1. Define material management, its objectives and functions. Ans.

Introduction: Challenges faced by hospitals areMinimum cost of inventory Critical items like certain medicines, tubes etc .have to be available at all times Many drugs have short shelf life or have to be stored at particular temperature; newer technology makes hospital equipment obsolete within very short period. All the above factors and many more make material management a challenge in hospitals. Definition: Material management can be defined as the process of management which coordinates, supervises and executes the task associated with flow of materials to through and out of an organization in an integrated fashion. It is the function responsible for the coordination of planning, sourcing, purchasing, moving, storing and controlling materials in an optimum manner so as to provide a pre decided service to the customer at minimum cost. Objectives and Functions of Materials Management: The objectives and functions of materials management can be categorized in two ways as follows: (I) Primary objectives (II) Secondary objectives They are discussed below: (I ) Primary objectives Which can be classified as: (i) Efficient materials planning (ii) Buying or Purchasing (iii) Procuring and receiving (iv) Storing and inventory control
1|Page

(v) Supply and distribution of materials (vi) Quality assurance4 / Materials and Financial Management (vii) Good supplier and customer relationship (viii) Improved departmental efficiency (II) Secondary objectives There can be several secondary objectives of materials management. Some of them are: (i) Efficient production scheduling (ii) To take make or buy decisions (iii) Prepare specifications and standization of materials (iv) To assist in product design and development (v) Forecasting demand and quantity of materials requirements (vi) Quality control of materials purchased (vii) Material handling (viii) Use of value analysis and value engineering (ix) Developing skills of workers in materials management (x) Smooth flow of materials in and out of the organization To fulfill all these objectives, it is necessary to establish harmony and good co-ordination between all the employees of material management department and this department should have good co-ordination with the other departments of the organization to serve all production centers. The functions of materials management are : In order to fulfill the objectives of materials management and to meet the basic objectives and goals, the functions of the materials management are (i) Materials Requirements Planning (MRP) Planning of materials requirements in manufacturing is a necessary function in any
2|Page

organization, as inventory of materials involve about 60% of the total investment of the organization. The profit earned depends on the utilization of these materials and reducing the inventory of the materials. The latest technique used is called Just in Time (JIT) is referred practically to no inventory. (ii) Purchasing All the organizations needs an efficient and economic purchasing and procurement of its various supplies of materials from the suppliers. The materials management department has to perform this function of purchasing and procurement of materials very efficiently. Since 50% to 60% of sales turnover is spent on the purchase of various materials, the amount of profit earned on this sales very much depends how economically the materials are purchased and utilized in the organization. The profitability depends on the efficiency by which this particular function of purchasing and procuring the requisite materials at appropriate time. The function of purchasing can be stated as follows: (1) The requisition of material is necessary by proper authority to initiate its purchase. (2) To select proper supplier for the materials requisitioned, before placing an order. (3) To negotiate about the price of the material from the supplier and it will be purchased at the cheapest price. (4) The quality of material must be assured and should not be compromised with the cost of the material. (5) The material should be purchased of right quantity and right quality at proper time at the cheapest cost. (6) To set the proper purchase policy and procedure. (iii) Inventory Planning and Control The modern concept of inventory planning is that the materials should be purchased and brought in the stores just before it enters the production or sold out so that inventory cost
3|Page

is negligible. The zero inventories are the ideal planning. There are three types of inventories. (i) Raw materials (ii) Purchased goods (iii) Finished parts and components6 / Materials and Financial Management The inventory control of these various materials lies with the materials management department, production department and sales department. Inventory at different levels is necessary to make sure about the availability of all these types of materials and goods and their proper flow from one facility to another at different levels of production centers in a manufacturing concern. The storing of various types of materials and parts as inventory is therefore very essential before its delivery and use at different production centers. This involves inventory planning and control of materials in the stores department. (iv) Ascertaining and Maintaining the Flow and Supply of Materials Distribution of materials requisitioned by the various production centers and other departments must be ascertained and its flow and continuity of supply must be maintained by the materials management department. (v) Quality Control of Materials Thus, pre requisites for modern material management in hospitals are as follows: o Meticulous planning o Accurate demand estimation o Appropriate staffing.

