MATERIAL MANAGEMENT

INTRODUCTION

Material management is a scientific technique concerned with planning, organizing

and control of materials from their initial purchase through internal operations to the service
point through distribution.

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.

DEFINITION : MATERIAL MANAGEMENT

According to Judith, material Management is managing and controlling medical,

surgical, clerical, interdepartmental services, and equipment from acquisition on the floor to
disposition. Housley referred to it as management and control of materials, including goods,
services, and equipment, from procurement to disposal. It is a technique or a method
concerning material management from purchasing to destination.

Material management is defined as an important function of the management that

involves coordinated efforts in planning, acquiring, purchasing, transporting, storing and
managing the materials in a better manner that serves the consumer to obtain the materials at
an affordable cost.

I. Clement (2020)

FUNCTIONS OF MATERIAL MANAGEMENT

Planning for materials

 Demand estimation

 Purchasing
  Inventory management

 Inbound traffic (receiving)

 Warehousing and stores

 Incoming quality control

OBJECTIVES OF MATERIAL MANAGEMENT

PRIMARY OBJECTIVES

 Right price

 High turnover

 Low procurement and storage cost

 Continuity of supply

 Consistency in quality

 Good supplier relations

SECONDAY OBJECTIVES

 Development of personnel

 Good information system

 Forecasting

 Inter-departmental harmony

 Product improvement

 Standardization

 Make or buy decision

 New materials and products

 Favourable reciprocal relationships

PRINCIPLES OF MATERIAL MANAGEMENT

 Effective management and supervision depends on managerial function of

POSDCORB.
  Sound purchasing methods.

 Skilful and hard poised negotiations.

 Effective purchase system.

 Simple

 Simple inventory control programme

CLASSIFICATION OF MATERIALS

1.General classification

Materials are generally classified into the following.

A. The material used in the hospital is of seven categories: capital assets, consumables,
hospital wear, printing and stationery, linen, instruments and consignment.

B. Materials can be under four heads: drugs, equipment, materials, and supplies. In the
government setup, the focus is almost wholly on the fourth class, i.e., supplies.

C. The material categorized as drugs, supplies including linen, equipment, and

instruments, monitors, etc. facilities related.

D. Another classification is as below

 Medical items include pharmaceutical, surgical consumables, and protective

materials.

 Capital equipment and accessories

 Catering equipment

 Electrical, Mechanical, civil materials used for maintenance work

 Housekeeping materials

 Linen.

2. Classification based on the cost criteria

• The material categorized on cost is commonly known as the “ABC” group. ABC
stands “Always Better Control.”
 • “A” category of material is under strict control and supervision and requires a right
estimate.

• “B” category of equipment is under reasonable control. The middle-level manager

manages the category of material based on a rigid requirement.

• “C” Category of items is under common control of storekeepers and purchases these
materials on usage estimates.

3.Classification based on time toleration of non-availability criteria

• The material classified on time toleration of non availability is commonly known as

the “VED” group.

• VED stands for “vital essential desirable/not so essential”. “V” category of items
cannot tolerate its non availability. These items are required to be all the time
available.

• “E” group items cannot tolerate its non availability for 2-3 days due to the availability
of alternative items.

• “D” category items may wait for a longer time for its availability.

ELEMENTS OF MATERIAL MANAGEMENT

1. Demand estimation
2. Procurement
3. Receipt and inspection

4. Inventory control

Storage
Issue and use

5.Maintenance and care

6.Accounting and information system

7.Disposal

1.DEMAND ESTIMATION/PLANNING AND BUDGETING:

 The first step in handling the problem of supply is determining requirement needs.
To estimate demand, one needs to consider three factors, i.e. the kind of articles
required, the quantity of each requested item, and the time and frequency of delivery.
Demand estimation is concerning with cost balance, material specification, and value
analysis.

