Materials Management and Maintenance

Dr. O G Olupona FM 503 Key words • Logistics, • supply chain, • out of stock, • re-order level, • inventory, • accounts payable, • warehouse, • bin card, • bulk purchasing, • pre-positioning, • consumption rate, • generic goods vs. branded goods, • preventive maintenance.

Materials Management and Maintenance 2 Logistics • The Oxford English Dictionary defines logistics as "the branch of military science relating to procuring, maintaining and transporting material, personnel and facilities". • The New Oxford American Dictionary defines logistics as "the detailed coordination of a complex operation involving many people, facilities, or supplies," • The Oxford Dictionary on-line defines it as "the detailed organization and implementation of a complex operation". As such, logistics is commonly seen as a branch of engineering that creates "people systems" rather than "machine systems." • According to the Council of Supply Chain Management Professionals logistics is the process of planning, implementing and controlling procedures for the efficient and effective transportation and storage of goods including services and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements and includes inbound, outbound, internal and external movements.

Materials Management and Maintenance 3 • Inbound logistics is one of the primary processes of logistics, concentrating on purchasing and arranging the inbound movement of materials, parts, and/or finished inventory from suppliers to manufacturing or assembly plants, warehouses, or retail stores. • Outbound logistics is the process related to the storage and movement of the final product and the related information flows from the end of the production line to the end user. • As hospitals deal with reimbursement cuts and other financial pressures, there has been a greater need to reduce how much healthcare providers spend on medical supplies and other services and equipment.

Materials Management and Maintenance 4 Supply Chain • A supply chain is a system of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer. Supply chain activities involve the transformation of natural resources, raw materials, and components into a finished product that is delivered to the end customer. • Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies.

Materials Management and Maintenance 5 Getting the right material in the right quantity in the right location and at the right time. • Out-of-stock: A situation in which the supply of an item is not available at the point it is needed. This can be prevented if a re-order level has been previously established and followed through. • Each item or good carries a bin card which helps to control the movement of that item. • Once the balance reaches the re-order level, requisition must be placed, and necessary approval and purchase performed to avoid stock-out. • Big establishments can operate a computerized system. There are commercial software packages that are available in the market for that purpose. • See video of BUTH’s transition from manual to e-stocktaking Materials Management and Maintenance 6 Materials Management and Maintenance 7 Materials Management and Maintenance 8 •It is essential to do an inventory periodically – frequency will be determined by a number of factors. •In setting the re-order level several factors must be taken into consideration. How common is the item? Are there many suppliers or just a few or worse still sole supplier? Is the item to be imported and if yes, how long does it take to clear customs etc.?

Materials Management and Maintenance 9 Factors to Consider • Should you buy branded or generic products? • Can you pool requisitions from different departments and do a bulk purchase? You may be able to get a discount or better unit price when you do bulk purchase. • Are you able to fix a price for a period? • Preferred suppliers of certain goods/items. • Payment for goods and supplies received – how much credit line do you have? • How do you prevent leakages/pilferages? • How do you prevent/eliminate fraud in the supply chain system?

Materials Management and Maintenance 10 • Should you buy branded or generic products? generally branded goods are more expensive than generic. In many instances, generic is as effective as the branded product. • Are you able to fix a price for a period?  this will be advantageous where prices fluctuate badly and in instances where the product is imported, and the exchange rate is unfavourable to the local currency. • Preferred suppliers of certain goods/items.  this approach eliminates spending a lot of time and other resources in obtaining quotations each time an item needs to be purchased. Effectiveness or efficacy of the item e.g. a generic for of a drug produced by a company as compared with a similar product by another company based on patients’ feedback. In such situation it makes sense to buy the item from that company

Materials Management and Maintenance 11 • Payment for goods and supplies received – how much credit line do you have?  credit sales can help an institution that has cash flow challenge to still be able to operate. Sometimes suppliers may build extra charge to the cost of the goods to compensate for the delay in payment. The extra cost should be weighed against bank fees if the institution were to obtain a bank loan or an overdraft. • How do you prevent leakages/pilferages? No level of leakage should be overlooked as little drops of water make the mighty ocean. Manual search or electronic monitor such as CCTV can help in eliminating or reducing significantly leakages. Recruitment process must ensure the persons hired have the right attitude and values. Fair salary can help prevent temptation. Genuine encounter with Jesus will go a long way in overcoming temptations.

Materials Management and Maintenance 12 •How do you prevent/eliminate fraud in the supply chain system?  good internal control system and transparent procurement system will go a long way in fraud prevention. All control measures must be tested periodically to ensure they are working as expected. There must be proper segregation of duties. Market survey periodically can also help such that preferred suppliers do not take undue advantage of the organization’s business relationship

Materials Management and Maintenance 13 Warehousing and Pre-positioning of Items • Pre-positioning of supplies – very critical in emergency response. System whereby supplies that are often needed have been previously placed close where it may be needed due to natural disaster or predicted disease outbreak prior to its occurrence. Sometimes ago President Bush of the USA requested that his country needed to stockpile equipment and other supplies that could enable the country to respond promptly to disease outbreak • Warehousing – FIFO first-in-first-out. • Drugs Storage temperature. Expiry dates.

Materials Management and Maintenance 14 Donated and Purchased Equipment •Donated equipment Are these compatible with what you already have on the ground? Are spare parts available locally for the equipment you are using in your hospital/practice? •Do you do routine preventive maintenance, or you wait till there is a breakdown? •Do the staff who use such equipment understand basic operating procedure of the equipment? •Have they been trained in the use of such equipment?

Materials Management and Maintenance 15 •Calibration of equipment. •What is the useful life cycle of that item? •Does your establishment have a disposal policy in place? •If you are buying equipment and materials with donor funding, have you observed the rule governing procurement e.g. origin of item, exclusion list etc.?

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