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7/28/2019 Material Mgmt SCM 1 (1)
http://slidepdf.com/reader/full/material-mgmt-scm-1-1 1/95
MATERIAL MANAGEMENT
LOGISTIC MANAGEMENT
SUPPLY CHAIN MANAGEMENT
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MATERIAL MANAGEMENT
MATERIAL - means hospital supplies andequipments- “Housely”
Equipment, apparatus and supplies procured,
stocked and utilised by an organisation Bringing together available resources so as to
achieve a specific objective
Management is the function responsible for the
coordination of planning, sourcing, purchasing,storing and controlling materials in an optimummanner so as to provide a pre decided service atminimum cost
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Housely- The management and control of goods, services and equipment fromacquisition to disposition”
A scientific technique- interchangeably used withSTORES management/ LOGISTIC management/SUPPLY CHAIN management
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LOGISTIC MANAGEMENT
Logical extension of transportation and related areas toachieve an efficient and effective goods distribution system
Design and operation of the physical, managerial, and informational systems needed to allow goods to overcometime and space (from the producer to customer).
Logistics management can provide a multitude of ways toincrease efficiency and productivity and hence contributesignificantly to reduced unit costs
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DEFINITION
Logistics is the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory( and the related
information flows) through the organization and itsmarketing channels in such a way that current and
future profitability are maximized through the cost-effective fulfillment of orders
Design and operation of the physical, managerial,and informational systems needed to allow goods toovercome time and space (from the producer toconsumer)
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Integrated Logistics
The process of anticipating customer needs andwants; acquiring the capital, materials, people,technologies, and information necessary to meetthose needs and wants; optimizing the goods orservice –producing network to fulfill customerrequests; and utilizing the network to fulfillcustomer requests in a timely way.
Inbound logistics Conversion operations
Outbound logistics
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Logistics management of services
Process of coordinating nonmaterial activitiesnecessary to the fulfillment of the service in acost – and customer service – effective manner
Service response logistics activities
waiting time
Capacity
delivery
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PROCESS OF MATERIAL MANAGEMENT
Demand forecasting Planning & budgeting
Purchasing
Receipt, inspection and storage
Inventory control
Issue and distribution
Disposal and condemnation
Minimising losses and pilferages
Cost reduction
Value analysis
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AIM OF MATERIAL MANAGEMENT
To ensure that there is adequate stock of requireditems for a continuous supply, to avoid surplus, haveappropriate storage, easy retrievability, distributionto the point of usage whenever required , effective
and efficient utilisation of available resources
OBJECTIVES- planning, acquisition, storage,movement and control of materials so as to optimise
personnel physical facilities and capacity
To provide right materials, of right quantity, rightquality, at the right time and of course from rightsource
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PRIMARY OBJECTIVES
Low purchase price (low cost)
High inventory turnover
Low storage cost Maintaining continuous supply
Maintaining quality of purchase
Cordial relation with suppliers
Low pay roll cost
Development of vendors
Good record keeping
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SECONDARY OBJECTIVE
Favourable reciprocal relations
Introduction of new material and products
Standardisation
Product improvement
Interdependent harmony
Economic forecast
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INTEGRATED MATERIAL MANAGEMENT
IN HOSPITALS
Close coordination of all departments
Balance conflicting objectives- to achieve
optimum results for the organisation Better accountability- centralisation of
authority & responsibilities
Better coordination
Better performance
Adaptability to EDP/ HMIS
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SOME ISSUES
Is it the same as Storekeeping?
Is it expensive?
Does it mean more people to be employed?
Is it only for large sized hospitals?
Is it a fad?
Is it too complex?
