This document discusses various concepts related to material management. It defines material management as planning, organizing, and controlling the flow of materials from initial purchase through operations to distribution. It describes key functions like planning, procurement, inventory management, and storage. Different inventory models are explained including EOQ and ABC analysis for classification and control of inventory. Material accounting systems and roles of nurses in material management are also summarized.

1. MATERIAL MANAGEMENT
By Asha E.K
Msc final year.

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

3. 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.

4. SUPPLY CHAIN MANAGEMENT
• Quinn defines the supply chain as "All of those
activities associated with moving goods from the
raw-materials stage through to the end user.
• This includes sourcing and procurement, production
scheduling, order processing, inventory
management, transportation, warehousing, and
customer service.

5. • 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

6. What could be the material management
functions?
• Planning for materials
• Demand estimation
• Purchasing
• Inventory management
• Inbound traffic
• Warehousing and stores
• Incoming quality control

7. 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

8. • It is done at all stages and all levels of management.
• Material planning is based on certain feedback
information and reviews.

9. 5 R’S OF MATERIAL MANAGEMENT PLANNING
Aim is to get:
• Right quality
• Right quantity of supplies
• Right time
• Right place
• Right cost

10. 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

11. PROCUREMENT
• Procurement is often thought of in terms of raw
materials, but it can actually cover a wide range of
items that could be used to complete a project. Even
services that will be needed as part of the work
would be included under the umbrella of
procurement.

12. Procurement management is the process of ensure
that everything required from outside the
organization is in place when it is needed so the
project can proceed successfully.

13. • Procurement is the process of obtaining goods and
services from preparation and processing of a
requisition through to receipt and approval of the
invoice for payment.

14. PROCUREMENT OBJECTIVES
• 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 procedure
•

15. 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

16. 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

17. 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

18. PURCHASING
The act of Purchasing is an
fundamantal function in the supply
cycle

19. DEFINITION
• It is the process by which materials are bought and
acquired using some standard specification.

20. PURCHASING PROCESS
INPUT
ACTIVITY
OUTPUT
FIND SUPPLIER AND
PLACE ORDER
REQUISITION
•Fulfilment
•Order receipt
•Supplier invoice

21. 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

22. 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

24. TERMINOLOGIES
1. INVENTORY
• It is defined as the blocked working capital of an
organization in the form of materials.
• It is the stock to ensure uninterrupted supplies, the
idle resources which have future economic value and
cushion between estimated and actual demand of
material.

25. INVENTORY CONTROL
• It is the process by which inventory is measured and
regulated according to predetermined norms such as
economic lot size for order, safety stock, minimum
level, maximum level, order level etc.
• It is a scientific system which indicates what to order,
when to order, how much to order, how much to
stock. It results in optimal balance.

26. INVENTORY SYSTEM
• It is a set of poilicies and controls that monitors levels
of inventory and determines what levels should be
maintained , when stocks will be replenished and
how large order should be.

27. INVENTORY MANAGEMENT SYSTEM
• It provides information to effeciently manage the
flow of materials, effectively utilize people and
equipment, coordinate internal activities and
communicates with customers

28. IMPORTANCE
• To provide maximum supply service,
consistet with maximum efficiency.
• To provide a cushion between the fore
casted and actual demand for a material.
• To have a optimum level of inventory.
• To avoid duplication in ordering
• To take care of fluctuations in demand
and lead time
• To take care of increasing price tendency
of commodities or rebate in bulk buying.
• To increase transportation efficiently.
• To minimize the inventory costs.
• To minimizing waiting time.
• To provide a check against the loss of
material.
• To better utilization of stocks available.
• To facilitate cost accounting activities.
• To locate and disposes inactive and
obsolete store items

29. TYPES OF INVENTORY COST
ORDERING COST
OUT OF
STOCK/SHORTAGE COST
INVENTORY CARRYING
COST

30. FACTORS AFFECTING IN INVENTORY CONTROL
DECISION MAKING
COST OF
PLACING ORDER
COST OF
HOLDING STOCK
COST OF
SHORTAGE.

31. SETTING UP OF VARIOUS STOCK LEVEL
1. REODER LEVEL = Maximum reorder period maximum
usage
2. MINIMUM LEVEL = reorder level – averege usage per
period average time to obtain delievery.
3. MAXIMUM LEVEL = Reorder Level – Expected minimum
consumption of material in unit during least time to
obtain delivery + reorder quantity.
4. Average Stock= Maximum Level + Minimum level/ Time

32. SAFETY STOCK SS
• It is the stock for usage at normal rate during the
extension of lead time.
• SS= [WCS- AWU]* LT

33. Lead Time (LT)
• It is the time spent between making the decision of
stock replenishment, and actual availability of the
goods in the store. It should be logic, effective,
attainable and dependable.