4|Page

3). Define inventory control, aims, functions and explain the types of inventory costs. Ans. Introduction: The management of hospital supply chain should be planned for efficient and effective inventory control. The just in time and hospital supply chain management are latest concepts in inventory control. Definition: Inventory Control is the supervision of supply, storage and accessibility of items in order to ensure an adequate supply without excessive oversupply. It can also be referred as internal control - an accounting procedure or system designed to promote efficiency or assure the implementation of a policy or safeguard assets or avoid fraud and error etc. Inventory control may refer to:

In economics, the inventory control problem, which aims to reduce overhead cost without hurting service In the field of loss prevention, systems designed to introduce technical barriers to shoplifting.

It answers the 3 basic questions of any supply chain: 1. When? 2. Where? 3. How much? Aim of inventory control: The aim of inventory control in hospitals is to: (i) (ii) (iii) Maintain availability of any item anywhere, anytime in the hospital at minimum cost. Optimize cost by analysing holding cost, ordering cost and stock out cost to have minimum cost of inventory. Minimize dead stock and obsolesce.

The whole principle is availability of items keeping cost to minimum. Functions of inventory control: A certain inventory stock has to be maintained by hospitals as: (i) (ii) (iii) There is a time lag in procuring items called as lead time. There has to be a reserve stock to service the hospital requirement during lead time called as safety or buffer stock. There would be larger buffer stock if there is unceratinty in procurement.

5|Page

(iv)

The inventory to be kept would depend upon striking a balance between ordering cost, inventory carrying cost and minimum obsolesce of consumable; since many drugs have a very short life but must be always available due to its vitality. Certain obsolesce in hospitals is unavoidable, specially life saving drugs.

Thus, a good inventory control is very important to minimize ineffective stock with items being available when required. An efficient inventory system in a health institution can: (i) (ii) (iii) Improve availability of items specially vital drugs. Reduce cost by minimum obscolescence of stock. Improve patient satisfaction by giving better service.

The quantum of inventory to be kept would depend upon: Lead time Cost factors Requirement Financial policies Credit availability Obscolescence Storage space Government policies Marketing conditions Paient service provider relations.

Thus, to summarize, inventory control functions are: (i) (ii) (iii) (iv) Stocking of adequate amount, number and range of stores at all service outlets. Provide minimum supply service consistent with maximum efficiency and optimum investment. Provide a cushion between the forecasted and actual demand for a material. Gives optimal outlay of financial and human resources.

Types of Inventory Costs: Types of inventory costs can be divided into: (i) Purchase cost: It is the actual cost of material like drugs, linen etc.

6|Page

The aim is to reduce the cost without compromising quality which can be done by bulk purchase, under generic names and not trade names. (ii) Carrying cost: This is the cost of interest on capita incurred on material, storage cost, insurance cost etc. This cost should be minimized to reduce the hospital cost. Ordering cost: This is money spent on procurement like staff engaged, cost of stationery etc. It would not depend on quantity of items. Stockout cost: In cse of stockout, the items procured during emergency would be of higher cost and more efforts. The balance betwwen carrying and ordering cost should be maintained because if the inventory level goes up carrying cost increases but procurement cost decreases. If we have a small inventory then the carrying cost would be less but ordering cost more due to more frequent orders.

(iii)

(iv)

Thus, inventory control is a very important function in material management.

7|Page

4. What are the various steps of procurment of equipment and nedd assessment. Ans. Introduction: Many studies conducted by the government indicate that 40 to 50% equipment procured by hospitals is not functional. Hence procurement should focus on cost beenfit analysis, choosing the equipment specification and identifying the source of supply. Following are the steps in equipment procurement and selection: (i) Assessment of Need: A proper justification of need should be done. It should be real need and not just felt need based on manufacturer hype. Each equipment to be procured must be properly evaluated by a committee represented by management, hospital administrator, hospital engineers, clinician and finance person. It should critically evaluate the potential of equipment and also visit the hospital where it is being used. It should also be assessed, if use of such equipment would be more cost effective by referring cases to other hospitals or self procurement is necessary. E.g to procure CT or MRI for hospital would depend on the number pf patients being referred for it. Hence, the requirement for equipmento Has to be realistic o Identify equipment and assess the quality o Decide on specification and the sources. o The bed strength and type of service to be provided. The need assessed should also consider training of manpower, additional manpower and creation of infrastructure while doing equipment costing. Various steps for equipment selection in hospitals are:

8|Page

o Need assessment o CIF destination o Use coefficient o Installation on turn key basis o Cost consciousness o Warranty with spares o Specifications o Service contracts o Continuous supply of consumables o Service contracts o Staff training o Site preparation o Foreign exchange o Facility of backup power supply o Good economics o Supplier selection and purchase procedure.

