning ofmanufacturing/service organizations.

y Materials are a major cost factor in any enterprise.

y In healthcare institutions about 40% of budgetaryallocation is on management of stores. Goodmanagement can improve profitability (rate of return)

and mismanagement can lead to significant lossesy Critical supplies can also make a difference between life

and death


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Contd..

Material Management, (also known as StoresManagement/Logistics Management) therefore, willaim at:

y

Procuring material atr

ight pr

ice

economyy Ofright quality ensure best buy

y In right quantity optimisation of space,resources, prevent obsolescence/ stock-out

y

In right time critical items to be procured in timey Right SafetyStock(cushion) to cater to

variations in demand & supply


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FUNCTIONS OF STORES MANAGEMENT

1. MATERIALS PLANNING & BUDGETING:assessing the NEED, forecasting the levels ofinventories required, scheduling orders andpreparing materials budget.

2. PURCHASING: the process to procure all hospitalsupplies by following the laid down Policies &Procedures calling for tenders, terms &conditions for suppliers/hospital.

3. RECEIVING & INSPECTION: receipt of storesfrom the suppliers as per predeterminedspecifications & ensuring are in conformance.


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Contd..

4. STOCKING & DISTRIBUTION: stores received must bestocked (documentation), ensure they reach theuser in right time/right quantity

5. INVENTORY CONTROL: physical control of materials,

safe preservation, avoiding over-stocking/obsolescence,stock-out

6. COST REDUCTION: cost containment measures tooptimise the resources.

7. VALUE ANALYSIS: organised approach to identifynon-essential costs incurred for cost reduction

8. DISPOSAL: of surplus items (to save space) or non-functional items beyond economical repair.


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PRIMARY OBJECTIVES

1. LOW COST: Lowest possible price for the correct(specified) Quality of materials

2. HIGH TURNOVER: use of materials should be

commensurate with the inflow to ensure min.capital is blocked on inventories

3. LOW STORAGE COST: holding cost/carrying costto be low.

4. LOW ORDERING COST: cost ofprocessing/procuring/chasing/transportation to beas low as possible


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Contd..

5. MAINTAINING CONTINUOUS SUPPLY:uninterrupted supplies promote quality of care andservice.

6. MAINTAINING QUALITY OF PURCHASE:

consistence of quality conforming to predeterminedspecifications.7. GOOD RECORDS: good accounting contributes to

efficiency & accountability.8. CHECK PILFERAGE: Good Stores Management

Practices will help in preventing MISU

SE.9. DEVELOPMENT OF VENDORS & CORDIAL

RELATIONS: more suppliers/cordial relations help incost-containment & urgency


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SECONDARY OBJECTIVES

1. FAVOURABLE RECIPROCAL RELATIONS: withsuppliers and user departments

2. INTRODUCTION OF NEW PRODUCT: as a better

/ cheaper substitute3. STANDARDISATION

4. PRODUCT IMPROVEMENT

5. INTERDEPARTMENT HARMONY

6. ECONOMIC FORECASTS: to take advantage inlowering the purchase cost.


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THE MATERIALS CYCLE

1. Design state Policies & Procedures to be followed.

2. Development of Suppliers and Sources

3. Planning Process Quality, Quantity, Time.

4. Ordering Process placing the order, follow-up,packaging and transportation.

5. Receiving Process

6. Inventory Control7. Final Stage: Packaging, Storage, Shipment


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Planning

(Quantity required, Specifications, Time when required)

Procurement(Right source, Right time, Right

price, Right quality, Rightquantity

Receipt and Inspection

Storing(Preservation, Inventory

control)

Distribution(Timely, Right quantity)

Condemnation andDisposal

MaterialsCycle


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INTEGRATED MATERIALS MANAGEMENT

y It is the close coordination of all the departments whichare concerned with utilisation of materials.

y The functions served by the MM include materialsplanning, purchasing, receiving, storage, inventory

control, scrap and disposal of surplus.y If some of the functions are to be handled separately, a

conflict of interests occurs resulting in higher costs.y The need is to balance the conflicting objectives from a

holistic view-point so as to achieve optimum results for

the organisation as a whole.y In this setup, manager MM, may delegate some of these

functions to user-depts. with a good control for bettercoordination, faster time frame & overall optimisation.


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ADVANTAGES OF INTEGRATED M.M

1. Better Accountability: centralisation of authority/authority for all functions enables the manager toensure specific accountability.

2. Better Coordination: of various functions of materials

management is facilitated.3. Better Performance: all inter-related functions are

integrated organisationally, affording effectivecommunication & enhanced performance.

