Hospital Stores Management An Integrated Approach Shakti Kumar Gupta, Sunil Kant
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Materials Management—Basic ConceptsOne

 
INTRODUCTION
Materials are a major cost factor in any enterprise. In health care institutions about 40 percent of the budgetary allocation is on procurement and management of stores. It includes all activities of stores from the stage of forecasting of requirements to utilisation to final disposal. Stores management to be effective and efficient should aim to optimise the available resources.
Modern day health care institutions are multifaceted and multidimensioned dynamic organisations. In the integrated and complex role of a hospital, the stores have a pivotal function. The stores required by the hospital varies from simple house-keeping materials to sophisticated state-of-the-art equipment. The source may be within the premises of the health care system, some other city or even a different country.
 
WHAT IS MATERIAL?
Webster defines the word “Materials” as “relating to the production and distribution of economics, goods and the social relationships of owners and labourers”.
Housely states “Materials” should be used universally to refer to hospital supplies and equipment.
“Materials” thus may be defined as equipment, apparatus and supplies procured, stocked and utilised by an organisation.
 
MATERIALS MANAGEMENT
Management means bringing together the available resources so as to achieve a specific objective. Management is the function responsible for the co-ordination of planning, sourcing, purchasing, storing and controlling materials in an optimum manner so as to provide a pre decided service at minimum cost.2
Housley has defined Materials Management as “The management and control of goods, services and equipment from acquisition to disposition”; whereas Judith A Mnarandole has defined the Materials Management as “The management and control of medical, surgical, clerical, interdepartment services and equipment from acquisition on floor to disposition”.
Materials management is a scientific technique which is concerned with the planning, organising and controlling the flow of materials from their initial purchase, internal operations to the distribution at service points.
Materials management is the integrated functioning of an organisation dealing with supply of materials and allied activities in order to achieve the maximum coordination and optimum expenditure on materials. Materials management is one of the vital areas of the process of management. Materials management may also be interchangebly termed as Stores Management.
FUNCTIONS OF STORES MANAGEMENT
The various functions of Stores Management are:
  1. Materials planning and budgeting: This requires, need assessment, preparing materials budget, forecasting the levels of inventories and scheduling orders.
  2. Purchasing: This is a process whereby all hospital supplies and equipment are procured following laid down procedures for calling for tenders and other requisitions.
  3. Receiving and inspection: This involves receipt of stores from suppliers as per predetermined specifications and ensuring that the received items are only those what have been ordered.
  4. Stocking and distribution: Stores received must be stocked and preserved. However, a product has little value until it is with those who utilise it. It is essential to supply at the right place, right time and in the right quantity.
  5. Inventory control: This involves physical control of materials, proper preservation, minimisation of obsolescence and efficient handling of stores.
  6. Cost reduction: Cost containment measures must be undertaken to optimise the resources.
  7. Value analysis: It is an organised approach to identify non-essential costs which are incurred. This process is essential for cost reduction.
  8. Disposal: Surplus pharmaceutical products and non-functional equipment which are either obsolete or beyond economic repair will require disposal. Non-disposal of these causes increase in the holding costs and decrease in the storage capacity.3
The functions are summarised in Box-1
 
AIM OF MATERIALS MANAGEMENT
The aim of materials management in a hospital is to ensure that there is adequate stock of required items for a continuous supply, to avoid surplus, have appropriate storage, easy retrievability, distribution to the point of usage whenever required, effective and efficient utilisation of available resources.
The art of stores management is largely that of optimising the use of resources to meet the needs in an efficient manner.
 
OBJECTIVES OF MATERIALS MANAGEMENT
The main objectives of stores management are planning, acquisition, storage, movement and control of materials so as to optimise personnel, physical facilities and capacity. It is a dynamic and a systematic approach for the control of materials. It seeks to provide right materials, of right quality, right quantity, at the right time and of course from a right source.
 
