UNIT 1 LOGISTICS MANAGEMENT

Structure
Objectives
~ntroduction
Defmition, Goals and Objectives of Logistics Management
1.2.1 Definition

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1.2.2 Goals and Objectives

Principles in Logistics Management
1.3.1 Principles
1.3.2 Essentials in Logistics Management
1.3.3 Procedural Planning Sequence
Functions of Logistics Management
Tendering
Procedures, Procurement and ~nspection
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1.5.1 Purchase Activities

1 S.2 Floatation of TenderdEnquiries

1.5.3 T&S of Purchases

1.5.4 Negotiations
1.5.5 Legal Aspects of Purchasing
1 S.6 Quality Assurance

Storage System, Standardization, and Codification and Classificatiotl

1.6.1 Storage System
1.6.2 Standardization
I .h.3 Codification and Classification

Materials Accounting and Physical Distribution Logistics

1.7.1 Materials Accounting
1.7.2

lo-w of Goods

1.7.3 Physical Distribution Logistics

1.8

Transportation System
1.8.1 Transport and Traffic importance
1.8.2 Modes of Transport
1.8.3 Miscellaneous

1.9

Security of Stores

1.10

Condemnation and Disposal of Stores

1 .lo.1 lntroduction

1.10.2, Obsolete Materials

1 10.3 Surplus Mater~als

1.10.4 Scrap or Process Waste

1.10.5 Condemnation and Disposal
1.11

Hospital Stores

1.11.1 Types
I. 11.2 Pharmacy Serv~ces
I 1 1.3 Stores Management-Organisation and s~&I&
1 . 1 1 4 Physical Facilities of Pharmacy

1.12

Let Us Sum Up

1.13

Answers to Check Your Progress

1.0 OBJECTIVES
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After going through this unit, you should be able to:

explain principles of logistics management;

Ewentials of Logistics and

Equipment Management

describe functiops of logistics management;

plan and coordinate various activities of materials planning and management catering
for optional stqck of items;

outline the s terns of storage, distribution, classification, security and disposal of

yk
materialslequipment; and

describe the hospital stores management.

In this unit, we introduce you to the concept of Logistics Management with particular
reference to hospitals. This has been explained by the way of understanding the
objectives, principles and functions involved in the logistics management.
Logistics is a broad, far-reaching function, which has a major impact on a society's standard
of living. In a health care institution, we have come to expect excellent logistics services,
and tend to notice logistics only when there is a problem. Logistics has been called by
many names, including the following : Materials management, Supply management,
Industrial logistics, Business logistics, etc.
What these terms have in common is that they deal with the management of flow of goods
or materials from point of origin to point of consumption, and in some case, even to th$
point of disposal.
The LogisticsISupply management in any health-care institution is that part of the entire
hospital activity which deals with procurement, storage, transportation, distribution,
maintenance and evaluation of drugs and equipment. Sufficient stocks of these varied
types of items are to be maintained, primarily because it will be too costly to initiate
action to procure an item at the time of need. Non-availability of an item when required by
the user in a hospital could lead to 'Stock-Out' and adversely affect the treatment of a
patient, or even create a life-threatening situation. On the other hand, over-stocking of
items could lead to blockage of finance, which in turn would be a costly proportion to any
hospital.
Hence, planning of logistics and supplies is a process of deciding what and how much of
various items are to be kept in stock at a given time. It is also necessary to determine the
lead-time involved and the appropriate quantity to be procured.

1.2 DEFINITION, GOALS AND OBJECTIVES OF

LOGISTICS MANAGEMENT
1.2.1 Definition
"Logistics management can be defined as the process of planning, implementing and
controlling the efficient, effective flow and storage of goods, services, and related
information from point of origin to point of consumption for the purpose of conforming to
customer (patient's) requirement."
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--

An integral part of the logistics management process is materials management, which

encompasses the administration of raw materials, subassemblies, manufactured parts,
packing materials, and in-process inventory. Materials management is critical to the total
logistics process.
Thus, "materials management is that process of management which coordinates,
supervises, and executes the tasks associated with the flow of materials to, through, and
out of an organisation in an integrated fashion".

1.2.2 Goals and Objectives

The primary goal is to obtain materials at the lowest possible price, which must go hand in
hand with consistency in both quality and continuity of supply. The other goal is to
maintain the minimum of inventory of materials so as to free the working capital for other
useful purposes. Finally, all activities in this functional area of management process should
be carried out at a minimum of cost.

Given the goals, let us now identify the objectives of logistics management, which can
ensure the best performance, and use of materials in a hospital. These are as follows:
Primary Objectives
a) Good information system regarding the items
b) Right pnce of purchase
c) High turnover of the items
d) Low procurement and storage cost
e) Continuity in supply of stores
f ) Consistency in quality of the product
g) Good supplier relations
h) Development of personnel carrying out materials management
Secondary Objectives
a) Forecasting requirement
b) Favourable reciprocal relationship between supplier and purchaser
c) Awareness of new materials and products.
d) "To make" or "to buy" decision.
e) Standardization of items.

1.3 PRINCIPLES IN LOGISTICS MANAGEMENT

1.3.1 Principles
Hospital managers must at all times be aware of the seven cardinal principles or e l e m e m
which may be utilized individually or in combination to achieve good results, which are lkenumerated below. These "righteous" elements can be achieved through various
Management Techniques marked against each principle. At this juncture, it is sufficient that
the students are aware that there are techniques, which can be applied. The gist df the
techniques will be touched upon in other units.
ManagementTechniques

Principles

a) Right itendmaterial

Value Analysis
Standardization
Codification

b) Right quantity

PurcPasing
Balancing of Inventories
EOQ (how much to buy and when to buy)

c) Right price

&st Analysis Price

Value analysis

d) Right source

Market research
Purchasing techniques
Selection process

e)

Right delivery time

f)

Right methodslsysterns
and procedures

g) Right people/attitda
oriented towards
,
innovative improydments

Procurement technique
Follow up
- PERTIOR
Work study
System analysis
Management information s y s t e p -

Organisational analysis
Behavioural sciences
Integrity

In adhtion, seve; other supportive elements of procurement strategies include:

h) Right quality
i)

Right place of delivery-

Logimticm Mnm8gemeot

Essentials of Logistics and

Equipment Management

Right transport

k)

Right packaging

1)

Right handling methods

IT$

Right materials intelligence

n) Right contract or legal aspects: This should cover all the above purchase parameters.

1.3.2 Essentials in Logistics Management

To follow the principles stated above, it is necessary that the students must understand
certain essential values in logistics management of any hospital, to ensure fulfilment of the
objectives, which are summarized as:
a) To develop a system of supplies whereby there will be right quantity of stock of items
properly stored, easily retrievable, and distributed close to the points of usage,
whenever required, at a given time. On the flip side of planning, if there is overstocking
of the items, it will block part of the working financial in the hospital.
b) To ensuie that the resources available are being used most effectively, and the stores
are purchased at the most economical price consistent with the quantity.
c)

To co-ordinate the activities amongst the various departments in the hospital, for
optional and equitable utilization of the items being procured.

d) To reduce the inventory costs-both

maintain the same.

carrying costs and ordering costs, and to

e)

To ensure that the receipt of stores is timely, and thereafter distribution time is also
within a reasonable time frame.

f)

To ensure that the inventory of stores is minimized by identifying items of common

usage in the different departments of the hospital.

1.3.3 Procedural Planning Sequence

Having understood the essential requirements of logistics management, it is imperative that
the sequential events of planning and control must be achieved, as follows:
a) To determine the categories of stock required, both in tenns of quantity and quality of
each item.
b)

To procure the items necessary from the best, reliable and authentic source either from
within or outside the country at economical prices.

c) To ensure timely supply from identified sources.

d) To ensure good storage, without loss of potency or deterioration of the item.
e)

To carry out effective and judpious distribution of the stores throughout the hospital.

f)

To develop an effective and realistic record-keeping system of the medical stores and
equipment (manual /computerized).

g) To minimize losses through pilferage and damage, and utilization of the stores within
the shelf life.
h) To carry out disposal of waste and scrap which cannot be utilized in the hospital.
i) Employing personnel conversant with logistics management of hospitals.
To ensure good performance of the personnel handling the system.

j)

...........................................................................................................................................................
2)

E~umeratethe cardinal e k m s inlogistics manage-t.