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FUNCTIONS OF MATERIAL MANAGEMENT
DEPT
Stores planning
Receive material as ordered
Inform indenting dept – arrival of stores Inspection of stores
Record keeping
Storage and preservation
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Issue of materials against authorised indents
Bill processing of materials received
Physical safe custody of stores Process purchase requisition of items
Condemnation and disposal
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TYPES OF HOSPITAL STORES
I. TWO BROAD CATEGORIES Consumable stores
Non consumable stores
II.- NATURE OF STORES Medical & Drug stores
Surgical stores
General stores
Linen stores Stationary stores
Engineering & maintenance stores
Medical equipment
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INDENTING OF STORES
Annual indents- by 1st Jan each year
Forecast for ensuing FY
Existing stock position
Last year’s average consumption
Quantities required for next year
Complete specification
Likely source
Appx cost
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Supplementary indents
In case of need- unforeseen circumstances
submit separately- by 1st Aug
Limit of finances
Emergent indents
In case of urgent, immediate and inescapable demand
Funds available O i/c to authenticate
Any time of the year
Approval of competent authority
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INDENTING GROUPS
Surgical instruments & equipment
Prosthetics
Medical stores/ chemicals/ stains/ dyes Linen
Stationary
General stores
Diet items
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Engineering items
Rubber goods
Furniture – wooden, steel Glassware- lab equpt
Optical instruments
Photographic materials
miscellaneous
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END OF PART - I
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CONTROL OF STORES
CLOSED SYSTEM-
physically stored in closed and controlledenvironment- under lock & key,
only authorised person to handle
Issue under authorised requisition
OPEN SYSTEM-
repetitive & mass use of items,
close to the point of use
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LOCATION OF STORES
Easy access- FIFO method
Receipt & issue in least possible time
Easily accessible to all users
Cost of transportation minimal Safe from pilferage, theft & fire
Ensure strict control
Unnecessary fatigue and monotony is avoided
Due consideration to humidity, temperature,lighting, ventilation
Scope for future expansion
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LAYOUT DESIGN… Principles
Maximum utilisation of available space
Greater efficiency of stores depot
Easy accessibility to all materials Maximum security of all materials
Proper maintenance of records
Economy in movement, placement and issue
Minimum of spoilage, damage and otherlosses
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DESIGNING A STORE
Space – McGibony – 20 sqft per bed/ 1000-1500 sqft Armed Forces Scale of Accomodation – 120% more
Rows of shelves parallel to longest dimension
Flow pattern – straight path Avoid dead ends
Proper space utilisation
Width of aisles – 1 ½ times of width of material
Match shelves with type of material being stored Flooring – clean and dust free
Adequate light
Ventilation- A/C
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SUB STORES
OP pharmacy
IP pharmacy
OT stores Cath lab stores
Linen stores
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STRAIGHT THROUGH FLOW
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ELEMENT BASED
FAST MOVINGMEDIUMMOVING
SLOW MOVING
OFFICE
ISSUE
IN
OUT
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PART III- PURCHASES
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ORGANISATION
CEO/ MANAGINGDIRECTOR
PURCHASING
DIRECTOROPERATIONS
DIRECTORPERSONNEL
DIRECTORMATERIAL
DIRECTORFINANCE
MEDICALDIRECTOR
TRAFFICCENTRAL
RECIEVINGSTORES
INVENTORYCONTROL
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PURCHASE MANAGER
PURCHASE MANAGER
EQUIPMENTS
SURGICALS
GENERAL STORES
DRUGS
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DEMAND FORECASTING AND PLANNING
CONCEPT OF STADARDISATION- groupingitems of similar specification. It ensures
Non duplication of inventory
Variety reduction
Economical purchase cost
Efficient use of materials
Allows to definitely establish units of services,capital equipment, consumables and suppliesfor each department
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Pareto rule/ - a small percentage of itemsrepresents the majority of inventoryinvestment
80-20 rule High cost high usage items should receive
greatest degree of attention.
Low cost low usage items account for largerpercentage but smaller percentage of inventory-crude forecast with large safetystock
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FORECAST
An estimate of demand expected in future. Certain & predictive-easy to forecast
Uncertain and un predictive- difficult
Fore casting techniques (trend line/ regression analysis/ exponentially weighted
moving average. Economic models/ simulation)
used in manufacturing industry not very applicable, excepta few
Last period method
Arithmetic average – of all past demands
Moving average- of past n times- n defined byexperimentation
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PURCHASE DEPARTMENT
PROCUREMENT an important and crucialactivity sophisticated life saving drugs used by doctors to
stapler pins used in the hospital office Since a huge portion of revenue is devoted to
purchasing, an effective purchasing strategyis vital.
