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Quality assurance, obstetric auditing, records, reports, norms, policies, protocols, practice and standards for OBG unit

Records and Reports: Documentation in Nursing Practice

Mission, Vision, Values, Objectives and Philosophy of an Organization

Material Management: Planning and Procurement

Material Management: ABC, VED, HML Analysis

Planning Equipments and Supplies in Hospitals

Nursing Informatics

Trends in Nursing Informatics

Infection Control Resources

Nursing Standards

World Health Reports from World Health Organization

Introduction

Material Management is concerned with providing the drugs, supplies and equipment needed by health personnel to deliver health services. The right drugs, supplies and equipment must be at the right place, at the right time, and in the right quantity in order that health personnel deliver health services. Without proper material health personnel cannot work effectively, they feel frustrated and the community lacks confidence in the health services and unless appropriate materials are provided in proper time and are required quantity, productivity of personnel will not be up to expectation.

Inventory control

Inventory control it is an important aspect of material management.  If the level of inventories goes up the carrying charges also increase but the procurement cost decreases. On the other hand, if we have a smaller inventory, turn-over is greater requiring lesser carrying charges but more of procurement costs, as orders have to be repeated more often. By inventory control we could find out the optimum quantities to be stocked so that the two costs, and therefore the total costs are kept at the minimum.

Inventory control is basically a scientific system which indicates as to what to order, when to order, and how much to order, and how much to stock so that purchasing costs and storing costs are kept as low as possible.

 ABC analysis

ABC analysis is the analysis of the store items cost criteria.  It is a simple approach, which avoids being penny wise and pound foolish. Of the various techniques, ABC classification is the most important technique. The cost of each item is multiplied by the number used in a given period and then these items are tabulated in descending numerical value order. It will be seen that first 10% of items approximately account for 70%, the next 20% for 20% of value and the last 70% account for 10% of value.

It has been seen that a large number of items consume only a small percentage of resources and vice- versa. A – Items represent the high cost centre, B items represent the immediate cost centres, and C- items represent low cost centres. A very close control is exercised over A items while less stringent control is adequate for those in the category B, and less attention for category C.

By concentrating on controlling A- items, and to a lesser degree on B items, it will be possible to control the inventory quiet effectively both in the way of cost control and lessening the risk of ‘stock out’. Since A items are of the highest value and are required in large numbers they could be purchased more frequently and the others, B & C items less frequently. In so far as inventory control is concerned the following guidelines will help in keeping the system optimum (i.e. Healthy balance between financial constraints and purchase of required quantity of materials)

A-    Items: on

1. Tight controls

2. Rigid estimates  of requirements

3. Strict and close watch ( monitoring)

4. Safety stocks should be low

5. Management of items should be done at top management level.

B-    Items

1. Moderate control

2. Purchase based on rigid requirements

3. Reasonably strict watch and control

4. Safety stocks moderate

5. Management be done at middle level

C-    Items

1. Ordinary control measure

2. Purchase based on usage estimates

3. Controls exercises by store keeper.

4. Safety stocks high

5. Management be done at lower levels.

Rate of consumption:

Close study of each item from the point of view of movement of store or consumption rate is a strong tool for proper inventory control. The items can be classified into:

1. Fast moving

2. Slow moving

3. Non- moving

4. Obsolete

An understanding of the movement of items helps to keep proper levels of inventories by deciding a rational policy or reordering. This method is based on the fact that some stock items have a much higher annual usage value than others. This after doing a cost analysis, stock items are separated into three classes with the following characteristics.

Class               Number of items                                 Rupee value in items

A                     10% of total items                                             70%

B                      20% of total items                                             20%

C                     70% of total items                                             10%

Steps in computing A-B-C analysis: procedure of A-B-C analysis

• First we are trying to prepare a list of items and calculate their annual usage in rupees. This can be obtained by multiplying the quantity ( number of units) of the item consumed in one year by its unit price.

• Arranging all these items in the descending order of their individual dosage in rupees. That means the first item in the list will now show the maximum annual usage in rupees, the second item the second maximum, the third item the third maximum and so on. After having done this the total of annual usage in rupees is put at the bottom of  the list.

• Those items which together form about 70% of the total annual usage may be total annual usage may be categorized as A items. Similarly. Items which contribute the next 20 to 25 % of the aggregate are listed as B items. The rest which contributes 5 to 10% of the total percentage of annual usage are called C items.

• Placing of the orders on the basis of this classification.

Example: The company has 10 items mentioned in the table .

Table: 1 A-B-C analysis usage in rupees

Table :1 shows a representative ABC analysis where 10 items have been studied and annual usage extended by unit cost to get annual usage in rupees.

Table: 2 A-B-C  ranking

 Table 2 shows the ranking and assignment of A, B and C categories of items.