34. Average inventory
• INVAVG= SS+ ½ * ROQ( Reorder Quantity)
• Reorder point= SS+ (AWU* LT)

36. TECHNIQUE BASIS MAIN USE
ABC( AlwaysBetterControl) Value of control To control inventories
VED(Vital Essential Desirable) Criticality of item To determine the stocking levels
FSN(Fast, Slow, Not moving) Consumption pattern of
item
To control obsolesce
SDE(Scarce, Difficult,Easy to
obtain)
Problem faced in
procurement
Lead time analysis and purchasing
strategies
HML( High Medium Low) Unit price of material To control purchasing
XYZ Value of items in storage To review the inventory and their
uses at scheduled intervals.
GOLF( Government,
Ordinary,Local,Foreign)
Sources of material Procurement from different
sources
SOS (Seasonal off- seasonal
items)
Nature of supplies Procurement/ holding strategies
for seasonal items

37. ABC ANALYSIS
• This method is also known as ‘stock control according
to value method’, ‘selective value approach’ and
‘proportional parts value approach’.
• If this method is applied with care, it ensures
considerable reduction in the storage expenses and it
is also greatly helpful in preserving costly items.

38. CLASSIFICATION
• Materials are classified into three categories in accordance with their respective
values.
• Group ‘a’ constitutes costly items which may be only 10 to 20% of the total
items but account for about 50% of the total value of the stores.A greater degree
of control is exercised to preserve these items.
• Group ‘b’ consists of items which constitutes 20 to 30% of the store items and
represent about 30% of the total value of stores.A reasonable degree of care may
be taken in order to control these items.
• Group ‘c’ about 70 to 80% of the items is covered costing about 20% of the total
value. This can be referred to as residuary category. A routine type of care may
be taken in the case of third category.

39. PRINCIPLES OF ABC
• The analysis is depends on its annual consumption values.
• It depends on unit cost ,on the size of organization, its inventory as
well as number of items controlled.
• The analysis based on material price, material credibility, and available
status of material, material physical characteristic and frequency of
material usage.
• It also depends on degree and characteristics of controls to be
exercised by the management: the necessity of control, the necessity
of which material to be placed under control and the particular
characteristics of material

40. CHARACTERISTICS A ITEM B ITEM C ITEM
CONSUMPTION High Moderate Low
CONTROL Strict Moderate Loose
SAFETY STOCK Very Low Low High
ORDERING Frequent 1 in 3 month Bulk
FOLLOW UP Maximum Periodic Very rare
CONTROL REPORT Weekly Monthly Quarterly
ESTIMATION Accurate
forecasting in
material
management
Based on past
record
Rough estimate

41. VALUE ANALYSIS Maximum Moderate Minimum
SOURCES Many Less Few
PURCHASING Central Combination Decentralization
LEAD TIME Maximum efforts Moderate efforts Minimum efforts
HANDLING Top Middle Totally Delegated

42. PROCESS
Collect all the data of inventory and prepare a list of all the items of stores indicating
the unit price of each item and annual number of consumption
" Calculate their annual usage in Rs.(Annual consumption of items units × unit costs in
Rs= annual consumption value).
For stores, it will be Quantity issued x unit rate of each item
Arrange all these items in the descending order of total value of annual consumption of each
item in rupees

43. Mention the item numbers against their annual consumption
Calculate cumulative annual consumption value control
Calculate cumulative annual consumption value percentage.
Categorize items as per the consumption value (cost)percentage

44. ADVANTAGE
•Investment in inventory can be
maintained.
•Easy to control the wastage of costly
items.
•Helps in maintaining safety to the
total cost.
•Easy to maintain stock and turnover
rate.
•Helps to exercise selective control
when confronted with large number of
items.
•Rationalizes the number of order,
number of items and reduce the
inventory.
DISADVANTAGE
•Proper standardization and
codification of inventory items is
required.
•Considers only the money value
not the importance of items for
functioning.
•Periodic review becomes difficult
when ABC analysis.

45. Applicability
• It has universal application for fields requiring
selective.
• It extends almost all aspects of material management
such as purchasing, receiving and inspection
• It can be used in any setting to control the cost.

46. VED Analysis
• VED Analysis means Vital, Essential and Desirable
Analysis
• The materials are classified based on criticality than
on functional basis.

47. • V’ is for vital items without which a hospital cannot
function.
eg. Oxygen supply.
• E ‘is for essential items without which an institution can
function but may affect the quality of the services.
Examples antibiotics, Intra venous fluids etc..
• D' stands for desirable items, unavailability of which will
not interfere with functioning.
Examples are tonics, cough syrups, B.complex etc.

48. ADVANTAGES
• It is useful for monitoring and control of stores and
spare inventory by classifying them into 3 categories
• It is useful in controlling and maintaining the stock of
various types.
• Determine the criticality of item and its effect on
production and services.

49. ISSUE AND DISTRIBUTION OF MATERIAL
Usually two methods are adopted :
• Requisition system means as and when required.
• Par level means periodic replenishing to a certain
fixed level.

50. INVENTORY MODEL FOR QUANTITY &
INVENTORY REPLENISHMENT( restoration of
stock)
• EOQ or Fixed Ordered Quantity system is the technique of ordering
materials whenever stock reaches the reorder point. It deals, when
the cost of procurement and handling of inventory are at the
optimum level with and minimum total cost. In this technique, the
order quantity is larger than a single period requirement so that
ordering cost and holding cost balanced out.

