Materials Management System Lesson 12 HIS

Materials Management System

is making sure that services go successfully from one source to an end user-includes several areas of the hospital and could drastically affect medical institution expenses. 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

Purchasing

This is used internally to identify a need for an item. A purchase request generally is a document which is made by a user to notify the purchasing department regarding needed items and services. This document specifies quantities, as well as a timeframe for the items requested.

Inventory Control

Johnston (2014) states that inventory is one of the biggest expenses for most medical institutions. It plays an important part in refining the quality of healthcare services, since the lives of the people are on the line, as well as because medical costs are increasing.

Making Sure Shippers are Accurate

Tracking medical inventory must involve checking shipments for accuracy. Most medical suppliers use third-party shippers, and the tracking system must ensure that the correct supplies were loaded at the warehouse. Even if items are ordered correctly, tracking can catch any errors in filling those orders. It can also reveal whether medical supplies have been properly handled in transit.

Alignment With Sales Projections

In the field of medicine, sales projections can be wildly inaccurate. It is difficult to predict disease and accident patterns, and patients are notoriously reluctant to switch doctors, hospitals and health insurance. Tracking inventory in comparison to actual sales is essential.

Compliance with Regulations

The medical field is heavily regulated. A company that routinely fails to serve the best interests of patients can quickly find itself being investigated, sued or simply shunned by health-care consumers. Tracking inventory can be extremely important in maintaining the responsiveness of a medical company.

Establishing Buying Cycles

Inventory control helps medical companies understand buying cycles. Instead of responding to needs for supplies and equipment, inventory personnel can anticipate needs based on previous cycles. Smoothing ordering out to fit predictable cycles can eliminate shortages and coverages

Item Tabs

is used for maintenance of the attributes of an inventory item, such as product type, item class, item type, etc. If the balance and order activity is zero, items can be deleted using this option.

Item Indents and issues

In some cases, there are instances where items are damaged either upon receiving from the supplier or during the move from the source to another location.

Re-order level, re-order quantity, minimum and maximum levels for each store

In a typical material management system, Re-order level is the minimum quantity of an item that a company has in stock, so when the stock reached the minimum quantity stated, the item must be then re-ordered (Purchase Order/Production Order)

Enquiries and quotations for drugs, consumables, assets and general items

Webrino (2018) states the following documentation needed in the material management process:

Enquiries

are the start point of a sale or purchase. It leads to getting information from a vendor / supplier for the requirement at hand. Leads to establishing a connection with the right vendor / supplier in order to get a quotation, place the order and receive the requirements

Quotations

consist of various pieces of vital information of a requirement towards a sale / Purchase. It states important information such as price, delivery times, delivery details, payment terms, taxation etc. On a quotation being accepted an order is placed for the requirements

Orders

is a stated intention, either spoke or written, to engage in a commercial transaction for specific products or services. It expresses the intention to buy and is called a purchase order.

Invoices

A commercial document issued by a seller to the buyer, indicating the products, quantities and agreed prices for products or services the seller has provided the buyer

Documents

For any sales or purchases to take place, it needs to be created in order to enable a quotation, order, invoice, tax forms etc. These are statutory requirements to enable smooth transition of the processes involved in successfully completing a sale purchase.

Purchase Quotations

is a document for requesting prices and delivery information from a vendor before the purchase order. One could create a purchase quotation, then send the document to a vendor; when a response from the vendor is received, with a list of prices and delivery dates, one can enter the information in the purchase quotation. This way, one can store in the system the complete history of the sourcing process.

Preferred Vendors

Companies typically maintain a list of preferred vendors, from which inventory items are usually purchased.

Purchase Request

A Purchase Order, on the other hand, is a document which records a business transaction between the buyer and the seller. A buyer issues his order, and upon seller acceptance of the order, a legally binding contract is created between the parties (SAP, 2012).

Approval Process

The person who creates the document, either a purchase request or order, is the originator. Upon adding documents to the material management system, the system checks for any approval requirements. If the document fails to meet the requisites for an approval, the originator is notified that the document needs approval. The document is temporarily saved as a draft.