3) Fill in the blanks:

a) The appropriate system of supplies endures that the ..............................................of

stock of items are available at the .........
.........
b) Overstocking of storeqwill block the/ ..............................................in the hospital.
c) Inventory of the stores is minimized by ...............................................

1.4 FUNCTIONS OF LOGISTICS MANAGEMENT

Logistics or materials management, as already defined, is that activity of management, which
primarily concerns with the efficient flow of materials, to, through and out of an organisation
for optimum use of materials. It, therefore, deals with several activities or functions which
are vital for hospital, and covers maximum utilization, conservation, elimination of wastes,
avoidance of unnecessary delays and assurance of right quality and in needed quantity of
economic costs.
These multifold functions often cut across the classical functional boundaries, so that
integrated functional control becomes necessary. This is important for any hospital
because logistics costs are a significant part of the total product cost. Conventionally,
logistics costs are buried under overheads as indirect charges under our present cost
accounting system. Only direct and variable costs are highlighted which receive greater
management attention.
In all hospitals, because of increased specialization, variety of items are being purchased in
large quantity, resulting in consequent increase in expenditure on material inputs. As the
purchasing function becomes critically important, the problem of systematic storage has
increased paripassu. This requires highly trained professionals, to which the students are
being made aware of in this unit. Now, let us identify the set of interrelated activities, which
emphasize the entire flow of materials, to, through and out of a medical institution. An
integrated functional approach treats each activity as a dynamic one. Each activity is
characterized by high sensitivity, since each one influences and in turn is influenced by all
others. An objective analysis of logistics management will reveal that it concerns itself with
the total flow of materials, from forecasting of future demands down to finaldistriljution at
end-points. 'All these sub-functions are individually important, but at the same time it has to
be realized that they are not isolated phenomena.
Thus the following knctions or activities are listed as logical boundaries of Logistics
Management:
a) Materials forecasting, budgeting, planning and procurement.
b) Scheduling, purchasing and procurement.
c)

Receiving, ?mpection (quality and quantity) and forwarding.

d) Inventory control, storage, warehousing and distribution.

e)

Materials handling, movements control and traffic, etc.

f)

Despatch, shipping and disposals (including wastes, scraps and reclairnedsurplus

materials).

In addition, there are also other functions which will need close attention ofthe logistics manager:
a)

Coordination among the above major six activities,

b) Keeping liaison between the various departments of the hospital, andor with the
supplierslmarket, and
c)

Cost-reduction by variety reduction and value analysis.

1.5 TENDERING ,PROCEDURES, PROCUREMENT

AND INSPECTION
1.5.1 Purchase Activities
Hospitals require supplies of materials aid services from outside swces. Therefore,
purchasing and procurement are common functions in almost all organisations. Purchasing

Essentials o f Logistics
Equipment Managcme

generally refers to the actual buying of materials and those activities associated with the
buying process. Procurement is broader in scope and includes purchasing, traffic,
warehousing/storage and all activities related to receiving inbound materials.
Purchasing activity starts with the recognition of a need. When materials requisition
emanates either from the user department, stores department or materials planning,
purchase department has to ensure its timely supply.

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The next step is the selection of the right source of supply. Often, the purchase department
has to develop alternative sources of supply and arrange for potential substitutes.
The responsibility of the purchase manager is from ascertaining the price of the item, which
is aprime factor in source selection, timely delivery, quality assurance, reliability, credit
availability, etc. according to the policy of the hospital.
Maintenance of records and files and good vendor-vendee relations are also important
phases of purchasing activities.
The main Abjectives of purchasing may be delineated as follows:
a) To ensure uninterrupted flow of materials;
b) To buy economically in a competitive market;
c)

To keep inventory investment low;

d) To develop good buyer-supplier relations;

e)

To develop alternative and reliable source of supply; and,

To act as logistics intelligence info~mationcentre with regard to specifications,
processes, price, quality, etc.

With these objectives in mind, the functions of the purchasing department may be
summarized as follows:
a)

Selection of supplies

b) Analyzing of bids
c)

Price negotiations

d) Issuance of purchase orders

e)

Follow-up actions
Cost analysis and market study

g) Maintenance of price catalogues, information library, etc.

Checklist of sources of supply
Selection of a potential supplier should be based on:
a)

financial capacity,

b) manufacturing capacity,
c)

total value of business,

d)

service facilities,

e) business reputations and other customers, and

f) production processes and specifications to which the products are manufactured by
the suppher,
In addition, a periodic rating of the supplier's performances item-wise should b'e carried
out, regarding: quality, delivery schedule; business ethics, promptness and competitive
bids.
Generally, all purchase orders must be covered by a requisition, whether for stockreplenishment or for non-repetitive items. All requisitions must be signed by authorized
persons who are competent to do so. It must also have the full and detailed descriptions.
specifications, drawings (wherever necessary) as well as estimated cost and expected
delivery time. On having all these particulars, the buyer must fioat tenders or enquiry.

1.5.2 Floatation of Tendersmnquiries

Enquiries should contain complete specifications, brand or trade names, and date on which
tenders are to be received. All governmental buying and purchases in public sector
undertakings resort to Tender buying. This ensures proper competition among the
vendors.
Tenders are floated according to the system prevailing in the respective hospitals. This
cannot be standardized since it depends on the size of firm, type of purchase, quantity,
etc.
Tender systems may be any one of the following:
a)

Open tender: By advertising in the requisite media of newspaper, bulletins, magazines,

etc.

b) Limited tender: Often advertising is costly and increases the lead time, then bids are
solicited only from reputed limited pre-qualified parties.
c)

Simple tender: In case of only a single source, that firm is asked to submit his quotation
in writing. Simple tender purchases should be avoided, as it leads to monopoly of
proprietary item, which is against the basic objective of purchasing.

d)

Global tender: When bulk purchase of special artioles is involved, global tenders are
invited through advertisements both in India and abroad.

The steps involved in Open tender system are:

a)

Formulate the requirements clearly,

b)

Establish bidder's list,

c)

Invite competitive bids through advertisement.

d) Open the tender before the representatives on the notified date.

e) Prepare comparative statements on quality, price, and delivery schedules.
f)

Evaluate the bid.

g) Award the contract for the lowest responsible bidder by taking a total view of the final
le
product. Lowest implies being below the average standard. ~ k s ~ o n s i bmeans
answerable legally and morally.
h) The quotation should be low, consistent with the quality requirement.
3 The lowest bidder need not be the best bidder from the buyer's view.
J]

Discounts such as cash discounts, trade discounts and quantity discount should be
familiar to the buyer to ascertain the final price.

1.5.3 Types of Purchases

a) RatdRunnlng contracts: This system is prevalent in governmental buying, publlc
'sector enterprises and procurement by direct demanding officers. The rate of the item
1s fixed usually by the tender system. In rate contract, rate is specified but quantity not
indicated. In running contract, the minimum quantity is also specified. Rate contracts
redyce internal administration lead time drastically.
b) Systefis contracting: This is a form of stockless purchasing, under which authorized
employees may directly obtain requisition of material from the supplier's storeroom.
TJseful for low unit price, but high consumption values.
C) Blanket order: It is an incomplete contract with a vendor to purchase certain low value
items. This becomes effectwe only when vendor receives a bonafide release requisition
order. A typical example is an annual order for stationery items.
d) Reciproczty: It involves a policy of buying from one party, who in turn buys from
anqther, so that it promotes good trade relations between the contracting parties. This
decision of reciprocal buying and selling is a matter of top-management policy, rather
than that of the purchase department.
e) Bazaar purchase: Also known as "cash purchase" or "imprest purchase" and is
confined to urgently needed small items.

