Fundamentals of Logistics Management in Healthcare Institutions

1. LOGISTICS
[MATERIALS]
MANAGEMENT
IN HEALTHCARE

2. LOGISTICS
MANAGEMENT
Logistics is the management of the flow
of goods, information and other resources
between the point of origin and the point of
consumption in order to meet the requirements of
consumers.
Logistics involves the integration of information,
transportation, inventory, warehousing, material
handling, and packaging, and
occasionally security.
Logistics is a channel of the supply chain which adds
the value of time and place utility.

3. Logistics Management
 Logistics management is that part of
the supply chain which plans,
implements and controls the efficient,
effective forward and reverse flow and
storage of goods, services and related
information between the point of origin
and the point of consumption in order
to meet customer and legal
requirements.

4. Supply Chain Management
It is a chain of interconnected
businesses and business processes.
Every time a requirement is
communicated, order is placed and
inventory is stocked, there is a
potential opportunity of value
addition, waste
reduction and process
standardization.

5. Logistics Management in
Hospital Supply Chain:
 Medicinal supplies have a limited shelf
life and many drugs are expensive.
 This call for a specific method of
provisioning, storing and
administering
such medicines which starts with
storing them in a temperature/
humidity controlled
atmosphere and issued on a First
Come First Served (FIFO) order.

6. MATERIALS
MANAGEMENT
 Planning and control of
the functions supporting the
complete cycle (flow) of materials, and
the associated flow of information
 These functions include
(1) identification, (2) cataloging,
(3) standardization, (4) need determination,
(5)scheduling, (6) procurement, (7) inspection,
(8) quality control, (9) packaging, (10) storage,
(11) inventory control, (12) distribution, and
(13) disposal

7. Objectives of MM
 Material selection Low operating costs
 Receiving material safely & in good
condition Issue material upon receipt of
appropriate authority Identification of
surplus stocks & taking appropriate
measures to reduce it.
 Providing economy in purchasing &
minimizing waste
 To purchase items of best quality at the
most competitive prices.

8. Functions
 Material planning
Purchasing
Receiving
Stores
Inventory control
Waste management

9. MM Functions
 Material planning and programming
 Purchasing and outsourcing
 Inventory control
 Storekeeping and warehousing
 Codification
 Standardization and evaluation of all products
 Transportation and material handling
 Inspection and quality control
 Cost reduction through value analysis
 Disposal of surplus / obsolete material
 Distribution

10. Basic Principles of MM
 Right quality,
 Right quantity,
 Right prices,
 Right source and at
 Right time to the
 Right place
 Centralize the purchase system
 Back up of good systems
management

11. Mat Purchase & Planning
Processing the requisition:
communicate to the purchase dept.
the requirements for various items by
requisition form which contains the
details of quality & other necessary
info. about items & is to be signed by
competent authority.
Proper Specification

12. Inventory Management
Inventory means stock of raw
material, semi finished &
finished goods maintained by
organization
Inventory control-the tool of
maintaining the size of inventory
at some desired level keeping in
view the best economic interest
of org.

13. Objectives of Inv Control
 Protection against fluctuation in
demand
 Better use of 5 M’s Protection against
fluctuation in output
 Control of stock volume
 Protecting against quality problems
 To ensure reliable delivery to
customers
 Reducing input costs (purchase in
advance of price increases)

14. Inventory Costs
 Costs associated with ordering too much (represented
by carrying costs) Costs associated with ordering too
little (represented by ordering costs) These costs are
opposing costs, i.e., as one increases the other
decreases The sum of the two costs is the total
stocking cost (TSC)
 Carrying (or holding) costs: sum of all costs that are
proportional to the amount of inventory physically on
hand at any point in time
 Cost of capital (opportunity cost) Breakage, spoilage,
deterioration, obsolescence, loss, insurance etc.
Physical storage, handling, book-keeping,
refrigeration, utility etc.

