Materials management - Inventory management

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Materials management - Inventory management

  1. 1. Materials Management Dr. Rizwan S A, M.D.,
  2. 2. Outline • • • • • • Introduction Need for materials management Components of materials management Details of Inventory management Managing equipment Managing drugs Rizwan S A CCM, AIIMS 2
  3. 3. Outline • • • • • • Introduction Need for materials management Components of materials management Details of Inventory management Managing equipment Managing drugs Rizwan S A CCM, AIIMS 3
  4. 4. Introduction • Objective of ‘Materials Management’ – To establish and operate • an efficient and effective system • that ensures supply of required quantity and quality of materials • when and where it is needed • A neglected area in health field – esp. public services Rizwan S A CCM, AIIMS 4
  5. 5. Outline • • • • • • Introduction Need for materials management Components of materials management Details of Inventory management Managing equipment Managing drugs Rizwan S A CCM, AIIMS 5
  6. 6. Need for materials management - 1 • Financial benefit – Materials make upto 40% of total expense in health centres – Effective management can release funds for other purposes • Better availability of materials – Adequate supply of right material at the right place whenever required – Avoid out-of-stock situations Rizwan S A CCM, AIIMS 6
  7. 7. Need for materials management - 2 • Complexity in health sector – Technical, non-technical, consumable and non-consumable items peculiar to health sector • Cold chain – Vaccines to be maintained in cold chain from the point of manufacture to point of use • Contraceptive supply – High priority, must be available at all times throughout the country • Scope for improvement – Cost-effectiveness mostly ignored in public sector Rizwan S A CCM, AIIMS 7
  8. 8. Outline • • • • • • Introduction Need for materials management Components of materials management Details of Inventory management Managing equipment Managing drugs Rizwan S A CCM, AIIMS 8
  9. 9. Components of Material Management in Health Services • • • • • • • • • Identification of items Estimating demand Purchase and procurement Inspection and quality control Storage Inventory control Issue procedure Maintenance, repair, condemnation Information system Rizwan S A CCM, AIIMS 9
  10. 10. Components of Material Management in Health Services • • • • • • • • • Identification of items Estimating demand Purchase and procurement Inspection and quality control Storage Inventory control Issue procedure Maintenance, repair, condemnation Information system Rizwan S A CCM, AIIMS 10
  11. 11. Identification of items • Large number of aggressively marketed drugs under proprietary names • A hospital committee – to decide the list of drugs to be purchased (based on prevalent morbidities and funds) • Prefer cheap & safe generic drugs to costly proprietary drugs Rizwan S A CCM, AIIMS 11
  12. 12. Components of Material Management in Health Services • • • • • • • • • Identification of items Estimating demand Purchase and procurement Inspection and quality control Storage Inventory control Issue procedure Maintenance, repair, condemnation Information system Rizwan S A CCM, AIIMS 12
  13. 13. Estimating demand - 1 • From previous trends – monthly, quarterly or annual requirements can be estimated • Unusual occurrences (epidemics) sh. be taken into account • Eg. Estimating vaccine requirement in PHC Rizwan S A CCM, AIIMS 13
  14. 14. Estimating demand - 2 • Estimating vaccine requirement – No. of beneficiaries, No. of doses of each vaccine, Wastage factor, No. of sessions – E.g. Requirement of TT for pregnant women • A HSC with 5000 population and birth rate of 30/1000 • 150 births with 10% pregnancy wastage = 165 • Total TT doses 165 X 2 = 330 doses – E.g. For children • Birth rate, IMR, no. of infants alive at one yr. of age • Wastage factor for DPT, OPV = 1.33, BCG, Measles = 1.33 for 5 dose vial, 2 for 10 dose vial • No. of doses divided by no. of doses per vial will give the no. of ampoules/vials required Rizwan S A CCM, AIIMS 14
  15. 15. Estimating demand - 3 • Estimating IFA requirement – No. of pregnant mothers = 165 – No. of tablets required = 16500 – 50% of women will be anaemic and require extra 100 tablets – So total required will be = 16500 + 8250 • Similarly requirement for IFA (paed), ORS, Septran can be calculated Rizwan S A CCM, AIIMS 15
  16. 16. Components of Material Management in Health Services • • • • • • • • • Identification of items Estimating demand Purchase and procurement Inspection and quality control Storage Inventory control Issue procedure Maintenance, repair, condemnation Information system Rizwan S A CCM, AIIMS 16
