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INTRODUCTION
Inventory control: Inventory control mean stocking adequate
number and kind of stores so that the materials are available
whenever required and wherever required. This has to be done at an
optimum outlay of financial and human resources. High inventory
level leads to high cost of inventories by:Locking the financeLarge
storage spaceLarge handling and administration
chargesObsolescenceSpoilage etc.
On the contrary, low inventories may lead to frequent stock
outs, and high shortage cost. Balancing the cost of carrying high
inventories and the cost of shortages is done through a system of
scientific inventory control
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RATE OF CONSUMTIONClose study of each item from the point to
view of movement of store or consumption rate is a strong tool for
proper inventory control.
The items can be classified into:
Fast movingSlow movingNon-movingObsolete
An understanding of the movement of items helps to keep proper
levels of inventors by deciding a rational policy or
reordering.
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VED ANALYSISThe stores when subjected to analysis based on their
critically can be classified intoVitalEssential and Desirable
stores
This analysis is termed as VED Analysis. Use of ABC and VED
analysisV E D A AvAeAdCat IBBvBeBdCat IIC CvCeCdCat IIIFig: finding
of ABC and VED analysis
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It will be seen from the figure, that findings of ABC and VED
analysis can be coupled and further grouping can be done to evolve
a priority system of management of stores.
Cat I Cat IICat IIIV E D A AvAeAdBBvBeBdC CvCeCd
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MANAGEMENT OF STORESThe grouping will essentially depend upon
the strategy of management and the environment of functioning.
These simple techniques can be very effective in material
management system.
STORAGE CONDITIONS Drugs like Sera, Vaccines and regular
products need to be stored at temperature range of 2 to 10 degree
Celsius. A large variety of drugs, etc need to be stored at
temperature of 15-20 degree Celsius.
Cool and cold room conditions should, therefore, be made
available in all medical store and strict monitoring of temperature
done by the store keeper and the supervisors.
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INVENTORY CONTROL METHODSIntuitive method: This is the want book
method that is most effective method. Here the items are recorded
in the want book when the number of units in stock reaches close to
zero. The amount ordered then is the best estimate for the store
keeper or worker in the field.
Perpetual inventory method:This is one of the best accurate and
effective methods of inventory are, of course an ideal situation if
the record keeping can be kept up to date. In a ward situation, the
nurse in charge of dispensing tats the end of each day. Summarizes
all drugs issued to patients and make the proper posting in the
perpetual inventory file. The file consists of appropriate
forms.
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ABC method: This method is based on the fact that some stock
items have a much higher annual usage value than others. This after
doing a cost analysis, stock items are separated into three classes
with the following characteristics:
CLASSNUMBER OF ITEMS RUPEE VALUE IN ITEMSA10% of total
items70%B20% of total items20%C70% of total items10%
Inventory control efforts are maximized on expensive items, e.g.
Inventory level consumption of class A items is minimized with the
help of tight and close control (frequent stock taking, secure
storage, careful using procedure).
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On the other hand, in the case of inexpensive C items control is
comparatively relaxed and an abundant buffer stock is maintained
throughout the year because it is quite economical to carry these
items.
VED method (vita, essential, desirable):In this method each
stock item is classified on vital, essential or desirable based on
how critical the item is for providing health services. The vital
items are stocked in abundance; essential items are stocked in
medium amounts and desirable items we stocked in small amounts. By
stocking items in order of priority. Vital and essential items are
always in stock which means a minimum disruption in the services
offered to the people.
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Two bin method: This method separates the stock of each item
into two bins (BOXES). One bin (box) contains the main stock, the
second (small) bin contains enough stock to satisfy demand during
the period necessary for replenishment. When the first bin is
exhausted and order for replenishment is immediately placed. In the
mean time, stock in the second bin is used to satisfy demand until
the replenishment stock arrives. Part of the new supply when it
arrives, is used to fill the second bin, which against placed in
reserve. The remainder of the replenishment stock is placed in the
first bin, where it is available for issuing and use.
Inventory control procedures provide continuous means of
verifying and accounting for materials and supplies which are
purchased and issued. The object of inventory control is to adhere
maximum efficiency in production and sales with the least
investment in inventory. Inventory is usually comprised of stocks
of stores, components, work in progress and finished products.
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However, the word inventory is meant for medicines purchased and
held in stock, medical equipments etc and consumables, medicine etc
in hospitals and voluntary agencies respectively. The techniques
commonly applied for inventory control are:ABC analysisSetting of
various levelsUse of perpetual inventory records and continuous
stock verificationEconomic order in quantity.Review of slow-moving
and non moving items andUse of control rations likeMaterial
consumer/average inventorySlow moving stores / total inventoryTotal
inventory cost of productionCost of sales/average finished goods
inventory
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REALATIONSHIP BETWEEN ASSETS AND EXPENSES
Before considering specific details of accounting for supplies
carried on inventory it will be helpful to review the relationship
between assets and expenses, which is clearly shown in the case of
supplies carried in stock.
