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INTRODUCTION
Inventory control in hospitals is more than just procurement and usage. The proper
controls and processes can save millions in healthcare costs by enabling a hospital to
efficiently order and store just the right amount of supplies needed for patient cases while
tracking cost, tier pricing and patient charges associated with supplies.
Inventory control is an important aspect of material management. If the level of
inventories goes up the carrying charges also increase but the procurement cost decreases.
Inventory control is basically a scientific system which indicates as to what to order,
when to order.
Condemnation occurs when a local, state or federal government seizes private
property and compensates the owner. Condemned property must be appraised by the
governmental authority.
2
3
INVENTORY CONTROL
DEFINITION:
Inventory is the list of moveable items which are required to manufacture a product or to
maintain equipment. Inventory is a unique item having identification number, nomenclature
and specification.
Or
Inventory control is defined as safe guarding of company’s property in the form of inventory
and maintaining at the optimum level considering the operating requirements and financial
resources of business.
Or
Inventory control is 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.
Or
Inventory control is the technique of maintaining the size of inventory at some desire level
keeping in view the best economic interest of an organization.
4
 TYPES OF INVENTROY CONTROL
The inventory is basically of two types
OFFICIAL INVENTORY
The materials lying in the main stores and being accounted for but have not been
issued to the user units.
 Medical and surgical items
 Dressings
 Linens
 X-ray supplies
 Laboratory supplies
 Housekeeping items
 All processed sterile items
UNOFFICIAL INVENTORY
The materials have been issued to the user units like the dispensary, CSSD, laundry,
wards, OPD, cast rooms etc. In case of forecasting or demand estimation, these items are not
taken into consideration by the hospital administration, so it is called as un-official inventory
for hospitals.
UNOFFICIAL
INVENTORY
OFFICIAL
INVENTORY
5
 OBJECTIVES OF INVENTORY CONTROL
 To supply the materials in time.
 To give maximum clients service by meeting their requirement timely, effectively, smoothly
and satisfactorily
 To reduce or minimize idle time by avoiding stock out and shortages
 To avoid shortage of stock
 To meet unforeseen future demand
 To average out demand fluctuations
 FUNCTIONS OF INVENTORY CONTROL:
 To carry adequate stock to avoid stock-outs
 To order sufficient quantity per order to reduce order cost
 To stock just sufficient quantity to minimize inventory carrying cost
 To make judicial selection of limiting the quantity of perishable items and costly materials
 To take advantage of seasonal cyclic variation on availability of materials to order the right
quantity at the right time.
 To provide safety stock to take care of fluctuation in demand/ consumption during lead time.
 To ensure optimum level of inventory holding to minimize the total inventory cost.
 PRINCIPALS OF INVENTROY MANAGEMENT
 Determination of order quantity
 Determination of Recorder point of Recorder level
6
CONCEPTS RELEVANT IN CONTROLLING INVENTORY COSTS:
The following concepts are relevant in controlling the inventory costs:
 Periodic/ cyclic system:
 This system involves review of stock status at periodic/ fixed intervals and placement of
orders depending on the stock on hand and rate of consumption. The ordering interval is thus
fixed but the quantity to be ordered varies each time.
 Two bin system:
 It is a system where the stock of each item is held in two bins, one large bin containing
sufficient stock to meet the demands during interval between arrivals of an order quantity and
placing of next order, and the other bin containing stocks large enough to satisfy probable
demands during the period of replenishment.
 When the first bin is empty, an order for replenishment is placed, and the stock in the second
bin is utilized until the ordered material is received.
 Lead time:
 This is the period required to obtain the supply once the need is determined. It is therefore the
average number of days between placing an indent and receiving the material.
 Lead time is composed of two elements:
Administrative or buyer‘s lead time (i.e. Time required for raising purchase requisitions,
obtaining quotations, raising purchase order, order to reach supplier etc)
Delivery or supplier‘s leading time (i.e. Time required for manufacture, packing and
forwarding, shipment, delays in transit)
 Minimum/safety/ buffer stock:
 This is the amount of stock that should be kept in reserve to avoid a stock-out in case
consumption increases unexpectedly or in case the lead time turns out to be longer than
normal. It is also the level at which fresh supply should normally arrive, failing which action
should be taken on an emergency basis to expedite supply and replenish the stock.
