This document provides an overview of materials management in the pharmaceutical industry. It discusses key concepts like: 1. The objectives of materials management which include maintaining production continuity, procuring quality items at reasonable prices, minimizing waste, and lowering production costs. 2. The functions of materials management such as material planning, purchasing, receiving, stores management, inventory control, and waste management. 3. Modern inventory control techniques like ABC analysis, VED analysis, perpetual inventory systems, economic order quantity modeling, and maintaining minimum/maximum stock levels. The document serves as an introduction to the principles and practices of effective materials procurement and inventory management in a pharmaceutical production setting.

1. PRESENTED BY – DIPJYOTI BISWAS (M.PHARM) DEPARTMENT OF
PHARMACEUTICS
ROLL NO—18HMPS03
SUBMITTED TO –DR. PRITHVIRAJ CHAKRABORTY

2. 1. INTRODUCTION:- It is the science that deals with the raw materials
procurements , obtaining machines and equipment which are necessary for the production
process and it also includes the upkeep and maintenance of the plant and making available the
spare parts required for the machinery in the plant.
It is the planning, directing, controlling and coordinating
those activities which are concerned with materials and inventory requirements, from the point
of their inception to their introduction into the manufacturing process. It begins with the
determination of materials quality and quantity and ends with its issuance to production to meet
the customer’s demand as per the schedule and at the lowest cost.

3. 2. OBJECTIVES OF MATERIALS MANAGEMENT:-
1. It maintains the continuity of production by providing regular uninterrupted
supply of raw materials.
2. It helps in procuring best quality items at the most reasonable price.
3. It leads to minimizing waste and economy thereby leading to high productivity.
4. Due to efficient management of production inputs, cost of production is lowered
which leads to enhancement of profits.
5. It helps in maintaining optimum stocks and minimizes the storage and stock
control costs.

4. 3.FUNCTIONS OF MATERIAL MANAGEMENT:-
1.Material Planning
2.Purchasing
3.Receiving
4.Stores
5.Inventory control
6.Waste management

5. 1. Material Planning:- Every manufacturing organization has a separate materials
management department, functioning directly under the president. The main role of this
department is planning, directing, controlling and co-ordination of all the activities related
to the materials and machinery in an organisation.
IMPORTANCE IN MATERIAL PLANNING:- A good material management has
the following advantages:-
1. Continuity in the production process due to uninterrupted supply of raw materials.
2. Continuous monitoring on the input costs and transportation costs.
3. Due to efficient store and stock control, minimization of waste.
4. Optimum utilization of men, material and machinery.
5. Helps in production of good quality goods.
6. Helps in reducing the steps involved in the manufacturing process.
7. Over storage of raw materials is avoided.
8. Helps in the elimination of storages and provides continuous supply of goods.

7. 2. PURCHASING:- Purchasing is defined of the procurement of Materials, Supplies,
Machinery, Tools, Implements, equipment and services, which are necessary for the production
of certain goods which includes the planning and policy activities , research and development
and selection of source of supply etc.
Purchasing is a very important function of materials management. It consist of a exploration of
market to obtain goods and services of desired quality , quantity at lowest price and at the
desired time. Supp]lier who can provide standard items at a reasonable rate is chosen.
A success of any business organisation depends on the effective buying . It is a managerial
activity and includes R& D for the selection of right material and right source , timely delivery,
ensuring inspections to control quality and quantity, receiving, store keeping and accounting
operations related to purchases.
OBJECTIVES OF PURCHASING:-
1.RIGHT SOURCE:- The source from the material is to be produced should be dependable
and capable of supplying items of uniform quality.
2.RIGHT QUALITY:- Prior assessment of the quality should be done, then only the order
should be placed with the supplier for his purchase.
3.RIGHT QUANTITY:- While deciding the right quantity, factors such as price structure ,
discounts, and availability of items are to be taken into consideration.

