Laboratory Information Management System

The laboratory information management system (LIMS) is designed to help process information in
medical research to improve the efficiency of the department's services and laboratory operations by reducing
manual tasks and procedures. For example, a LIMS records information automatically which saves time and
reduces typographical error. This is commonly used in conjunction with laboratory information systems (LIS)
in the medical and pharmaceutical industries.
According to Gartner's 2016 Hype Cycle for Life Sciences, most of the top pharmaceutical laboratories
use LIMS. The system is also useful for biobanks and genomic testing centers and laboratories that study
drugs and develop formulations. However, the health care institution must consider the data capture process,
storage, and retrieval in selecting the solutions provider because some are more suitable than others
(Reisenwitz, 2017).

Functional Requirements and Features of LIMS

According to Reisenwitz (2017), the functionality of LIMS includes sample management, workflow
management, reporting, electronic medical records (EMR)/electronic health records (EHR), mobile, and
enterprise resource planning (ERP).
Sample Management
Accurate and detailed records are necessary to make sure that samples are not lost or mixed up. A record
should show whether the sample meets the acceptable values.
LIMS records and stores the following information about the sample:
✓ Who the sample was taken from?
✓ What is the sample taken?
✓ Who is working with it (researcher or provider)?
✓ Who handled the sample?
✓ Where does it go next?
✓ How do you store these samples?
✓ When does it need to move?
LIMS automates most of these by using radio-frequency identification (RFID) or barcodes in recording and
updating logs and track the chain of custody of the sample.
Workflow Management
LIMS can be used to automate records and workflows which saves time Existing coding methods and
procedures enable the system to take part in the decision process. Using preset rules, it can suggest
instruments needed for the procedure and assign the medical laboratory technician or specialist to complete
the test
Reporting
Using LIMS, reports can be run and exported to make them standard and customized. Reports on the most
frequently used instrument, the average handling time of sample, and list of backlogs are useful in data
analysis and formulation of recommendation for future policymaking
EHR
Some LIMS have a built-in electronic health records (EHR) functionality which is capable of handling patient
records and billing information. A health institution should consider this during acquisition because this fea ture
will greatly help in managing clinical laboratory procedures
Mobile
Gartner's (2016) reports that mobile LIMS offerings are limited. But with the accepted use of smartphones in
the laboratory, it is better for LIMS to be mobile-friendly.
ERP
A LIMS that can handle inventory functions is recommended. The enterprise resource planning (ERP) solution
is especially useful in viewing current supplies, calculating storage capacity, and managing location.

Core Components of LIMS

LIMS software suites usually involve multiple components to provide a variety of functions for different levels
of the laboratory. IEEE GlobalSpec (2015) specifies the components of a LIMS software but are not limited to
the following:

• Electronic laboratory notebooks

• Sample management programs
• Process execution software
• Records management software
• Applications to interface with analytical instruments or data systems
• Workflow tools
• Client tracking applications
• Best practice and compliance databases
• ERP software
(View the complete components of a laboratory information management system in McDowall's Rik Based
Validation of Laboratory Information Management Systems)

Laboratory Standards
To help promote laboratory safety, the Occupational Exposure to Hazardous Chemicals in Laboratories
Standard (29 CFR 1910.1450) was released in the United States by the Occupational Safety and Health
Administration (OSHA) in 2011.
Some Important provisions from the standard are cited below:
Laboratory is a workplace where hazardous chemicals are used. It is also a facility that stores small quantities
of hazardous chemicals which are not intended for production use. On the other hand, the laboratory use of
hazardous chemicals should meet the conditions listed below:

• The manipulations of chemicals should be on "laboratory scale” only and can be handled by one
person.
• There is the use of multiple chemicals and procedures.
• The procedures should not simulate any production process.
• Protective laboratory tools are available and proper practices are followed to minimize potential
exposure to harmful chemicals.
• Any hazardous use of chemicals which does not meet this definition is regulated under other standards.
Examples are
✓ chemicals used in the maintenance of the laboratory building,
✓ production for commercial sale,
✓ and testing of a product for quality control.
A Chemical Hygiene Plan (CHP) which discusses all aspects of the laboratory standards should be
formulated if the standards apply. The employer must implement the provisions which address the proper
purchase, storage, handling, and disposal of the chemicals used in the facility.
 The primary elements of a CHP include the following:
1. establishment of standard operating procedures (SOP) to minimize exposure to chemicals and
dissemination of information on the requirements for personal protective equipment. Waste
disposal procedures, and engineering controls;
2. monitoring of the work environment to provide the action and medical attention required for
some chemicals;
3. statement of plan on how to obtain free medical care for work-related exposures; and
4. designation of personnel who will handle CHP-related activities such as handling data sheets,
organizing trainings, monitoring adaption, and revising CHP if deemed necessary