'Logistics Management

Essentials of Lngistics and

Equipment Management

1.5.4 Negotiations
In the purchasing context; negotiation is essentially a discussion between a buyer and a
seller with a view to reaching an agreement. The price agreement is a major factor in
purchase and sale contracts, but other factors are also determined in such discussions.
These parameters may be with regard to: price and payment schedules, delivery, quality
and/or performance characteristics, specification variations, accessory benefits, insurance,
spares, guarantee, warranty, freight, and other special features.
In any case, negotiation is considered very important in the buying process and when it is
actually held, it creates a good buyer-seller relationship. Negotiation is an art, and the
hospital purchaser must familiarize himself with the requisite details of the product, prior to
the meeting.

1.5.5 Legal Aspects of Purchasing

All purchase orders signed by the purchaser on behalf of his hospital and commitments
made therein legally binds his institution. It creates a contractual relationship as to the
contract between the buyer and the seller as per the terms and conditions agreed to in the
course of a deal. The purchase order or contract is, therefore, a legal document which has a
direct bearing on the company as to the performance of the contract.
Law is complicated subject, and, therefore, its application and interpretation must be left to
those who are competent to deal with it. As a primary rule, all purchasing personnel should
consult competent counsel on doubtful or controversial points.
The students should always be familiar with the basic principles of contract and be aware of
certain legal terminology, so as to minimize the area of understanding and conflict, and to
avoid litigation.

Law of agency: This states that the acts of the purchaser (agent on behalf of the hospital)
done within the apparent scope of his authority binds his hospital with respect to third
parties (seller), in respect of any contract concluded.
Law of contract: A formal contract of purchase duly signed by an authorized hospital
purchaser binds both the seller and the buyer. An offer becomes a contract only when it is
accepted by the seller. A valid contract has four basic elements:

a) An agreement resulting fiom an offer and acceptance, understood in the same sense by
both the buyer and the seller.
b) A consideration or an obligation imposed on both the parties.
c) Parties should be competent to contract.
d) The purpose of the contract should be within the existing laws of the land.
Legal Status of Buyer: The purchase officer whlle signlng a purchase contract does so on
behalf of the hospital. The buyer must, therefore, know the extent of his scope and
delegated authority, either express or implied, to bind his hospital with the supplier.

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1.5.6 Quality Assurance

Quality is the inherent characteristic and distinctive attribute that makes a product different
from others. It ensures conformity to requirements. Products and services should be
essentially free fiorn defects, thereby becoming cost-effective.
In India, awareness of quality standards began with the establishment of Indian Standards
Institution (ISI), now re-named as Bureau of Indian Standards (BSI). The bureau provides
certification of quality, and at the same time keeps a check on the quality system.
The International Standards (ISO) 'with its headquarters at Geneva, maintains standards of
manufactured goods and products within and outside the industry. The I S 0 9000 series are
norms aimed at documentation of procedures which define precepts, guidelines and
processes to maintain discipline and quality management practices. Where design of the
pwduct is involved, I S 0 9001 is required. If the design is already established, then I S 0 9002
would-apply,which means activity of production, installation and servicing is in conformity

Logistics Management

with the requirements. IS0 9003 is applicable only when capability is demonstrated in the
field of final inspection. These are various criteria for quality of material, depending upon
the buyer's price consideration, availability of the item, their possible substitution and
relfable sources of supply. In purchasing the right quality of materials, the following
cflnsiderations are significant:
a)

Determination of the quality

b) Defining it properly and clearly

Controlling it through some methods

c)

The consideration of quality of the material has direct ;elationship to the :pchnicai
suitability, physical availability and the economic consideration of pric,. T'he other two
aspects are relative to the procedures of procurement.

Inspection

...

The role of inspection is to maintain standards of physical measurements and also to

provide precise determination of physical constants and the properties of materials. It also
provides the necessary methods and instruments of measurements required to utilize these
standards. Further, through calibration services, it ensures the accuracy of various
hospital equipment and instruments and working standards by comparing them with master
standards.
The drugs, intravenous fluids, powders, etc. are also subjected to inspectiori by physical
standards, chemical analysis (qualitative and quantitative) and stability of the items.
Depending on the type of the product and its nature, the amount of inspection is bound to
vary. However, that does not reduce the importance of the subject, and more so, when lack
of inspection may mean faulty purchases and defective store-holding.
The inspection duties are detailed as follows:
a)

interpretation of specification given in the requisition or conforming to identified

formulation,

b)

measurement of product,

c) checking for conformance to specification,

d) disposition of product, and
e)

maintenance of inspection records.

Inspection of stores are carried out in batches, with each batch being tested to thorough
Sample Inspection. There are different methods adopted to the type of sampling, depending
upon the product and its quantity.
Instruments and accessories have to be functionally checked before these are acceptable to
stores. Sample of drugs and other hospital materials e.g. cotton, gauze have to be sent from
the lots for confirmatory tests. Any defect or deficiency noted has to be reported to the
vexldor for corrective action. Reports of chemical analysis
.
. (if. any)
. have to be preserved for
future reference.
All rejections have to be reported to purchase department so that they know the quality
Pel.formance of various vendors.

Check Your Progress 2

Fill in the blanks:
a)

Purchasing pertains to ......................................... ..., whilst procurement includes

................., ................., ............. .., ................., etc.

b) The main cbjective of purchase is ............:..................................... of materials.

c)

Periodic check of supplier's performance is related to . ................, .................., .................:

................ and ..................

d) Tender buying is resorted to all ................. agencies and ...................................

e ) Running Contract caters to

.................

and ...................................

Essenlials of Logistics and

Equipment Management

f)

Negotiation is an art involving ................. between

.................

and

.................,

to reach

..................

g) Law of Contract is a formal purchase contract between

h) BSI stands for .................................................
i)

................

and ..................

Inspection through calibration services ensures ................. of hospital equipment.

1.ti STORAGE :SYSTEM, STANDARDIZATION, AND

CODIFICATION AND CLASSIFICATION
1.6.1 Storage Syste
e broadly viewed in a three-fold sub-systems i.e. the
maintenance and the issue system. In a medical
institution bustling with materials needs, the system design should cater not only for the
current requirements of existing supplies, but also take care of the future growth potential
and demands. The system should, therefore, be flexible to cope with the changing demand
and supply environment.
The main objective behind the stores function is to render service to the users. The
m may be enumerated as follows:
a)

Receive the materials, check them for quantity, coordinate for inspection and quality
checks, and prepare the stores receipt vouchers.

b)

Accept the passed materials, prepare the rejection notes and complete the formalities
for payment of bills.

c)

Take into stock the accepted materials, store them in respective locations as predetermined.

d) Prepare issue vouchers, make actual issues for disposal and accaunt for the same.
e)

Keep the purchasing team well informed through systematic indents and other reports.

f)

Keep the storage place clean for facilitating handling and movements, and observe all
safety measures and security regulations.The materials are to be arranged in such a
manner so as to enable easy storage, minimized pilferage, proper identification and
quick retrievals with minimum wastage of time and effort.

StoresLocation and Layout

The storage system has to accommodate the inflow of materials, in-process inventories and
outflow to the wards/outpatients departments. It usually takes into account the elements of
space requirement, labour, equipment needs and costs to.build/maintain the storage area.
Any of the specific systems design planned has some'advantages in sacrificing the
accessibility to stock in favour of getting more stores in less space, or vice versa. It may
thus not be possible to arrive at any absolute criterion for the efficiency of one storage
system or another. l'he design, size and location of the storehouse must, therefore, be an
integral part of the hospital design and management strategy. Storage of nature and type of
the material is a crucial factor to be considered whilst planning the type of building or site.
Bulky and slow-moving items in a haspital may be stored in a basement or ground floor
level, pharmacy services may be planned on the ground3,oor or first floor depending on the
layout of the out-patient department, dietary and laundry stores are preferable on the lower
floor to accommodate the heavy equipment. However, dietary services may often be
plznned on a higher floor closer to the in-patient areas in a vertical-rise building. Hence, the
students will appreciate the need for flexibility of ideas whilst planning the storage areas in
conjunctibn with the hospital plans.