8. 4.RIGHT PRICE:- The goods should be purchased at right price. For determination of the right
price the cost structure of the product has to be taken into consideration.
5.RIGHT TIME:- For determining the right time of purchase, the lead time information is taken
into consideration . The lead time means the total time consumed between the recognition of the
need of an item, till its receipt for use.
6.RIGHT PLACE OF DELIVERY:- The goods should be delivered at the place of the
business. A supplier should deliver the goods at the place where they are required.w

9. FUNCTION OF THE PURCHASING DEPARTMENT:-

10. 1. Calculating and estimating the total material requirement.
2. Deciding the economic order quantity i.e the optimum number of units or quantity that must
be purchased under one order.
3. Market survey to know the right person who can supply right goods at right price.
4. Calling for quotations and tenders.
5. Placing order for real quantity on the basis of quotations or tenders according to the terms
and conditions laid there in.
6. Receiving the goods and an inspection of quality and quantity.
7. Distributing the goods to store.
8. Checking of the bill and making the payment.
9. Disposal of the items which are not useful.
10. Avoiding duplication of purchase and monitoring so that materials are not wasted or damaged
by the user department.
11. Setting of disputes arising out of purchase of materials.
12. Maintenance of records pertaining to suppliers, products available with them.

11. 3.RECEIVING AND CHECKING OF THE MATERIAL:-

12. The material sent by the supplier is received by the store keeper. Each and every item is
physically checked, Quantity verified and specifications are cross checked with the invoice or
“bill sent by the supplier”. If the goods required does not confirm with any specifications or any
damage is noticed, the matter is recorded on the challan form or bill and the supplier must be
informed immediately so as to rectify the mistakes by the supplier.
CHECKING THE INVOICE OR BILL OF PURCHASING MATERIALS:-
If the goods are received in satisfactory condition the invoice is checked before it is approved for
payment . The rates of various items charged in the bill and the other terms and conditions are
thoroughly checked and compared with the supply order.
RECORDING OF THE BILLS IN BOOKS OF PURCHASING:-
The bills are sent to accounts section where the bills are entered into account books. Any errors
in bills are entered into account books. Any errors in bills are immediately informed to higher
authorities for necessary action.
RELEASING THE PAYMENT TO THE SUPPLIER:- According to terms and conditions of
the supply order, the payment is done by accounts section to the supplier.

14. 4.DRUG STORE MANAGEMENT :-
• SITE SELECTION FOR A DRUG STORE
1.POPULATION DENSITY
2.NUMBER OF PHYSICIANS
3.PROXIMITY OF PHYSICIANS & HEALTH CARE CENTRES
4.NUMBER OFALREADY EXISTING DRUG STORE
5.NEARNESS TO MARKET
6.NEARNESS TO A PACKING FACILITY
7.TRAFFIC COUNT
8.INCOME GROUP OF PEOPLE IN THE AREA
9.AGE GROUP OF PEOPLE IN THE AREA
10.SCOPE FOR EXPANSION
11.ECONOMIC FACTOR

15. FEATURES OF GOOD LAYOUT
DESIGN
Proper ventillation
It must be located on the ground floor,close to pharmacy
It must have 2 enteries, one for receiving and other for
issuing of materials.
Proper illumination
Walls & roof should be painted with washable paint
Sufficient no of wooden or steel racks should be provided
Movement of men & material should be minimised thus
saving time,cost
Fast moving items should kept near the counter while
slow moving items are kept at back of shelves.

16. Bulky iteams should store at the bottom of shelve
Surgical instruments should store in separate racks
Cash counter ,wrapping counter should b located
near entrance
GRAPHICAL IMAGE OF THE DRUG STORE LAYOUT

17. GOOD LAYOUT DESIGN OF DRUG STORAGE MANAGEMENT

18. STORAGE
CONDITIONS
Drug store are used to store all kind of material like
capsules, tablets, liquid dosage forms, injections.
Coldstorage for antibiotics, biological.
Lock and key system for narcotics andpsychotropic
substances, separate tracks for poisons.
Cold :2 ̊-8 ̊c
Cool :8 ̊-25 ̊c
Room temperature:tem prevaling in a working area.
Warm :30 ̊-40 ̊c.
Excessive heat:any tem above 40 ̊c.

19. Proper
STORAGE CONDITIONS

20. Store management
STORAGE AT COOL TEMPERATURE:
LIST A:
These are the drugs that require storage at 2-8 0C . These includes
Sera,
Vaccines, Whole human Blood, normal human plasma, thrombin,
thromboplastin ,
cobra and viper in solution, oxytocin and vasopressin , insulin
preparations ,
porterior pituitary injection, human gamma globulin injection etc.
LIST B:
These are the drugs that require storage at 8-25 0C . It includes
Antibiotics,
blood preparations, hormone preparations, vitamin preparation and
other.