SCM is a major link in having effective vendorrelations, vendor evaluation, vendordevelopment and negotiations.
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PURCHASE DEPT
Task of purchase department is to procure the inventory at lower prices
without compromising on the quality
by reducing the lead times with the suppliers through
competitive bidding, direct negotiation and group purchasing.
Departments of materials, finance, receiving and
store-keeping work in tandem to processeffectively the high volume of purchases, receiptand payment transactions that take place atregular intervals.
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An efficient inventory policy should link thesupply to the consumption patterns forreducing overall inventory level.
The transactions should be online so that thedatabase gets updated automaticallysubsequent to each and every issue of
material /medicine etc to enhance efficiency.
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PURCHASE CYCLE
Develop a clear complete description andspecification of items
Determine important commercial requirements,
performance and eligibility criteria
Invite bids allowing considerable time for
response from suppliers
Open tenders in public Evaluate tenders
Assess capacity of new suppliers
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Visit the manufacturer’s premises
Select suppliers
Award contracts
Follow up contracts
Check stores at consignee’s end
Release initial payment
Check satisfactory performance
Release balance payment
Evaluate performance for future transaction
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PURCHASE
Acquiring material as required to meet qualityand time schedules Selection of acceptable vendors
Negotiation of terms
Placing purchase orders considering economic level Expediting deliveries to meet inventory requirement
Centralised purchasing/ decentralisedpurchasing
Lower purchasing cost Quantity discounts
Lower inventory costs
Better management control
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PURCHASE PROCEDURE
Drawing up specification
Inviting quotation
Preparing comparative statements-incorporating basic prices, freight charges/octroi/ taxes/payment/ discounts/deliveryperiod
Short listing
issuing purchase orders
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TENDER PROCESS
Tender Enquiry
Clear & specific about terms of delivery-
for destination rly station, FOB (free onboard), C&F (cost & freight), CIF (cost,insurance and frieght), free delivery atconsignee’s depot etc.
Clear mention of duties/ taxes/ octroi
Risk of property in goods follows theownership
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TENDER SYSTEM
SINGLE TENDER
LIMITED TENDER ENQUIRY
ADVERTISE TENDER (OPEN TENDER) GLOBAL TENDER
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SUPPLY CHAIN
PURCHASINGDEPTT/ STORES
VENDORS
RECEIVING DEPTT/STORES
ACCOUNTPAYABLE DEPT
ORIGINATINGDEPTT
NEED
CONDEMNATION
NONSTOCK ITEMS
STOCK ITEMS
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PARAMETERS
COMPANY
Size/Capacity
Financial strength
Operational profit
Manufacturing range
Research facilities
Geographical location Trade relation
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PRODUCTS
Quality
Price
Packaging
Uniformity
Warranty
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SERVICE
Delivery on time
Condition on arrival
Follow-up instructions
Number of rejections
Handling of complaint
Technical assistance Emergency aid
Supply update catalogues
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VALUE ANALYSIS
Less expensive means of providing desirablequality and acceptable performance
Finding answers to following questions
Does its use contribute value?
Is its cost proportionate to its usefulness?
Is there anything better for the intended use?
Does the cost justify its quality?
Will another supplier provide it for less?