LIMS Application
Patient Registration
When a patient arrives at the hospital, the admission clerk will take some basic information and will guide him
or her to a registration window.
Billing
The process of generating SOAs (statement of accounts) or billing statements of in-patients, out-patients, and
emergencies are the same. In the following example, an in-patient's billing statement is used.

Contract Management
Most LIMS allow the laboratory professionals to manage the billing and payment aspects of their activities and
to create statistical and billing reports on a par with the laboratory and management needs. They provide
parameters for a flexible price schedule and enable heightened attention on customer needs. They automate
billing processing, hasten collections, and offer marketing tools which reduce the time spent on standard flow
and allow billing and accounting personnel to focus on improving collection of problematic accounts (Infomed,
2017).
In addition, the common features of LIMS for invoicing and contract management include:

• customer customizable invoices including history analysis of balance and charges, history balance,
detailed services, and participation when in insurance coverage, discounts, among others;
• different electronic formats for invoices to allow interfacing with customer electronic systems;
• customizable information completion reports for customers;
• managerial reports which display laboratory billing status for payer groups including projected return
values for each payer group:
• ability to change the insurance organization of a patient per visit;
• ability to select which tests are covered by insurance and which have automatic modification of the
prices accordingly;
• supervision of financial data management of the senders;
• reminder for amounts due from past visits;
• immediate access to the billing card of each patient;
• and consistency with international laws.
Accounts Receivables
Through the integration of the LIMS, the personnel in charge of managing accounts receivables can easily
extract information which was already available from the invoicing and contract management procedures.
Additionally, the LIMS can

• generate specific or complete accounts receivable reports,

• monitor balances reconciliation and audit purposes
 • export data to other accounting systems,
• and, customize reports according to specifications.

Worklist and Workflow

LIMS assists laboratories in setting priorities of current workloads based on analyst and instrument
availability. This function allows the user to track a sample, a batch of samples, or numerous batches through
their lifecycle. Queuing can also be done by sample or by workflow which is a block of repetitive procedures
in a certain process. The queuing and work list feature provides insights about when an event occurred, how
long it was, and who was involved.
In addition, other features also enable personnel and workload management, thereby, allowing users to
plan workload schedules and assignments, and employee information and training. Ultimately, the worklis t and
workflow functions operate to facilitate more efficient laboratory processes.

Quality Control
Diagnostic tests executed inside the clinical laboratory may yield two kinds of results, a patient result
or a quality control (QC) result. The result can be quantitative (in numbers), or qualitative (positive or negative)
or semi-quantitative (limited to a few different values). QC results are used to verify whether or not the
instrument is working within prescribed parameters. Based on the said results, reliability of a patient's test
results will be determined (Bio-Rad Laboratories, 2008).
LIMS' functions enable users to set standards about the relevant range of patient test results or to
extract test result information for the purpose of quality assurance. Outliers and deviations can be flagged,
and appropriate warning signals can notify users about issues which might involve the quality of the samples
or the equipment currently in use.

Barcode-generation, Printing, and Reading

LIMS modules are commonly linked to a barcoding label generator which enables a fast and easy
method to identify tubes, samples, documents, and many others. The code can simply be printed on a label
sticker to be placed on any item which needs identification. A barcode editor also allows multiple labels to be
printed at a label printer. The barcode series can usually be customized to suit the organization's or
classification needs. With this kind of technology, information about a tube, a specimen, or equipment within
the laboratory can be found and retrieved effortlessly using a barcode scanner.