(ii)

Costing of Equipment: o It includes procurement cost, maintenance cost, use of consumables and replacement cost due to obsolescence. o Would also include insurance and freight charges. o Site preparation for building, air conditioning, electricity, plumbing etc is to be also included.

(iii)

Qualitative Requirement: The qualitative requirement of equipment and specification should be worked out by a committee of specialist, administrator and finance person.

(iv)

Use Coefficient:

9|Page

This is applied to assess utilization of an equipment. Its formula is:

Use coefficient = N / M x 100 where N = Average number of hours of equipment used per day. M = Maximum number of hours of equipment can be used per day. If use coefficient is less than 50% equipment is under utilised. This formula cannot be applied for life saving equipment as these have to be procured and kept even if these are underutilised like ventilator etc. Factors affecting utilization of equipment in hospitals are: o o o o o o o o Staff training Equipment installed on turn key basis Preventive maintenance and after sales service Facility of backup power supply Time scheduling of hospital Use coefficient Awareness of the facility among patients / consumers Utilization of the facility

(v)

(vi)

Warranty: It should be clearly spelled out and should be comprehensive which means even spare to be povided at companys cost. After sales service and AMC: o The AMC (annual maintenance contract) should also be comprehensive and negotiated as such at the time of purchase. o The service contract after warranty should be 5 to 7 years and about 10% of equipment cost to be paid every year. o A minimum downtime of equipment and penalty clause should be inbuilt in service contract to bind company to keep equipment always serviceable.

(vii)

Consumable Supply:

10 | P a g e

They should be procured for atleast one year at the time of equipment procurement and guarantee to supply consumables and spares for 10 years should be part of procurement and after sales service document. (viii) Training of Staff: The firm should train manpower free of cost for operating the equipment. Preparation of Site: The site should be selected alongwith firm engineers and facilities like power supply, plumbing and generator backup must be provided by hospital. A standby generator and UPS should be ensured for all electronic equipment. Purchase Order: It should be evaluated critically and include every aspect which bind both the parties and penalty clauses. The technical user manual should accompany equipment.

(ix)

(x)

11 | P a g e

5. Discuss in detail condemnation and disposal procedures in a General Hospital. Ans. Definition of Unserviceable goods (1) An articles/goods/equipment may be declared unserviceable, if the same is beyond economical repair thus unfit for use by the Department. (2) It includes Surplus or obsolete goods meaning items, which though in good and serviceable condition, are not required by the Department due to change in programme, procedure or policy of the Department; which are to be disposed of in the best interest of the Department as per the prescribed guideline. (3) It excludes: (a) Certain surplus or obsolete or unserviceable goods such as expired medicines, food products, radioactive materials etc., which are hazardous or unfit for human consumption, which should be disposed of or destroyed immediately by adopting suitable mode so as to avoid any health hazard and/or environmental pollution and also the possibility of misuse of such goods. (b) Surplus or obsolete or unserviceable goods, equipment and documents, which involve security concerns (e.g. currency, negotiable instruments, receipt books, stamps, security press etc.) should be disposed of / destroyed in an appropriate manner to ensure compliance with rules relating to official secrets as well as financial prudence. (c) unserviceable vehicle which should be declared condemned and disposed of in an appropriate manner

12 | P a g e

Constitution of Condemnation & Disposal Board: To declare unserviceable item(s) as unserviceable and condemnable; a board known as Condemnation and Disposal board must be constituted at different levels i n the Hospital General Principles & Procedures to declare an item as unserviceable (1) All goods which may be declared as unserviceable shall be collected at a suitable place and the Officer in-charge of concerned store shall be instructed well in advance, to produce them for inspection of the Board on the date fixed for the purpose. (2) The concerned Head of office shall prepare a consolidated Pre-inspection Report of unserviceable goods in the condemnation form. (3) In case of sophisticated equipment, appliances, machine etc., a technical report on each machine or its parts as regarding beyond economic repairs should be obtained from suitable expert before condemnation as prescribed below: (a) for Cold chain Equipment: State Cold chain Officer or his representative (b) for sophisticated/specialized equipment, appliances, machine including : XRay Machine: A suitable technically qualified person in related field to be selected by the DDHS(E&S) on behalf of the department. (4) In other cases, where the life period is not over or no life period has been prescribed or stipulated, the reason(s) for declaring the item unserviceable should be clearly recorded such as, may be normal wear and tear, excessive use in public interest, accidental fire, flood and other natural causes, damage due to insect, rats etc (5) The Board shall take into account the Prescribed life period of the goods before declaring them as unserviceable and to be condemned. (6) The term Prescribed life period means: (a) the normal life period of the item as guaranteed/stipulated by the manufacturers or (b) more than 10 years service life period when the same is not guaranteed/stipulated by the manufacturers.
13 | P a g e