  17. 17. Purchase and procurement • Objective – maximum value for rupee spent and have minimum of delay • Centralised  Ordering in bulk makes negotiating easy and reduces cost, eliminate middleman, quality control  Disadvantages – delay in supply, consumer dissatisfaction • Decentralised  Peripheral units buy their own supplies, avoids delay, consumer satisfied, flexibility,  Disadvantages – office work increases, lack of interest or expertise Rizwan S A CCM, AIIMS 17
  18. 18. Procurement in PHC • Indenting from District level/CMO • Action plan form (form 2) • Supplies are received quarterly, but earlier replenishment can be requested Rizwan S A CCM, AIIMS 18
  19. 19. Components of Material Management in Health Services • • • • • • • • • Identification of items Estimating demand Purchase and procurement Inspection and quality control Storage Inventory control Issue procedure Maintenance, repair, condemnation Information system Rizwan S A CCM, AIIMS 19
  20. 20. Inspection and quality control • ISI or ISO standards of the items should be looked for before purchasing • Once the goods are received checked for quality and quantity Rizwan S A CCM, AIIMS it must be 20
  21. 21. Components of Material Management in Health Services • • • • • • • • • Identification of items Estimating demand Purchase and procurement Inspection and quality control Storage Inventory control Issue procedure Maintenance, repair, condemnation Information system Rizwan S A CCM, AIIMS 21
  22. 22. Storage • Separate for medical and non-medical items • Adequate facilities – light, ventilation, cupboards, shelves/racks, refrigerators • Narcotics and dangerous drugs in locked cupboard • Storage free from vermin Rizwan S A CCM, AIIMS 22
  23. 23. Components of Material Management in Health Services • • • • • • • • • Identification of items Estimating demand Purchase and procurement Inspection and quality control Storage Inventory control Issue procedure Maintenance, repair, condemnation Information system Rizwan S A CCM, AIIMS 23
  24. 24. Inventory control • Inventory – A complete list of items such as goods in stock, drugs, equipment • It is method of maintaining stock of items – At a level at which purchasing and stocking costs are the lowest possible – Without interference with supply Rizwan S A CCM, AIIMS 24
  25. 25. Components of Material Management in Health Services • • • • • • • • • Identification of items Estimating demand Purchase and procurement Inspection and quality control Storage Inventory control Issue procedure Maintenance, repair, condemnation Information system Rizwan S A CCM, AIIMS 25
  26. 26. Issue procedure - 1 • A procedure that saves time, reduces paperwork and prevents duplication • Written indent for issues to various depts., special rules for dangerous and costly drugs • First In First Out principle – Keeping older stock in the front and newer stock at the back • Push or allocation system – Decision making at the top level • Pull or requisition system – Peripheral outlets draws stock from central stores • Mixed system Rizwan S A CCM, AIIMS 26
  27. 27. Issue procedure - 2 • Maintain Stock Register • The pharmacist or the user sh. be asked to maintain a separate register for entering daily usage of each item • At the end of each month the balance sh. be checked physically Rizwan S A CCM, AIIMS 27
  28. 28. Components of Material Management in Health Services • • • • • • • • • Identification of items Estimating demand Purchase and procurement Inspection and quality control Storage Inventory control Issue procedure Maintenance, repair, condemnation Information system Rizwan S A CCM, AIIMS 28
  29. 29. Maintenance, repair & condemnation • Vehicles – keeping maximum proportion of vehicles roadworthy • Expensive equipment require proper maintenance, convince staff for proper cleaning inspection and reporting about equipment • Condemnation committee formed for worn out objects Rizwan S A CCM, AIIMS 29
  30. 30. Components of Material Management in Health Services • • • • • • • • • Identification of items Estimating demand Purchase and procurement Inspection and quality control Storage Inventory control Issue procedure Maintenance, repair, condemnation Information system Rizwan S A CCM, AIIMS 30
  31. 31. Information system • Meticulous record keeping is absolutely essential to justify actions • A BIN CARD – it is a record of receipt, issue and stock in hand – maintained for each item separately • Stock verification regularly to ascertain physical quantity Rizwan S A CCM, AIIMS 31
  32. 32. Outline • • • • • • Introduction Need for materials management Components of materials management Details of Inventory management Managing equipment Managing drugs Rizwan S A CCM, AIIMS 32
  33. 33. Inventory management - 1 • It is method of maintaining stock of items – At a level at which purchasing and stocking costs are the lowest possible – Without interference with supply • There should be a balance in stocking – If large quantities of drugs are purchased there will be no problem of supply and out-of-stock situation – But maintaining large amount of items is like storing money which could have been used for other useful purpose – A large stock will require space and staff to manage it – Pilferage, loss, expiry, better and newer cheaper alternatives – The yearly carrying cost of inventory is about 25% Rizwan S A CCM, AIIMS 33