A.Cost balance:

Material management is involving balancing the cost of the material. The price
of the item includes both its actual cost and carrying (inventory) cost. The carrying
cost is the cost of storing for distributing. The carrying value has 20-30% of the price.
It includes interest on capital (15%), storage cost (racks, almirah, building). workforce
cost, deterioration cost, pilferage cost, obsolescence, ordering costs, insurance cost,
and stock out the cost. If stock increases, carrying costs will increase. Similarly, if the
ordering cost rises, the carrying cost will increase.

B. Material specification

Material specification is the character of the material required. The material

specification classifies material . It gives the exact character of the articles required,
quality or grade, the nature of their construction, and all other required special
attributes. It facilitates and smoothens the work of service and reduces the purchasing
process.

C.Value analysis

Value analysis is the management technique in material management to

identify incurred nonessential costs and to reduce the cost. It examines the quality
(right item) and price of the item.

2.PROCUREMENT

After determining the supply requirement, the next step in material management is
procuring the required material. Each institute has its rules and regulation regarding
acquisitions of materials. Many institutes have centralized medical stores for the procurement
of drugs and supplies. State governments also use a system of fixed-rate contracts or running
rate contracts.

DEFINITION

It is the act of buying goods and service for the government.

- Defence Acquisition university

Procurement is the sourcing and purchasing of goods and service for business use. It
is the acquisition of goods or commodities by a company, organization, institution or a
person. This simply means the purchase of goods from supplies at lowest possible.

OBJECTIVES OF PROCUREMENT

 To acquire needed supplies as cheap as possible.

 To obtain high quality supplies.

 To assure prompt and dependable deliveries.

 To avoid idle and overwork period.

 To optimize inventory management via scientific procurement procedures.

PROCUREMENT CYCLE / PROCESS

Review selection
Determine needed quantities
Reconcile needs and funds
Choose procurement method
Select suppliers
Specify contract terms
Monitor order status
Receipt and inspection

METHODS IN PROCUREMENT PROCESS AND NEGOTIATION STRATEGIES

Open tender :

Public bidding (low prices),

 Technical bid,

Financial bid

Published in newspapers.

Quotation (must be sent before the time and date mentioned in the tender form).

Restricted or limited tender :

From limited suppliers (about 10).

Lead-time is reduced and better quality

Negotiated procurement :

o A buyer approaches selected potential suppliers

o Fix at a rate acceptable to both parties.
o Used in long time supply contracts.

Direct procurement:

Purchased from a single supplier, at his quoted price.

Prices may be high.

Reserved for low priced and small quantity and emergency purchases.

Spot purchase:

By committee (officer from stores, accounts and purchasing departments).

Risk purchase:

If a supplier fails, the item is purchased by other agencies and the differences in cost
is recovered from the first supplier.

PROCUREMENT OF EQUIPMNET - POINTS TO BE NOTED BEFORE

PURCHASE OF EQUIPMENTS

 Latest Technology

 Availability of maintenance and repair facilities, with

minimum down time.

  Post warranty repair at reasonable cost.

 Upgrade ability.

 Reputed manufacturer.

 Availability of consumables.

 Low operating costs.

 Installation.

 Proper installation as per guidelines.

3. RECEIVING AND INSPECTING THE MATERIAL

After receiving the supply in the store, control is necessary to ensure the quality of
materials. The store in charge, which is representative of the supplier and representative from
the purchase committee of the hospital, verifies the delivered items against the invoice.
Verification ensures the things per the order placed. The following figure depicts the
procedure followed by receiving the supply.

4. INVENTORY CONTROL

Inventory control includes storing, issuing, and delivery. It is one of the vital functions of
material management.

A. Storing

 The store must be adequate space.

 Materials must be stored in an appropriate place.

 Group wise and alphabetical arrangement (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 (lead time and small safety stock)

Medical supplies required controlled temperature and humidity and protection from
lights.
 There should be a provision of refrigeration to store all sera and vaccines.

Stock the minimum and maximum level of each item and consider the level of
reordering, buffer stock policies.