(7) Where the Prescribed life period on any item and the same is already over, it should normally be taken as enough ground for declaring the item unserviceable. However, the condition of the item should still be thoroughly examined by the board to see whether the item could be put to further use and in case these are fit to be used economically those may not be declared unserviceable. (8) In case an item becomes unserviceable due to negligence, fraud or mischief on the part of an employee, the same shall be brought out clearly; responsibility for the same shall be fixed by the Board. (9) After considering all the relevant data, and conducting the inspection, the Board shall decide whether any of the goods submitted for condemnation are to be declared as unserviceable and be condemned or can be utilised after proper repairs. (10) The Board shall record their decision in writing in the condemnation form. Determination of Floor/Reserve Price (1) The Condemnation and Disposal Board after consideration of book value and inspection shall workout and fix up Floor/Reserve Price for each of the condemned items as per the formula given below: Floor/Reserve price = Book value minus Depreciation plus Weightage considering condition of the item Whereas Depreciation = Book Value multiplied by year of service divided by Prescribed Life Period in year (2) If the book value is not available, the Board shall determine the same after consideration of available records pertaining to similar kind of items stored elsewhere. (3) The Board shall record their decision in writing in condemnation form. (4) Weightage, as referred to above will be as per the condition of the item and not exceeding 10% of the book value of the item.

Following records need to be mentioned specifically on the condemnation form: (a) History sheet of equipment to be maitained for every equipment and must incorporate:
14 | P a g e

o Identification date i.e. make, model and date of purchasing o Details of sources and reputation of suppliers. o Availability of spares. o Purchase cost. o Details of breakdown and expenditure incurred o If imported, details thereof. o Details of procurement procedure. (b) A column may be added for determining the life of the equipment at purchase. Logbook of maintenance and repair will give details of: Warranty period, servicing and repairs during warranty Annual service contract after warranty. Expenditre incurred on annual basis Expenditure on other maintenance and repairs. Details of preventive maintenance. Whether in working condition or not.

Disposal Once the equipment has been condemned it should be quarantined or thrown away. To quarantine the equipment means removing it from clinical use and putting it somewhere it cannot be used which is allocated as an area for scrapped equipment. There may be an alternative use for this equipment:

Charity Research project Training Sold on to vetinary practice, etc. If there is an alternative use, the equipment may be held in the quarantine area until it can be handed over. Whoever takes the equipment must sign a form agreeing that the equipment is 'taken as seen'. All service and inventory labels must be removed, and all patient information deleted (where the device has IT storage capability)

15 | P a g e

The equipment that cannot be found an alternative use must be disposed of safely. This will usually include:

Removal of lead acid, Nickel Cadmium or other alkaline batteries for separate disposal in line with trust policies. Evacuation of Cathode ray tubes to prevent the risk of implosion (Usually by breaking off the nipple at the back of the tube). Removal of in line fuses. Cleaning and decontamination. Removal of all means to power up the device. (i.e. On hard wired devices the mains cable should be cut off.) Removal of all hoses able to pressurise a device (if driven by gases)

16 | P a g e

6. Explain briefly the following: a) ERP or Enterprise Resource Planning: ERP is a software which deals with the total resources of the hospital. Material is one resource since it consumes 30 to 40% of a hospital budget. The Materials Management component of the ERP business solutions software addresses a broad range of issues around material inventory like. Product A 'Product' is something that can be sold and/or purchased, (or something that can be stored) and it has to have a Price. The main examples of Products in the inventory management software are: Items Services Resources Expense Types . Product Catalog The Product Catalog organizes all products for simplified searching based on product attributes. Price Lists Multiple Price Lists are supported for all purchased and sold items. The system provides general and customer specific sales price lists. Price Lists are date controlled to allow special sales initiatives. Bill of Materials A Bill of Materials (BOM) is a product structure that lists the parts and components that constitute the product in the context of an assembly, kit, or model. It contains one or more Products, Services, or BOMs. The number of components a Bill of Materials may contain is unlimited. Distribution and Multi-Warehouse Control ERP supports multiple warehouses with user-defined locations within each warehouse for recording stock locations in shelves and bays (Bin Locations).. Movements between warehouses

