1. Materials Management
Dr. Rizwan S A, M.D.,

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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
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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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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
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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. 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. 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. 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. 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. 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. 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
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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
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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. 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. 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
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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. 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. 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. 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
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42. Methods of ordering
• Two bin system
• Cyclic system
• Economic order level
Rizwan S A
CCM, AIIMS
42

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. 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. 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. 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. 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. Fixed period system
Target quantity (T)
Q4
On-hand inventory
Q2
Q1
Q3
P
P
P
Time
Rizwan S A
CCM, AIIMS
48

49. Variable demand with reorder point
Inventory level
Q
Reorder
point, R
0
LT
LT
Time
Rizwan S A
CCM, AIIMS
49

50. Reorder point with safety stock
Rizwan S A
CCM, AIIMS
50

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. 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. Rizwan S A
CCM, AIIMS
53

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. 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. 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
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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. 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. 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. 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. 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. 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. 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. Managing drugs - 3
• Stock-card system
– Sometimes used instead of a ledger
Rizwan S A
CCM, AIIMS
64

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. 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. 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. 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. Thank you