1.6.2 Standardization
Standardization is the orderly and systeinatic formulation, adoption, application and review
of hospital institution standards,.which leads to simplification or variety reduction. This
implies reducing unnecessary varieties of items and standardizing to the most economical
sizes, grades, shapes and colours or type of stores. It reduces the number of types and
sizes of items to m minimum, consistent with the needs of the departments / hospital.

Logistics Management

Benefits: Standardization has multiple advantages, some of which are:

a) The purchase manager can concentrate on largelquantity of fewer items.
b) It is possible to place economic order quantity or orders of staggered deliveries with
bulk discount.
c)

Reduction of inventory will require lesser amount of working capital commitment of the
hospital.

d) Items can be easily identified by all the stores personnel, as the bin location can also
be standardized.
e) Reduces the tinle involved in negotiation process with the vendors, with better
communication and prompt delivery,schedules.
t)

Procurement lead-time gets reduced, as all users know item.

g) Buyer-seller relatio~isimproved as purchase dimensions of cost, specifications, etc. are

standardized, without scope for disputes.

h) Minimizes obsolescence of variety of items.

i)

Possible to have rateirunning contracts for standard items.'

j)

Assists in fewer annual maintenance contracts (AMC) of equipment.

k)

Reduces inventory of spare parts of equipment to be stocked, thus giving costeffectiveness.

1)

Enables reduced inspection and quality control burden.

m) Interchangeability of parts is assured.

n) Efficiency of personnel handling stores/equipment is enhanced.

. 0)

Reduces paperwork, improves inter-departmental coordination and ensures better

communication between the stores department and end-users in the hospital.

The process of standardization should be entrusted to a task force in the hospital. They
should obtain the relevant datalfacts from the relevant departments and develop standards.
There should be a constant reviewing, updating and monitoring committee to deliver the
best benefits to the hospital. The role of standardization and variety reduction in inventory
simplification has real significance in hospital logistics management field. This also assists
in rationalized codification.

1.6.3 Codificatian and Classification

In hospitals, often the reason for stocking a large number of drugs and unnecessary items in
inventory can be traced to different and misleadhg nomenclature, faulty numbering and use
of trade or brand names used to describe the same item. It would, therefore, be useful to
classify them as to their permanent basic or generic characteristics; group together all
closely similar materialslitemseither function-wiseor for its utility. This would reduce long,
incomplete and ambiguous designations. Standard numerical coding should be evolved for
the purpose of use in purchase, stores, issue and other purposes m order to symbolize
fundamental and particular characteristics.
One of the pre-requisites of classification and codification is to know the basic nature and
characteristics of all mater~alsldrugsused in that hospital, and classify these in broad
categories, and then to group and sub-group them in logical progression of typis, sues and
funcbonal usage. As for example, bio-medical equipment (department-wise),chemicals,
laboratory, office (equipment and supplies), pharmacy (drugs), X-rays (films and chemicals),
hospital linen, etc. can be classified, grouped and sub-grouped.
/
'

After the broad classifications as to their nature and use, a code or symbol is allotted to
each of them.
Systems

There are various systems of codification in use: Alphabetical, Numerical, Decimal,

Combined Alphabetical and Numerical, Brisch and Kodak systems. The system to be
adopted depends upon the type of stores and organisational set-up.
\

F.\sentials of Logistics and

Equipment M a ~ ~ n g e ~ n e n t

Examples

a) Alphabetical System
Class
Table operating (TO)

Group
Stainless steel (SS), Hydraulic (H)

Code
TO-SS-H

b) Numerical System
Class
Drug

System
CVS

(01)

(31)

GenericName with Strength Family of Drug Condition Code

Tablet
New 0 1-31-021
Atenolol - 50 mgm
2-1-1
(02/2)
(1)
(1)

c) Combined Alphabetical and Numerical System

Class
Sulphuric Acid

Sub-group II
81

Subgroup I
SP

Code
SP-8 1

d) Brisch System
A comprehensive system with usually a 7-digit numerical code assigned to each item
with digital significance by virtue of their position and value.

e) K d a k System
Developed by Eastman Kodak Company, U.S.A., based upon numerical system and
grouping done on purchase category, with 10-digits.
Class
Sub-class
Matelrial
Class Code Item Sub-class
Furniture
61-70
Chair
63

Sub-class of 63
Class Sub-class
63
2

Kind of chair
Wooden

etc., till tenth digit stage of minor variation is reached.

Therefore, Code : 632-XXXX-XXX
Merits and Demerits of Codification
A rationalized system of codification helps in accurate identification, prevents duplication
and reduces varieties. It also assists in recording, accounting, pricing and costing of
materials. Locating and indexing for inspection are made simple. However, the demerits are
thiit often codes are misunderstood, and when a mistake occurs, finding out the exact code
is -rendereddifficult. Also when large numbers are coded in one group, this could lead to
confusion.

4Check Your Progress 3

Fill in the blanks:

#a)

The arrangement of materials should be planned to enable easy ....................

..................... pilferage, ..................... identification and ..........................................

b)

Layout of stores should be an

c)

Standardization ensures ...........................................

in the varieties of items, thereby
requiring lesser amount of .......................................... comt~litmentof the hospital.

.....................................

.... .... part of the hospital design.

as a result of variety reduction.

d) Procurement.lead time is ............................................
e) Codification helps in ..................... identification, ..................... duplication and
..: ................. varieties.

3.7 MATERIALS ACCOUNTING AND PHYSICAL

DISTRIBUTION LOGISTICS
1.7.1 Materials Accounting

l?he primary basis for Materials Accounting is cost. Materials are ordered on a continuous
blasis and there is no prescribed procedure which can be used in the determination of
nnaterials cost for accounting purposes. In order to determine the money value of materials
a a hand at a given point of time, the quality of the materials must be known, and a value
n mst be assigned ;to those quantities based on one of the several accounting methods.

The records kept by the logistics department have two broad characteristics:
a) Only quantities are showd in the records; and
b) Regular balancing of materials is done.
For this purpose, the following records and documents are kept:
a) Bin card: It is a record of movement of materials against each kind of stock in respect
of daily transactions, which is attached to each bin or ghelf or any other form of
containers. It shows daily receipts, issues and balance quantity on hand. The card
also shows maximum and ininlmum and re-order levels.
b) Stores ledger: The stores ledger shows the details of the information of each itemi.e, supplier's name and address, quantity ordered, invoice number, price, expected
delivery date and stock levels.
c)

Stock identification card: These cards are kept against each bidrack to identify the
materials. It has the material code number, full description, stores ledger folio and
bin-card numbers.

d) Materials received note: Materials a f t h s p e c t i o n are taken Into stock through this
document. It passes through the Inspection Department to Accounts Department for
recording and accounting of materials.
e) Materials requisition slip: This document conveys the quantity required of the
material from the issue counter. Stores department must ensure that the MR slip is
signed by the authorized person, proper code number, andlor description of material is
mentioned and the quantity issued must be entered and signed.
Materials returned note: When materials are not required by a department, these are
returned to the stores with this note. Stock and stores records are adjusted accordingly.

g) Materials transfer note: Transfer of materials from one department to another is

carried out on this note and stores account informed for necessary recording.