Table 3: Summary of A-B-C analysis:

Table 3 shows a summary ABC analysis showing that 20% of the items represent 65.57 % of annual usage 20 percent of the item represent 21.21% of annual usage and 60% of the items represent only 13.22 % of annual usage.

A items are ordered more frequently and I small quantities ( i.e. few weeks requirements) while C items are ordered just once or twice a year to obtain the entire year’s requirement. Without A-B C analysis, the ordering policy of an undertaking may be to order all items once a quarter and position would be somewhat represented  by: TABLE 4

Table 4:

The average total inventory in the above case is 5550 and adding 20% carrying cost the total inventory cost works out to be 5550+ 1110= Rs: 6660. Now , if A-B-C analysis is applied the ordering policy would be different , thought the total number of orders placed during the year is the same as before.

Average total inventory is now Rs: 2600 and adding 20% inventory carrying cost the total inventory cost works out to be 2600+ 520= 3120, which is 3540 lower than the corresponding cost in the first instance.

VED ANALYSIS

ABC analysis does not tell anything about the criticality of the items. This is an important variant in patient care services. Based on the estimation of the time length for which non availability can be tolerated, there are three categories. The stores when subjected to analysis based on their criticality can be classified into vital, essential and desirable stores. This analysis is termed as VED analysis.

1. Vital: items without which treatment comes to standstill: i.e. non- availability can not be tolerated.

2. Essential: items whose non availability can be tolerated for 2-3 days, because similar or alternative items are available.

3. Desirable: items whose non availability can be tolerated for a long period. Although the proportion of vital, essential and desirable items varies from hospital to hospital depending on the type and quantity of workload, on an average vital items are 10%, essential items are 40% and desirable items make 50% of total items available.

Although not included in scientific VED analysis, in some public organizations which are static or inefficiently managed, there is a peculiar category of ‘U’ items which can be grouped as unnecessary. These unnecessary items get purchased due to the following reasons.

a)      Thoughtless continuation of previous purchase.

b)      Indifferent attitude towards hospital formulary

c)      Fear of change

d)      Poor supervision and control

e)      Unfair practice due to vested interest.

The vital items are stocked in abundance; essential items are stocked in medium amounts, and desirable items we stocked in small amounts. By stocking the items in order of priority, vital and essential items are always in stock which means a minimum disruption in the services offered to the people.

It should be realized that vital- V items and A items are not the same. All the vital items are not expensive and all the expensive items are not vital. Domestic examples of salt and matchbox proves that though these items are vital, they are not expensive, similarly microwave oven and air conditioning unit are expensive, but they are not essential.

It is possible to conduct a two dimensional analysis taking into consideration cost on one hand , i.e. A,B,C categories, and critically VED on the other. Findings of ABC and VED analysis can be coupled and further grouping can be done to evolve a priority system of management of stores:

Coupling matrix model

                                                Cat I                Cat II                           Cat III

                                                  V                      E                                   D

                        A                       Av                   Ae                                Ad

                        B                        Bv                    Be                               Bd

                        C                       Cv                    Ce                                Cd

An example for the coupling matrix model for equipment between criticality and cost

NB: 1-9 is cell no                       Matrix module: criticality Vs cost

•  Cell 1 contains vital and high cost items like defibrillator. It must be noted that a material manager has to comprehensively supervise category 1 items since an item may be a low cost one but critical for patient care. ( oxygen regulator)

• Category I items: these items are the most important ones and require control by the administrator himself.

• Category II items: these items are of intermediate importance and should be under control of the officer in charge of the stores.

• Category III items: these items are of least importance which can be left under the control of the store keeper.

• The grouping will essentially depend upon the strategy of management and the environment of functioning. However these simple techniques can be effective in material management system.

•  Items with high criticality (V), but required in small quantity (A) should receive highest priority. Items with low criticality (D) and which are required in big quantity should receive least priority.

Conclusion

A thorough understanding and use of the techniques of materials management would help in ordering the supplies when needed, controlling their use, keeping them safely and in working order, and also motivating the personnel in the best use of equipment and drugs. This also prevents chances of non availability of equipments and drugs as being out of stock of these reduces the usefulness of the hospital system.

References:

1. Kulkarni G R. Managerial accounting for hospitals. Mumbai: Ridhiraj enterprise; 2003.

2. Ghei P N. Selected reading in hospital administration. New Delhi: Indian hospital association. 1990.

3. Pai P. Effective hospital management.( 2 nd edn).  Mumbai: the national book depot; 2003

4. Kumar R& Goel SL. Hospital administration and management. Vol 1 ( first edn).New Delhi: Deep & deep publications;

5. Gupta S& Kanth S. Hospital stores management, an integrated approach.( First edn). New Delhi: Jaypee brothers; 2004.

6. Basavanthappa B T. Nursing administration. ( Ist edn). Newdelhi: Jaypee brothers medical publishers (p) ltd; 2000