  34. 34. Inventory management - 2 • Managing inventory in a systematic way avoiding over or under stocking is a scientific process • General principal – Fast moving items which have large consumption must be ordered frequently while maintaining a safety buffer stock – Items which have small consumption must be ordered frequently with a large buffer stock • Some techniques – – – – ABC analysis VED analysis SDE analysis FSN analysis Rizwan S A CCM, AIIMS 34
  35. 35. ABC Analysis - 1 • Divides inventory into three classes based on annual cost  Class A - high annual cost  Class B - medium annual cost  Class C - low annual cost • Category A drugs should get high priority because they account for bulk of expenditure, their consumption, purchase must be critically watched Rizwan S A CCM, AIIMS 35
  36. 36. ABC Analysis - 2 Item Stock Number Item1 Percent of Number of Items 20% Annual Volume (units) 1,000 x Unit Cost = $ 90.00 Annual cost $ 90,000 Percent of Annual cost Class 38.8% A 72% Item2 500 154.00 77,000 33.2% A Item3 1,550 17.00 26,350 11.3% B 350 42.86 15,001 6.4% Item5 1,000 12.50 12,500 5.4% B Item6 600 $ 14.17 $ 8,502 3.7% C Item7 2,000 .60 1,200 .5% C 100 8.50 850 .4% 1,200 .42 504 .2% C 250 .60 150 .1% C Item4 Item8 Item9 Item10 Rizwan S A 30% 50% CCM, AIIMS 23% 5% B C 36
  37. 37. Percent of annual cost ABC Analysis - 3 80 70 60 50 40 30 20 10 0 A Items – – – – – – – B Items – | | | | – 10 20 30 40 C Items | | | | 50 60 70 80 | | 90 100 Percent of inventory items Rizwan S A CCM, AIIMS 37
  38. 38. ABC Analysis - 4  Criteria other than annual cost may also be used  Delivery problems  Quality problems  High unit cost Rizwan S A CCM, AIIMS 38
  39. 39. VED analysis • Vital (10%) - life saving drugs, no alternatives, can’t afford to have out-of-stock • Essential (40%) - absence can be tolerated for short stretches and alternatives are available • Desirable (50%) – absence can be tolerated for longer periods Rizwan S A CCM, AIIMS 39
  40. 40. Combined ABC and VED V E D Category I – 15% A AV AE AD B BV BE BD Category II – 40% C CV CE CD Category III – 45% • Cat I – continuously monitored, keep minimum safety stock to reduce carrying cost • Cat II – mid level managers, low priority, moderate control • Cat III – low level managers, high buffer stocks, lower priority Rizwan S A CCM, AIIMS 40
  41. 41. SDE analysis • Scarce – imported, frequently in short supply • Difficult – difficult to obtain in quantity or quality • Easy – easily available FSN analysis • Fast moving – large consumption • Slow moving – small consumption • Non-moving – obsolete drugs, lockup space and funds and usually condemned due to expiry Rizwan S A CCM, AIIMS 41
  42. 42. Methods of ordering • Two bin system • Cyclic system • Economic order level Rizwan S A CCM, AIIMS 42
  43. 43. Two bin system • New order is placed when stocks reach a predetermined level for which following information is required  Lead time – the interval between placing order and receiving supply, may vary from item to item  Buffer stock – stock maintained as insurance against variations in consumption  In RCH, for very crucial items recommended buffer is 10% and 5% for rest of the items  Reorder level – the level at which new order is placed, equals the amount that will be consumed in the lead time plus buffer stock Rizwan S A CCM, AIIMS 43
  44. 44. Cyclic system • Various items are checked with certain periodicity called review period – Find out consumption, balance in hand – The period between orders is fixed • The quantity ordered depends upon lead time – It the lead time is less than the review period, the amount ordered will be the difference between maximum stock and stock in hand Rizwan S A CCM, AIIMS 44
  45. 45. Reorder Points  The reorder point (ROP) tells when to order Demand per day ROP = Lead time for a new order in days =dxL d= Rizwan S A D Number of working days in a year CCM, AIIMS 45
  46. 46. Reorder Point Curve Inventory level (units) Q* Slope = units/day = d ROP (units) Time (days) Lead time = L Rizwan S A CCM, AIIMS 46
  47. 47. Reorder Point Example Demand = 8,000 tablets per year 250 working day year Lead time for orders is 3 working days d= D Number of working days in a year = 8,000/250 = 32 tablets ROP = d x L = 32 tablets per day x 3 days = 96 tablets Rizwan S A CCM, AIIMS 47
  48. 48. Fixed period system Target quantity (T) Q4 On-hand inventory Q2 Q1 Q3 P P P Time Rizwan S A CCM, AIIMS 48
  49. 49. Variable demand with reorder point Inventory level Q Reorder point, R 0 LT LT Time Rizwan S A CCM, AIIMS 49
  50. 50. Reorder point with safety stock Rizwan S A CCM, AIIMS 50