B. Issuing and distribution

The stores ensure an uninterrupted supply of materials to the various departments to

ensure the smooth and efficient functioning of the hospital. The hospital must have a
systematic procedure of issuing and distribution.

Distribution usually involves transportation to various units’ health-care delivery

system. It is an intricate process focusing on the distribution of the right item at the time and
right place.

5. MAINTENANCE AND REPAIRS

Maintenance and repair of equipment go side by side. Proper maintenance and repair
reduce the losses and breakdown of the machine.

6. ACCOUNTING AND INFORMATION SYSTEM

The accounting and information system aids in controlling the material management
system. Accounting handles the financial matters associated with procurement.

7. DISPOSAL AND CONDEMNATION

Dispose of surplus products and nonfunctional equipment that are either functional
but obsolete or nonfunctional and obsolete or beyond economic repair, operational but
hazardous, useful but no longer. It is essential to decrease in holding costs and in storage
capacity. All the hospitals have a condemnation committee. Dispose of the used material
either by selling to other hospitals or scrap dealers.

The user department informs the store in writing to dispose of any equipment. The store
immediately arranges for removal of the same from the user department. Before removing the
material, centralize parts so that one can use the usable parts of the discarded machine in the
future for another device of the same time.

CLASSIFICATION OF INVENTORY

o Raw material inventories

 o Finished goods inventories
o In-process inventory (work in process)
o Indirect inventory (Components)

MAJOR ACTIVITIES OF INVENTORY CONTROL

 Planning

 Procurement

 Receiving and inspection

 Storing and issuing the inventories

 Recording the receipt and issuing of inventories

 Physical verification

 Follow up function

 Material standardization and substitution

TECHNIQUES OF INVENTORY CONTROL

Items Quality: Value analysis, standardization, codification

Quantity : Purchasing balancing of inventories EOQ

Price : Cost price value analysis

Source : Market research, purchasing techniques selection

Delivery : Procurement technique, Follow up PERT / Operational research

Methods : Work study analysis: ABC analysis etc.

People : Organization analysis

INVENTORY CONTROL

ADVANTAGES

 Delivery on time.

 Possibility for discount for bulk purchase.

 Handling of unforeseen circumstances to some extent.

  Workers and machinery need not be idle.

DISADVANTAGES

 Working capital is tied up.

 More space is required.

 Increase in insurance charges & overhead expenses.

 Increase in charges for damage, pilferage, replacement, etc.

 Increase in charges for obsolescence.

SELECTIVE CONTROLS IN MATERIAL MANAGEMENT

 ABC Analysis (Always, Better, Control)

 VED Analysis (Vital, Essential, Desirable)

 FSN Analysis (Fast, Slow-moving & Non-moving)

 HMT Analysis (High, Medium, Low)

 XYZ Analysis (High-X, Low-Y, Z-Better)

 GOLF Analysis (Government, Ordinary, Local, Foreign)

 SOS Analysis (Seasonal off -Seasonal items)

ABC ANALYSIS

 ABC analysis is a basic supply chain technique in inventory control.

 It is a very common tool in all the stores where all large inventories are stocked.

 ABC analysis, popularly known as “Always, Better, Control” or alphabetical

approach,

 It is a very useful approach to material management based on

Pareto’s principle of “Vital few and trivial many”

 Based on annual consumption value = (quantity consumed X cost of the item)

 It is also known as Selective Inventory Control Method (SIM).

ABC ANALYSIS

PRINCIPLES OF ABC ANALYSIS

 It depends on its annual consumption values rather than unit cost & degree and
characteristics of controls to be exercised by the management.

 It is not uniform, but depends on the organization, its inventory as well as the
number of items controlled.

 It does not depend on the importance of items, rather based on material price,
material credibility, and available status of material, material physical characteristics
and frequency of material usage.

ADVANTAGES OF ABC ANALYSIS

 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.

 Rationalizes the number of orders, number of items & reduce the inventory.

