LESSON 12

MATERIAL MANAGEMENT SYSTEM

 LEARNING GUIDE TIME LEARNING
Lesson 12: Materials Management System ALLOTMENT RESOURCES

Intended Learning Outcomes 4.0 hours Lesson Content:

Lesson 12
12.1. discuss the concepts in the materials management system;
12.2. explain item master maintenance, indents, issues, reorder level, and
minimum/maximum inventory;
12.3. describe the procurement process from enquiries, quotations,
purchase request, order and approval, receiving, and returns;
12.4. review the concepts involving consignment, consumption,
regularization, and treatment of expired stock and quarantine;
12.5. compare different issue methods; and
12.6. define the generic tax formula configuration.

Self-Directed Activity 3.0 hours

After completing the hand-on exercises, submit a narrative report on your
experience in using a materials management information system.

Baseline Concept Understanding 30 minutes

Learning Outcomes Assessment 30 minutes
MATERIALS MANAGEMENT SYSTEM

Receiving
Purchase Request Purchase Order
Delivery

The Materials Management System can be used to manage functions like

purchasing, accounting, inventory management, and patient supply charges (Materials
Management Systems, 1996)
INVENTORY CONTROL
Strategies in improving inventory control in the health care facility:
Ensuring shipment accuracy

Aligning with sales projections

Complying with regulations

Establishing buying cycles

ITEM MASTER MAINTENANCE
Item master maintenance has many sections. The upper portion contain master
information. The “item” tab is used for maintenance of the attributes of the item.

Item Availability form specifies inventory levels across all warehouses.

Figure 12.2 Inventory Items
Figure 12.3 Item Availability
Item Indents and Issues
Goods that are damaged or have indents while being transported from the source to the
warehouse may be returned when the supplier allows it.

Damaged items are moved to another warehouse for them to be monitored.

Reorder Level and Minimum and Maximum Inventory Ordering
Reorder Level is the minimum quantity of an item that a company has in stock, so when
the stock reaches the stated minimum quantity, the item must then be reordered.

Min/Max inventory ordering method is the basic reordering method implemented in many
ERPs and other inventory management software.
o Min value represents the stock level that prompts the reorder.
o Max value sets the new targeted level that follows the reorder.
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 requesting prices and delivery information from a
vendor before the purchase order.

Preferred Vendor is part of the list that a company keeps from whom they purchase their
supplies. They look for vendors who has on-time performance, offers reasonable costs,
provides high quality products and services, fully licensed, bonded, and insured product
and services, and has good business practices.
PURCHASE REQUESTS, ORDERS, AND APPROVAL
Purchase request or purchase requisition is a document that notifies the purchasing
department that certain items ore services need to be replenished.

Purchase Order is legally binding contract which shows that the seller has already
accepted the order issued by the buyer (SAP, 2012).

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 dates and decrease in values of items must be reflected in the financial records
so discrepancies in financial statements will be prevented.

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 so they have more reliable information
regarding the drugs and consumables which is critical to decision making.
 First In, First
Out (FIFO)

Last In, First

ISSUE METHODS Out (LIFO)
First Expired,
First Out
(FEFO)
GENERIC TAX FORMULA CONFIGURATIONS
Materials Management System usually allow tax rates to be defined internally via tax
codes, or imported from an external source. The automatic calculation of tax dues during
the purchasing process makes the process less susceptible to clerical errors.
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 REMEMBER
 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).
 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. These strategies include ensuring
shipment accuracy, aligning with sales projections, complying with regulations, and
establishing buying cycles.
 The MMS handles issues such as item indents and re-order level.
 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 tool to ensure accurate and less
burdensome counts.