  51. 51. Economic order quantity • It is the order quantity that minimizes total inventory holding costs and ordering costs • EOQ is fixed for each item taking into account – Annual requirement – Cost of carrying inventory – Cost ordering • We want to determine – the optimal number of units to order – so that we minimize the total cost associated with the purchase, delivery and storage of the product Rizwan S A CCM, AIIMS 51
  52. 52. Economic order quantity • Variables needed to calculate EOQ = optimal order quantity  Q = order quantity  D = annual demand quantity  S = fixed cost per order (typically cost of ordering and shipping and handling. This is not the cost of goods)  H = annual holding cost per unit (carrying cost) (warehouse space, refrigeration, insurance, etc. usually not related to the unit cost) Rizwan S A CCM, AIIMS 52
  53. 53. Rizwan S A CCM, AIIMS 53
  54. 54. EOQ Model - advantages • The EOQ model is robust • It works even if all parameters and assumptions are not met Rizwan S A CCM, AIIMS 54
  55. 55. Outline • • • • • • Introduction Need for materials management Components of materials management Details of Inventory management Managing equipment Managing drugs Rizwan S A CCM, AIIMS 55
  56. 56. Managing equipment • Four main procedures Ordering Storing Issuing -(obtaining from stores) -(recording, labelling, holding) -(giving out, recording the issue and balancing the stock, signed voucher) Controlling/maintaining Rizwan S A CCM, AIIMS 56
  57. 57. Ordering equipment • Making list – A list of all required items, the exact quantity • Balancing needs and resources – Making a cost estimate • Using a catalogue • Completing order/requisition form Rizwan S A CCM, AIIMS 57
  58. 58. Storing equipment • Equipment is stored in 2 places – A main store where stocks are kept – The place of use • Receiving new items – Noting in the stock register, the date, reference number, invoice number, and quantity of items • Keeping ledger balance after issue Rizwan S A CCM, AIIMS 58
  59. 59. Issuing equipment • Ledger record – The issue of items is noted and the balance is entered – Issue voucher is an official form with date, quantity, department of use, recipient, and sign Rizwan S A CCM, AIIMS 59
  60. 60. Controlling/maintaining • Convincing staff that equipment must be cleaned, inspected and kept in good order, defects must be reported immeddiately • Inspection checklist and inspection schedule • Detecting discrepancies and taking action • Keeping accurate equipment records Rizwan S A CCM, AIIMS 60
  61. 61. Outline • • • • • • Introduction Need for materials management Components of materials management Details of Inventory management Managing equipment Managing drugs Rizwan S A CCM, AIIMS 61
  62. 62. Managing drugs - 1 • The objective of managing drugs is to use drugs wisely and avoid wasting them • Educate staff about use of drugs – Notes on common drugs – Correct doses – Discuss wastage in staff meetings – Lecture/discussion on common drugs • Educate patients Rizwan S A CCM, AIIMS 62
  63. 63. Managing drugs - 2 • Preparing a standard drug list – Selected from a list of essential drugs – Depending upon common diseases in the hospital – New drugs availability – Budget • Estimating requirement; ordering and stocking Rizwan S A CCM, AIIMS 63
  64. 64. Managing drugs - 3 • Stock-card system – Sometimes used instead of a ledger Rizwan S A CCM, AIIMS 64
  65. 65. Managing drugs - 4 • Issuing and controlling use of drugs • It helps in identifying when stocks need reordering, checking usage against treatment, detecting discrepancies, check usage in different depts. • A/B or Double-shelf system – when shelf A is used up order is placed for new stock – Part B will be used up by the time the new order arrives Rizwan S A CCM, AIIMS 65
  66. 66. Managing drugs - 5 • Controlling life saving drugs – Make a list of such drugs – Place them together in one shelf – Check frequently, Order new supply when depleted to half • Prepacking drugs for outpatient Rizwan S A CCM, AIIMS 66
  67. 67. Eg. TNMSC Model • TNMSC, the state government's drug procurement agency, is considered among the best centralized and efficient public sector drug procurement mechanism in the country • Primary objective - ensure ready availability of all essential drugs and medicines • These improvements have helped bring down the average cost of drugs for inpatients in Tamil Nadu’s public hospitals to Rs. 102, (3,268 Haryana, 2,166 Himachal Pradesh, 3,187 Rajasthan) Rizwan S A CCM, AIIMS 67
  68. 68. Exercises • You are the MOIC of PHC Chhainsa 1. Calculate the number of ORS packets required for this year 2. Calculate the requirement of BCG and Measles doses required for this quarter 3. Calculate the requirement of Paediatric Septran tablets for this year Rizwan S A CCM, AIIMS 68
  69. 69. Thank you

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