15. Inventory Costs
 Ordering cost: Sum of all costs related to the
amount of inventory that is ordered for
replenishment.
 Fixed cost: incurred independently of the size of
the order as long as it is not zero, e.g. book-
keeping and paper work, mailing, etc., associated
with the order
 Variable cost: incurred on a per unit basis
 Penalty cost (or stockout or shortage costs): cost
of not having sufficient stock on hand to meet
demand when it occurs

16. Inventory Decisions
 ABC (ALWAYS BETTER CONTROL)
analysis- Class A –constitutes 10% of
total items & accounts for 75% of total
money spend on inventories. Class B –
constitutes 15% of total items & accounts
for 15% of total money spend on
inventories
 Class C - constitutes 75% of total items &
accounts for 10% of total money spend on
inventories

17. VED Analysis
 This analysis represents the classification of
items based on the criticality.
 The analysis classifies the items in 3 groups
called vital, essential & desirable.
 Vital items are those items the unavailability of
which will stop the production
 Essential items are those items whose stock
out costs are very high.
 Desirable items will not cause any immediate
production stoppage & their stock out costs
are nominal

18. Buffer Stock
 Buffer stock The min. level of inventory to
cover some unforeseen & uncalled for
situations is called safety or buffer stock
 Factors affecting choice of buffer stocks-
Uncertainty in demand
 Uncertainty in lead time
 Size of batch Larger the uncertainty
associated with any factor, larger should
be the buffer stock.

19. Finding the Right Source
Supplies catalogue
Print media :Trade directories, trade
journals , news papers, yellow
pages
Salespersons: many advantages
Trade exhibition , fairs , conferences
Colleagues in similar field
Internet

20. Negotiations
 Possible because of huge margins
 Pass on to patients
 Not at the cost of quality
 Win-win situation for all
 Maintain relationship
 Not to purchase on listed price
 Negotiate bulk price
 Always ask for discount
 Price protection
 Credit

21. Receiving
 Establish written protocols, assign
responsibility
 Checking of goods for quality, expiry etc
 Cross check with purchase order &
invoice / delivery chalan
 Proper record in designed registers
 Signature of receiver & delivery person
 Periodic checks

22. Distribution
From store to user
An intricate process
Right item at right time at right
place
2 methods:
Requisition: as and when
required
Par level: periodic replenishing to
a certain fixed level

23. Scope of MM
 Every health care organization requires a
continuous stream of material and supplies
for providing quality care to patient.
 There are numerous individual items of
materials required for running a hospital,
larger the size of the hospital, greater the
number of items required
 The efficiency of a hospital partly consists
in maximizing the quantity of patient care
per unit of cost while maintaining
satisfactory levels of quality and consumer
satisfaction

24. Purchasing
 Purchasing is one of the important
functions of administration and the goals
of purchasing are to purchase at a right
price, right quality, right quantity, right
contractual terms, right time, right source,
right material, right place, right mode of
transportation, right attitude, with
techniques such as value analysis,
material intelligence, purchase
research, SWOT analysis, purchase

27. Procurement
Procurement of the material depends on
 prioritization of purchase of material
 fixing the price
 calling for tenders/quotations
 evaluation of the tenders/quotations
 placement of orders
 ensuring receipt of material
 making the payment.

28. Negotiation
 Procurement by negotiation is a battle of wits and
art of embodying sophisticated tactics and
maneuvers by both the buyer and the suppliers.
 It is an art of arriving at common understanding
through bargaining on the essential points for the
contract such as delivery, specification, price and
payment terms, etc.
 It is a difficult art and requires the exercise of
executive judgment, tact and commonsense and
the bargaining power will definitely be influenced
by the preparedness of the buyer as well as the
place and time of negotiation.

29. Status of Supplies
 Carrying the discussion about the volume
and cost of medicines used in a typical
hospital scenario, we can safely
recommend:
 “Class – A” status to the critical/life
saving drugs.
 “Class – B” status to the important drugs
that are used by different departments.
 “Class – C” status to the routine drugs
and medical supplies

30. Automation
 A fully automated medication
administering process provides tools
and guidance that
assist in ensuring the “Five Rights” of
prescribing and administering a
medicine:
 ✔Right Drug
✔Right Dose
✔Right Patient
✔Right Route
✔Right Tim

31. Benchmarking the hospital logistics
process
 Improved operations should provide better
cost control, while maintaining the quality
of care delivered to the public.
 Support processes are excellent targets
because they don't necessarily have a
direct impact on the quality of care
provided.
 Hospital logistics is one such process, the
goal of which is to efficiently deliver
medical supplies and pharmaceutical
products to the final consumer, the patient