PRIMARY OBJECTIVES
The primary objectives of materials management are:
  1. Low purchase price (Low cost): The most important aspect of materials management is to obtain correct quality of materials at the lowest possible price.
  2. High inventory turn over: Use of materials should commensurate the incoming flow so that minimum capital is blocked on inventories.
  3. Low storage cost: If materials are purchased, handled, stored in an efficient manner, the carrying cost and cost of ordering will be reduced considerably.
  4. Maintaining continuous supply: Uninterrupted supply of materials is the essential requirement of any organisation. Whenever continuity of the supply is interrupted, it affects the quality of care and service.4
  5. Maintaining quality of purchase: Consistence of quality is aimed at ensuring proper purchase of standard products as per predetermined specifications.
  6. Cordial relations with suppliers: Cordial relations directly contributes to success of any organisation. Good supplier relations also helps in obtaining the supplies on time in case of urgent requirements.
  7. Low pay roll cost: The lower the pay rolls, the higher are the profits if all other factors remain static.
  8. Development of vendors: The materials department should develop a number of vendors from time to time to ensure more sources of supply as well as to reduce purchase cost of materials.
  9. Good records: Effective records and paper work contributes directly to efficiency in an organisation.
 
SECONDARY OBJECTIVES
The secondary objectives of materials management represent the departments contribution to the achievement of the primary objectives of some other department. There are numerous possible secondary objectives out of which the common and important ones are:
  • Favourable reciprocal relations
  • Introduction of new materials and products
  • Standardisation
  • Product improvement
  • Interdepartment harmony
  • Economic forecasts
 
IMPORTANCE OF MATERIALS MANAGEMENT
The stores function is vital to an organisation whether it be an industrial concern, public or private utility undertaking or a health care institution.
The fast developing Indian economy has placed before the materials manager a tremendous challenge and responsibility. It is generally found that materials represent the most expensive asset of any organisation. As per the studies conducted in India and abroad the expenditure on providing materials ranges from 25 to 45 percent of the total hospital budget. The expenditure on hospitals materials ranks second, next to the cost on hospital personnel. Mismanagement of this asset leads to significant losses. On the other hand, its judicious management will minimise losses and achieve maximum service for which they are meant. The importance of materials management lies in the fact that the significant contribution made by the materials manager in reducing costs will go a long way in improving the profitability and rate of return on investment.5
 
MATERIALS MANAGEMENT IN HEALTH CARE INSTITUTIONS
During the last few decades there has been a tremendous increase in the knowledge of medical science and technology with the result that hospitals have increased and diversified the types of services provided by them. Even in developing countries like ours, there has been a substantial increase in the quantity and quality of services in the hospitals. The increase in population, rising expectations of the people information technological advancements and automation have enhanced the demand on hospital services.
Materials management is relatively a new concept in the health care field. The modern techniques of efficient materials management were developed in United States of America during and after the second World War which helped the industrial developed countries to make spectacular progress in improving their productivity. Materials management is a new concept in our country. The term was unknown in India until early sixties. Terms such as purchasing, store keeping, transportation etc. were in use in the country which in a vague manner represented the functions covered by modern materials management.
In the last few years there has been increasing awareness of the importance of materials management which has gradually found its place in the different areas of management in our country. The hospital organisation provides an ideal situation for the applications of this concept as 25-40 percent of the budgetary expenditure is done on accomplishing the stores function. Many hospitals have started adopting this management concept in whole or in part to accomplish the objectives of providing efficient patient care.
 
THE MATERIALS CYCLE
In order to understand the various aspects of materials management, it is necessary to study the various phases of the cycle through which a typical material would go in different types of business. Materials cycle has the following important stages.
  1. Design state
  2. Development of suppliers and sources
  3. Production planning or planning process
  4. Ordering process
    1. Placing the order
    2. Follow up
    3. Packaging and transportation
  5. Receiving process
  6. Inventory control
  7. Final stage is completed by
    1. Packaging6
    2. Storage
    3. Shipment
The materials cycle is shown in Figure 1.1.
zoom view
Fig. 1.1: Materials Cycle
 
INTEGRATED MATERIALS MANAGEMENT
Integrated materials management is a close co-ordination of all the departments which are concerned with utilisation of materials. Various functions served by materials management include materials planning, purchasing, receiving, storage, inventory control, scrap and surplus disposal. If some of the functions are to be separately handled, normally a conflict of interest occurs and there is bound to be an increase in the materials costs. The need is to balance the conflicting objectives from a holistic view-point so as to achieve optimum results for the organisation as a whole. In an integrated set up, the materials manager, who is responsible for all such inter-related functions, is in a position to exercise control and co-ordination with a view to ensure proper balance of the conflicting objectives of the individual functions.
 