1.7.2 Flow of Goods

The flow of goods physically in the inventory is directly related to the financial
characteristics of flow of costs. The flow of costs depends upon the method used, which in
general use are as follows:
a)

FIFO method: "First m,first out" method is in most common use. Materials from the
oldest stock is issded, and their unit cost also represents the oldest cost on the stock
ledger. However, when prices are subject to change, this method cannot match costs
against revenue on a current cost basis.

b) LTFO method: "Last in, first out" method assumes that most current cost should be
charged to the goods. This however results in unrealistic inventory valuation for the
balance sheet.
c) Average cost method: This does not take into account which item went out of the
inventory first or last, rather it determines the average cost for each item during a period
of time.
d) Specific cost method: This provides the most realistic valuation of ending inventory as
well as flow of costs. Costs flow and physical flow are identical under this method,
with proper maintenance of records. It is suitable for physical verification of
inventories made round the year.

1.7.3 Physical Distribution Logistics

An efficient distribution system includes:
a)

Elimination or reduction of all unnecessary handling and movements.

b) Planning of stores distribution for overall economy.

c) Mechanization, wherever possible, and use of simplest equipment.
d) Standardization of handling equipment.
Distribution System

The distribution of stores may be Centralized or Decentralized according to the hospital

management policy, and depending upon the storage location system, which may be as follows:

D
~f Logistics
Manageme

a) Spot location system: Whichever item fits in whichever place. Tt has the proper
utilization of space, but has an admixture of items. Chances of pilferage are high.
b) sequence system: The materials are sequentially arranged and are easy to locate,
However, additional space is required for storage.
c) Popularity system: Items which are used more often and are in greater demand are
readily available at convenient sites.
d) Size system: The bulky items are placed at distant locations and on lower floors, whilst
the smaller items are more easily accessible at decentralized locations.
The physical distribution system in the hospitals is usually one of the following methods:
a) Basket system: Requisition note from the wardidepartment approved by the
authorized signatory is received by thestores department, and items issued in totality
on as required basis. Chances of misuse and pilferage in this system are higher. This
system should usually be utllized in specialized departments.
b) Topping up system or replenishmentsystem: Here the issues made by the stores are
against the number of identified/accountable items utilized in case of disposable, or are
exchanged on one-to-one basis in case of non-expendable items. Chances of pilferage
are reduced, but there is no bufferlreserve stocks available with the ward/departments.
c) Unit dose system: In case of certain operationslprocedures, certain identified items are
issued as a "unit dose" or single item requirement by the stores.
The hospital management should bring out a "materials handling guidelines" for easy
handling and distribution of stores. Some of the recommendations are as follows:
a) Materials should be kept generally at a level at which distribution is most convenient.
b) Materials should be placed Dn pallets, trays or platforms.
c) Distances for distribution should be as short as possible.
d) When distances are long, attempt should be made to handle as large a quantity as
possible on each triplissue, to cut dowri frequency of handling.
e) Straight flow layout is ideal.
f) Gravitational use muvt be encouraged.
load factor is high. Fork liAs/truch
g) Belt and roller conveyors should be utilized NLG~G
help in facilitating movement of bins/containerslwire baskets.
h) Incoming materials should be received in a covered area, amd in-process handling
should preferably be in pallets or in suitable container, wherever direct transfer to the
respective department is not possible.

Check Your Progress 4

Fill in the blanks:
a) Bin Card is a record of ................................................. ...........................................
each kind of stock, on ............................................. transactions.

against

b) Stores ledger shows ............................................. of each item.

C) Materials requisition slip indicates ............................................ of material demanded.
...................
.
d) FIFO is ............................................. .................... .
e)

Large number of pick-up and delivery points affects ............................................. and

........................
.
.
............ requirements adversely.

f)

Basket distribution system is based on ........................................... basis.

1.8 TRANSPORTATION SYSTEM

1.8.1 Transport and Traffic Importance
Transportation and traffic often means the same thing to many people. Transportation is
the management of the movement of goods and materials through space and time from their
original source to the ultimate destination. Traffic considers only the techniques.
With the necessity of large scale supply of stores to the hospitals, transportation system
has always exerted tremendous impact on the supporting activities associated with

rnarketing/supply of goods, and economic activity. Transportation influences the cost of

supply of goods, and may even represent 20 to 40% of the total cost. Material
characteristics as well as volume influences the transportation decisions. Its effectiveness,
therefore, depends on the knowledge of alternative sources, rates, schedules, etc. The
important aspects relate to the choice of mode of transport, route selection, rate verification,
claims management for lost materialsldamage and auditing.

1.8.2 Modes of Transport

a) Water transport: Shipping is generally considered in case of imports. It is the cheapest
mode.
b) Rail transport: India has the foremost railway system in Asia. However this mode is
preferable for raw material transportation, rather than for finished products. Rail
transportation has its limitations as regards to time schedules, and freight building-up
of a complete finn. However, there are some need based railway transport packages
e.g. container service, quick transport service, freight forwarder scheme, and parcel
express. Charges are twice that of shipping, but nearly half as compared to lorry
transport.
c)

Post parcel: Available between all essential points in the country, but carriage is limited
to small packages and selected commodities only. Primary benefit is door-to-door
delivery.atrelatively low cost.

Each mode of transport has varying service capabilities. The factors enumerated above
affect the cost and priclng of transportation. The materials manager in the hospital weighs
the various factors, keeping cost in the fore-front before contracting an order.

1.8.3 Miscellaneous
Responsibilities of Materials Manager: The important points to ponder over in this issue
are:
a)

Arranging adequate insurance cover for materials in transit, storage and warehouse.

b) Management of claims, if any in event of loss.

c)

Minimization of annual insurance cost paid as premium.

An adequate insurance value is computed by adding the invoice value, freight charges
payable, plus incidental charges and add on percentage to allow for likely increase in market
value during total lead time involved. If the cargo is a total loss, the full insured value is
collectable.
Open policy insurance: To simplify covering repetitive risks during transportation, a blanket
or open cargo contract is resorted to. Under an open policy, an insured party may obtain
contmuous coverage for all shipments for an extended period of time or until cancelled by
the other party. An open cargo policy covering general stores is usually written on "all
risks" basis.
The term "marine insurance" is insurance of transit of materials by ocean voyage, air
consignments and inland transit by road or other means of transport.

Third parties: These are companies similar to channel intermediariesthat provide linkages
between shippers and carriers. Often, third parties partner with a number of carriers who
provide the necessary equipment to transport their shipments. Q e r e are several types of
third parties, including transportation brokers, freight forwarders, third party logistics
service providers,~shippers' associations. With the increasing emphasis on supplies and
management, more companies are exploring the third party option. These third party firms
handle all or most.of the freight offers and dedicated contract carriage.
Carrier pricing related issues: Pricing issues are important in transportatlon. Rates are
developed in general or specific rates are determined by a carrier. These rates are followed
by a description of the Issues the specific rates carrier charges. The most significant
approach is FOB (free-on-board) pricing. Also available are quantity discounts and
allowances provided by the carrler to the buyer. The FOB prlcing items that are offered
have a significant impact on logistics generally and transportation specifically e.g. if a
seller quotes a delivered price to the hospital's pharmacy stores at a distant location, the

Essentials of Logistics and

Equipment Management

total price includes not only the cost of the product, but also the cost of moving the
product to the distant location store.

Check Your Progress 5

Fill in the blanks:
a)

Water transport is the .................................. ..... mode of transportation, followed by rail

transport which is nearly ..................................... than shipping, but nearly half as
compared to ....................... .
.
.......... transport. ...................................
transport is the
costliest, but the ............................... ....

b) Open policy insurance gives ....................................

extended .........
by either party.

coverage for all shipments for an

or until .....................................