17 | P a g e

can be configured to produce appropriate shipping documentation, and manage 'in transit' stock. Inventory counts and Inventory valuation adjustments are managed by recording the difference between the book stock quantity and the count quantity. Stock used for internal purposes can be written-off to record the stock decrement and related adjustments in the General Ledger. Material Receipts and Replenishment. Material Replenishment lists are created based on inventory replenishment rules, past sales, or targeted inventory levels. Requisitions or Purchase Orders can also be automatically generated from the Material Replenishment report. Optionally, you can also replenish a warehouse from another warehouse. Costing of Product and Services

Standard Costing Actual Costing (Last PO, Last Invoice, LIFO, FIFO) Average (PO, Invoice) Costs can be recorded at three levels: Company, Organization, or Batch/Lot. You can also specify a different costing method or level for a Product Category. This allows the maximum flexibility for financial analysis. You may switch the costing method used any time. The information is very valuable to compare trends. Costs are maintained in your accounting currency. Using different costing methods (Standard, Actual, or Average) can result in different financial results. The Compiere ERP supports more than one costing method, e.g. for legal accounting and business decision-making. The following general information is maintained per Product and Accounting Schema: Current Cost (based on Standard or Actual Costing) Last Purchase Order Price (converted) Last AP Invoice Price (converted) Total lifetime Invoice Quantity and Amount (resulting in lifetime average cost) Benefits of ERP: o Information is available across all functions and locations within the organization. Hence management can act and take decision quickly and competetively. o Better customer satisfaction o Better vendor responsibility
18 | P a g e

o Better quality cost o Increased flexibility o Improve decision making and resource utilisation. o Reduction in lead time by 60% o Almost 99% ontime availability of drugs / inventory o Reduction of inventory by 30%.

Thus, ERP allows us to exploit information to our advantage for better material control due to better hospital / management information.

b) Economic order quantity: Economic order quantity (EOQ) is the order quantity of inventory that minimizes the total cost of inventory management. Two most important categories of inventory costs are ordering costs and carrying costs. It is one of the oldest classical production scheduling models. The framework used to determine this order quantity is also known as Wilson EOQ Model or Wilson Formula. The model was developed by Ford W. Harris in 1913,but R. H. Wilson, a consultant who applied it extensively, is given credit for his in-depth analysis EOQ applies only when demand for a product is constant over the year and each new order is delivered in full when inventory reaches zero. There is a fixed cost for each order placed, regardless of the number of units ordered. There is also a cost for each unit held in storage, commonly known as holding cost, sometimes expressed as a percentage of the purchase cost of the item. Underlying assumptions 1. 2. 3. 4. 5. 6. The ordering cost is constant. The rate of demand is known, and spread evenly throughout the year. The lead time is fixed. The purchase price of the item is constant i.e. no discount is available The replenishment is made instantaneously, the whole batch is delivered at once. Only one product is involved.

19 | P a g e

EOQ is the quantity to order, so that ordering cost + holding cost finds its minimum. The both are antagonist to each other. The more ordering cost means less inventory carrying cost and vice versa. It can be calculated as: EOQ = 2 AD / H Where A = fixed cost of ordering (Rupees / order) D = Average annual demand (Unit / year) H = Holding cost (Rupess/unit/year) or Purchase cost of item per unit X inventory carrying cost in percentage TC = Total annual cost (Rupee / year) TC = 2ADH Example: If annual demand (D) od Inj Ampicillin 1 gm is 20000 units, the cost of placing order (A) is Rs 100 and purchase cost is Rs 20 per unit X inventory carrying cost is 20 % of purchase cost (H) the calculation would be 1,000 units.

c) Shutdown maintenance. According to a survey conducted by the Government of India in 132 govt. Hospitals showed that electro medical equipment worth 48.61 crore out of the total cost of 180.58 crore were not in working condition. The reasons for this were: Lack of maintenance policy by the hospitals and lack of budget provision for the same. Non availability of technical documents for installation, maintenance and safety as these equipments were either donated or purchased without adequate purchase policies. Maintenance is any action or combination of actions carried out to ascertain an item in, or restore it to, an acceptable condition. It may be planned or unplanned / emergency maintenence. (i) Planned maintenance: Preventive : like running and shutdown maintenance Corrective maintenance Shutdown maintenance is maintenance that can only be carried out when the item is out of service.