Signing for Deliveries

Whenever possible, the person receiving the product should sign the receiving documents provided by the supplier or shipping company. The person receiving the delivery should inspect the items before signing the receipt and should also initial the packing list. Then, submit the packing list to the appropriate person (Accounts Payable, Requester, Asset Management) for financial reconciliation.

Refusing Delivery

Whenever possible, departments should refuse to accept shipments if they are unable to confirm that the order was placed by their department, or if the packing appears sufficiently damaged to warrant concern

Record Retention

During the receiving process, the Receiving Department takes physical possession and legal ownership of the shipment. Therefore, it is important for the supplier to provide the department with a packing list for all shipments delivered to the department. If the supplier fails to provide the packing list, the department should contact the supplier to request that copies be sent to the department for its files. Department must keep receiving documents on file in accordance with these guidelines. The need for saving receiving documents is particularly important when accepting any partial or staggered deliveries over a period of time

Inspecting a Shipment

Persons receiving shipments should, upon acknowledging receipt of an order, conduct an inspection to verify the following minimum conditions: The products conform to the purchase order requirements and other relevant documents (for example: correct model number, description, size, type, color, ratings, etc.) The quantity ordered against the quantity shipped or delivered. There is no damage or breakage. The unit of measurement count is correct (e.g., if the unit of measurement on the purchase order is one dozen, there should be 12 in the package). Delivery documentation (packing list, certifications, etc.) is acceptable. Perishable items are in good condition and expiration dates have not been exceeded. Products are operable or functional.

Partial Deliveries

Departments should contact the appropriate Purchasing Agent whenever a purchase is received as a partial delivery without acknowledgement or notification from the supplier. This information is typically noted on the packing list

Tracking of Goods

Goods can be easily tracked /traced when they are managed by Serial or Batch. Aging of products can also be done if the items are slow moving/stay longer in the warehouse

Purchase returns along with returnable/non-returnable gate pass

Defective or substandard quality goods, incorrect order delivery, and deterioration among inventory purchased and sold are usually common in business, and this gives rise to purchase or sales returns.

Consignment stock receipt, consumption and regularization

In the process of consignment, the vendor or consignor issues materials to the receiver or consignee, and these materials are stored on the consignee's premises. The vendor maintains legal ownership until such materials are removed from consignment stores. The invoice is due at predetermined intervals, such as monthly. In addition, customers can also arrange to take over ownership of the remaining consignment material after a certain period of time (SAP, 2011)

Expired Stock/Inventory

Upon reaching their expiration dates, some goods, such as food and medicine, can no longer be utilized. In rare instances, it may be sold to other parties at a lower cost. However, as soon as inventory expires and its value falls below its original cost, this must be reflected in the financial records so as not to misstate the financial statements. The amount that reduces inventory in your records is recognized as a loss that is 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 has been reached

Drugs and consumable issues and returns to patients

Nagarajan (2017) affirms that 30 to 50% of hospital charges are actually attributable to diagnostics, drugs, and consumables, and doctors get only between 10 to 20%. For both hospitals and patients, drugs and consumables take up the bulk of expenditure. This is why material management is critical, at least on the part of the hospital, in order to optimize the investment in these kinds of consumable assets

First In, First Out (FIFO)

Inventory items are sold in the order they are purchased. This is the most common technique

Last In, First Out (LIFO)

Last to enter the system are sold first. This is common among non-perishable items like petroleum, minerals, and metals.

First Expired, First Out (FEFO)

Materials are sold based on date they should be consumed, regardless of when it was purchased.

Generic Tax formula configurations

Material Management Systems usually allow tax rates to be defined internally via tax codes or imported from an external source. Tax configurations are usually accounted for on a per country basis. The following taxes can usually be processed while posting documents

Periodic physical stock taking and adjustments with tracking

Fortunately, these are all features and benefits offered by the Material Management System. Barcode and RFID are supplementary technologies that can be used in combination with the Material Management System in order to have more accurate and less burdensome inventory counts.