Materials and supplies continue to have a market value until
actually consumed in the daily operations of the hospital or an
agency and if not used could be sold and turned into money
again.
Therefore, materials and supplies are assets until they are
consumed in operations, at which time they become expenses,
materials and supplies are consumed in relatively short periods of
time, whereas buildings and equipments are consumed in relatively
long periods of time and their consumption is recorded in the form
of depreciation expenses.
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In short, assets can be called unconsumed expenses. In order to
accurately record as expenses only those materials and supplies
actually consumed in the financial year, it is necessary to assess
the quality and value of unconsumed supplies and materials at the
end of the year. This task is obviously known as taking the
inventory and shall be done by a responsible person other than a
storekeeper.
ACCOUNTING FOR INVENTORYInventory is being treated ax unconsumed
expenses and hence is shown in the asset side of the balance sheet
under the head of current aspects. The method of valuation of
inventory and various methods of pricing are dealt.However, if the
value of inventories has not been shown previously in the hospital
accounts or in accounts of an agency they may be entered firstly in
the general journal by using the second rule (related to real
accounts) and after posting from journal to the concerned ledger It
shall be entered in the balance sheet of the hospital/agency at the
year end.
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One must notice that the process of increasing the inventory or
stock by entering assets which were previously omitted mugs be done
either b decreasing other assets like cash in hand or bank balance
or by increasing the liabilities of the hospital pregnancy so as to
maintain the double entry principle.When the value of supplies in
hand at the end of the financial year is negligible book keeping
can be minimized during the year by regularly debiting various
department supplies and expense accounts for all purchases made. At
the end of the year, after taking the inventory, the appropriate
expense and inventory accounting will require adjustment.This
procedure of counting and adjusting the inventory and supplies
accounts only once a year for inventory on hand is simple and
involves little clerical work. However it gives an inaccurate
picture of inventory value and departmental expenses during the
year.
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PERPETUAL INVENTORY (OR) AUTOMATIC INVENTORY SYSTEM
The control of materials while in storage is affected through
what is known as the perpetual inventory inventory means, here a
list of goods in hand and the , perpetual inventory derives its
name from its function of indicating at all times the balance of
each item of stores in hand. Thus, the two main functions of the
perpetual inventory system are:Recording stores receipts and issues
so as to determine at any time the stock in hand, in quantity or
value or both without the need for physical count of stock.
Continuous verification of the physical stock with reference or
the balance recorded in the records at any frequency, as convenient
for the management.
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Perpetual inventory system is comprised of:Bin cards
(quantitiave perpetual inventory)Stores ledger (quantitative cum
valued perpetual inventory)Continuous stock taking (physical
perpetual inventory)
Bin card: A bin card is a quantitative record of receipts issues
and closing balance of items of stores. Separate bin cards are
maintained for each item of medicine or any other material and are
placed in shelves or bins or are suitably lung up as convenient,
alongside materials or medicine. If it is not possible all bin
cards may be maintained in a single place by using any of the
filing techniques (especially suspended filing or circular filing
is preferable in this regard).
On receipt of a consignment of materials/medicines, suitable
entry of the quantity is made in the receipts column of the bin
card from goods received note.
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Similarly issues of materials/medicines to various departments
of the hospital/agency and sale of medicines/materials are recorded
in the issue column. Remaining balance on the date is entered in
the balance column. All these entries are to be supported by
receipt or issue documents of the materials or medicines as the
case may be.
Stores ledger:
Like bin cards, the stores ledger is maintained to record all
receipt and issue transaction is respect of materials with the
difference that along with the quantities, the values (sometimes
also the rate per unit quantity) are entered in the receipt, issue
and balance columns.
Unlike bin cards, here, issue or sale of medicines materials are
priced by using any of the methods shown in the section pricing of
inventory later (however, in case of sale of medicines,
materials/medicines are priced ont eh basis of actual price of the
material/medicine).
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After posting in the bin cards, the receipt and issue documents
are valued and then passed on to the stores ledger clerk for entry
in the ledger. Thus, there may be
Arithmetical errorsPosting errors in the form of commission,
omission or duplication errors.
Both stores ledger and bin cards are to be compared frequently
and reconciled after locating the causes of difference.
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CONTINOUS PHYSICAL STOCK VERIFICATION
The perpetual inventory system is not complete about a
systematic procedure for physical verification of stores. The bin
cards and stores ledger record the balance but their correctives
can be verified by means of physical verification only.