21. 5.INVENTORY CONTROL MANAGEMENT-

22. DEFINITION:-
Inventory means all the raw materials, spare parts, tools, fuels, lubricants,
semi processed materials and finished goods etc. Recorded in the books of any organisation at
any given point of time. On an average about 30% of the working capital is spent on
inventories. Hence for the smooth working of the business organisation , a sound inventory
should be maintained. It should be neither excessive nor inadequate but of maximum level.
Inventory management is essential to maintain a large size inventory for smooth and efficient
production and also for sales operation. It also minimises a firm’s investment with a view to
gain maximum profit.
OBJECTIVES OF INVENTORY CONTROL:-
• To maintain sufficient inventory so as to avoid production held up which leads to customer
dissatisfaction , loss of revenue and increase in cost.
• To avoid excess investment in inventory.
• To improve the customer service.
• To keep plant (equipment) costs low. The overall plant costs are kept low by stable
production which is possible only by having sufficient inventories.
• To smoothen the production process.
• To gain economy production or purchase in lots.

23. FUNCTION OF INVENTORY CONTROL:-
 1. Men, machines and materials are properly utilised.
 2. The products can be supplied to the consumers at a short notice as and when the demand is received.
 Wastage of materials and theft of materials can be checked.
 To assess the material requirement systematically.
 To obtain and supply the required quantity of the materials at the lowest cost and in proper time.
 To keep the inventories as low as possible which leads to consistent price of market conditions.
 To maintain proper records and to asses the stock position of the materials.

24. MODERN TECHNIQUES OF INVENTORY CONTROL:-
 ABC analysis or ABC method.
 VED analysis.
 Perpetual inventory control system.
 Lead time method.
 Safety stock method.
 Minimum and maximum stock levels.
 Economic order quantity(E.O.Q)

25. ABC analysis or ABC method:- ABC method means “ Always better control” method. This
is a selective analysis based on annual inventory value which is found out as follows –the
number of units of each material/part used during the past year is multiplied by its unit cost.
Then the inventory items are divided into three groups A, B and C in the order of their annual
value. The method is based on the concept- Thick on the best and thin on the rest.
Hence , this technique with a selective approach concentrates time and attention upon the items
in terms of their monetary turnover. According to this approach, the items are classified into
three main categories.
 A CLASS
 B CLASS
 C CLASS
GROUPA ITEMS :-
1. These items cover 10% of the total inventories.
2. It consumes about 70% of total budget.
3. Hence these items require strict monitoring.
4. They require either no safety stocks or low safety stocks.
5. They require either no safety stocks or low safety stocks.

26. B – CLASS ITEMS:-
1. It covers 20% of the total inventors.
2. It consumes 20% of total budget.
3. It requires moderate control.
4. It requires low safety stocks.
5. It needs periodic follow up.
6. It can be handled by middle management.
C- CLASS ITEMS:-
1.This class of items cover 70% of the total inventories.
2. It consumes 10% of total expenditure of inventories.
3.It may require loose control.
4.It requires high safety stocks .
5.It needs close follow up.
6. It can be handled by any official of the organisation.
ADVANTAGES OF ABC ANALYSIS:-
Helps to exercise selective control
Gives rewarding results quickly

27. Helps to point out obsolete stocks easily.
In case of “A” items careful attention can be paid at every step such as estimate of
requirements, purchase, safety stock, receipts, inspections, issues, etc. & close control is
maintained.
In case of “C” items, recording & follow up, etc. may be dispensed with or combined.
Helps better planning of inventory control
Provides sound basis for allocation of funds &
human resources
DISADVANTAGES OF ABC ANALYSIS:-
 Proper standardization & codification of inventory items needed.
 Considers only money value of items & neglects the importance of items for the
production process or assembly or functioning.
 Periodic review becomes difficult if only ABC analysis is recalled.
 When other important factors make it obligatory to concentrate on “C” items
more, the purpose of ABC analysis is defeated.

28. VED CLASSIFICATION:-
VED: Vital, Essential & Desirable classification
VED classification is based on the criticality of the inventories.
Vital items – Its shortage may cause havoc & stop the work in organization. They are stocked
adequately to ensure smooth operation.
Essential items - Here, reasonable risk can be taken. If not available, the plant does not stop;
but the efficiency of operations is adversely affected due to expediting expenses. They should
be sufficiently stocked to ensure regular flow of work.
Desirable items – Its non availability does not stop the work because they can be easily
purchased from the market as & when needed. They may be stocked very low or not stocked.