ADVANTAGES OF INTEGRATED MATERIALS MANAGEMENT
Materials management impinges on many of the functional areas of organisational activities. Its effects are felt in almost all spheres of organisational work.
Organisations which have adopted the integrated materials management approach have the following advantages.
  1. Better Accountability: Centralisation of authority and responsibility for all aspects of materials functions ensures specific accountability.7
  2. Better Coordination: When a central materials manager is responsible for all functions, co-ordination of the various functions of materials management is facilitated.
  3. Better Performance: As all the inter-related functions are integrated organisationally, an effective communication and enhanced performance is a natural sequelae.
  4. Adaptability to Electronic Data Processing (EDP): All information with regard to materials functions is centralised. This facilitates collection, collation and analysis of data leading to better decisions. Advanced and efficient electronic data processing systems can be economically introduced under an integrated set up.
  5. Miscellaneous Advantages: Team spirit is inculcated under a central materials manager resulting in coordination and coorperation. The opportunities of growth and development are better in an integrated set up.
The integrated materials management concept has recently gained greater importance in India. Although organisations may not be adopting it in totality, there is a definite tendency to move towards an integrated approach.
 
ELEMENTS OF MATERIALS MANAGEMENT SYSTEM
Materials Planning and Management is a system having numerous elements which are interdependent to achieve the objectives of an organisation.
The elements of Materials Management as applicable to health care institutions may be grouped as shown in Box 1.2:
All these elements are very much applicable in a hospital set up. In relation to a modern hospital, Housley described the following areas in the Materials management domain.8
  • Writing and adhering to product specifications
  • Procuring all supplies and services through centralised purchasing
  • Receiving and accounting for all supplies
  • Stocking supplies for “adequate” period of time only
  • Studying and reviewing utilisation of materials
  • Developing and adhering to policies and procedures for product utilisation.
  • Standardising and evaluating all products and services
  • Processing and reprocessing reusable supplies and materials
  • Distributing all goods and services
  • Controlling “unofficial” inventories
  • Assuming accountability for capital equipment
  • Reviewing and servicing patient care equipment
  • Reviewing and evaluating patient charges
  • Disposing efficiently surplus goods
Materials management is a philosophy that should be religiously applied to the materials process on a consistent basis. It is a continuum along which many important supply functions take place under the disciplined supervision of the materials manager. Accordingly to Housley if developed and implemented properly the idea of total materials management represents control of “anything that moves and is not alive”.
 
MYTHS AND REALITIES OF MATERIALS MANAGEMENT
  1. Myth: Materials management is same as store keeping.
    Reality: Materials management is a process of management functional at micro and macro levels, which co-ordinates, supervises and executes the tasks associated with the flow of materials, to, through and out in an integrated fashion. Store keeping is one of the many components of materials management.
  2. Myth: Materials Management is too expensive.
    Reality: Materials Management if implemented effectively, provides hospital with total supply services at a better level of quality, an increased mode of service and at a reduced cost.
  3. Myth: Materials management means deployment of more personnel.
    Reality: With the amalgamation of the functions of supply, process and distribution there will be reduction in the number of personnel. The system will combine functions, amalgamate supervision and provide efficient service with fewer personnel.
  4. Myth: Materials management is only for large sized hospitals.
    Reality: Wherever there are materials, management of these will optimise the resources hence Materials Management is applicable to hospitals and health care institutions of all types and sizes.9
  5. Myth: Materials management is a fad that will soon pass.
    Reality: Materials management is the application of good management principles to the medical process. Its scope is multifaceted, multidimensioned and may be applied to all areas of the health care institutions.
  6. Myth: Materials management is too complex
    Reality: Materials management utilises simple management principles of planning, organising, staffing, leading, controlling to solve problems and thus facilitates decision making.