INTRODUCTION TO MATERIAL MANAGEMENT

INTRODUCTION

Materials Management is simply the process by which an organization is supplied with the goods and services that it needs to achieve its objectives of buying, storage and movement of materials.

Material management is the coordinated function, responsible for planning, acquiring, stocking, moving and controlling the appropriate material of right quality, right quantity at right place in right time so as to optimise the usage of facilities and capital funds in order to provide customer patient service. It is only possible by efficient materials management.

Material management is one of the key factors for improving performance of any health unit. Proper management of materials, therefore, assumes considerable importance in functioning of health services as well as national economy. It is generally observed that senior functionaries of health do not pay desired attention to material management, which results in inefficiency. 40 per cent of the funds are utilized in providing material. In the absence of materials manpower will be rendered non-functional.

Materials include equipment, apparatus, and other supplies used for patient care. 'Material' refers to commodities purchased and stocked by an institution for the purpose of consumption and rendering service (Bharucha, 1989).

DEFINITION

·        In the health service organizations material management includes the complete supply process from purchase distribution.

·        Material is defined as "An equipment, apparatus and supplies used by an organization or institution. Material is an essential resource to achieve the objectives of health organisation.

·        Material management is management and control of goods, services and equipment from the acquisition to disposition. It is concerned with providing the drugs, supplies and equipment needed by the health personnel to deliver health services.

·        Material management is a scientific technique, concerned with planning, organizing and controlling the flow of materials from their initial purchase through internal operations to the service point through distribution.

·        "Management of goods services and equipment from acquisition to disposition.” - Housely

·        "Material management is the integrated function of an organization dealing with supply of materials and allied activities in order to achieve the maximum co-ordination and optimum expenditure on materials." - Khare and Monga

·        According to Judith and Maradole, as applied to nursing services, "the management and control of medical, surgical and clerical, inter-department services and equipment from acquisition on floor to disposition of patient care.”

·        According to the International Federation of Purchasing and Materials Management, “Materials management is a total concept having its definite organization to plan and control all types of materials, its supply, and its flow from raw stage to finished stage so as to deliver the product to customer as per his requirements in time. This involves materials planning, purchasing, receiving, storing, inventory control, scheduling, production, physical distribution and marketing.”

CONCEPT OF MATERIAL MANAGEMENT

The concept of Material management is relatively a new concept in India and in health care field. Term was unknown in India till 60’s. Terms such as purchasing, store keeping, transportation, etc. were in use in country which in a vague manner represented the functions covered by modern material management.

Modern techniques of efficient material management were developed in US of America during & after 2nd World war which helped industrial developed to make spectacular progress in improving their productivity.

Many hospitals have started adopting this management concept in whole or in part to accomplish the objectives of providing efficient patient care due to increasing awareness of importance of material management in last few years.

Material management is concerned with providing the supplies and equipment needed by health personnel to deliver health services.

The right supplies and equipment must be at the right place, at the right time and in the right quantity in order that health personnel deliver health services.

Without proper material, health personnel cannot work effectively, they feel frustrated and the community lacks confidence in the health services and unless an appropriate material are provided in proper time and is required quantity, productivity of personnel will not be up to expectation.

INTEGRATED CONCEPT OF MATERIAL MANAGEMENT

Close coordination of all departments which are concerned with utilisation of materials. If some of functions are to be separately handled, normally a conflict of interest occurs & there is bound to be an increase in materials costs.

In an integrated set up, materials manager is responsible for all such inter-related functions & is in a position to exercise control & coordination with a view to ensure proper balance of conflicting objectives of individual functions.

Integrated material 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.

Need for Integrated Concept

The major functions served by materials management include Material Planning, Purchasing, Receiving, Stores, Inventory Control, Scrap and Surplus Disposal. If handled separately it may lead to a conflict of interest. Eg: if purchasing is handled separately they may over purchase to avail discounts without considering the expenditure for stores and inventory control, which will result in over expenditure.

Advantages of Integrated Material Management

·        Better Accountability- Centralisation of authority & responsibility for all aspects of materials functions ensures specific accountability.

·        Better Coordination- Coordination of various functions of material management is facilitated.

·        Better Performance- As all inter-related functions are integrated organisationally, an effective communication & enhanced performance is natural sequelae.

·        Adaptability To Electronic Data Processing (EDP)- All information with regard to materials functions is centralised. This facilitates collection, collation & analysis of data leading to better decisions. Advanced & efficient EDP systems can be economically introduced under integrated set up.

