Lesson 12

MATERIAL MANAGEMENT SYSTEM

MATERIALS MANAGEMENT SYSTEM

To successfully manage such information, many hospitals implement a form of materials management
information system (MMIS). The aforementioned systems can be used to manage functions like purchasing,
accounting, inventory management, and patient supply charges (“Materials Management Information
Systems,” 1996).
INVENTORY CONTROL
Strategies in improving inventory control in the health care facility:

Making sure shippers are accurate

Alignment with Sales Projection
Compliance with regulations
Establishing buying cycles
ITEM MASTER MAINTENANCE – MEDICAL AND NON-MEDICAL INVENTORY
In Material Management Systems, the inventory item maintenance screen has many sections. The upper
portion contains master information. Additional options appear after the selection of an existing item.
Users could 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
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. Some suppliers allow returns of the said 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

Re-order Level is the minimum quantity of an item that a company has in stock, so when the stock reaches
the minimum quantity stated, the item must then be re-ordered (Purchase Order/Production Order).
o Min/Max inventory ordering method is the basic reordering method implemented in many ERPs and
other inventory management software.
o Min value representative of a stock level
o Max value representative of a new targeted stock level that follows the re-order.
o Economic Order Quantity (EOQ) is often interpreted as the main difference between the Min and Max
value.
ENQUIRIES AND QUOTATIONS FOR DRUGS, CONSUMABLES, ASSETS, AND GENERAL ITEMS

Documents required in materials Enquiries

management process
Quotations
Orders
Invoices
Documents
COMPARISONS OF QUOTATION AND PREFERRED VENDORS

Purchase Quotation is a document for requesting prices and delivery information

from a vendor before the purchase order.

Preferred Vendor Companies typically maintain a list of preferred vendors, from which inventory items
are usually purchased. Several qualities of a preferred vendor that a company looks for are: On-time
performance, Reasonable costs, High quality of products and services, Fully licensed, bonded, and insured, and
Good business practices.
PURCHASE REQUESTS, ORDERS, AND APPROVAL PROCESS

Purchase Request or Purchase Requisition is a document that notifies the purchasing department that certain
items or services need to be replenished.

Purchase Order, is a document which records a business transaction between the buyer and the seller.

Approval Process - The request for approval is sent to the first approver when the document fails to meet the
approval requisites. Once the document has been approved an internal notice is sent to the originator. He can
then process the document.
RECEIVING AND TRACKING ITEMS

Proper receipt and inspection of goods

Signing for Refusing Record Inspecting Partial

Tracking
deliveries deliveries retention a shipment deliveries
PURCHASE RETURNS ALONG WITH RETURNABLE/NON-RETURNABLE GATE PASS

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

For temporary movement, a returnable gate pass is issued, whereas for permanent movement, a non-
returnable gate pass is given.
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 in the consignee’s premises. The vendor maintains legal ownership until such
materials are removed from consignment stores.
EXPIRED STOCK AND QUARANTINE
Expired Stock/Inventory
Expiration 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 is
reached.
DRUGS AND CONSUMABLE ISSUE AND RETUNS TO PATIENTS
Materials Management System 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.
ISSUE METHODS

First In, First Out (FIFO)

Last In, First Out (LIFO)

First Expired, First Out

(FEFO)
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:
o Tax on sales and purchases
o Additional taxes like VAT
o Sales and Use tax, as in USA
o 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. Barcode and RFID
can be used to ensure accurate and less burdensome counts. The following tactics can be used to minimize
disruption during the physical inventory:
• Inventory services
• Inventory control system software
• Perpetual inventory system
• Cycle counting
 KEY POINTS TO
◻ To successfully manage REMEMBER
gathered information, many hospitals
implement a form of materials
management information system (MMIS). This system can be used to manage
functions like purchasing, accounting, inventory management, and patient supply charges
(“Materials Management Information Systems,” 1996).
◻ 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 healthcare services and
different strategies could be employed to ensure efficiency. This include: making sure
shippers are accurate, alignment with sales projections, compliance with regulations,
and establishing buying cycles.
◻ The MMS handles issues such as item indents and re-order level.
◻ There are policies for receipt and inspection of goods that needs to be applied. The same
is true for returns,
consignment stock, expired and quarantined stock.
◻ There are three issue methods that are currently used in the healthcare industry: First In, First
Out (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 less burdensome counts.
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