In-built Bi-directional Interfaces with Equipment

Figure 10.4 shows the interface of a bi-directional equipment used in medical laboratories. A two-way
communication between the information system and the clinical instrument is required. LIMS downloads the
test orders and specimen ID for each test. On the other hand, the clinical instrument uploads the same
information for analysis. The same method is also used by instruments for microbiology, hematology, and
other areas.
When a health institution uses this type of application, productivity is enhanced because it minimizes the time
spent in programming the order into the analyzer, and ensures accuracy due to the elimination of errors usually
committed in the manual process. Nowadays, these machines also have the random access testing feature
and barcode label scanning for specimen (Selmyer & Cloutier, 1996).
Key Points to Remember:
✓ A laboratory information management system (LIMS) is a software designed to make laboratories more
efficient and effective.
✓ The ultimate aim of a LIMS is to enhance efficiency in laboratory operations by reducing manual
procedures.
✓ The core components of LIMS are electronic laboratory notebooks, sample management programs,
process execution software, records management software, applications interface, work flow tools,
client tracking, best practice and compliance databases, and ERP software.
✓ The US Occupational Safety and Health Administration (OSHA) released an Occupational Exposure
to Hazardous Chemicals in Laboratories Standard (29 CFR 1910.1450) in 2011 to facilitate laboratory
safety.
✓ LIMS covers registration, billing, contract management, and monitoring of accounts receivable.
✓ LIMS assists laboratories in setting priorities of current workloads based on availability of analysts and
instruments
✓ LIMS functions enable users to set standards for the relevant range of patient test results or to extract
test result information for the purpose of quality assurance.
✓ LIMS modules are commonly linked to a barcoding label generator, enabling a fast and easy method
of identifying tubes, samples, documents, and many others. The label can simply be printed on a sticker
and be placed on any item which needs identification.
✓ A bi-directional interface application saves time in programming test orders into the analyzer and
eliminates errors in manual entry. This can result in a considerable enhancement of analyzer
productivity
Cardiology Information System
Definition
The cardiology information system (CIS) is mainly focused on the storage and retrieval of cardiology-
centric images. This system usually receives an order with patient demographics from other information
management systems. Once the images are acquired from imaging modalities, they a profiled based on the
order and stored for further distribution, viewing, and long-term archiving (Kampula & Ireland, 2013).
The information used by cardiologists for the diagnosis and treatment of illnesses varies from personal
notes (history physical examination) to signals (electrocardiograms), images (echocardiogram angiograms,
CT, MRI), and reports from investigations and procedures. All these types of information can currently be
provided in digital format, and the system serves as repository of these forms of images Unfortunately, most
systems are limited by their storage capabilities and do not include post-processing functions.

Evolution of CIS
Decades ago, the requirements for an electronic medical information system were restricted by the
availability of equipment. A good database schema combined with a functional user interface was deemed
adequate. In the 1970s, available cardiology information systems originated from mainframe environments,
whose technical specifics would be considered ridiculous in today's context.
In the 1980s, modular systems that emphasized the use of real-time applications and mini computers
became the trend (Turney & Kohls, 1997). Over the years, the trend for smaller computers remained, but the
introduction of the internet became a turning point that shifted the focus of most systems towards creating
networks and facilitating integration Cardiology information systems nowadays have unique features that
enable remote access and easy retrieval. Some systems have also attempted to integrate radiology
information systems (RIS) to involve more administrative processes and go beyond storage purposes

Benefits of CIS
Different CIS, coming from different sellers, vary in their available features. However, the following are the
most common benefits
1. Ease of Access while Maintaining Data Security
CIS consolidates multiple types of patient cardiology information, thus eliminating the need for
doctors to request different imaging results from different departments

2. Flexibility in the Workflow

Availability of mobile technology allows cardiologists to assess a wide array of information
without having to leave the patient's bedside. Having cardiological data in a single platform offers
mobility to physicians and nurses, thereby improving the efficiency of providing service.

3. Enhanced Comparability
CIS is an essential repository of cardiology imagery results, thereby, retrieval of past data is
convenient. This comparability enables health care professionals to make more informed decisions on
their patient's treatment.

Functionalities of CIS
1. Editing, Viewing, and Storing Multi-Modal Cardiology Data - With the help of CIS, different types
of data, including those of computed tomography (CT), cardiac ultrasound (echocardiography).
magnetic resonance imaging (MRI), nuclear imaging (PET and SPECT), and angiography may be
managed on a single platform.
 2. Remote Access -The use of networks and integrated information systems, coupled with the availability
of the internet and tablets and smart phones, offers flexibility to CIS.
3. Visualization and Reporting Capabilities - Two of the main benefits of CIS are the case and the
consistency of reporting. As a result, virtual real-time information retrieval is possible anytime and
anywhere with just a couple of clicks.
4. EHR Integration - CIS may be integrated with existing electronic health record systems, this results in
the enhancement of the quality of services of the health professionals by offering a more
comprehensive view of the patient care spectrum.