4. Adaptability of EDP: information is centralisedfacilitating analysis & better decision-making

5. Team Spirit: This results from better coordination &cooperation > growth & development on all fronts.


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ELEMENTS OF MATERIALS MANAGEMENT

1. Materials planning and programming: writing &adhering to product specifications

2. Purchasing: all purchases to be centralised

3. Receiving, Warehousing (time-bound), accounting4. Store-keeping: policies for product utilisation

5. Inventory Control: prevent over/under stocking

6. Value Analysis and Standardisation: for appropriate

patient charges, Accountability for capital equipment7. Condemnation: of surplus or unserviceable items

8. Disposal: policies tuned to get best possible return


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TYPES OF HOSPITAL STORES

1. Non-consumable Stores: These stores can beutilised repeatedly: items like equipment, linen,surgical instruments, electrical/electronic items,

transportation facilities, wheels, furniture etc.

2. Consumable Stores: These items are used onlyonce, e.g., syringes, needles, blades, X-ray films,

catheters, other disposable items etc.


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VARIOUS TYPES OF STORES

1. Medical and Drugs Stores: consist of all types of drugs,medical gases, chemicals etc.

2. Surgical Stores: items like gauze, cotton, bandages,sutures, instruments, equipment, rubber goods, glass

items, other surgical items.3. General Stores: cleaning materials soap, detergent,enamel ware, furniture, electric items

4. Linen Stores: all textiles, mattresses, blankets etc.5. Stationery Stores: all forms & general stationery

6. Dietary Stores: all dietary items, vegetables, milk7. Engineering & Maintenance Stores: raw material/

spares for civil, electrical, mechanical and electronicitems


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INDENTING OF STORES

Three different Categories of indents made by differentdepts., to be sent to Purchase Dept.

1. Annual Indents: forecast of requirements for nextfinancial year- prepared with care after taking into

account the existing stock, aver

age consumptionof one year, specifications of each item, likelysource, cost etc. by 1st Jan each yr.

2. Supplementary Indents: in the event of variationsin demand / supply, requirement ofnewitem by

Aug., each year limited to financial allocation3. Emergent Indents: to be avoided, resorted to when

the demand is urgent/unavoidable subject tofunds availability


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INDENTING GROUPS IN HOSPITALS

1. Surgical Instruments and equipment2. Medical stores / Chemicals /Stains / Dyes etc.3. Linen items4. Stationary items5. General Stores items6. Dietary items7. Engineering items -Electric, electronic8. Rubber Goods9. Furniture wooden, steel

10. Glass Wares- lab equipment11. Photographic Material12. Miscellaneous Stores- spare parts etc.


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DUTIES OF STORE-KEEPER

y Store items space, availability and easy retrieval

y Premises to be neat & clean affording goodpreservation

y

Prevent obsolescence, over-stocking and stock-outsy Efficient and effective Inventory Control

y To ensure all items issued are authorized

y Updating all Stocks, records, ledgers, Bin Cards

y Responsible for safe custody and Security set-upy He is accountable for any variations in the stocks

held physically and documented stocks.


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DUTIES OF STORES PURCHASE OFFICER

y Projection of budgetary requirements

y Planning & execution of stock-verification activities

y Communicate with the user departments

y

Ensure efficient & effective material handling systemy Help the depts., in standardization/varietyreduction

y Control obsolescence, surplus, scrap through effectiveinventory control and purchase system

y Coordinating with user depts., for various storesfunctions including demand forecasting, developingSpecifications for all importnt items


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CONTROL OF STORES

y Closed System: all items are physically stored in aclosed and controlled area under lock & key.Only the authorized persons have access. All items

are received and issued from this area for maxphysical securityusually Centralized as in ahospital set-up

y Open system: in industries with high, repetitive,

mass production- type of operations demand samematerial continuously stores items kept close tousage point.


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LAYOUT DESIGN

To offer Economy & Efficiency. Essentials:

y Design must followfunction

y Max. utilization of available space

y Greater efficiency of stores depoty Easy accessibility of all materials

y Proper maintenance of records

y Greater economy and use of lesser time in receipts

movement, placement and issue of material, itsmovement.

y Min. of spoilage, damage and other losses


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Planning the Layout

Points to be remembered:

1. Rows of shelves should parallel to the longestdimension of the room

2. Flow pattern should be optimized by straight path

3. Dead ends should be avoided

4. Width of aisles to be 50% more than the width ofmaterial handling equipment used in the room

5. Shelves must match the type of products that are being

stored.6. Temperature control to the recommended levels for the

product.