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TYPES OF PURCHASE
One time purchase
Repeat and periodical purchase
Reorder for fixed quantity at specifiedintervals,
Reorder for fixed quantity at specified dates
Contract for purchases at annual basis(committed volume contract) – advantage of fixed predetermined rates
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PURCHASE ORDERS
To include all the conditions of supply
Purchaser’s orders no. and reference, date
Supplier’s name and address
Quotation reference
Description of materials Specification Brand
Name Quantity
Number of units Pack size
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Supplier’s quotation reference
Packing – special packing if any
Price and total value, billing terms
Unit price Quantity discounts sales tax, excise Total value
Freight charges and despatch Freight on board(FOB), clearing, inspection andforwarding (CIF), freight to pay, insurance
Despatch mode and name of railway station,port,PO
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Inspection at receiver site
Acknowledgement
Mode of payment Warrant
Insurance
Authorised signatures Penalty
Any other terms & conditions
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RATE CONTRACT
Important contracts offered through DGS &Dfor Govt institutions
Firms supply stores at specified rates, no fixed
quantities mentioned
All govt institutes bound to purchase from rate
contractor for all stores
Monitoring through committees
Advantages- maximum flexibility in ordering
specified quantity
Help to maintain optimum inventory
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Discounts offered linked to purchase of acertain quantity-
Questions of savings v/s cost of holdingadditional quantity
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PURCHASING SYSTEM
CENTRALISED-single person/dept/ corporateoffice responsible for entire purchases
DECENTRALISED- other functional areas(dept/ units) decide on their own for theirsupplies and requirements
GROUP- group of hospitals joinhands-
general usage items
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CENTRALISED
ADV – No duplication
Discounts/ better pricing
Transportation savings Effective inventory control
More efficiency – done by specialist officer/ lesser nos.of orders
Effective management control Record keeping easy
DISADV- individual unit’s/ dept’s requirements may not be met
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PRICE TREND
FALL CLAUSE-
A contract provision enabling the purchase to takeadvantage of downward trend in price.
Upward trend not taken into consideration No compensation paid for the same except that
provided under specific price variation clauses incontract
DGS&D rate contracts have a clause to ensure thatthe rates quoted/ accepted are the minimum thattrade can offer any other major user of same store
Supplier to forthwith notify the reduced rates
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TYPES OF CONTRACT RATE CONTRACT-
a contract for supply of stores at specified rates during periodcovered by contract (usually one year , but renewable). No quantity are mentioned but the contractor is bound to accept any
order which may be placed at specified rates during currency of contract
RUNNING CONTRACT- for supply of an approximate quantity at a specified rate during
certain period covered by contract Quantities calculated by DGS&D
Any indentor may place demand directly or through
DGS&D Purchaser has the right to take any quantity
Withdrawals are closely monitored and guaranteedquantity are made before expiry of period of contract
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PAYMENTS TERMS AGAINST
CONTRACTS
GENERAL ITEMS- 95% against inspectionand despatches . 5% after acceptance of stores
PLANT & MACHINARY – 90 % against initialinspection & despatches . 10 % against finalcommission and acceptance (consumersatisfaction certificate)
RATE CONTRACT- 98% against inspection.2% after acceptance
LOCAL PURCHASE – 100% against delivery
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PRINCIPLES OF PURCHASING
5 Rs
RIGHT QUANTITY-by effective inventorycontrol-EOQ
RIGHT QUALITY- pre determined standards-technical & economic - BIS
RIGHT PRICE- utility & satisfaction- costanalysis- PNC for lowest tenderer
RIGHT TIME (DELIVERY)- availability, criticality,sources, lead time, avoid stock outs & crisis
RIGHT SOURCE- vendor rating
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RULES REGARDING PURCHASE
ORDER No goods, except small sundry purchases, to bemade without written order & signed
Only responsible official authorised to sanction
purchase Confirmation in writing from supplier
Each order absolutely in accordance withspecification
Reliable record of time required from date of order to date of delivery (lead time)
Regular review of outstanding from supplier
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DELIVERY
Severable contract- indicating specificdelivery dates for different installments.Portions/ quantities. Each portion of contract
is an individual contract
Entire contract- when delivery of entirequantity is completed by a specific date
without indicating deliveries for intermediateinstallments
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EOQ
Analyse all the cost factors associated with orderquantity
Cost of materials
Cost associated with keeping materials in stock-inventory carrying cost
Cost associated with placing orders – ordering cost
Q= √2AS/IC Q= quantity to be ordered
A= annual demand of an item S= procurement cost per order
I= ICC(expressed as %)
C= Unit cost of item
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PREREQUISITES FOR EOQ
The ordering cost is constant.
The rate of demand is constant
The lead time is fixed The purchase price of the item is constant i.e.
no discount is available
The replenishment is made instantaneously,the whole batch is delivered at once.
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LOGISTICS
the process of strategically managing theprocurement, the movement and the storageof materials, through the organization and its
marketing channels in such a way that thecurrent and future supply flow is maximizedthrough the cost effective fulfillment of
orders.