29. It is useful in capital intensive industries, transport industries, etc.
VED analysis can be better used with ABC analysis in the following pattern:
Category “V” items “E” items “D” items
“A” items Constant control
& regular follow
up
Moderate stocks Nil stocks
“B” items Moderate stocks Moderate stocks Low stocks
“C” items High stocks Moderate stocks Very low stocks

30. PERPETUAL INVENTORY CONTROL SYSTEM:- Proper examination with regard to receipt, issue
and balance of material in hand is done every time when the stock is handled and moreover the
entire stock is rechecked . Hence this enables the manufacturer to know about the material
available without physical stock verification.
The perpetual inventory system consists of:-
1.Bin card.
2.Stores ledger.
3.Continuous stock taking.
LEAD TIME METHOD:-The time interval between the placing the order for purchase of
certain items to the time, the materials are actually received in the stores. It has two important
components.
(a) Administrative or servicing lead time.
(b) Supplier’s lead time.
SAFETY STOCK METHOD:-
1. A firm has to keep adequate safety stock as well as ordinary stock. Over stocking goods are known as safety
stock.
2. Inventories are generally divided into “Working stock”(quantity of the inventories that are ordered) and
“safety stock”(overstocking of goods).

31. MINIMUM AND MAXIMUM STOCK LEVELS:-

32. E.O.Q(ECONOMIC ORDER QUANTITY):-
Economic order quantity is one of the techniques of inventory control which minimizes
total holding and ordering costs for the year. The economic order quantity is the technique
which solves the problem of the materials manager.
The correct quantity to be ordered is determined by considering the following factors:-
(i)Ordering cost.
(2)The inventory carrying cost.
METHODS OF DETERMINATION OF E.O.Q:-
(1)Tabular column method.
(2)Algebraic method.
(1)TABULAR METHOD:-
The purchasing details are written in a tabular column. This arrangement may help the
company to find out the number of orders needed weekly or quarterly or monthly or monthly
or yearly.
(2)ALGEBRIC METHOD;-
Economic order quantity (EOQ) is the ideal order quantity a company should purchase for
its inventory given a set cost of production, demand rate and other variables.

33. This is done to minimize variable inventory costs, and the equation for EOQ takes into account
storage, ordering costs and shortage costs. The full equation is:
EOQ = √(2SD / H), or the square root of (2 x S x D / H).
S = Setup costs (per order, generally includes shipping and handling)
D=Demand rate (quantity sold per year)
H = Holding costs (per year, per unit)
Merits of ‘Q’ system
(1)Each material can be in the most economical quantity;
(2)Purchasing an inventory control personnel automatically devote attention to the items
that are needed only when required.
(3)Positive control can be easily exerted to maintain total inventory investment at the
desired level, simply by manipulating the plant maximum and minimum values.

34. Demerits of ‘Q’ system:-
(1)The orders are raised at irregular intervals which may not be convenient to the suppliers;
(2)In case the lead time is very high supply of inventory may interpret;
(3)EOQ may give you an order quantity which is much below the supplier minimum, and there
is always a chance that the ordering level for an item has been reached but not noticed in which
case a stock out may occur; and
(4)The items cannot be group and ordered at a time since the recorder points occur irregularly.

35. WASTE MANAGEMENT:-

39. WASTE MANAGEMENT STEPS

40. CONCLUSION
Material management is an important management tool which will be very useful in getting the
right quality & right quantity of supplies at right time, having good inventory control &
adopting sound methods of condemnation & disposal will improve the efficiency of the
organization & also make the working atmosphere healthy any type of organization, whether it
is Private, Government ,Small organization, Big organization and Household.
Even a common man must know the basics of material management so that he can get the best
of the available resources and make it a habit to adopt the principles of material management in
all our daily activities

41. References:-
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<http://www.youtube.com/watch?v=b143Y7dTfIA> [Accessed 13 February 2013].
• 2010. Introduction to Product Management , [Video online] Available at:
<http://www.youtube.com/watch?v=ONrbwhPxJUc> [Accessed 13 February 2013].
• 2012. Capacity Planning & Facility Location , [Pdf] Available at:
<http://www1.pu.edu.tw/~ylai/OM/1011/ppts_f12/1011_OM_Ch09_F12.pdf> [Accessed 13
February 2013].
• Arora, K. C., 2004. Production and Operations Management, Batch Production,
Firewall Media.