 Shows visible results in a short span of time.

 The manager is able to control the inventories special controlling ‘A’ items.

 Helps to pin point the obsolete stocks.

 Helps in reducing clerical cost.

DISADVANTAGES OF ABC ANALYSIS

 Proper standardization and codification of inventory items required.

 Considers only the money value not the importance of items for functioning.

 Periodic reviews becomes difficult if only ABC analysis recalled.

A' items
 Tight controls
Rigid estimates
Strict and close watch
Safety stocks should be low
Management of items should be done at top management level.

'B' Items

Moderate controls
Purchase based on rigid requirements
Reasonably strict watch and control
Safety stocks moderate
Management be done at middle level.

'C' Items

Ordinary control measure

Purchase based on usage estimates
Controls exercises by store keeper
Safety stocks high
Management be done at lower level.

PROBLEMS OF MATERIAL MANAGEMENT

 Problems relating to material planning

 Problems relating to design and specification
 Problems relating to obsolescence
 Problems relating to procurement.

EVALUATION OF MATERIAL MANAGEMENT

Evaluation of material management is directly linked with the success of the

organization. If the organization succeeds the material management has done its job
satisfactorily.
Forms of Evaluation

1. Mere Reporting: Periodic reports by the operating staff to the middle order and top
management, analysis of the same and consequent actions are the accepted form of evaluation
of the performance of the materials departments.

While preparing a report the reporting official should take care of the following important
points.

The report should be written in simple language.

It should be clear

It should be brief

It should be related to frequency i.e. periodicity should be maintained.

2 Questionnaire: A separate or combined questionnaire may be prepared to evaluate the

performance of the material department.

3. Policy decisions: Under policy decision as a form of performance evaluation, the material
department may fix certain procedure and lay down specific criteria.

Role of Nurse in Material Management

Role of head nurse or nurse incharge:

1.Be responsible for maintaining adequate equipment and supplies in the ward.

2.Make sure that materials are in good working conditions.

3.Indent a requisition for necessary equipment for repair and maintenance.

4.Ensure that equipment and supplies are conveniently placed.

5. Ensure the delegation properly to responsible staff in the ward to use ward articles and
equipment.
6. Must be vigilant and prevent waste or misuse by educating the staff in the economical in
use of all equipment.

7. Conduct class on cost of the equipment and materials to the staff under her control.

8. Ensure an adequate stock of supplies in the ward.

9. Maintain the standard for the item to be maintained in the ward all the time.

10. Implement high quality and satisfactory systems for replacement of broken or condemned
equipment.

11. Register regular stock inventories of all the items.

Materials Management in Primary Health Centre

Local procurement of medicine by the PHC

In case the cost of medicine to be purchased is below one thousand rupee

The medicines can be purchased from local distributers. The price of the medicine should not
exceed the Rate Contract provided by the Zilla Parishad office (DHO). The DHO provides a
list of the medicines with the list of thevendors and the Rate contract price list for medicines,
equipment and other supplies required by the PHC.

The Medical officer (MO) sanctions the application written by the pharmacist and then the
medicines are procured by the Pharmacist with the help of the clerk for the payment to the
local distributor. The distributer is made payment by cheque signed by the MO. Funds from
the Panchyat Samiti are also utilised to purchase medicines.

In case the cost of medicine to be purchased are more than one thousand rupees:

The Medical officer keeps this issue as a discussion in the Rogi KalyanSamiti (RKS) meeting
and asks the RKS members to release the money for the same. If the committee feels that it
is important to procure the medicines locally and the community is facing problems then the
RKS sanctions the funds according to the rate contract (RC) list provided by the Zilla
Parishad.

If the cost of the medicine required is more than fifteen thousand rupees:
An advertisement is published in local newspapers and quotations are asked for the same.
Minimum three quotations are collected and the MO in collaboration with the RKS members
negotiates and finalise the vendor.