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STOCKLESS PURCHASING
General system- central purchasing, stocking &distribution/ bulk stores off premises
Overstocking, pilferage, obsolescence
Alternative- central stores to stock minimum
Stockless purchasing – buying supplies for directutilisation by respective department withoutduplication or accumulation in central stores
Based on JIT system
Required materials are delivered by originalsuppliers to the location where they are utilisedwhen required
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Inventory to be kept at two weeks supply
For supplies that require special handling viz. labreagents, x-ray films
For institutions in urban areas- short lead time Dept – lab
Radiology
Housekeeping
Dietary services
Linen supply
IV fluids-central reservestock
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Requisites –
specification & delineation of appropriate quota with flexibility Lead time Supplier reliability Criticality of item
ADV- Space saving
Holding cost reduced Paper work reduced Enhances effective control over unofficial inventory Avoids lengthy processes Obsolescence is minimised- negligent lead time
DISADV- To cater for all variability- seasonal Fluctuation in patient census
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SHELF LIFE
All medicines and biological products have a shelf life and many are very expensive
A fool-proof strategy and mechanism of provisioning, storing and issue of such ‘shelf -life’
drugs in a manner that they are stored and carried ina temperature-/ humidity-controlled atmosphereand issued on a FIFO (First in, first out ) basis
An early warning report to be automaticallygenerated to alert the doctors/ pharmacists on the
anticipated expiry of the shelf life. contractual arrangement with the vendors, without
loss of shelf life
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TACTICS FOR SHELF LIFE ITEMS
Such material should have the longest‘remaining’ life, while procuring
and if possible, arrangement for replacementwithin some agreed months of the remaininglife may be had with the suppliers.
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PARTNERSHIP MANAGEMENT
Plays most crucial and pervasive role instrengthening and supporting processes of any industry
25% of Your Supply Costs Are Above TheWater Line And Can Be Reduced By PriceCutting. While 75% Are Hidden Under The
Water Line And Can Only Be Attacked WithNew Advanced Strategies, Tactics andTechniques You Need To Know About
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The honest truth is that “price” savings arequickly disappearing because most healthcareorganizations now belong to two grouppurchasing organizations (GPO) and their
compliance is at the highest levels in years. Infact, our own studies show that there is less than.005% left in price savings annually for anyhospital, system or IDN in their supplyexpenses. In fact, when you factor the 2.6%annual medical commodities inflation rate thereis no actual savings to be achieved on pricesavings. In effect, you are always fighting alosing battle with price!
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The Cost Of Change Compounds This Problem
To make matters worst it is even harder to changeproducts, services and technologies today to get abetter price because the cost of “switching” vendors
is so high. For example, if you wanted to switch yourIVs to another vendor you will need to change yoursolutions, IV pumps, administration sets, bags,compounders and other components that make itvery expenses to retrain your nurses. Even changing
a routine product like your compression selves cancause mass confusion and actually cost you moremoney than the change is worth.
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SCM
“You can make even a parrot into a learned
political economist. All he must learn arethe two words:
Supply and Demand” Anon.
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Supply Chain Management (SCM) is the processof planning, implementing and controlling theoperations of the supply chain with the purposeof satisfying the customer requirements as
efficiently as possible. SCM encompasses the planning and
management of all activities involved in sourcingand procurement (viz. acquire, store, move and
control) and all logistics management activitiesto optimise the usage of facilities and capitalfunds and to provide customer service inaccordance with organisational goal.
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provide not only quality services to thepatients but also meet the expectations of allthe stake holders.
STRATEGIC IMPORTANCE-
“Hub and Spoke Model”, and
“Networking Model”
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HOSPITAL SUPPLY CHAIN
MANAGEMENT
HSCM is a set of approaches to efficiently integratesuppliers or vendors, transport and hospital services(including outpatient, emergency, in-patient,laboratory, radiology, stores and purchase, food,
laundry and medicines /equipments) to achieve TotalQuality Management (TQM) in health care servicesby optimum utilization of resources.
The HSCM deals with the management of materials/equipments, manpower like doctors,
nurses and other supporting staff, to transform sickpatient to healthy person at a reasonable cost, in theshortest possible time with utmost satisfaction of the patient.