Radiology Information System

A radiology information system refers to a network system used in managing imagery and
associated data in the radiology department. The system tracks the orders and billing information of the
requesting department. It uses picture archiving and communication systems (PACS) for the storage and
management of medical images and vendor neutral archivals (VNA) to manage image archives and for record-
keeping and billing within a hospital information system (HIS) (Rouse, 2017).
The use of RIS in health care institutions has many advantages in the context of improving overall
operations of the institution. The system enables easier access to patient information because it can be
integrated in referring to the doctor's electronic health record (EHR) system, resulting in better patient
experience. It also allows faster processing of payments because the insurance plans of patients may be
verified prior to their visit and electronic payment is an available option. It also permits reports to be easily
generated and sent to the requesting department which dramatically improves the efficiency of the workflow
of the institution.

Functions of RIS
Rouse (2017) describes the following functions of a RIS:

• Patient Management-The system tracks the patient's entire workflow within the radiology department.
It can add images and generate reports to EHRs for easy retrieval and viewing by the authorized
radiology staff.
• Scheduling-The system allows staff to schedule appointments for in-patients and out-patients
• Patient Tracking - Patient tracking means tracing the patient's radiology history starting from
admission to discharge and coordinating it with his or her past, present, and future appointments
• Results reporting - Results reporting is possible through the statistical reports generated by RIS. The
reports may be done for a single patient or a group of patients, as well as for specific
procedures, depending on the needs
• Image tracking -RIS was traditionally used to track individual films and associated data. Nowadays,
RIS PACS systems managed by radiology departments cover the entire clinical workflow of the medical
enterprise.
• Billing-Billing is made convenient through the system's financial record keeping and processing of
electronic payments and automated claims
Key Points to Remember
✓ Cardiology information system (CIS) is mainly focused on the storage and retrieval of cardiology-centric
images.
✓ The benefits and features of CIS include ease of access while maintaining data security, flexibility in
the workflow, and enhanced comparability.
✓ The functionalities of CIS are editing, viewing, and storing multi-modal cardiology data; remote access;
visualization and reporting capabilities, and EHR integration.
✓ A radiology information system (RIS) is a network software system designed to manage medical
imagery and associated data. A RIS is especially useful for tracking radiology imaging orders and billing
information, and is often used in conjunction with picture archiving and communication systems (PACS)
and vendor neutral archivals (VNA) to manage image archives and for record-keeping and billing within
a hospital information system (HIS).
✓ The functions of a RIS are patient management, scheduling, patient tracking, results reporting, image
tracking, and billing.
Materials Management System
The management function of hospital materials‒ that is, to ensure that services are rendered
successfully from one source to an end user-covers several areas of the hospital and could drastically affect
the expenses of the medical institution. Executing this function in a manner that lessens expenses and ensures
adequate cash flow requires effective management of a large amount of information from several sources.
To successfully manage such information, many hospitals implement a form of materials management
information system (MMIS). The aforementioned system can be used to manage functions like purchasing,
accounting, inventory management, and patient supply charges ("Materials management information
systems," 1996).

Purchasing

Purcahse Purchase Receiving

request order Delivery

In HIS by BizBox, a purchase request marks the beginning of the procurement process. Using this
form, the user notifies the purchasing department regarding the needed items and services. It contains the
quantity, as well as a timeframe for the items requested. It has the authorization information needed to proceed
with the purchase. The requested items are then confirmed using the purchase order and a supplier is
nominated. Once completed, the order is sent to the supplier for processing.
Finally, the items are checked during receipt of the delivery. The receiver, which is usually the Central
Supplies department, uses the purchase order as basis for accepting the delivered items that should be
checked for indents and damages. Afterwards, the said items are then released to the requesting department.

Inventory Control
Inventory is one of the biggest expenses for most medical institutions (Johnston, 2014). Inventory
control plays an important part in refining the quality of health care services since lives of people are on the
line and medical costs are increasing.
Strategies in improving inventory control in the health care facility:
1. Ensuring Shipment Accuracy
Checking shipments for accuracy means ensuring that the received items are the ones ordered and
the supplies are free from possible damages during transit.

