To spend money is easy
To spend it well is hard”
-Wesley C Michel
Outline
- Overview of material management
- Materials Planning
- Procurement
- Objectives of procurement system
- Procurement cycle
- Methods in Procurement Process and Negotiation Strategies
- Contractual services by DGSD for Government Institutions
- Points to remember while purchasing
- Procurement of equipment
- Storage
- Inventory Control
- Conclusion
Introduction
Material management is a scientific technique, concerned with Planning, Organizing and Control of flow of materials, from their initial purchase to destination. It is 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.. About 40 percent of the funds in the health care system are used up for providing materials. It is of great importance that materials of right quality are supplied to the consumers
Material management integrates all materials functions
- Planning for materials
- Demand estimation
- Purchasing
- Inventory management
- Inbound traffic
- Warehousing and stores
- Incoming quality control
Material Planning
"Material planning is the scientific way of determining the requirements that goes into meeting production needs within the economic investment policies”. - Gopalakrishnan & Sunderasan
It is done at all stages and all levels of management. Material planning is based on certain feedback information and 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
- To provide reasonable level of client services
Objective of material management planning
Primary |
Secondary |
- Right price
- High turnover
- Low procurement and storage cost
- Continuity of supply
- Consistency in quality
- Good supplier relations
- 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
It 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 materials planning.
- Explosion of bill of materials refers to splitting the requirements for the product to be manufactures in to its basic components. E.g. in health care is drugs manufactured in the pharmacy
- This technique is ideally suited to engineering industries.
- The technique is based on demand forecasts.
- Requirement for various materials are listed with their complete specifications
Past Consumption Analysis Technique
- In this technique future projection is made on the basis of the past consumption data, which is analyzed taken in to consideration the past and 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, equipment and appliances (1963) identified 3200 items of instruments, equipments and appliances being used in the hospital.
Identify the needed items
- Need for variety reduction-less number of materials, less will be the 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
Procurement process planning
Problems affecting material planning
Corporate/Govt objectives and plans
Technology available
Market demand
Lead time and rejection rates
Working capital available
Nature of inventory required
Capacity and its utilization of the organization
Seasonal variations
Information and data available
Overall material policy
Procurement
Most organizations have a detailed set of rules and regulations regarding the procedure for ordering for materials. In the Government systems DGHS play a crucial role in purchasing materials of heavy cost.
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 idleness and overwork
Optimize inventory management through scientific procurement procedures
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
Published in newspapers
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 (about 10)
Lead-time is reduced
Better quality
Negotiated procurement
Buyer approaches selected potential Suppliers and bargain directly
Used in long time supply contracts
Direct procurement
Purchased from single supplier, at his quoted price
Prices may be high
Reserved for proprietary materials, or low priced, small quantity 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 Suppliers 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 (large orders)
Frequent, small lots
Delivery to point of use
Contractual services by Directorate General of Supplies and Disposals for 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 contacts are for supply of an approximate quantity of stores at a specified price during a 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 contract. No fixed quantity is mentioned. This system of offers maximum flexibility in ordering specified quantity of materials at frequent intervals.
Points to remember while purchasing
Proper specification
Invite quotations from reputed firms
Comparison of offers based on basic price, freight and insurance, taxes and levies
Quantity and payment discounts
Payment terms
Delivery period, guarantee
Vendor reputation (reliability, technical capabilities, Convenience, Availability, after-sales service, sales assistance)
Short listing for better negotiation terms
Seek order acknowledgement
Procurement of equipments
Points to be noted before purchase of an 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 a correct way
Group wise and alphabetical arrangement helps in
identification and retrieval
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
It means stocking adequate number and kind of stores, so that the materials are available whenever required and wherever required. Scientific inventory control results in optimal balance
Functions 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
Conclusion
Material management is an important management tool which will be very useful in getting the right quality and right quantity of supplies at right time, having good inventory control and adopting sound methods of condemnation and disposal will improve the efficiency of the organization and also make the working atmosphere healthy any type of organization, whether it is Private, Government, Small organization, Big organization and Household. 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 our daily activities
References:
1. Basavanthappa B T. Nursing administration. ( Ist edn). New Delhi: Jaypee brothers medical publishers (p) ltd; 2000.
2. Gopalakrishnan & Sunderasan: Material Management, Prentice Hall of India Pvt Ltd. New Delhi, 1979.
3. Kulkarni G R. Managerial accounting for hospitals. Mumbai: Ridhiraj enterprise; 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.. |