1.9 SECURITY OF STORES

In almost all medical institutions, loss of fittings, linen, instruments, drugs, etc. is a big
problem. Some of these losses occur in units which operate in limited hours. In a properly
designed hospital, it should be possible for security personnel to lock certain sections,
especially relating to stores area. Much of the pilferage u an inside affair. Insistence on all
members of the staff having an identity badge, prominently displayed is a help.
\

Security implies prevention of pilferage and theft by employees, vendor's men and carrier
representatives. It also means guarding the assets against burglary and dacoity.
The stores manager by virtue of being custodan of the stores, he is responsible for its
security. Some security and safety considerations playing a crucial role are:
a) The security force or watch-and-ward staff should keep vigil throughout the daylnight,
not only in the stores area but in the entire premises of the organisation. The security
staff must be carefully selected with high integritj. and sufficient strength. They should
be trained in all aspects of security and security checks, and should be headed by a
capable officer. The appointment conditions should indcate that these personnel
must not belnor become members of hospit; unions or indulge in undisciplined
activities. Rotations of shift timings must be worked out, with appropriate handing
over overlap.
b) All storage areas are to have proper locking arrangements and periodic checks must be
carried out.
c)

Personnel entering the stores must be informed that the security staff will check or search
them while leaving. The security staff must forbid unauthorized entry or exit of persons.

d) Receipt or disposal of materials should be checked by security personnel for authorized

documents like invoicelgatepass etc.
e)

The stores premses should be properly fenced, or have high walls or efficient locking
devices, depending on the type of storehouse and design of the hospital. Burglar
alarms and video cameras are aided assets these days. Powerful lighting must be
provided at all strategic areas with automatic switchover to battery lights in the event
of power failure.

f)

The hospital formulary i.e. variety of items stocked should be reduced.

g) Strict inventory control measures to be enforced, with regular checks.

h) Labeling of containers, linen, furniture, etc. so as to exhibit distinguishing marks of the
institution.

i)

Indent forms should be printed, not hHnd-written. Quantity indicated should be in

figures and words.

The above guidelines should be written as policies or standing policies or standing

operating procedures (SOPS), and circulated to all wardsldepartments so that all the
hospital employees are aware of the same. Appropriate sign-posting cautioning visitors
and patients regarding security measures must be exhibited.

Check Your Progress 6

Fill in the blanks:

a) In most medical institutions, pilferage is an

displayed is a ..................................

......................................

Identity badges

b) The security persoiulel must not be part of ....................................

c) ..................................... of hospital foimulary ...................................... changes of pilferage.

1 . l o - -CONDEMNATION AND DISPOSAL OF STORES

1.10.1 Introduction
One of the important areas of materials management is that a hospital must look into the
rdentification and disposal of scrap, surplus, recyclable or obsolete materials. This area has
been coined as "Reverse Logistics", and is gaining significant importance because of
increased public awareness of the environment, more stringent government legislation, and
a better recognition of the opportunities it offers in return.

1.10.2 Obsolete Materials

Obsolescence, particularly technological, is well known especially in the field of electronics.
Presence of obsolete items cannot be eliminated but can be controlled by better planning.
Obsolete matenals are often those items which are not required at all due to changes in
design or model. These materials have economic value for whch the need no longer exists.
These materials, no longer useful for current needs or anticipated !%ture requirements, nor
usable elsewhere in the institution, find a place in stores adding onto valuable storage place
and adding to costs. Sometimes, because of the high value of materials, managers are
unwilling to authorize then disposal. Disposal is necessary, when it is established as a fact
that their holding cost is a real loss to the organisation. Frequent reports should be made
by all wardsldepartrnents to the stores manager with recommendations for disposal of such
obsolete items.
A follow-up procedure should be established so that materials department can negotiate,
and expedite disposals and removal of the materials from stocks, either by selling, junking or
mamgement must approve of
otherwise. This entails disposal of assets of the hospital,
the disposal within the guidelines framed for such purpose.

Identification of Obsolete Items

The stores manager or the hospltal administratorhas to periodically analyze the movement
of items and classify them as fast-movmg, slow-moving and non-moving depending on the
.
frequemy of the issue from the store. The non-movmg items are subjected to the XYZ
invent* value analysis. The few "x" items (about 20%) account forthe bulk or about 80%
of &e inventory value, and the large number of "z" items account for a trivial ~nventory
value of about 20%. This list of "x" and non-moving items is circulated to all departments
for their opinion and likelihood of usage, before pending them up for disposal. All pending
orders for "x" category and non-moving items are correspondingly cancelled.
Reasons for Obsolescence
a)

Sudden introduction of new technology, rationalization and design changes, without

adequate preparation or planning.

b) Adoption of standardization, elimination of non-standard varieties and introduction of

cost-reduction methods, have led to obsolescence of certain,categories of items.
c) Initial procurement of spare parts based on supplier's recommendations, leads to
dumping of slow-movinglnon-movingparts, leading to obsolescence.
d) Cannibalization of spare parts to feed other equipment could lead to obsolescence of
denuded equipment.
e) Overstocking of spares present to prevent stock-outs contributes to obsolescent
behaviour.
f)

Faulty forecast, bulk purchases, faulty store-keeping, improper ~ o ~ c a t i opoor

n,
matpri>lc

hlnAlinn

rr\-h.;h..ml. .,t

-L--l-------

E s s e ~ ~ t i a lof
s Logistics and
Equipment ~Managerne~lt

1.1 0.3 Surplus Materials

Surplus items are those materials which have no immediate use but have accumulated due
to faulty planning, forecasting and purchasing. Surplus stock results from overordering
and significantly contribute to the quantity of obsolescent and dormant stock, if stored
over a period of time.
Surplus is also the state of an item when the stock is likely to last longer than a reasonable
period or when it is no loager required for the job for which it was purchased, but the
material is in good condition. If the management discards the surplus materials, the
Inventory turnover will increase but profit will dwindle for the period. The decision to retain
or salvage such surplus materials must be based on a cost-benefit ratio. In deciding to
discard surplus rnater~als,usually some arbitrary rule is applied. Materials which are not
movlng for two o r three years are declared as surpluses.

1.10.4 Scrap or Process Waste

Scrap or process wastes are defectives which cannot be used in their present condition.
Defectives can be re-worked, but the cost of such rework may be uneconomic. Jt may be
more economical to salvage these and get the best value by discarding. Here also, materials
control must use the facilities provided by the purchase manager by acting as a coordinator
in order that scrap is sold for best value.

1.1 0.5 Condemnation and Disposal

The above three areas viz. obsolete items, surplus stores and scrap are problematic in
materials management, since they are cost-points without any return on investments.
The above items are to be identified, inventory prepared, approved by management, and put
up for condemnation, followed by disposal.
Delay in disposing of redundant stock increases the inventory carrying cost, and also
creates the risk of deterioration and loss of sale value of the stock.
Before disposal is planned for, a minimum value, to be approved by finance, should be fixed
to avoid future audit queries.
Obsolete items should be disfigured before disposal, so that the same item in a new
packaging, is not re-purchased by the hospital.
Disposal is effected by:
a)

Inviting offers from time to time from possible sources.

b) Entering into annual contracts, and

C)

Public auction.

It is necessary to associate the fmance and user departments in the process of realizing the
highest value from the items being disposed.

Fill in the blanks:

a)

Reverse Logish involves ........................

and ......................... of scrap, .......................

and obsdrre n~aturialb.

b) Swplus stack resu2ts from ............................... anJ contributes towards the quantity of
...................... dorn?..mt stcck.

Reconmendations far &spas1 of items must be received from the .........................I

..........................

d) 9lrrpius is the state of itterns when stwk are likely to last

~asunabtepi-loci.
c!
f)

.................

Ccldew.nntion cf i k n ~is approved by ........................

n i ~ 3 ~iss preceded
l
by a
.........................

auctinn.