The above books indicate what the balances should be or should
have been whereas a physical check would reveal what the balances
actually are.
The continuous physical stock verification must be neatly
undertaken without disturbing regular functions of stores. There
methods of recording the results the sheet is then sent to the
stores ledger clerk who enters the balance on recorded in the
stores ledger.
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PERIODIC STOCK VERIFICATIONBesides the method of continuous
stock verifications as described above, there is another system
known as the periodic stock verification under this system, the
entire stock is verified all at a time, all periodic intervals,
usually once in a year.
It is advantageous to have the verification at the close of the
annual accounting period so as to facilitate valuation of stores
for exhibition in the final accounts.
An alternative practice is to arrange the verification in such a
manner that the stock taking usually coincides with a period of
slack business activity but this practice cannot be adapted in
hospitals where there is no clear cut demarcation between busy
season and lean season.
Stock may also be verified at intervals and than a year if so
desired but such a curse is expensive.
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MANAITNAING BALANCE BETWEEN COSTS AND RISKS
There are two types of costs namely ordering costs and carrying
costs:
Ordering costs: if inventory of small quantities of supplies are
purchased frequently the ordering costs will be quite high.
Ordering costs include secretarial tome book keeping, telephone,
postage, transportation and the process of placing orders.
Carrying costs: on the other hand if one orders very large
quantities, one incurs carrying costs. These costs are time value
of money tied up in inventory, spoilage and storage cost.
An optimum quantity to be ordered will be at which quantity
ordering cost equals carrying costs.
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In order to plan the inventory one needs to know:The monthly
quarterly yearly requirement of each item.Purchase cost per
orderLead time (time from placing order to receipt of goods)Price
of itemsInventory carrying cost
SIZE OF INVENTORY
In determining the size of the inventory the hospital/agency has
to consider:The volume of safety stock: this will be influenced by
procurement lead time which normally depends on the locality of the
hospital/agency, transportation, problems and availability of
supplies.Economy on purchase of larger costs: This will depend on
the cash position and availability of storage space of the
hospital/agency.
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VALUATION OF INVENTORY
First in first out method (FIFO): The oldest items in stock are
assumed to be issued before new stock, and the issue is priced
accordingly.Advantage: the issues and inventory are priced exactly
at original cost. Since actual prices are used, there cannot be any
profit or loss in the pricing arrangements. In FIFO process, the
value of the stock shield on hand is the money that has been paid
for that amount of stock at latest price levels and hence can
straight away be used in balance sheet, truly reflecting the
value.
Limitations: the limitations of FIFO process are that the
process becomes unwieldy when too many changes in price levels are
encountered and the fact that this method does not provide a
satisfactory answer to costing returns from stores.
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The FIFO method has the effect of maximizing the book profits
during periods of rising prices and minimizing the book profits
during the periods of falling prices. Hence under inflationary
conditions FIFO is not suitable.
Last in first out method (LIFO): The newest items in stock are
assumed to be issued before the order and priced accordingly.
Strictly followed, this method too can have the same difficulties
as FIFO.
Advantages: unlike FIFO under LIFO issues reflect current prices
under inflationary conditions.
Limitations: this method will show higher profits under
dictionary conditions (when prices fall) and hence is into suitable
for deflationary conditions.
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Average unit price method:
In this method the issue price (and the price of the inventory)
is set by averaging in the quantities and the prices of each new
purchase f the item.Advantage: this is suitable both for
inflationary and deflationary conditions since it reflects lesser
gain or loss than the previous methods.Difficulty: lots of
mathematics involved in this system.
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Fixed last price method: Any method which involves a lot of
careful and frequent mathematic, though more precise, may not be of
sufficient advantage to the management of or small organization to
warrant the effort.Interestingly, the above said method (simplest)
is available. In this method issues and the inventory at stock
taking time are priced at the price of the last receipt of the
item.Advantage: no cumbersome calculations involved. Supplies
expense reflects charge in market prices immediately and inventory
valuation is conservative as it reflects current market prices.
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DONATED SUPPLIES
Hospitals/agencies often receive gifts (i.e., donations in the
form of donated supplies from the public or any other agencies.
Such supplies are to be entered in its books and shown in its
balance sheet.
The value assigned to these free supplies should be the selling
price prevailing in India. If supplies are of no value to the
hospitals agencies their value should be considered nil and not
entered into the accounts.
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NARCOTICS
Under the Dangerous Drugs Act 1950, the Government of India is
empowered to make rules permitting and regulating import, export,
transport, possession and sale of manufactured drugs defined under
the act and it is imperative for every hospital to be conversant
with rules and regulations governing the handling of dangerous
drugs in its own state.