51. Economic Order Quantity (EOQ)
• EOQ or Fixed Ordered Quantity system is the
technique of ordering materials whenever stock
reaches the reorder point.

52. EOQ Model
• A= Demand for the year of an item in terms of
Rupees
• S = Ordering costs in Rupees
• I= Carrying cost per Rupee per year expressed as a
decimal
• U = Unit cost of procuring item.

53. Steps for Calculation of EOQ
• A -Demand for the year of an item in terms of Rupees
• S=Ordering costs in Rupees
• I= Carrying cost per Rupee per year expressed as decimel
• Q= Quantity per order in Rupees
• Total procurement and inventory procurement cost,
inventory costs per item= Number of order X S+ Average
invetory.

54. Assumptions of EOQ
• Demand for product is constant.
• Lead time is constant.
• Price per unit is constant.
• Inventory carrying cost is based on average inventory.
• Ordering cost is constant per order
• All demands of the product will be satisfied.

55. Advantages
• -It is easy technique to estimate how much of the
inventory is to be ordered
• It is useful for avoiding some expenditure which is
not generally required.
• The ordering cost consists of stationary, stock
quantity , storage and receiving,

56. INVENTORY ACCOUNTING SYSYTEM
PERPETUAL INVENTORY SYSTEM
(Continous maintainance of
records)
PERIODIC INVENTORY SYSTEM
(At certain point of time)
BIN
CARD
STOCK
TAKING
STORE
LEDGER

57. EQUIPMENT AND SUPPLIES
• Equipment means all items necessary for the
functioning of all services of the hospital including
accounting and records, maintenance of building,
laundry,nursing unit e.t.c.
• Supplies are those items that are used up or
consumed.( consumable)

58. Equipment Management
• It includes all the related policies and procedures
govern activities from the selection and acquisition
through to the incoming inspection , acceptance,
maintenance and eventual retirement and disposal
of medical equipment.

59. PHASES OF EQUIPMENT MANAGEMENT
INCOMING INSPECTION
PROCUREMENT
PLANNING PHASE

61. DECOMMISSIONING
MAINTENANCE

62. In case of materials other than drugs like equipments, instruments any such articles
are treated as salvage or scrap, whatever the case may be, action is taken accordingly
The surplus materials are offered to the manufacturer/ suppliers for buy back.
The surplus materials are transferred to other hospitals where these may be required.
The condemned articles are stored and disposed off as per the policy of the hospital.
Before removing the equipment cannibalization of the parts is done so that the
usable part of discarded machine be used in future for other machine of same type.
The store immediately makes arrangements for the removal of the same rom the user
department.
The user department informs the store in writing about any equipment that are to be
disposed.

63. MINIMISING LOSSES AND PILFERAGES.
• Intense vigilance is required by all material personnel.
• A system of internal audit as part of control process can
point out possible loopholes in the system that may lead
to pilferages or fraud.
• All such loopholes should be plugged with appropriate
organization, methods , policies and procedures.

64. • BARRIERS FOR EFFECTIVE MATERIAL MANAGEMENT

65. STRATEGIES TO RESOLVE THE BARRIERS
• Education
• Inventory Control
• Procurement
• Vendors Relationships
• Physicians Relationships

66. NURSES ACTIVITIES
1. PROCUREMENT
• Establish Requirements.
• Send requisition of the supplies equipments.
• Put indent for the supplies
2.RECEIVING AND INSPECTION
• Items should be inspected and counted and
documented.

67. 3.STORING
• Items should be safely kept in a store room.
• Arrangement of items should be in FIFO manner.
• Expiry of the items should be check periodically.
4.ISSUING , DISTRIBUTION AND MAINTAINANCE
• Ensure the proper availability of items for working of
operational level nurses in 3 shifts.
• Maintenance of record of all supply used, disposed and
for repair

68. 5.REPAIRING AND DISPOSAL
• Check item for it’s proper working, damage , leaks,
calibration.
• Sent unserviceable item for repair,
• Ensure the quality of equipment.
• Conduct routine checking of equipments.

69. 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.
• Principles of material management and procurement are
applicable to every organization as well as individuals.

70. REFERENCES
• Basavanthappa B T. Nursing administration. ( Ist edn). New Delhi:
Jaypee brothers medical publishers (p) ltd; 2000.
• Gopalakrishnan & Sunderasan: Material Management, Prentice Hall
of India Pvt Ltd. New Delhi, 1979.
• Kulkarni G R. Managerial accounting for hospitals. Mumbai: Ridhiraj
enterprise; 2003.
• Kumar R& Goel SL. Hospital administration and management. Vol 1
( first edn).New Delhi: Deep & deep publications;
• Gupta S& Kanth S. Hospital stores management, an integrated
approach.( First edn). New Delhi: Jaypee brothers; 2004.

71. ANY QUESTION????