If the cost of medicine is less than fifteen thousand and more than one thousand rupees:

The local vendors are contacted and at least three quotations are invited. Then after
negotiation if the cost is less than the RC, then the tender is given to that vendor and payment
is made by cheque to the vendor after delivery of the medicines.

STOCK ENTRY AND STORAGE

The stock is entered in various pre-designated registers:

a. Stock register for tablets, capsules, syrups

b.Stock register for surgical equipment, Ayurvedic medicines, ointment, injections

c. Stock register for NLEP medicine

d.Stock register for RNTCP medicine

These registers have separate columns for entry of stock received and disbursed from the
stores.

Expiry Date Register

This register is updated as soon as new stock is received by the pharmacist. This register is
constantly reviewed by the Pharmacist to check the near expiry date drugs. The near expiry
date drugs are the drugs whose expiry date is within three months. In case any such
medicines are available, then the Medical officer is informed and the estimation of the
utilisation is predicted.

If the MO feels that these medicines can be utilised in the PHC itself then the medicines are
retained. Otherwise,the nearby PHCs are approached and enquired if they have a requirement
for the same,or the RH is given the medicine against the indent and hence, it is made sure that
the medicines are utilised and not wasted.

Drug Storage

• The materials are stocked in the store. There is one room in the PHC, which is
designated to store the materials ( drugs and instruments) except linen.
 The Pharmacist is the in-charge of the stores and the sister is in-charge of the
instruments and the injections in the stores.

Material Identification code (MIC):

There is no proper mechanism in place or any coding in place to identify the material in the
stores. However the stores are well maintained under the guidance of the health supervisor,
who is an experienced person in the PHC. The medicines have been arranged in the store in
different racks and the medicines are well displayed. Proper demarcation and space allocation
of the shelves of the racks has been done under the following heads: Capsules; Tablets;
Syrups;Paediatric medicines; Ointments; External use medicines; Injections; Surgical
supplies;Ayurvedic medicines; IV fluids and Local purchase medicines. All these medicines
are arranged in alphabetical order in the shelves to help identify the medicines. The store was
very clean and well maintained.

STOCK TAKING and AUDITS

• There are various internal and external audits mechanisms in addition to regular
stock taking by the pharmacist at the PHC. On regular basis, the Pharmacist does
physical stock taking once a month to ensure that the stock on records is in synch with
the physical stock. There is close vigilance on the stock as many audits take place
regularly due to its close proximity to the Rural Hospital.

• Stock taking by Medical Officer

• The Medical Officer checks the entries in the registers by verifying it with the
physical stock once a month. The stock-taking is done randomly. Some medicines are
picked randomly and the medicine stock is verified. This supervision is done as a
surprise check by the MO

Taluka Health Officer

checks the stock in the stores physically once a month.

There is an audit from the DHO once a quarter

The stock is checked randomly by taking physical stock and comparing it with the
records. In case the stock is less than what is shown in the register, the money is recovered
from the pharmacist salary and in case the stock is more than the mentioned in register then
disciplinary action is taken against the pharmacist.
Internal District Audit

This is an audit in which physical verification of the stock is done once a year. It is also a
surprise visit.

District level Audit

A team from the state department takes the physical stock of all the material in the stores
and prepares a stock discrepancy report. In case the stock isless than what is recorded in the
register, the money is recovered from the pharmacist salary and in case the stock is more than
recorded then disciplinary action is taken against the pharmacist.

Agency scheme audit

It is a government audit that takes place once in four years.During this audit complete
physical stock taking is done and the stock is verified against the records.

Panchyat Raj Committee Audit

this audit takes place to check the quality of services rendered to the community. One of
the components of the audit is stock verification.This audit committee is a part of the Member
of Legislative Assembly cabinet. Thiscommittee has a lot of powers, and they can even
question the CEO of the Zilla Parishad and if they feel that the services are not rendered as
per the standards set then they can even suspend the CEO of the Zilla Parishad.