2. Aligning with Sales Projections

Coming up with an inventory tracking report in comparison with actual sales proves to be a challenge
in the field of medicine. However, it is necessary to prevent wastage, identify trends, and ensure that
there is no excess inventory.
 3. Complying with Regulations
The health institution should be responsive to the current trends and needs of the highly regulated
health care industry. The regulators monitor health institutions and determine the success or failure of
companies to serve the best interest of the patients.

4. Establishing Buying Cycles

Buying cycles should be determined and understood by inventory personnel based on the previous
cycles, so that inventory ordering becomes manageable through the elimination of shortages and
overages. The said cycles determine the trends and adjustments that can be made accordingly.

Item Master Maintenance

Since the importance of inventory control has been recognized, the usage of a materials management
system brings an advantage. In this system, the Inventory Item Maintenance screen has many sections. The
upper portion contains master information. Additional options appear after the selection of an existing item.
"Item Tab" is used for maintenance of the attributes of an inventory item, such as product type, item class,
item type, and others. If the balance and order activity is zero (0), items can be deleted using this option. Users
may set the product type to group similar items for sales analysis and inventory reporting Most of the inventory
reports are based on a certain product type. The "Item Availability" form specifies inventory levels across all
warehouses.

Item Indents and Issues

There are some instances when items are damaged either upon receipt from the supplier or during the
move from the source to another location. Some suppliers allow return of goods that have indents or the like,
with a guarantee of replacement without any additional payments. This applies to distribution and retail
industries where the goods for sale are fast-moving. Normally, damaged items are moved to another
warehouse for them to be monitored.

Reorder Level and Minimum and Maximum Inventory Ordering

In a typical materials management system reorder level is the minimum quantity of an em that a
company has in stock, so when the stock reaches the stated minimum quantity, the item must then be re -
ordered (purchase order/production order).
A basic reordering method implemented in many ERPV and other inventory management softwares
the Min/Max inventory ordering method. The "Min" value is representative of a stock level that prompts a
reorder, and the "Max" value is representative of a new targeted stock level that follows the reorder The main
difference of these two-Max and Min-is often interpreted as the economic order quantity (EOQ). Although the
Min/Max method is an unpolished method for inventory ordering its settings could be adjusted to provide better
inventory performance (Vermorel. 2014)

Enquiries and Quotations for Drugs, Consumables, Assets, and General Items
According to Webrino (2018), the following documents are required in the materials management
process:
1. Enquiries - The enquiries mark the beginning of the purchasing process. These establish the
relationship between the entity and the right supplier The supplier provides information on the
availability and price of the required items.
2. Quotations - Quotations contain vital information regarding the requirements which include price,
delivery details, payment terms, etc. Companies usually review two to three quotations before selecting
the supplier
3. Orders - The buyer shows the intention to purchase the required item by issuing a purchase order A
purchase order is placed to signify intention to engage in commercial operations for a specific product
 or service. Upon agreement, the order becomes a contract between the health care institution and the
supplier.
4. Invoices - An invoice is also called a bill. It is a commercial document that indicates the product
the ordered quantity, and the agreed price. The supplier issues this to the buyer to show the products
and services that were sold or provided to the buyer
5. Documents - Documents are statutory requirements used during purchase and sales transactions
These ensure smooth transition and completion of the process.

Comparison of Quotations and Preferred Vendors

Purchase Quotations
A purchase quotation is a document for requesting prices and delivery information from a vendor before
the purchase order. It can be created then sent to a vendor. When a response from a vendor is received, with
a list of prices and delivery dates, the information can be entered in the purchase quotation. In this way, the
complete history of the sourcing process can already be stored in the system. From the quotation, the right
vendor for the purchase can be chosen based on the tracked information. It helps in lessening expenses,
improving the quality of the product or service, and increasing on-time delivery. A purchase quotation report
allows the comparison of offers in order to pick the appropriate vendor for the purchase scenario. Afterwards,
the purchase order can already be created from the selected quotation.

Preferred Vendors
Companies typically maintain a list of preferred vendors from whom inventory items are usually
purchased. They look for a vendor who has on-time performance, offers reasonable costs, provides high-
quality products and services, offers fully licensed, bonded, and insured products and services, and has good
business practices.