 Safety stock = maximum daily consumption-average daily consumption x total lead time
 Maximum order level:
 This is the maximum quantity of the materials to be stocked, beyond which the item must not
be in the inventory. If the inventory is maintained beyond this point, there would be loss to
the hospital by way of expiry of life items beyond the shelf life of items, loss incurred on the
capital locked up in the inventory, unnecessary use of items just to exhaust the inventory.
 Re-order level:
 This is the value which is very important from the point of view of the inventory control. This
is the point at which we have to place an order for procurement for replenishing the stock.
 It is derived by the formula (minimum order level + buffer stock )

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Inventroy control word file

  • 1. 1 INTRODUCTION Inventory control in hospitals is more than just procurement and usage. The proper controls and processes can save millions in healthcare costs by enabling a hospital to efficiently order and store just the right amount of supplies needed for patient cases while tracking cost, tier pricing and patient charges associated with supplies. Inventory control is an important aspect of material management. If the level of inventories goes up the carrying charges also increase but the procurement cost decreases. Inventory control is basically a scientific system which indicates as to what to order, when to order. Condemnation occurs when a local, state or federal government seizes private property and compensates the owner. Condemned property must be appraised by the governmental authority.
  • 2. 2
  • 3. 3 INVENTORY CONTROL DEFINITION: Inventory is the list of moveable items which are required to manufacture a product or to maintain equipment. Inventory is a unique item having identification number, nomenclature and specification. Or Inventory control is defined as safe guarding of company’s property in the form of inventory and maintaining at the optimum level considering the operating requirements and financial resources of business. Or Inventory control is 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. Or Inventory control is the technique of maintaining the size of inventory at some desire level keeping in view the best economic interest of an organization.
  • 4. 4  TYPES OF INVENTROY CONTROL The inventory is basically of two types OFFICIAL INVENTORY The materials lying in the main stores and being accounted for but have not been issued to the user units.  Medical and surgical items  Dressings  Linens  X-ray supplies  Laboratory supplies  Housekeeping items  All processed sterile items UNOFFICIAL INVENTORY The materials have been issued to the user units like the dispensary, CSSD, laundry, wards, OPD, cast rooms etc. In case of forecasting or demand estimation, these items are not taken into consideration by the hospital administration, so it is called as un-official inventory for hospitals. UNOFFICIAL INVENTORY OFFICIAL INVENTORY
  • 5. 5  OBJECTIVES OF INVENTORY CONTROL  To supply the materials in time.  To give maximum clients service by meeting their requirement timely, effectively, smoothly and satisfactorily  To reduce or minimize idle time by avoiding stock out and shortages  To avoid shortage of stock  To meet unforeseen future demand  To average out demand fluctuations  FUNCTIONS OF INVENTORY CONTROL:  To carry adequate stock to avoid stock-outs  To order sufficient quantity per order to reduce order cost  To stock just sufficient quantity to minimize inventory carrying cost  To make judicial selection of limiting the quantity of perishable items and costly materials  To take advantage of seasonal cyclic variation on availability of materials to order the right quantity at the right time.  To provide safety stock to take care of fluctuation in demand/ consumption during lead time.  To ensure optimum level of inventory holding to minimize the total inventory cost.  PRINCIPALS OF INVENTROY MANAGEMENT  Determination of order quantity  Determination of Recorder point of Recorder level
  • 6. 6 CONCEPTS RELEVANT IN CONTROLLING INVENTORY COSTS: The following concepts are relevant in controlling the inventory costs:  Periodic/ cyclic system:  This system involves review of stock status at periodic/ fixed intervals and placement of orders depending on the stock on hand and rate of consumption. The ordering interval is thus fixed but the quantity to be ordered varies each time.  Two bin system:  It is a system where the stock of each item is held in two bins, one large bin containing sufficient stock to meet the demands during interval between arrivals of an order quantity and placing of next order, and the other bin containing stocks large enough to satisfy probable demands during the period of replenishment.  When the first bin is empty, an order for replenishment is placed, and the stock in the second bin is utilized until the ordered material is received.  Lead time:  This is the period required to obtain the supply once the need is determined. It is therefore the average number of days between placing an indent and receiving the material.  