·        Miscellaneous Advantages- Team spirit is inculcated resulting in coordination & cooperation. Opportunities of growth & development are better in integrated set up.

IMPORTANCE OF MATERIAL MANAGEMENT

The fast developing Indian economy has placed a tremendous challenge and responsibility before the-material manpower. It is generally found that materials represent the most expensive asset of any organization. Mismanagement of this asset leads to serious losses. On the other hand its judicious management will minimize losses and achieve maximum service for which they are meant.

As stated by Gopal Krishnan, "The importance of material management lies in the fact that any significant contribution made by the material manager in reducing materials cost will go a long way in improving the profitability and rate of return on investment."

PURPOSE OF MATERIAL MANAGEMENT

·        To gain economy in purchasing

·        To satisfy the demand during period of replenishment

·        To carry reserve stock to avoid stock out

·        To stabilize fluctuations in consumption

·        To provide reasonable level of client services

AIM OF MATERIAL MANAGEMENT

·        The aim of material management is to bring about control over acquisition, storage, retrievability, distribution, use and disposal of supplies and equipment in order to carry the primary responsibilities of an organization in an efficient, effective and economical manner.

·        Material management seems to ensure availability of –

ü  The Right material

ü  The Right quality

ü  Right quantity of supplies

ü  At the Right time

ü  At the Right place

ü  For the least cost

OBJECTIVE OF MATERIAL MANAGEMENT

·        Primary Objective -

ü  Right price

ü  High turnover

ü  Low procurement

ü  & storage cost

ü  Continuity of supply

ü  Consistency in quality

ü  Good supplier relations

ü  Development of personnel

ü  Good information system

·        Secondary Objective -

ü  Forecasting

ü  Inter-departmental harmony

ü  Product improvement

ü  Standardization

ü  Make or buy decision

ü  New materials & products

ü  Favourable reciprocal relationships

PRINCIPLES OF MATERIAL MANAGEMENT

Basic principles

·        Basic principles of material management are following -

ü  Effective management & supervision

ü  It depends on managerial functions of

§  Planning

§  Organizing

§  Staffing

§  Directing

§  Controlling

§  Reporting

§  Budgeting

ü  Sound purchasing methods

ü  Skilful & hard poised negotiations

ü  Effective purchase system

ü  Should be simple

ü  Must not increase other costs

ü  Simple inventory control programme

Essential principles

·        There are seven Essential principles of material management which must be kept in mind to ensure good results. Health managers should follow the principles or rights.

1.      Right Item

2.      Right Quality

3.      Right Price

4.      Right Source

5.      Right Delivery

6.      Right Method

7.      Right People

Techniques to decide/apply the essential principles

Materials can essentially be categorised under three heads that is vital, essential and desirable. These three categories must determine how much quantity of each item should be stocked by the storekeeper.

Various techniques are available to decide on right item, quantity, price, source, delivery methods and people. The technique as follows –

1.      Right Item

ü  Value analysis

ü  Standardisation

ü  Codification

2.      Right Quality

ü  Purchasing

ü  Balancing of Inventories

ü  EOQ (How much to buy and when to buy)

3.      Right Price

ü  Cost

ü  Price

ü  Value analysis

4.      Right Source

ü  Market Research

ü  Purchasing Techniques

ü  Selection

5.      Right Delivery

ü  Procurement Techniques

ü  Follow up

ü  PERT1O.R.

6.      Right Method

ü  Work Study

ü  ABC Analysis

ü  Management Information System

7.      Right People

ü  HRD

ü  Organizational Analysis

ü  Behavioural Sciences

THE PROCESS OF MATERIAL MANAGEMENT

The process of material management include the following steps –

1.      Budgeting and Materials Planning

2.      Demand Forecast

3.      Procurement

4.      Inspection and Quality Control

5.      Storage

6.      Inventory Control

7.      Issue and Distribution

8.      Maintenance

9.      Disposal and Condemnation

Budgeting and Materials Planning

The listing of materials in terms of units required and their cost estimates would constitute the materials budget, which should be prepared annually. This preparation of budget would be based on past levels of performance and on anticipated activity, capital equipment, consumables and supplies to be procured.