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OPERATIVE GOALS
OPTIMUM MATERIAL ACQUISITION- mosteffective purchase, storage, handling andusage practices
OPTIMUM INVENTORY TURNOVER RATE-maintained at lowest optimum level
GOOD VENDOR RELATIONSHIP – ability to
procure at best possible terms MATERIAL COST CONTROL- purchase cost
to be economical and as low as possible
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EFFECTIVE ISSUE AND DISTRIBUTION-economical holding at the point of usage
ELIMINATION OF LOSSES ANDPILFERAGES- system of internal audit
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5 Rs
for continuous supply of all types of materials/medicines required by the hospital
right source,
right quantity,
right quality,
right price and
right time
ISSUES WITH HSCM
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ISSUES WITH HSCM
insufficient linkages to clinical systems, revenuecycle, IT, and clinical operations.
viewed as a "back dock" support service thatprovides the products and services required by
clinical departments. To be fully effective, it must be an integrated link in
the chain of clinical and non-clinical operations.
should be the primary conduit for all third partyrelationships.
many hospitals have non-materials trained peopleordering supplies and signing contracts withoututilizing supply chain procedures.
ORGANISATION OF DEPARTMENT
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ORGANISATION OF DEPARTMENT
Traditional healthcare materials managementfocused on processing requisitions and placingorders. The procurement aspect (PURCHASE )of the
operation, disseminated information and researchedprice quotes. The materials management (STORES) aspect focused
on ensuring that there were enough supplies to satisfycustomers and storage conditions, inventory
management The two can be integrated also in certain
situations (small hosp) as well as strategicpositioning
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GOODS+ MONEY+ FLOW OF INFORMATION
The 3 touch points are handled by the sameperson/ dept in other industries (the person
who is ordering the product is exchanging theinformation and paying for it),
but in Healthcare, it is handled by different
people
STRATEGIC IMPORTANCE
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STRATEGIC IMPORTANCE
should focus on the total impact of care, notmerely product acquisition costs. It shouldlook strategically at value, to positively affect
both the patient outcome and the costs of care, not just price.
NEED OF S C MANAGER
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NEED OF S C MANAGER
Analytic skills to evaluate spend history andanalyze cost-benefit;
Project management experience to leverage cross
functional expertise from departments across theorganization (e.g., Physicians, Nursing, Finance,Administration);
Facilitation skills to ensure that different points of
view are considered when developing strategies;
Professional skills to communicate effectivelyacross the organization.
ACTIVITIES OF STORES
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ACTIVITIES OF STORES
A very crucial department in hospital
The issue of material from the stores to the userdepartment is an intricate system.
Performs vital functions acquisition, receiving, evaluation, warehousing,
maintenance, accounting and distributing goods and supplies to all the departments
of the hospital.
I/C STORES
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I/C STORES
An expert individual in all activities of stores
Well versed with accounting system
maintain a co-operative relationship withother departments of the hospital
To interact with various external agencies viz.vendors, transporters, govt officials, other
local bodies
internal customers, such as doctors, services,house keeping, canteens, movements etc.
SCM
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SCM
RECEIPT
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RECEIPT
Awaiting inspection – This category consists of material that has beenreceived and is awaiting inspection before being moved into stock.
Acceptance upon certification – This
category consists of material that may be accepted pendingcertification.
Rework – In this category are materials that are defective and must bereworked.
Return – This category contains materials that are defective and will bereturned to the supplier for credit or replacement.
Materials to be tested – This category consists of materials which havebeen received and are awaiting delivery to the using/testingdepartment.
STEPS IN RECIEPT
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STEPS IN RECIEPT
Open Purchase Order wise file, once P.O. is received.
DOCUMENTS Maintain Railway Receipt Register,
Consignment Note Register,
Inspection Request Register,
Rejection Register and other relevant documents viz.\
individual P.O. wise file,
advance document file,
shipping documents,
Guarantee Certificate and inspection certificate, challan etc.and
to feed the relevant data into the computer.
STEPS
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STEPS
Receiving reports/documentation
Unloading , checking of quantity (checkingthe shipment)
Unpacking / opening of packages andinspecting
Lodging of Claim for Discrepancy
Procedure for the return of goods tosuppliers