Effective management of materials and finance is essential for ensuring that a hospital pharmacy functions smoothly, economically, and safely. Hospitals rely on well-structured material management systems to maintain uninterrupted drug supply, control costs, and support clinical services. Similarly, financial management enables proper allocation of resources, budgeting, expenditure tracking, and sustainability of pharmacy operations. Together, these components create a framework for efficient hospital pharmacy management.
Material Management: Definition
Material management refers to the systematic planning, procurement, storage, distribution, and control of materials from the point of purchase to final use. In a hospital pharmacy, it ensures that medicines and supplies are available in the right quantity, at the right time, and at the lowest possible cost without compromising quality.
Aims of Material Management
The goals of an efficient material management system include:
- Ensuring the right quality and correct quantity of materials are available.
- Procuring supplies at the right time to avoid stock-outs and treatment delays.
- Delivering materials at the right place to support clinical operations.
- Maintaining cost efficiency and minimizing wastage.
Purpose of Material Management
- Achieving economic purchasing through proper selection of suppliers.
- Meeting demand during the replenishment cycle.
- Maintaining reserve or buffer stocks to prevent shortages.
- Stabilizing fluctuations in consumption.
- Providing reliable service levels for patient care.
Objectives of Material Management
Primary Objectives
- Acquiring materials at the right price.
- Ensuring high turnover of inventory.
- Maintaining continuity of supply.
- Consistent quality assurance.
- Developing a strong information management system.
Secondary Objectives
- Inter-departmental coordination.
- Product improvement and standardization.
- Good supplier relationships.
- Personnel development.
- Evaluating decisions on whether to manufacture or purchase items.
Economy in Material Management
Economy refers to cost containment and improving efficiency in all material-related activities. This involves selecting reliable suppliers, negotiating effectively, and ensuring smooth procurement processes.
Basic Principles of Material Management
- Effective management and supervision: Includes planning, organizing, directing, controlling, reporting, and budgeting.
- Sound purchasing methods: Supplier selection and negotiation ensure quality and affordability.
- Efficient purchasing systems: Processes should be simple and cost-effective.
- Inventory control: Helps balance availability and cost.
Key Elements of Material Management
- Demand estimation based on consumption trends from previous years.
- Identifying essential materials and verifying availability.
- Reviewing needs based on hospital workload and budgets.
Financial Management in Hospital Pharmacy
Finances are vital for sustaining pharmacy operations. Hospitals obtain funds from multiple sources, including patient charges, third-party payments, research activities, investments, contributions, and endowment funds.
Inventory Control
Inventory control is a scientific approach to determining optimal stock levels for uninterrupted services. It ensures the right quantity of materials is available at the right time, preventing both overstocking and shortages.
Inventory Control Techniques
1. ABC Analysis
The ABC (Always Better Control) method categorizes inventory based on annual consumption value:
| A Items | B Items | C Items |
|---|---|---|
| 10% of items; 70% of budget; strict control required | 20% of items; 20% of budget; moderate control | 70% of items; 10% of budget; loose control |
Advantages
- Helps prioritize high-value items.
- Reduces paperwork and clerical workload.
- Achieves significant cost reduction.
Disadvantages
- Requires periodic revision.
- Standardization can be challenging.
2. VED Analysis
Classifies items based on criticality:
- V – Vital: Essential for hospital functioning.
- E – Essential: Required for quality care; shortage affects services.
- D – Desirable: Useful but not essential.
ABC and VED analyses can be combined to categorize drugs into Class I, II, and III for better control and budgeting.
3. EOQ (Economic Order Quantity) Analysis
EOQ determines the optimal quantity of items to order, minimizing total inventory cost.
Assumptions of EOQ
- Constant and known demand.
- Constant lead time.
- Instantaneous receipt of goods.
- No quantity discounts.
- Costs include ordering and holding costs only.
EOQ Models
Two major EOQ models are used:
- Q Model: Fixed order quantity placed when stock reaches reorder point.
- P Model: Fixed time interval model where orders are placed periodically.
Merits and Demerits of EOQ Models
Q Model
- Ensures economic ordering.
- Provides better inventory control.
- Requires monitoring to avoid stock-outs.
P Model
- Reduces ordering costs.
- Ideal for seasonal or irregular usage items.
- May require inflexible order quantities.
Detailed Notes:
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PATH: PHARMD/ PHARMD NOTES/ PHARMD FOURTH YEAR NOTES/ HOSPITAL PHARMACY/ MANAGEMENT OF MATERIALS AND FINANCE.