MATERIALS

MANAGEMENT
SYSTEM
 making sure that services go
successfully from one source
to an end user

MATERIALS
MANAGEMENT
MATERIALS MANAGEMENT
SYSTEM
INFORMATION SYSTEM
(MMIS) → manage functions lessens expenses and ensures
like purchasing, accounting, adequate cash flow
inventory management, and
patient supply charges
FUNCTIONS
OF MMIS
PURCHASING

Overview of the Purchasing Process

WAYS TO MAKE PURCHASE
QUOTATIONS:

Quotation → created
Single quotations → Multiple quotations →
from sales orders by
manually or out of a the purchase quotation
using the procurement
purchase requisition wizard could be used
confirmation wizard
INVENTORY CONTROL

• Inventory is one of the biggest expenses for most medical institutions (Johnston, 2014)
• Plays an important part in refining the quality of healthcare services → Lives of people are on
the line, as well as because medical costs are increasing
 Making Sure Shippers Are
Accurate
• Most medical suppliers use third-party shippers, and
the tracking system must ensure that the correct
supplies were loaded at the warehouse
STRATEGIES • Reveal whether medical supplies have been properly
handled in transit.
TO IMPROVE Alignment With Sales Projections
INVENTORY • Sales projections can be wildly inaccurate →
CONTROL: difficult to predict disease and accident patterns,
and patients are notoriously reluctant to switch
doctors, hospitals and health insurance
• Prevents waste, frees up cash that would have gone
to excess inventory and helps medical companies
identify trends they might not have seen before
Compliance With Regulations

• A company that routinely fails to serve the best

interests of patients can quickly find itself being

STRATEGIES
investigated, sued or simply shunned by health-care
consumers
• Knowing what inventory is on hand and what items
are needed can keep a medical company responsive
and prevent closer scrutiny by regulators. TO IMPROVE
Establishing Buying Cycles INVENTORY
• Instead of responding to needs for supplies and
equipment, inventory personnel can anticipate needs
based on previous cycles → can eliminate shortages
CONTROL:
and overages.
• Tracked to determine whether trends are shifting
and need to be adjusted.
 ITEM MASTER
MAINTENANCE - MEDICAL
AND NON-MEDICAL
INVENTORY ITEMS
INVENTORY ITEM
MAINTENANCE
• Upper portion contains master
information
• “Item Tab” is used for maintenance of
the attributes of an inventory item,
such as product type, item class, item
type, etc
• “Item Availability” form specifies
inventory levels across all warehouses
ITEM INDENTS AND ISSUES

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

Some suppliers allow returns of the said goods that have indents or the
like, with a guarantee of replacement without any additional payments

Damaged items are moved to another warehouse for them to be

monitored.
Re-order level is the minimum quantity Min/Max inventory ordering method
of an item that a company has in stock, Min” value is representative of a stock level that
so when the stock reached the prompts a re-order, and the “Max” value is
minimum quantity stated, the item representative of a new targeted stock level that
must then be re-ordered follows the re-order.
Economic Order Quantity (EOQ) → main
difference of these two—Max and Min

RE-ORDER LEVEL, RE-ORDER QUANTITY, MINIMUM

AND MAXIMUM LEVELS FOR EACH STORE
ENQUIRIES AND
QUOTATIONS FOR DRUGS,
CONSUMABLES, ASSETS
AND GENERAL ITEMS
• Enquiries - start point of a sale or
purchase process
– lead to getting information from a
vendor / supplier for the
requirement at hand
– establishing a connection with the
right vendor / supplier in order
to get a quotation, place the
order and receive the
requirements.
• Quotations
– state important information such
as price, delivery times, delivery
details, payment terms, taxation
etc
ORDER
• stated intention, either spoken or written,
to engage in a commercial transaction for
specific products or services
• buyer's point of view → expresses the
intention to buy and is called a purchase
order
• seller's point of view → intention to sell
and is referred to as a sales order
• orders become a contract between the
buyer and seller.
INVOICES

• invoice or bill is 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
• indicates the sale transaction only.
 Documents need to be created in order
to enable a quotation, order, invoice, tax
forms etc. to be used

DOCUMENTS

These documents are statutory

requirements to enable smooth transition
of the processes involved in successfully
completing a sale / purchase.
 COMPARISON OF
Q U O TAT I O N S A N D
PREFERRED VENDOR
FOR EACH ITEM
PURCHASE QUOTATIONS

• document for requesting prices and delivery information from a vendor before the purchase
order.
• complete history of the sourcing process: create a purchase quotation → 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
• the information tracked enables one to choose the right vendor for the purchase
• helps in lessening expenses, improving the quality and increasing on-time delivery
• allows one to compare offers in order to pick the appropriate vendor for the purchase
scenario
PREFERRED VENDORS
SEVER A L QUA L IT I ES O F A P R EFER RED VENDO R T H AT A CO M PA NY LO O KS FO R A R E:

On-time Reasonable High quality Fully licensed, Good

performance costs of products bonded, and Business
and services insured practices
 PURCHASE
REQUESTS,
O R D E R S C R E AT I O N
AND APPROVAL
PROCESS
 PURCHASE REQUEST

• 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 items
requested. 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
PURCHASE ORDERS
A simple Purchase Order will identify the following
basic elements:
• Buyer: name, address, and contact info of party giving
money for goods
• a document which records a • Seller: name, address, and contact info of party
business transaction between receiving money for goods

the buyer and the seller • Order Number: a unique ID number to track each
business transaction
• buyer issues his order, and • Item Description: details, quantity of goods, cost per
unit, and total price of goods
upon seller acceptance of the • Shipping Address: where the goods will be shipped
order, a legally binding • Shipping Date: when the goods will be delivered to
the final location
contract is created between • Billing Address: location of where the invoice should
the parties be sent so the Buyer can pay
• Signature: signature of Buyer offering to buy and
signature of Seller accepting
• Order Date: when the business transaction occurred
APPROVAL PROCESS
Originator → The person who creates the document, either a purchase request or order

An internal request is immediately sent to the first approval stage when the approval process
is launched

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

Internal notification goes back to the originator with a link to the rejected document should
the approver reject the document

The originator can amend the document, and the approval procedures will continue until the
approval conditions are adequately satisfied
 RECEIPT AND INSPECTION OF GOODS:

• Signing for Deliveries

– the person receiving the product should sign the receiving documents provided
by the supplier or shipping company.
– inspect the items before signing the receipt and should also initial the packing
list.
– submit the packing list to the appropriate person (Accounts Payable, Requester,
Asset Management) for financial reconciliation.
 RECEIPT AND INSPECTION OF GOODS:
• Refusing Delivery
– 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.
 RECEIPT AND INSPECTION OF GOODS:
• Record Retention
– Receiving Department takes physical possession and legal ownership of the shipment.
– 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.
– The need for saving receiving documents is particularly important when accepting any
partial or staggered deliveries over a period of time.
 1. The products conform to the purchase order requirements and other
relevant documents (for example: correct model number, description,
size, type, color, ratings, etc.)
2. The quantity ordered against the quantity shipped or delivered.
3. There is no damage or breakage.
RECEIPT
4. The unit of measurement count is correct (e.g. if the unit of
AND measurement on the purchase order is one dozen, there should be 12
INSPECTION in the package).
OF GOODS: 5. Delivery documentation (packing list, certifications, etc.) is acceptable.
6. Perishable items are in good condition and expiration dates have not
been exceeded.
7. Products are operable or functional.
 RECEIPT AND INSPECTION OF GOODS:
• 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.
 RECEIPT AND INSPECTION OF GOODS:
• 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

When purchased goods are returned, the material management system updates inventory levels to reflect the decrease in
quantity.

Supplies and equipment are also sometimes required to be taken out of the department for repairs or consignment →
temporary movement → Returnable Gate Pass is issued

Non-returnable Gate Pass → permanent movement.

The material management system can be configured to track returnable and non-returnable items of inventory or equipment
→ monitor due dates for returnable items, and provide detailed reports about the status of different inventory items.
 CONSIGNMENT STOCK RECEIPT,
CONSUMPTION AND REGULARIZATION
• 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.
• Customers can also arrange to take over ownership of the remaining
consignment material after a certain period of time
 E X PI RED S TOCK
A ND QU ARANTI NE
Upon reaching their expiration dates, some goods,
such as food and medicine, can no longer be utilized.

It may be sold to other parties at a lower cost.

EXPIRED
STOCK/INVENTORY
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
QUARANTINE STOCK/INVENTORY

Inventory is put into Inbound inspection upon receipt of:

quarantine if initially rejected Manufactured end items
during → Production, upon Purchased items
completion of an operation, Sold items on sales return orders
when specified as Move Enterprise Planning distribution orders
Rejected End Item to Outbound inspection upon issue of:
Quarantine. Materials to production
30 to 50% of hospital charges are actually
attributable to diagnostics, drugs, and consumables,

DRUGS AND
and doctors get only between 10 to 20%

CONSUMABLE
drugs and consumables take up the bulk of ISSUES AND
RETURNS TO
expenditure

PATIENTS
Material Management Systems become advantageous
→ provides an overview of the entire institution’s
purchasing and inventory control processes, decision-
makers can have more reliable information, and can
monitor the bigger picture
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

LIFO, FIFO,
the system are sold first. This is
common among non-perishable items
like petroleum, minerals, and metals.
FEFO ISSUES
METHODS
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 on sales and purchases
– Additional taxes like VAT
– Sales and Use tax as in USA
– Withholding tax like income tax in India
PERIODIC PHYSICAL STOCK TAKING
AND ADJUSTMENTS WITH TRACKING
• An inventory count is a process where a business physically counts its entire inventory
– Inventory services provide labor and automation to quickly count inventory and minimize shutdown
time.
– Inventory control system software can speed 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
• 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