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I N

OFFICE

ISSUE

Flat

Moving

Items

Medium

Moving

Items

Slow

Moving

Items

O U TLayout as per consumability


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SPACE REQUIREMENT

SPACE PROGRAMMING is one of vital steps inhospital planning.

y Space requirement for hospital stores needs proper

attention to improve its efficiencyy McGibony recommends an area of 20 sq. ft. per bed

for hospital stores

y Drugs store in a major hospital needs 4-5 sq. ft. per

bed

y General consideration for space requirement in amajor hospital for stores: 25 sq ft. per bed.


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Procurement Procedure

It is Science and Art. Basic principles of procuring any itemare:

y Procure the right Quality

y Procure the right Quantity

y Procure at the right Price

y Procure from the right Source

y Procure at the right Time

y Procure for the right Place

y All these Principles are generally exercised after payingdue attention to need of the item, extent of the use ofthe item


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Essentials of Scientific Buying

Purchasing Inputs:

y What to purchase?

y When to purchase?

y From where to purchase?

y How much to purchase?

y At what price to purchase?

These are mostly in the form of purchaserequisitions/indents, product specificationsemanating from the user depts.


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PURCHASE CYCLE

1. Develop clear, complete description & specifications ofitems to be purchased.

2. Determine important Commercial requirements,performance and eligibility criteria.

3. Invite Bids allowing reasonable time for response

4. Open tenders in public

5. Evaluate tenders: technical & commercial bids

6. Assess credibility of new suppliers.

7. Visit the supplier/manufacturer when necessary

8. Select suppliers after negotiations on price, terms &conditions


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Contd..

9. Award contracts/ place order for supplies

10.Follow up the contracts/orders

11. Check the stores at Consignors end if necessary

12. Initial payment as per terms & conditions

13. Report on Satisfactory Performance / Quality

14. Release balance payment

15. Record of items Performance Evaluation forfuture transactions


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Tender Process

Tender Enquiry needs to be very clear and specific on:

y Terms and conditions of delivery: FORDestinationRailway Station, FOB, C&F, CIF, Free delivery atconsignees Depot etc. This factor has an impact on the

price of the itemy seek clarification on the various levies like Duties (Excise

duty, Customs duty, Sales tax, Octroi duty and othersurcharges if any), indicating the current rates of theseduties with proof of variations if any

y Risk of property in goods follows the ownership. Anydamage prior to delivery is to the risk of seller and afterdelivery it is transferred to buyer.


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Purchase Order

Purchase Order is Legal Document, that commits thebuyer to the seller, careful drafting is a must:

y Oder No. with Date, Serial No.y Full name & address of the Supplier

y Consignees name and addressy Terms & conditions of supply, description of goods

(specifications), quantity, Price with Fall & Rise Clause.y Suppliers quotation reference, mode of payment,

delivery date & schedule, packing instructions, transport

instructions, Freight terms, inspection procedures,Insurance, Authorised Signatures, Penalties (liquidateddamages) to be levied.

y Any other special terms and conditions as agreed


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D G S & D

Two types of Contract awarded by the DGS&D:

y Rate Contract: this is a contract for the supply ofstores at specified rates during the period covered b y

the contract (usually 1 yr but renewable)y Running Contract: this is a contract for the supply

of an approx quantity at a specified rate during acertain period covered by the contract.

Approx. quantities are mentioned & the purchaserhas a right to take a certain quantity +/- 25%.Quantities guaranteed are 75% before contract expiry


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Contd..

y Inspection of articles: mandatory before acceptance andpayment to ensure conformance to quality and quantity by thesupplier.

y Registration ofFirms: Firm has to apply on a prescribedform with credentials and supportive documents on financial

status. After approval by the inspection wing, firm isregistered for period of 5 yrs.

y Indenting & service charges: prescribed forms for CivilIndents (form 85 & from 86), for Defense: (form 81) intriplicate. Service charges (0.5%) are levied for commercialdepts. (Central Govt.), Defense, Railways and State Govt.

y Payments: Advance payment up to 90% against proof ofdispatch and balance within 3 weeks after satisfactoryinspection report.


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LOCAL PURCHASES

y It is acquisition of petty items required on emergencybasis, arranged from local market.

y The need arises due to unforeseen and emergentsituation due to ;

- failure of planned procurement- delay in centralised buying

- operational emergencies - hospital emergencies

- sudden arousal of urgent demand

y The biggest drawback is compulsion to paya higherprice/ for all the local purchases, invariably in cash

y Every effort should be made to minimize this.

materials management ii (2)

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