Ayurvedic medicine supply

• In addition to allopathic medicine supply, ayurvedic medicines are also supplied to

IPHS certified PHCs, as a part of integration and m ainstreaming of AYUSH

Distribution of Drugs and instruments

The materials are distributed within different wards of the PHC as well as to the sub-centres
functioning under the PHC.

Drug distribution within PHC:

The stock of the medicine required for a week is taken out from the stores of the PHC and an
internal indent is prepared for the same in the name of the OPD (issued to OPD) and is
entered in the stock register. Similarly when the injections, medicines and instruments are
issued to the other wards like IPD, OT, Sub-Centres, an indent for the same is issued and the
materials are handed over to the concerned person in that department.There are two registers
that have the details of the daily expenditure of the materials:

The Daily Expenditure Register (DRUGS) - maintained by Pharmacist

The Daily Expenditure Register (INJECTIONS) - maintained by sister-in-charge

Drug distribution to Sub-Centre

There are two types of supplies to the sub centre from the PHC. There are annual medicine
supplies in the form of Drug Kit A, Drug Kit B and Drug Kit C for the Sub-Centre. Each
carton contains medicines for five thousand population for the sub-centre.However, many sub
centres cater to more than 5,000 population hence there is a short fall of the medicine stock.

Then, they give a requisition to the PHC and the MO sanctions the medicines to the Sub-
Centre as per her judgement about the requirement at the Sub-Centre.

Apart from the medicines in the drug Kit A, B and C, the Disposable Drug Kit (DDK) is also
supplied to the Sub-Centre to be distributed to the ANC cases to ensure a safe delivery
whether at home or institution. If the delivery takes place in the institution, the beneficiary
returns the DDK to the Sub-Centre.

Material disposal

• The drugs are seldom disposed at the PHC. Normally the medicines are utilised at the
PHC or distributed to RH or other PHCs so that the medicines are utilised and
not wasted. However, if at all any drugs cross the expiry date, they are either buried in
a pit or burnt.

JOURNAL ABSTRACT

1.Geetha Mani, Kalaivani Annadurai, Raja Danasekaran, Jegadeesh Ramasamy (2014)

conducted a study on Drug Inventory control analysis in a Primary level Health care facility
in Rural Tamil Nadu, India.Effective and scientific drug inventory management techniques
are necessary for efficient health care delivery.

Methods: The data related to annual consumption and annual drug expenditure (ADE)
incurred on each drug during the year 2012 in a primary level health care facility in
Kancheepuram District, Tamil Nadu was collected. The drugs were categorised based on
ABC, VED analysis using Microsoft Office Excel version 2007.
 • Results :A total of 84 drugs used in the hospital were included in the analysis. The
ADE on these 84 items, for the year 2012 was, Rs.3,22,697.10. ABC analysis showed,
15 items (17.9%) in Category A, 17 (20.2%) in Category B and 52 (61.9%) in
Category C consumed 70.6%, 19.47% and 9.9% of the total ADE. VED analysis
revealed 25 vital items (29.8%), 31 essential items (36.9%) and 28 desirable items
(33.3%) consuming 29.3%, 44.2% and 26.5% of the ADE respectively. On ABC-
VED matrix analysis, 42.8%, 36.9% and 20.2% items were categorised under
Category I, II and III respectively accounting for 78.4%, 17.1% and 4.5% of ADE.

• Conclusions :This analysis allowed for categorisation of drugs based on cost and
criticality factors and identifies level of managerial control required

CONCLUSION

• Material management is concerned with systematic and incorporated way of

handling the equipment by analyzing the need of the equipment, developing a
planning strategy, supervising, organizing the list based on the budget allotted, getting
approval from the organization for purchase, planning production, deciding the
purchasing are based on standardized criteria, acquiring the articles, receiving the
receipt and conducting material audit. All these processes are carried out to obtain
right number of articles with good quality at right time and right place to have the
quality output.

THEORY APPLICATION

General System Theory

ASSIGNMENT

Write an assignment on problems in material management