Purchase Requests, Orders, and Approval

Purchase Request
A purchase request or purchase requisition is a document that notifies the purchasing department that
certain items or services need to be replenished. The document stipulates a timeframe and required quantities
for the requested items. In certain instances, it also contains authorization to acquire assets. For enhanced
accountability and for documentation purposes, some companies require a purchase requisition for all
purchases, but others only require them for specific kinds of purchases, such as those that would require
greater capital outlay (SAP, 2012).

Purchase Orders
A purchase order is a legally binding contract which shows that the seller has already accepted the order
issued by the buyer (SAP, 2012). It should contain: information about the buyer and seller (name, address,
contact details, etc.) order number and order date; item description (quantity, unit, and total price); shipping
information (shipping date and address); billing address; and the authorized signature.

Approval Process
The person who creates the document, either a purchase request or order, is the originator. When the said
originator adds document/s to the materials management system, the system checks for any approval
requirements. If the document fails to meet the approval requisites, the originator is notified that the document
needs approval. The document is temporarily saved as a draft.
When the approval process is launched, an internal request is immediately sent to the first approval
stage. This request is received in the Messages/Alerts Overview window, and the approver can access the
document. Approval can be done through a mobile phone if the devices are integrated. An internal
 notification goes back to the originator with a link to the rejected document when the approver rejects the
document. The originator can amend the document, and the approval procedure will continue until the
conditions are adequately satisfied (SAP, 2012).

Receiving and Tracking Items

The following policies should be followed for the proper receipt and inspection of goods (The York College,
2017):
1. Signing for Deliveries - The person who receives the delivery should inspect the delivered items
before signing the receiving document and the packing list. Then the document should be submitted to
the appropriate department for reconciliation.
2. Refusing Delivery - The receiving department should refuse to accept any shipment if the packaging
appears to be damaged or if there is any item that does not have a corresponding purchase order
3. Record Retention - The packing list should be provided to the receiving department during delivery to
ensure that there is proper documentation since it is are taking possession and legal ownership of the
delivered items. If no list was provided, the department should request the copy from the supplier. All
files should be kept according to the guidelines of the entity. This helps track partial and staggered
deliveries.
4. Inspecting a Shipment - The personnel receiving the items should inspect the goods to ensure that
the following minimum conditions are met:
a. The received items match the requirements stated in the purchase order (type, description,
color, etc.).
b. The quantity is correct.
c. The item has no damage, discoloration, and issues.
d. The quantity per unit of measurement is accurate (eg, one dozen 12 pieces).
e. Packing list, certifications, and other delivery documentation are completely provided.
f. Perishable items should be in good condition and have not reached the expiration dates.
g. The items are functioning properly.
5. Partial Deliveries - When items are delivered partially without proper notification from the supplier, the
receiving personnel should advise the Purchasing department for approval and further instructions.
This should also be typically noted in the packing list or the receiving document.
6. Tracking of Goods - Goods can be easily tracked/traced when they are managed by serial number or
batch. Through that, aging of products can also be monitored based on how long they have been in
the warehouse.

Purchase Returns along with Returnable/Non-Returnable Gate Pass

Defective or substandard quality goods, incorrect order delivery, and deteriorated purchased and sold
items are usually common in business. These lead to purchase or sales returns. When purchased goods a re
returned, the materials management system updates inventory levels to reflect the decrease in quantity.
Movement of inventory is not limited to purchase returns Supplies and equipment are also sometimes
required to be taken out of the department for repairs or consignment. For temporary movement, a returnable
gate pass is issued, whereas for permanent movement, a non-returnable gate pass is given. The system can
be configured to track returnable and non-returnable items or equipment. It can also be set to monitor due
dates for returnable items and to provide detailed reports about the status of different inventory items.

Consignment Stock Receipt, Consumption, and Regularization

In the process of consignment, the vendor or consignor issues materials to the receiver or consigner.
and these materials are stored in the consignee's premises. The vendor maintains legal ownership until such
materials are removed from consignment stores. The invoice is due at predetermined intervals. In addition,
customers can also arrange to take over ownership of the remaining consignment material after a certain
period (SAP, 2011).
Expired Stock and Quarantine
Expired Stock/Inventory
Upon reaching their expiration dates, some goods, such as food and medicine, can no longer be
utilized. In rare instances, they may be sold to other parties at lower costs. Expiration dates and decrease in
values of items must be reflected in the financial records so discrepancies in financial statements will be
prevented. The amount that reduces inventory in the records is recognized as a loss which equates to a
reduction in profit (Keythman, 2017).