......................... valus

of the item. and is usually effected by,

--

--

1.1 1 HOSPITAL STORES

IIospitals are consumers of a great variety of goods; and the problems of storage,
inventory, and distribution of these goods are of great importance. Supplies are most often
stored and distributed from the department concerned. This is especially so, when the
quantity remains small and corresponds to a few days of consumption pattern. However,
when the bulk of these goods is great, it becomes necessary to keep them in a central store.
In economically developed countries, where the network of trade centre is highly organized,
hospital stores, beeatise
the suppliers or retail departments are able to provide the hospitals, in a matter of haurs,
with a great number of items upon a telephonic call. On the other hand, in a developing
country or even ina remotely placed townlcity in India, if a reliable medical supplies
industry is not available; then the health services are dependant upon imports and bulk
purchase of items.
it is generally iiot necessary to keep a large amount of goods in

'The potential hospital administrators must weigh these aspects during planning and
forecasting, before placement of the requisite quantity of orders.
It is imperative that a sound administrator must deal with the problem of medical supplies.
The chief official must have knowledge and experience in handling of medical supplies. He/
She must have experience in business. It is not necessary that he should have a scientific
speciality e.g. speciality of pharnlacy is not necessary to fill the post of director of medical
supplies, nor this official needs to be a medical practitioner. Basically, he must have a record
of successful management in the field. Yet again, a scientific or medical background is az
added asset.

1.11.1 Types
Hospital is an industry, has hotel management techniques. and is a health care institution,
with a variety of services being rendered and departments being catered for. The types of
hospital stores include:
a)

Phaimacy services or drug stores

b) Medical equipment (expendable and non-expendable)

c) Bio-medical specialized equipment

d) Laundry services stores iriclude linen (for hospital and staff)
e) Housekeeping services stores
f)
g)

Dietary services and kitchen stores

Hospital furniture stores

h) Stationery and offrce equipment stores

i) Hospital vehicles stores
j)

Machinery, gas, electrical stores

k)

General non-specific stores for other sundry items.

When planning for the hospital stores, these areas should be carefully demarcated, and
duties, areas of responsibilities and policies of each sub-division identified.
In this unit, the students will be given a resume on Pharmacy or Drugs services and allied
stores affiliated with it e.g. laboratory chemicals, X-ray films and chemicals, gases, etc.
The other type of stores including bio-medical and other medical equipment are being
explained in the other units. 'The endeavour is to generally explain the management
principles of any type of logistic stores.

1.11.2 Pharmacy Services

Pharmacy service plays1 very important role in patient care. It has to ensure a constant
supply of good standard of drugs for the treatment of patients at economical price.
Pharmacy in OPD is generally the last place to be visited by the patients coming to the outnatient denartment. and when thev reach t h e r e thev are in a tired s t a t e it i s nan:ral for them

Logistics Mgaagemen t

Essentials of Logistics and

Equipment Management

to expect quick service from the pharmacy. Likewise, availability and issue of drugs for the
in-patients admitted in the hospital wards has to be carried out, on as per demand of each
department, to bring total efficiency in patient care.

Definition : The hospital pharmacy may be defined as a department which deals with all
aspects of drugs except prescribing and administration of drugs, which are exclusive rights
of physician and nurses respectively.
Role and Function: The services rendered by the hospital pharmacy can be categorised as:
a)

Demand estimation according to formulary; and in the absence of formulary,

establishment of specification for drug procurement.

b) Purchasing of stores.
c)

Storage and distribution of drugs to in-patients (wards), and dispensing for outpatients.

d) Compounding and manufacturing of sterile and non-sterile products, in some

specialized institutions.
e) Quality control of drugs purchased, compounded and manufactured in the pharmacy.
f ) Maintenance of formulary system, and implementation of the decisions of the
Pharmacy and Therapeutic Committee.
g) Furnishing drugs information to physicians and other professional staff.
h) Control of medical gases services, including piped gases.
i) Maintenance of the facilities of the department.
j

Imparting training to students of school of nursing, and in the medical intern training
progmnme.

k) Preparation and submission of periodic reports on progress of department to the

hospital administrator.

Pharmacy and TherapeuticsCommittee

m e pharmacist-in-chargeis the member secretary of the Committee, and the members are
chosen from the various divisions of the medical staff. The Committee should hold at least
two regular meetings annually, and additional meetings as deemed necessary. The purposk
of the committee shall be: .
a) To develop a formulary of accepted drugs for use in a hospital.
b) To serve as an advisory group on matters pertaining to choice of drugs for stocking.
c) To evaluate clinical data concerning drugs requested for use in the hospital.

d) To adddelete drugs for use in the hospital.

e) To prevent unnecessary duplication of same basic drugs and its preparation hthe
stock.

t)

Tomake recommendations concerning drugs to be stocked on the nursing units and

other services.

1.11.3 Stores Management - Organisation and Staffing

Organisation
The hospital administrator should verify the qualificabons of the pharmacists and their
registration status with the respective board. The number of pharmacists and staff to be
employed in the department varies according to the size and commitment policies of the
hospitals.

Duties
The prime duty of the hospital pharmacist is to render good service to the patient. This is
achievable by providing medications of the highest standards, promptly available and at
reasonable expense. The pharmacist also renders a valuable professional service to the
medical staff. This is feasible through regular communication between the staff and
pharmacist. The latteris a source of information on merits of different brands of the same
basic drug, as8 W advise on the &sage and strength of innumerable new preparations
being msrkWhy. 'Ibc pbsnnaciot contributes to the education of nurses in the uses,

actions and dosage of drugs, control of narcotics, proper care of perishable items, and
labellng and filling of bottles and containers. A well-organized pharmacy under an efficient
pharmacist can prove to be a revenue-producing department, even in small hospitals. The
medcation cost per patient is reduced by proper management, despite the profitability. An
exception to this may be made on the ordinary drugs stocked in the floor medicine cabinets
which are often dispersed without charge to the patients. Erroneous medication should be
viewed seriously, which are detrimental to patient care and is an economc loss.
Staffing Pattern

I
I
I

This is dependant on the work load i.e. number of items to be served per prescription and
hours of service to be given. Further, the number of pharmacists required varies with the
programme, policies, responsibil~ties,services and their utilization for in-patients, outpat~ents,employees and the public. The workload consists of measurable activities and
quantifiable load. Generally, each category of activity requires about one-half of the time of
the pharrnac~st.More readily measured items include filling of prescriptions, issues to
patient care areas, includ~ngout-patients, compounding and pre-packaging.

Onan average, in a 8-hour shift of OPD Pharmacy, apharrnacist can serve 150prescriptions
with a half-hour break. If the items are 3 to 5, then limit to serve will be reduced to 120
prescriptions in one shift. Hospital having more than 200 beds needs a Head Pharmacist,
and for more than 300 beds requires one additional Asst. Pharmacist.

Studies in India indicate certain guidelines for the staffing pattern of Pharmacy Service,
based on the number of beds in a hospital. These are as follows:
Bed Complement
Up to 50
"
100
"

"
"

200
300

'

500

Number of Pharmacist
3
5
8
10
15

It is imperative that the personnel department must create seope of promotion avenues to
keep the workers motivated amongst the different services/departments.
Supenision and Control
.

Drug stocks in nursing units should be standardized and kept at a useful minimum level.
This should be inspected by the pharmacist, with the nursing supervisor, every month. Old
and deteriorated medication are to be removed; unopened original packages may be
returnable to the vendor for credit. Containers and labels in poor condition to be replaced.
Excess stocking to be curtailed. Some hospital pharmacies work with as two-unit container
system, which provides for a full container remaining on the ward floor while an empty
container is in the pharmacy being refilled. The Head Pharmacist must process managerial
skills, so as to guide the performance of the subordinates towards a common goal.
Purchase and Supplies
The pharmacist's principal function in purchasing is to establrsh standards and
specifications for medication and equipment. HeIShe alone is responsible for sub-standard
or dangerous items reaching the pahent. The pharmacist is familiar with the pharmaceutical
and chemical manufacturers, their distribution system and discounts. A sound purchase
and control system is essential.

