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Material Management: Planning and Procurement
This page was last updated on February 17, 2011

To spend money is easy
To spend it well is hard” -Wesley C Michel


  • 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..

  • 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

Basic principles of material management Planning

  • 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

Elements of material management Planning

  • Demand estimation
  • Identify the needed items
  • Calculate from the trends in Consumption
  • Review with resource constraints


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
  • Restricted or limited tender
  • Negotiated procurement
  • Direct procurement
  • Rate contract
  • Spot purchase
  • Risk purchase
  • Many Suppliers Strategy
  • Few Suppliers Strategy

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

Procurement of equipments

  • 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


  • 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


  • 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.
  • Principles of material management and procurement are applicable to every organization as well as individuals.


  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.



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