Quarantine Stock/Inventory
When undecided about how to handle defective goods, whether to be sold as scrap, reworked,
returned, or used as it is, a quarantine location or warehouse can be used to temporarily house them until a
final decision is reached.
Inventory is put into quarantine if it is initially rejected during (Infor LN Warehousing, 2018):

• Production, upon completion of an operation, when specified as "Move Rejected End Item to
Quarantine”.
• Inbound inspection upon receipt of:
✓ Manufactured end items
✓ Purchased items
✓ Sold items on sales return orders
✓ Enterprise planning distribution orders
✓ Outbound inspection upon issue of materials to production.

Drugs and Consumable Issues and Returns to Patients

Nagarajan (2017) affirms that 30 to 50 percent of hospital charges are actually attributable to
diagnostics, drugs, and consumables; and doctors get only between 10 to 20 percent. For both hospitals and
patients, drugs and consumables take up the bulk of expenditure. This is why materials management is critical
for hospitals to optimize the investment in these kinds of consumable assets.
While some hospitals have functional inventory databases, the lack of integration does not give them
holistic information, and this affects decision-making, both on a managerial level and during day-to-day
operations. For instance, some drugs are misplaced or misappropriated, or shortages and surpluses may
occur as a result of improper inventory controls in a traditional system (Infor LN Warehousing, 2018). This is
where materials management system becomes advantageous. It provides an overview of the entire institution's
purchasing and inventory control processes. As a result, decision-makers can have more reliable information
and can monitor the bigger picture.

Issue Methods
Inventory management is a crucial function for any product-oriented business Common inventory handling
methods include
a. First In, First Out (FIFO)- Inventory items are sold based on the order they are purchased. This is the
most common technique.
b. Last In, First Out (LIFO) - Last items to enter the system are sold first. This is common among non-
perishable items like petroleum, minerals, and metals.
c. First Expired, First Out (FEFO) - Materials are sold based on the dates they should be consumed,
regardless of when they were purchased.
Generic Tax Formula Configurations
Materials management systems usually allow tax rates to be defined internally via tax codes, or
imported from an external source. Tax configurations are usually accounted on a per country basis. The
following taxes that can usually be processed while posting documents are

• tax on sales and purchases,

• additional taxes like VAT.
• sales and use tax in USA, and
• withholding tax like income tax in India.
The automatic calculation of the tax dues during the purchasing process makes the process less susceptible
to clerical errors.

Periodic Physical Stock Taking and Adjustments with Tracking

An inventory count is a process where a business physically counts its entire inventory. A physica l
inventory may be mandated by financial accounting rules or tax regulations to place an accurate value on the
inventory, or the business may need to count inventory so component parts or raw materials can be restocked.
Businesses may use the following tactics to minimize the disruption caused by physical inventory (CTI
Reviews, 2016):

• Inventory services provide labor and automation to quickly count inventory and minimize shutdown
time.
• Inventory control system software can speed up the physical inventory process. . A perpetual inventory
system tracks the receipt and use of inventory, and calculates the quantity on hand.
• Cycle counting, an alternative to physical inventory, may be less disruptive.
The materials management systems offer all of these in addition to the barcode and RFID capability which
are supplementary technologies placed to give the institution more accurate and less burdensome inventory
counts.

Key to Remember
✓ To successfully manage information, many hospitals implement a form of materials management
information system (MMIS). The aforementioned system can be used to manage functions like
purchasing, accounting, inventory management, and patient supply charges
✓ Purchasing request could be used as a first step in the process of purchasing. This could be followed
by a quotation before proceeding to the purchase order depending on the process preferred by the
management.
✓ Inventory control plays an important role in refining the quality of health care services and different
strategies can be employed to ensure efficiency. These strategies include ensuring shipment accuracy,
aligning with sales projections, complying with regulations, and establishing buying cycles.
✓ The MMS can handle issues such as item indents and reorder level.
✓ There are three issue methods that are currently used in the health care industry: First In, First Ou t
(FIFO); Last In, First Out (LIFO); and First Expired, First Out (FEFO).
✓ Periodic physical stock taking or inventory count may be mandated by financial accounting. MMS have
barcode and RFID that can be used as tools to ensure accurate and convenient counting.