An adequate perpetual inventory (just like Group A items under
ABC Analysis). Must be maintained by the pharmacy department for
the receipt and issued each narcotic. This is accomplished by
maintain a Narcotic stock register) which will have a separate
sheet in the register for each item.
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DANGEROUS DRUG REGISTER
This record of narcotics must be kept by every ward e.g. OPD,
operating and delivery rooms and returned to the pharmacy at
regular intervals for checking.
A perpetual inventory must be maintained also for receipts and
issues from the also for rectified and methylated spirits. This
inventory will be checked annually by the local (state) excise and
taxation officer before another permit is granted.
All the above records must be kept on file for a minimum of 5
years and is subject to government inspection at any time
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RECORD OF NARCOTICS
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MATERIAL MANAGEMENT
PlanningProcurementStorageIssueUtilization
The main purpose of material management includes:
Reduction of costAvoidance of wastageShortagesEnsuing adequate
quality and quantity of material without any delay in
procurement.
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The categories of materials used in PHC levels are as
follows:
Drugs: which includes substances used in prevention and
treatment of illness, they are in the form of tablets, capsules,
solutions, ointments, injects etc.
Medical supplies: This includes items used along with drugs to
provide curative and preventive services eg: bandages, cotton wool,
needles, syringes, suture materials etc.
Non medical supplies: include such items use by health personnel
like fuel, linen, clothings, supplies, stationary supplies etc.
Equipment include movable items used by personnel which last for
many years like desks, tables, beds, cot mattress, refrigerator,
vehicles.
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Facilities include non-movable items used by personnel for many
years like buildings, latrines, wells, fencing etc.
Primarily the medical officers are concerned with the inventory
control and regular replenishment materials already stated above.
But actual material management falls on the shoulders of nurse
managers. Hence, the nurse also should know the policies and
procedures for materials management.
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PROCEDURES AND RULES FOR MATERIAL MANAGEMENT
Procurement of materials is governed by certain procedures and
rules prescribed by the government of materials management. These
rules cover such activities:
Estimation and budgeting for materialsIndent for
materials.Placing indent with government stores as or local firms
(RC)Receiving and verification of materials (quantity, quality
breakage, damage, expiry date, spoiled etc)Transportation of
materials.Taking into stock and storage of materials.Issuing
materials.
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THE METHODS OF STORAGE OF MATERIALS
All the poisonous drugs should be kept separately in
compartments under the custody of medical offices or supervisor
concerned.
All the general drugs, instrumental equipments, kept separately
in the compartment under the custody of sore keeper/pharmacist.All
the insecticide and disinfectants kept separately under the custody
of pharmacist.All vaccines should be kept stored in refrigerate
with proper temperatures.
All linen should be stored in compartment under the custody of
store keeper.
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And insist a physical verification to be done at the end of
every calendar year/financial year. If any articles are found
unserviceable, a list has to be prepared, and the articles
condemned by the competent authority.
The Health Assistant (M) in collaboration with the health
Assistant (F) is required to check at regular intervals at
sub-centers, the availability of requisite medicine and
replenishment of items and preventive maintenance.
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IMPORTANCE OF MATERIAL MANAGEMENT IN NURSING
For any nursing technique or procedure from very simple to
complex and invasive nursing procedures, materials are required, be
it administration of an oral medication an intra muscular injection
or performance of a dressing, materials are essential.
No nursing procedure can be undertaken without appropriate and
adequate materials. Whether these are performed in institutional or
community settings.
NURSES ROLE IN MATERIAL MANAGEMENTA word is often referred to as
a nursing unity. This implies that a ward is actually under the
control of the nurse in charge for its maintenance activities.
Material management consequently is an onus that lies on the nurse
in charge as well on all members of the nursing team.
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Ensuring regular and adequate flow of supply of necessary
equipment, supplies, drugs and solutions.Monitoring and sustaining
the quality and safety of the materials used including drugs and
solutions issuing of items often the basis of first in First out
and regular checking of expiry dates of drugs contribute towards
safety.Indenting, receiving, storing, checking and timely
replenishing of all necessary equipment, supplies, drugs and
solution.Maintaining of emergency and buffer stocks.Arranging for
preventive maintenance where ever necessary.Maintaining inventory
and stock of all items and supplies.Arranging for condemnation of
articles in accordance with the laid down policies of the
organization and maintaining of a dead stock register.Arranging and
assisting in audit of materials.Participation in policy making for
material management.Participation in tender/procurement
sub-committees.Orienting nursing personnel on material management
policies from time to timeEvaluating the efficacy of the material
management system followed in particular nursing unit.
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