Elements of a Materials Management System

Material planning and management (MP and M) is a system having numerous elements.
Proper functioning of each of the elements (sub-systems) coupled with inter-dependence of all the
sub-systems to achieve the primary objectives are the classical characteristics of the MP and M
system. The major sub-systems of MP and M system are:
a. Demand estimation
b. Procurement
c. Receipt and inspection
d. Storage
e. Issue and use
f. Maintenance and repair
g. Disposal
h. Accounting and information system.
Demand Estimation
A large variety and number of materials are used in hospitals and other health care institutions.
The Advisory Committee for development of surgical instruments, equipment and appliances (1963)
identified 3200 items of instruments and equipment being used in a hospital. This is just to
illustrate the variety and diversity of stores used for patient care in a hospital situation. There is,
therefore, need for variety reduction of the materials; as less the number of materials, less will be the
problems of planning and management of the same. Along with variety reduction there is need
for laying down proper specification of the materials. In this area, the Indian Standard Institute has
been and is playing a very important role by standardizing a large number and variety of
instruments and equipments.
The ISI has set up a number of technical committees to work out the details of standards of
surgical instruments, glassware, anaesthesia equipments, dental machine, artificial limbs,
surgical dressing, utensils, and electromedical Instruments, rubber goods, etc. Along with
standardization, variety reduction, and proper classification of materials a major area of activity
of MP and MS is demand estimation of each category of material. This should always be done
keeping in view the trends in consumption pattern over the last 2-3 years, objectives of the
organization, changing clientele and changing emphasis on various programmes and activities in the
health field. In this field a "sound data base" and use of advance projection techniques are of
great use. These techniques are relatively simple and medical administrator should use them
frequently to streamline the MP and MS system.
Procurement
Having drawn up the list of requirements, the next step in MP and MS is the process of
procurement of these materials. Most of the states and other organizations have laid down detailed
set of rules and regulations regarding the procedure of ordering for materials. The financial
authority is also vested in various levels of the administrative hierarchy. The basic spirit behind all
these rules, regulations, procedures etc. is to maximize the value of money invested in the
purchase of stores. Organizations like Directorate General of Supplies and Disposals (DGSD)
play a crucial role in purchase which involve heavy costs.
Many states have medical stores depots which are centralized agencies of procurement and
stocking of medical stores. There is also a system of fixed contract or running rate contract which
is followed in large organization and some State Governments Limited tenders, rate enquiries local
spot and emergent purchase form a part of the complex sub-system of procurement. It would
neither be appropriate nor feasible to go into the details of these procedures as they are specific to
different states/organization. However, the role of DGSD needs special mentioning in the sub-
system of procurement of bulk materials.
Normally three types of contractual services are offered by DGSD. These are:
a. Fixed quantity contract This type of contract is generally entered into where firms are called
upon to offer to supply a definite number of quantity of stores by a specified date. Such
contracts, are binding on both the purchasing as well as supplying agency.
b. Running contract These are contracts for the supply of an approximate quantity of
stores at a specified price during a certain period of time.
c. Rate contract these are the most important contracts as far as health institutions are
concerned. Under these contracts the firms are asked to supply stores at specific rates during
the period covered by the contract. No fixed quantities are mentioned. The purchaser is
bound to order from the contractor all stores under the contract, which are required to be
purchased. The list of direct demanding officers (DDO) forms integral part of the contract and
the supplies are delivered to DDO's in response to orders received from DDO's direct. DGS
and D keeps a close watch over the progress of rate contract performance with the help of a
high powered committee on drugs which includes amongst others Drug Controller of India,
CGHs, ESIS, DG, AFMS, DGHS, Director General of Technical Development, CMO
Railway and Medical Supdts. Of large hospitals.
The system of purchase through rate Contracts has been commended by medical
authorities as this system offers maximum flexibility in ordering specified quantities of
materials at periodic intervals. This helps to maintain optimum inventories and minimize the
chances of deterioration or obsolescence of the medical stores. The quality of the products is also
assured to a large extent as only reported concerns are entered into contract with.
Value Analysis
The obvious and elementary principle of material use is the right quality of material. This
includes questioning and analysis of each specification to see if it could be amended or
substituted to maximize the end use of material. This process of analysis of the intrinsic value
of the material for achieving the objectives o
f
the organization is termed as value analysis. This
is a vital function of a materials manager. The following considerations help to carry out the value
analysis.
a. Can the material be dispensed with?
b. Can it be simplified?
c. Will a standard material do?
d. Is its value proportionate to its cost?
e. Is anything cheaper but equally good available in the market?
f. Would not it be better to manufacture it?
Receipt and I nspection
The stores ordered are received in the store. A reasonable sound policy and methodology
of inspection of incoming stores is an essential element of MP and MS. The inspection policy
should enunciate the sampling procedure for inspection and this procedure must be followed. The
lot thus picked up by a random sampling method be subjected to physical and chemical inspection.
Basic facilities for such examination be created in the organization itself depending upon the
size of stores turnover, governmental and commercial chemical laboratories should also be made
use of for analysis of chemical composition of drugs etc. Investments made in sound sampling
policy and procedure will go a long way in assuring the right quality of materials supplied to the
organization.
Storage
The medical stores should be situated near the other stores of the hospital. It should be
easily accessable to suppliers as well as indentors. Location of the store will, therefore, be guided
by the flow activity of the stores. The store should be of adequate size to accommodate all the drugs,
instruments, appliances etc. required for use in form of steel racks with shelves. Refrigeration
should be provided for storage of thermolabile items. A graded temperature zone concept is
essential in medical stores.
Separation of stores of various types, i.e. injections, tablets, local use agents from others,
poisons from non-poisonous, inflammable from non-inflammable etc. dictates the layout of the
stores. Drugs and medicines should be grouped according to the pharmacological actions and in
accordance with the classification adopted in the formulary. Alphabetical arrangement group-wise
enables easy identification and retrieval. Items received later from the suppliers should be stored
behind similar items and the principle of First in First out (FIFO) should be adopted.
I nventory Control
Inventory control mean stocking adequate number and kind of stores so that the materials
are available whenever required and wherever required. This has to be done at an optimum
outlay of financial and human resources. High inventory level leads to high cost of inventories
by:
a. Locking the finance
b. Large storage space
c. Large handling and administration charges
d. Obsolescence
e. Spoilage etc.
On the contrary, low inventories may lead to frequent stock outs and high shortage cost.
Balancing the cost of carrying high inventories and the cost of shortages is done through a system
of scientific inventory control.