Important budgetary control and reduction of material costs is the concept of standardization. This involves grouping together similar items depending on their specifications or use so as to choose one of those more universally acceptable for the purpose. It does not imply just cutting down on the number of sizes which is generally termed as simplification but adoption of standards leading to specification of quality, reduction in sizes and varieties, facilitating interchangeability of components etc.

Concept of value analysis is also related to standardization. This attempt to examine all facts of the function and cost of product/ item used in order to determine whether the cost can be reduced without compromising on quality.

Value analysis attempts at addressing the following issues:

·        What is the Item?

·        What is it intended to do?

·        How much does it cost?

·        How can an item do the same job?

·        What are the suggested alternative costs?

Demand Forecast

After finding out what is require and how much money do we have in hand, we have to find out how much is required, anticipation of future need is done through demand forecasting biased on past consumptions patterns.

Estimation of right amount of each equipment is the most crucial factor for maximum use and minimum wastage. Reduce number and variety of materials will lead to less problem of management.

Demand estimation of category of material should always be done keeping in view the trend in consumption pattern over the last 2-3 years, the objective of the organization, change in the clientele, changing emphasis on various programmes and activities in the health field or organization this is known as casting and forecasting in nursing service administration.

The common methods are to forecasting the demands are –

1.      Last period demand forecast for the next period is done on the basis of the level of demand that occurred in the previous period.

2.      Arithmetic average: Average of all past demands is taken for forecasting demand.

3.      Moving average: Forecast for the next period is generated by averaging the actual demand for last 'n' time periods where 'n' can be about (2-3 years).

Procurement

Procurement is the acquisition of material from an external source. An effective purchasing system aims at procurement of items of acceptable quality in appropriate quantity at minimum price and within an available time.

When you have listed down the requirements the next process is procurement of those items. Most hospitals have a set of rules and regulations regarding the procedures of ordering materials. A purchase department may be available and financial authority may or may not be vested in this department. In some institutions a purchase committee may be established beyond the purchase department to scrutinize all the indents or demands as per priority for procurement of materials. The basic principle in all these rules and regulations of procedure is to maximize the value of money invested in purchase.

Process of Purchase

Generally, most of the institutions have a purchase department it may be centralized or decentralized or a combination of both. The policy on purchase may vary according to the size, structure and complexity of the institution. However, this will provide better control over material management, less of over lapping.

Process of purchase is shown in a diagrammatic way as below:-

Different systems are available for procuring materials from manufacturing companies. Few of them, which are practiced in our country, are explained here.

1)     Fixed Quantity Contract: This type of contract is generally extended, where firms are called to offer materials and a definite number are asked to supply.

2)     Running Contract: These are contracts for the supply of an approximate quantity of materials at a specific price during a certain period of time.

3)     Rate Contract: These are the most important contracts as far as health institutions are concerned. In this, the firms are asked to supply materials at specific rates during the period covered by the contract and fixed quantities are not mentioned. The list of materials required is given to the contractors and they provide materials to the demanding office. Watch very carefully the progress of rate contract procedures.

A purchase committee or department can provide maximum flexibility in ordering specified quantities of material at regular interval. This helps us to maintain optimum inventories and minimize the chance of deterioration or obsolescence of materials. Here the quality of the material to a large extent is assured because only the needed material is given for contract.

Value Analysis

The basic principle of material use is the right quality of material is done by questioning and analysing each specification whether it could be amended or substituted so that the use of materials will be at the maximum level. The process of analysis of the intrinsic value of the material for achieving the objectives of the organization is termed as “Value Analysis". This is an important function of a materials manager.

How is value analysis carried out? To carry out Value Analysis we need to answer few questions for better understanding such as:

1)     Can the material be dispensed with?

2)     Can it be simplified?

3)     Will a standard material do?

4)     Is the value proportional to its cost?

5)     Is anything cheaper but equally good available in the market?

6)     Would it not be better to manufacture it?

Inspection and Quality Control –

(Receipt, Inspection, Acceptance and Payment)

As soon as the ordered materials are received in the goods receiving store, inspection should be carried out. The material should be picked upon a random sampling method and it should be inspected physically and chemically (where required). The organization should have inspection policy, procedures and the basic facilities for the inspection and examination. Investment should be done on sound sampling policy and procedures. This will assure the right quality of materials supplied to the organization.

Points to Remember

1)     Receive all items.

2)     Check the same against specification and arrange for inspection.

3)     Inform the end users regarding the receipt of materials.

4)     Prepare receipt notes and inform excess or shortage of items received.

