Professional Documents
Culture Documents
be able to
a. list the needs for materials management in health
care sector
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A.Background
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A. Background…
• What is Inventory?
– Usable but idle resource having an economic value
• Raw materials
• Work-in-progress and
• Finished goods
• What is Stock?
– When we deal with tangible items
– Drugs, Vaccines, Syringes, Cottons etc
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Inventory/ Material Management Cycle
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Aims of Material Management
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Why we should learn?
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Why we should learn? …
• The Transaction Motive
– Outflows are not synchronized with inflows
• The Precautionary Motive
– One must maintain reserve stocks in order to
satisfy the demand while awaiting delivery
• The Speculative Motive
– If prices are expected to rise, it pays to keep
stocks on hand
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B. Inventory Control Techniques
I. Eyeballing Technique
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II. Double shelf method or A/B method
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III. Modern Techniques
1. ABC analysis
2. VED analysis
3. SDE analysis
4. FSN analysis
5. HML analysis
6. ………………….
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1. ABC Analysis
• Always Better Control
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Steps in Analysis
The following logical steps are followed for the analysis:
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1. ABC Analysis: Cycle Counting
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Hospital Management Course: AMU, Chidambaram
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2. VED Analysis
Critical value: Effect on the functioning of the
institution
Vital - Heart, lungs, head (fundamental for life)
Emergency medicines, First aid, blood, ICU
Essential - Eyes, hands, ear (necessary functions)
Desirable- Hair, nails (decorative and protection)
Nutrients, food supplements
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ABC-VED Combination
V E D ITEM COST
B BV BE BD CATEGORY 2 20 20%
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3. SDE Analysis
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4. FSN ANALYSIS
– Based on utilization.
• Fast moving
• Slow moving
• Non-moving
– Non-moving items must be periodically reviewed to
prevent expiry & obsolescence
5. HML ANALYSIS
– Based on cost per unit
• Highest
• Medium
• Low
– This is used to keep control over consumption at
departmental level for deciding the frequency of physical
verification
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C. Economics in Inventory Control
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Some Definitions
Lead Time (L)
Period between placing an order and receiving an item
Re-order Level
(Average consumptn rate/day X L) +Q0
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Av consumption
=10 pkts/day
Max
consumption =
25 pkts/day
(25-10)*30=450 1 month
pkts 28
Economic Order Quantity (EOQ)
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EOQ Model
Annual Cost
Order Quantity
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EOQ Model
Annual Cost
Holding Cost
Order Quantity
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EOQ Model
Annual Cost
Holding Cost
Order (Setup) Cost
Order Quantity
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EOQ Model
Annual Cost
Holding Cost
Order (Setup) Cost
Order Quantity
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EOQ Model
Annual Cost
Holding Cost
Order (Setup) Cost
2 D S
EOQ
H
D= Annual demand (units)
S= Cost per order ()
C= Cost per unit
I = Holding cost (%)
H= Holding cost = I x C
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Example
The cost of Syrup Septran is Rs 40 per bottle. Average prescription
rate is 20 bottles per month at JIUHC, Kurusukuppam. Ordering
cost is Rs 50 per order. The carrying cost for each bottle of Syr
Septran is 10% of per unit cost. As a Medical Officer I/C of JIUHC
you don’t want interruption in service provision as well as don’t
want to over stock the Syp Septran.
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Assumptions of EOQ
• Ordering cost is constant
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4. Summary
Basic principles
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