20 | P a g e

An electrical shutdown is a carefully managed process whereby electrical equipment is switched off for various reasons, including crucial maintenance, training, expansion and repair; and then turned back on again with minimal impact to patients. Electrical shutdowns can be performed safely and hospitals can gain added benefits from their electrical shutdowns if they also use them to train clinical and support staff in how to deal with power outages. Some examples of effective shutdown activities include the following Detailed planning at several levels; A personalized walk-through of each affected area; Comprehensive multimedia communications; Brief, scheduled and localized power outages for assessment purposes; A focused assessment of the shutdown impact on each space and activity; Action plans for each unit or department; Shutdown contingency plans; Pre-shutdown work plans or checklists; A hold point list that permits clinical control of the process; Checklists of shutdown work scope; An overall shutdown plan, also called the shutdown white paper; Timely lessons learned critiques; and Official shutdown reports for the utility management record Inspection tests to be carried out during shutdown maintenance: Some of the examples are: Dye Penetrant Test Hardness Test Magnetic Particle Test Gauss Measurement Test Radiographic Test Thickness Measurement Test Ultrasonic Examination Vibration Readings
21 | P a g e

 Dynamic Balancing Readings Primary Reformer Monitoring - (a) Tube Master (b) Creep Measurement (c) Delta P Measurement (d) Metallography Measurement (e) Temperature Measurement (f) Visual Inspection Rubber Line Thickness Measurement Equipment Skin Temperature Measurement Vendor Site Inspection Back EOT / Mobile Crane Overload Test

Planned shutdowns also include recovery (i.e., getting back to normal). This can be a burdensome process. The final shutdown task force meeting, held a week after the shutdown, should be billed as a lessons learned meeting. This is an opportunity for people to report their perceptions and their recommendations for improving future shutdowns. The results of this meeting should be entered into a cumulative database for future reference. Lessons learned are invaluable aids to improving the environment of care. Hospitals should critique the entire process and plan to adjust any procedures as appropriate. Objectives: (i) (ii) To extend life of equipment To ensure optimum availability of equipment and explicating it fully to ensure maximum return in investment before it is phased out. (iii) (iv) To give optimal operational cost To ensure operational readiness of equipment all the times, reduce idle time and provide continued service. (v) Ensure safety of patient and person operating or using it.

22 | P a g e

d) Supply chain management. Introduction: Supply chain management (SCM) is the management of the flow of goods. It includes the movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption. Interconnected or interlinked networks, channels and node businesses are involved in the provision of products and services required by end customers in a supply chain Definition: Supply chain management is the coordination of production, inventory, location, and transportation among the participants in a supply chain to achieve the best mix of responsiveness and efficiency for the market being served. It may also be defined as the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally. A supply chain, is a set of organizations directly linked by one or more upstream and downstream flows of products, services, finances, or information from a source to a customer. Supply chain management is the management of such a chain. Supply chain management addresses the following problems:

Distribution network configuration: the number, location, and network missions of suppliers, production facilities, distribution centers, warehouses, cross-docks, and customers.

Distribution strategy: questions of operating control (e.g., centralized, decentralized, or shared); delivery scheme (e.g., direct shipment, pool point shipping, ); mode of transportation (e.g road, rail, by air or sea); replenishment strategy (e.g., pull, push, or hybrid); and transportation control (e.g., owner operated, contract carrier, etc.)

Trade-offs in logistical activities: The above activities must be coordinated in order to achieve the lowest total logistics cost. Trade-offs may increase the total cost if only one of the activities is optimized..

23 | P a g e

Information: The integration of processes through the supply chain in order to share valuable information, including demand signals, forecasts, inventory, transportation, and potential collaboration.

Inventory management: Management of the quantity and location of inventory, including raw materials, work in process (WIP), and finished goods.

Cash flow: Arranging the payment terms and methodologies for exchanging funds across entities within the supply chain. Functions of supply chain management: Supply chain management is a cross-functional approach that includes managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and toward the end consumer.

As organizations strive to focus on core competencies and becoming more flexible, they reduce their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other firms that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing managerial control of daily logistics operations. Less control and more supply chain partners led to the creation of the concept of supply chain management. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement.

Thus, supply chain management allows an enterprise to build a realtionship between various activities to optimally identify demand supply chain. This concept can be applied in hospitals also for inventory management.

24 | P a g e