Lead time is composed of two elements: Administrative or buyer‘s lead time (i.e. Time required for raising purchase requisitions, obtaining quotations, raising purchase order, order to reach supplier etc) Delivery or supplier‘s leading time (i.e. Time required for manufacture, packing and forwarding, shipment, delays in transit)  Minimum/safety/ buffer stock:  This is the amount of stock that should be kept in reserve to avoid a stock-out in case consumption increases unexpectedly or in case the lead time turns out to be longer than normal. It is also the level at which fresh supply should normally arrive, failing which action should be taken on an emergency basis to expedite supply and replenish the stock.  Safety stock = maximum daily consumption-average daily consumption x total lead time  Maximum order level:  This is the maximum quantity of the materials to be stocked, beyond which the item must not be in the inventory. If the inventory is maintained beyond this point, there would be loss to the hospital by way of expiry of life items beyond the shelf life of items, loss incurred on the capital locked up in the inventory, unnecessary use of items just to exhaust the inventory.  Re-order level:  This is the value which is very important from the point of view of the inventory control. This is the point at which we have to place an order for procurement for replenishing the stock.  It is derived by the formula (minimum order level + buffer stock )
  • 7. 7 TYPES OF INVENTORY COSTS  ORDERING COSTS  CARRYING COSTS  SHORTAGE COSTS  TOTAL INVENTORY COST  LEAD TIME a. Ordering costs: This is the cost of getting an item into the store. The process of ordering starts with raising requisition, placing an order, follow up, transportation receipt and inspection, acceptance and placing in stores. b. Carrying costs: This is the cost of holding an item in the store till it is issued out or sold. Following are the elements:-  Interest on capital cost incurred.  Cost of obsolescence, wastages, damages.  Rent, insurance, depreciation and taxes  Maintenance costs of inventory like special treatment, stock taking etc.  Operating costs of store like direct labor and overheads like electricity, dust proofing etc. c. Shortage costs: These are the costs incurred both directly and indirectly due to shortages like intangible costs due to loss of goodwill, opportunity loss or production hold costs. d. Total inventory cost: A total inventory cost consists of carrying costs and ordering costs. e. Lead time: This is the time which has elapsed between placing an order till the same items are received, stocked and ready to use.
  • 8. 8 AVERAGE INVENTORY  Average inventory is defined in two cases:  Average inventory at constant usage rate: Average inventory = opening stock+ closing stock 2  Average inventory at variable usage rate:  Simple average method: Average inventory = opening stock+ closing stock 2  Six monthly average method: Average inventory= opening stock+ stock after 6 months+ closing stock 2  Quarterly average method: Average inventory = sum of 4 - quarterly stock + closing stock 5  Monthly average method:  Average inventory = sum of 12- quarterly stock + closing stock 13
  • 9. 9 SELECTIVE INVENTORY CONTROL Definition: Selective inventory control means grouping the inventory and classifying for the purpose of applying the right type of control based on their costs and functional importance. Objective: The primary objective of inventory control is to minimize total cost of inventory. It requires the following:  Supervision on planning and control of inventory functions like forecast of requirements  Purchase quantity fixation  Storage and supply Need for selective inventory control:  Inventory consists of many items, in which some are costly whereas some may be not.  Some inventories are required in large quantities whereas some are required in limited quantities, thus each item require different type of control, some tight and some loose. Methods of selective inventory control: Following are the popular methods of selective inventory control: a. ABC Analysis b. VED Analysis c. HML Analysis d. XYZ Analysis e. FSN Analysis f. SDE Analysis g. GOLF Analysis h. SOS Analysis A. ABC Analysis It is the process of classifying items by using values as measure. B. VED Analysis VED Analysis – Vital, Essential and Desirable. The vital items are stocked in abundance
  • 10. 10 Essential items are moderate controls, purchase based on rigid requirements and reasonably strict watch. Desirable items are ordinary control, safety stock high, purchase based on usage estimate. C. HML Analysis As the name itself indicates materials are classified according to their unit value as high, medium and low. D. XYZ Analysis X items are those whose stock value are high, while Z items are those stock values are low. Understandably Y items fall between the two categories. E. FSN Analysis Movement analysis forms the basis for this classification. The items are classified as fast moving, slow moving and non-moving. F. SDE Analysis Classification methods based on source of supply, SDE classification is a system where materials are sorted out as scare to obtain, difficult to obtain and easy to obtain. G. GOLF Analysis In the GOLF system, classification is based on the availability and nature of supplies. Government suppliers, Ordinary suppliers, Local suppliers and Foreign suppliers. H. SOS Analysis Raw materials can be classified into seasonal or off season items.