Purchase card for each Item stocked in pharmacy must indicate date, quantity and price,
which will assist in reordering of that product in the requisite quantity. Quantity discounts
may be taken advantage of, dependant on business condibons, and over-stocking should
be prevented.
Inventory should be worked out on annual basis to further improve efficiency, but it is
amply simplified when a purcliase record system is already installed. Purchase of drugs and
pharmaceuticals should be on a bid basis where practicable.
Manufacturing
In some institutions, manufacturing selechve preparations could be profitable and
convenient. This includes alcoholic preparations such as elixirs and tinctures, made from
tax-free alcohols.

hssentials of Logistics and

Equipment M a n a g w e n t

Pharmaceutical Services in Small Hospitals

Renderivg quality of care is the same in all hospitals, regardless of size or services.
However, hospitals with less than 100beds, have pharmaceutical services of smaller volume
which may not warranty use of full-time registered pharmacist. These are alternatives
suggested for such situations. They may be utilized in addition for general administration,
such as purchasing. Also, in professional medical fields like laboratory, X-ray services, or
supervision of central sterilizing and supply services, pharmacists can be gainfully utilized.
He may even be utdized for pharmacy services in two or more small hospitals, if the
distances between them are nearby.
These methods which may appear to be feasible locally should be fully explored by the
small hospitals.

1.1 1.4 Physical Facilities of Pharmacy

Location: Wherever feasible, the pharmacy should be located on the first floor of the
hospital and readily accessible to lifts to ensure adequate and efficient service to the
various nursing stations and departments. In case of out-patients department the pharmacy
or a branch thereof, should be located conveniently nearer to it. Space should be provided
in the OPD, for seating of patients awaiting issue of-medicines.
Floor area: The total area for efficient pharmacy services varies with the layout and service
of the hospital, utilization pattern and workload. However, the minimumneed for any sized
hospital is 27 square meters. From that point basic estimates range from 1.0 square meter
per bed in 100-bed hospital; 0.6 square meter per bed in 200-bed institution; and an average
of at least 0.5 square meter per bed in larger hospitals. Teaching hospitals require much
larger space.
L

Finishes and lighting: The floors of the pharmacy should be resilient, smooth, easily
cleaned and acid resistant. Rubber or asphalt tiles and heavy linoleum are satisfactory
material. Walls should have a smooth surface with painted or equally washable finish in
light colour. The finish of cabinets and similar items should be light-coloured wood or
whlte enameled. Good lighting and venhlation are imperative. Venetian window blinds
benefit of daylight without glare. In
could be fitted onto windows, to provide maxi~l-m
addition to general illumination,fluorescent lamps should be placed immediately above the
prescription counter where necessary to assure adequate light. Ample electrical outlets
should be provided for in all areas.

Equipment: Equipment lists will be at variance to cater for design and services of
individual hospitals. Equipment includes drug stock cabinets with proper shelving and
drawers for a large assortment of drugs. Sectional drawer cabinets are ideal to fit into any
area. Work tables or counters are required for manufacturing solutions, powers, ointments
and for filtermg; also for loading of word baskets and checking orders. Counters with
drawers has the advantage of providing more storage space. Standard counter height is 0.9
meters, depth 0.75 meters and minimum length of 1.8 meters. The finish of the work top may
be acid resistant or of heavy linoleum.
Also necessary are an acid-proof sink with swivel tap and drain board, with a cabinet below
to provide space for glass equipment. Refrigerator is a must, especially for stocking items
necessitating storage at low temperatures. Space required is variable, but generally at least
0.2 cubic meters (8 cubic feet) in 50-bed hospital, 0.4 cubic meters (16 cubic feet) in 100-bed
hospital, and 0.8 cubic meters (32 cubic feet) in 200-bed hospital.
A "cool-room" temperature controlled by air-conditioning is also necessary for storage of
antibiotics. Office furniture, computers, communicahon facilities like telephone and
intercoms, file cabinets for records and manufacturers current literature, cord index file
system and pharmaceutical library are also to be catered for. Dispensing windowls is a must
through which prescriptions are dispensed to out-patients and ward staff/nurses.
General storage: The ideal area for bulk pharmacy stores would be adjacent to the
pharmacy itself. However, this may often not be feasible. The next choice would be directly
below the pharmacy with dumb-waiters and special staircase connection. Bulk pharmacy
stores should be kept with the general stores area, and must have an access enclosure for
the pharmacy staff.

Equipment required would be open adjustable metal shelving for reserve stock, raw material,
empty bottles, and packaging containers. Separate lockable fueproof room with drum cradle
is necessary for alcohol storage.

Check your Progress 8 '

Fill in the blanks:
a) In a developing country, reliable medical supplies industry is a must. If not available,
then we are dependant upon .......................................
b) A sound hospital administrator must have a record of ....................................... in the field
of hospital stores.
c) Pharmacy is a department dealing with all aspects of .......................................
d) Pharmaceutical services caters for ...................and also ................... patients department.
e) The head pharmacist is a member secretary of .........................................................................
f)

A qualified pharmacist must be ...................................... with the respective board.

g) A well-organised pharmacy can be ...................................... producing for the hospital.

1.12 LETUSSUMUP
In this unit you have been given the outlines of Logistics Management. We have exposed
you to the general principles and fbnctions of logistics management. Plaming and
coordination of various activities relating to materials plannlng and purchases have been
brought out in the unit. The procedures involved in the tendering process, procurement
and inspechon, including quality assurance have been explained. The storage system,
standardization methods and codification of stores have being outlined. The methods of
distribution of stores, accounting of materials, and security of stores, have been touched
upon briefly. The various types of transportation of stores have been pointed out. Finally,
identification of stores for condemnation and disposal have been explained.
The students should be able to identify the management techmques outlined and aptly
apply the same in their respective medical institutions, as managers/hospitaladministrators.
The hospital stores, with detailed reference to the pharmacy service, its organisation,
staffing pattern and physical facilities have been illustrated so that the students could
utilize the knowledge in their perspective planning.

1.13 ANSWERS TO CHECK YOUR PROGRESS

Check Your Progress 1
1)

a) Obtain materials at the lowest possible price, which must go hand in hand with
consistency in both quality and continuity of supply.
b) Maintain the minimum of inventory of materials so as to free the working capital for
other useful purposes.
c) All activibes should be carned out at a minimum of cost.

2) Right itemhaterial, right quantity, right price, right source, right delivery time, right
methoddsystem and right peoplelattitude.

3) a) optimum level; right time

b) working capital
C) identifying items of common uskge

Check Your Progress 2

a) actual buying of materials
purchasing, traffic, warehousing/storage, etc.

b) to ensure uninterrupted flow

c) quality, delivery schedule, business ethics, prpmptness; competitive bids.
d) governmental; public sector undertaking
e) rate; minimum quantity

,ogistics Management

Essentials of Logistics and

Equipment Management

f)

dlscusslon; buyer and seller; an agree1ment

g) buyer and seller

h) Bureau of Indian Standards

i)

accuracy

Check Your Progress 3

a) storage, minimize; proper; quick retrie~
b) integral
c) reduction; working capital
d) reduced
e) accurate; prevents; reduces

Check Your Progress 4

a)

movement of materials; daily

b) details
C) quantity
d) fmstin,fustout
e)

manpower; equipment

f)

as required

Check Your Progress 5

a)

cheapest; double; road; air; fastest

b) continuous; period of time; cancelled

Check Your Progress 6

a)

inside affair; help

b) hdspital unions
c)

Reduction; diminshes

Check Your Progress 7

a)

~dentification,disposal, surplus

b) overordering, obsolescent
c)

wardstdepartments

d) longer than a
e) management
f')

mmmnm,public

Check Yeur Progress 8

a) import
b) successful management
c)

drugs

d) inpatients; outpatients
e) Pharmacy and Therapeutic Corninittee
f)

registered

g) revenue.