Storage

Materials after being inspected and received are stored in the storeroom till its distribution and consumption.

The objective of storage is to ensure that the issue of material for usage of the supplies are adequately preserved to prevent loss or damage.

The store should be located near the other stores of the hospital. It should be accessible to the suppliers and indenters. Location should be as per activity of the stores. Size should be adequate to accommodate all materials such as instruments, appliances steel racks with shelves. Refrigeration should be available for storing thermo-labile items.

Many stores maintain two bins method or card system. This method separates the entire stock of each item into two bins or boxes. One bin contains main stock and the second bin contains enough stock to satisfy the demand during lead-time. Lead-time is the time between placement of order and receipt of the same order. As soon as the first bin is exhausted, demand for the order is placed and the second bins item are issued. Part of new stock received is placed in the second bin as reserve.

Inventory Control

Principles of inventory control seek to minimize investment on materials so that sufficient working capital is available for other important activities of the organization.

The primary aim of inventory control is to decrease material cost by preventing over staking the material which result in locking up of capital, possible pilferage and obsolescence.

Issue and Distribution

Arrangement of materials can be done alphabetically or Group wise. Both are easy for identification and retrieval.

Items held in inventory by the stores may be issued through indents to the user department on periodical basis.

Materials should be stored on both sides of open rack. These racks are always filled from backside and issued from front side. Materials received later from the suppliers should be stored behind. By this you maintain the principle of "FIRST IN FIRST OUT". "FIFO" means issuing items first which are received first.

Maintenance

A large variety of materials are used in the hospitals. An average hospital needs more than 3000 items of instrument and equipment’s. This shows the type of stores used for patient care in the hospital and therefore its management and maintenance itself is very important.

Material management is an important aspect of resource management. Proper management of materials are very crucial to all the organization and we the nurses play a vital role in controlling, maintaining and inspecting the materials time to time for efficient and effective patient care. The nurse in her unit is the user of various equipments, therefore she needs to maintain the equipment for their longetivity.

·        Purposes of Controlling and Maintaining Equipment

ü  To make materials available in safe and viable condition as necessary for both elective and emergency situation.

ü  To increase efficiency of the organization.

ü  To provide material at an optional cost.

ü  To cut down material cost through standardization.

Disposal and Condemnation

Indents are often arbitrarily made with improper scrutiny. This leads to an unofficial inventory in the nursing units. It is therefore necessary for a nurse administrator to inspect the stores periodically and return the excess stock to the main store, or condemn articles on the spot to prevent the store in becoming a dumping place. Usually, all hospitals have a condemnation committee, whose duty is to review the stock from time to time and assess the materials that are to be disposed or condemned.

ROLE OF A NURSE IN MATERIAL MANAGEMENT

The nurse as the user of the material is in the best position to cut the cost of materials in her unit, or to utilize it at its best. Her role as a middle manager is very important in the smooth functioning of the unit. Hence, her role in material management can be summarized as:

·        She should have sound knowledge of the requirements and functioning of her unit.

·        Must prepare budget for materials required.

·        Forecast the demands for smooth running of the unit (less or more supplies will cause mismanagement and poor quality of patient care).

·        Prepares, assists and maintains the policy about purchasing, inventory, maintenance, prevention of pilferage and condemnation of the unserviceable items.

·        Exercise her powers to control the inventory in her unit.

·        Ensures perfect functioning of the equipment in the unit under her control.

·        Should be able to provide feedback about the materials regarding their quality to the purchase department.

·        Accurate recording and reporting of the materials required regarding their maintenance and quality.

·        Prepares guidelines and ensures that they are followed properly regarding the breakdown of equipment, loss of equipment and avoid mishandling of them.

·        Research activities to assess the impact of material management on patient care.

·        Evaluation, of the procedures, policy and performance of equipment and feasibility of the policies should be documented.

·        Should be able to prevent pilferage and fraud, hence be alarmed at the night time.

CONCLUSION

Material management is an important management tool which will be very useful in getting the right quality & right quantity of supplies at right time, having good inventory control & adopting sound methods of condemnation & disposal will improve the efficiency of the organization & also make the working atmosphere healthy any type of organization, whether it is Private, Government ,Small organization, Big organization and Household.

Even a common man must know the basics of material management so that he can get the best of the available resources and make it a habit to adopt the principles of material management in all our daily activities

BIBLIOGRAPHY

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