  • 11. 11 ADVANTAGES:  Delivery in time  Possibility of discount for bulk purchase  Unforeseen circumstances can be handled to some extent.  Workers and machinery needn’t idle. DISADVANTAGES:  Working capacity is tied up  More space required  Increase insurance chargers  Increased overhead expenses  Changes of damage  Increase charge for obsolescence
  • 12. 12 CONDEMNATION The materials which could not be used within its shelf life, deteriorated and declared unfit for use, became obsolete or banned due to legal provisions are considered for condemnation or disposal. Criteria for condemnation: The equipment has become: 1. Non-functional & beyond economical repair 2. Non-functional & obsolete 3. Functional, but obsolete 4. Functional, but hazardous 5. Functional, but no longer required  PROCEDURE FOR CONDEMNATION Following procedure is generally carried out in case of the materials particularly drugs and nondrug items:  A condemnation committee comprising of three or more members is constituted by the competent authority, the terms of reference of the committee are: a. To go in details of the reasons as to why this situation has occurred. b. The people who are responsible for the lapses on the aspects from acquisition to storage and distribution of materials. c. To suggest measures to be taken for disposal of the items.  The committee members go into details through inventory records right from the point of demand estimation to the distribution level of materials, and will find out reasons for being an item surplus and remained unused.  The committee will declare the items condemned and make recommendation for further disposal of items.  The condemned items are to be destroyed, so it is to be taken out from the inventory registers, a write off sanction of the competent authority is obtained before final disposal.  The items particularly medicines which are toxic and cannot be disposed of by burial or as per the relevant laid down rules under the subject of waste disposal.
  • 13. 13  The effective measures are taken for disposal of surplus items before it becomes unfit for use is:  A list of surplus material is circulated among the hospital staff/user units requesting them to pay special attention for mobilizing such items and giving priority to this category of items.  The surplus materials are transferred to other hospitals where these may be required.  The surplus materials are offered to the manufacturer/ suppliers for buy back.  In case of materials other than drugs like equipment, instruments any such articles are treated as salvage or scrap, whatever the case may be, action is taken accordingly  The materials may be sold by inviting tender.  Open auctions of items through authorized auctioneers.
  • 14. 14 ROLE OF NURSE MANAGER Ensuring regular and adequate flow of supply Monitoring quality and safety of the materials. Indenting, receiving, storing, and checking for all necessary equipment and supply. Maintain of emergency stocks Arranging and assisting in audit. Participation in policy making for material management Evaluating the efficacy of the material management system followed in particular nursing unit.
  • 15. 15 SUMMARY In this topic inventory control and condemnation including effective of level in management. Inventory control including definition which gives concepts of inventory control, types, and inventory costs. Condemnation is based on the government authority.
  • 16. 16 CONCLUSION Inventory control and condemnation both are very important part of material management. Having good inventory control and adopting sound methods of condemnation will improve the efficiency of the organization. Inventory control helps in management system. Inventory is unique item, condemnation appraised by governmental authority.
  • 17. 17 BIBLIOGRAPHY 1. Sarath Chandran, Deepak K; NURSING MANAGEMENT., 1st Edition; 2013. EMMESS, Page No:311-328. 2. Jogindra Vati; PRINCIPAL AND PRACTICE OF NURSING MANAGEMENT AND ADMINISTARTION; 1st Edition, 2013, JAYPEE;Page No : 555-560. 3. Elakkuvana Bhaskara Raj,MANAGEMENT OF NURSING SERVICE AND EDUCATION; 2nd Edition;2012,EMMESS. Page No: 223-226. 4. Clement, MANAGEMENT OF NURSING SERVICE AND EDUCATION; 2nd Edition, 2015, Elsevier. Page No: 212-215. 5. BT Basavanthapa, NURSING ADMINISTRATION, 3rd Edition, 2014; Jaypee . Page No: 432-437. 6.