Indian Journal for the Practising Doctor

Parray S.H, Kadri S.M

Dr Showkat Hussain Parray (MB, MHA) and Dr Syed Manzoor Kadri are from the Regional Institute of Health and Family Welfare, Dhobiwan, Kashmir.

“You can make even a parrot into a learned political economist. All he must learn are the two words: Supply and Demand”
Anon.

Introduction

Supply Chain Management (SMC) is the process of planning, implementing and controlling the operations of the supply chain with the purpose of satisfying the customer requirements as efficiently as possible. SCM encompasses the planning and management of all activities involved in sourcing and procurement, conversion and all logistics management activities¹.

Healthcare is a gigantic sector in India, estimated to be around 80,000 crores. But unfortunately the sector remained fragmented and non-competitive till very recently. It is projected that in the next few years approximately Rs 4000 will be pumped in to modernize the Indian health care services. The new facilities provided particularly in superspeciality hospitals with the start-of–art equipment should be able to provide not only quality services to the patients but also meet the expectations of all the stake holders. Corporate sector has come up in many states of India, who are adopting different business models like “Hub and Spoke Model”, and “Networking Model” to achieve their strategic objectives and goals. Regretfully, money is generally at the top of the agenda. To meet the rising demands, India will need 80,000 beds every year for the next 5 years.² . It is uncertain wjhether the public sector could fill the gap. Private sector has the potential to meet such a huge demand.

HOSPITAL SUPPLY CHAIN MANAGEMENT SYSTEM (HSCM)

HSCM is a set of approaches to efficiently integrate suppliers or vendors, transport, hospital services (including outpatient, emergency, in-patient, laboratory, radiology, stores and purchase, food, laundry and medicines /equipments) to achieve Total Quality Management (TQM) in health care services by optimum utilization of resources. The HSCM deals with the management of materials/equipments, manpower like doctors, nurses and other supporting staff, to transform sick patient to healthy person at a reasonable cost, in the shortest possible time with utmost satisfaction of the patient.

It is necessary that the departments related to materials, finance, receiving and store-keeping work in tandem to process effectively the high volume of purchases, receipt and payment transactions that take place at regular intervals. The task of the purchase department is to procure the inventory at lower prices without compromising on the quality by reducing the lead times with the suppliers through competitive bidding, direct negotiation and group purchasing. An efficient inventory policy should link the supply to the consumption patterns for reducing overall inventory level. The transactions should be online so that the database gets updated automatically subsequent to each and every issue of material /medicine etc to enhance efficiency.^3,4

Purchase Activity

Procurement is one of the crucial factors in purchasing activity. Several day -today operations and functions of each and every department of a hospital depend upon the activities of the purchase department. Right from the sophisticated life saving drugs used by doctors to stapler pins used in the hospital office are purchased by the purchase department.

The purchase department should concentrate on 5 R’s – right source, right quantity, right quality, right price and right time for continuous supply of all types of materials/medicines required by the hospital. It is important at this stage that the hospitals undertake vendor analysis and keep the list of vendors rated on a muti-parameter rating. Vendor Analysis must take into account the factors like quality, quantity, pricing, reliability, speed, financial position, production capacity, process capacity, and transport facilities available with the vendors.

Vendor Rating: Parameters

COMPANY	PRODUCTS	SERVICE
Size/Capacity	Quality	Delivery on time
Financial strength	Price	Condition on arrival
Operational profit	Packaging	Follow-up instructions
Manufacturing range	Uniformity	Number of rejections
Research facilities	Warranty	Handling of complaint
Geographical location		Technical assistance
Labour relation		Emergency aid
Trade relation		Supply update catalogues

The Supply Chain Management in hospitals is linked with purchase function so as to minimize cost, time and delivery of better services to the patient. Since a huge portion of revenue is devoted to purchasing, an effective purchasing strategy is vital. SCM is a major link in having effective vendor relations, vendor evaluation, vendor development and negotiatons^2,4.

Activity of Stores

‘Stores’ is one of the most crucial departments of a hospital. It is responsible for performing vital functions – acquisition, receiving, evaluation, warehousing, maintenance, accounting and distributing goods and supplies to all the departments of the hospital. The issue of material from the stores to the user department is an intricate system.

The stores department in-charge should be well versed with accounting or should be trained for the same. The stores department has to maintain a co-operative relationship with other departments of the hospital. A good interaction with other departments of the hospital ensures efficient functioning of the stores department.

The materials/medicines used in the hospital can be classified based on their usage or purpose:

1. Diagnostic
2. Surgical
3. Therapeutic
4. Bedside
5. Service
6. Engineering
7. Housekeeping and
8. Printing and Stationery.⁴

Logistics is the process of strategically managing the procurement, the movement and the storage of materials, through the organization and its marketing channels in such a way that the current and future supply flow is maximized through the cost effective fulfillment of orders.

Medicines (and biologicals) have a shelf life and many drugs/medicines are expensive. The Logistics Department in the hospital should have a fool-proof strategy and mechanism of provisioning, storing and issue of such ‘shelf-life’ drugs in a manner that they are stored and carried in a temperature-/ humidity-controlled atmosphere and issued on a FIFO (First in, first out ) basis. An early warning report should automatically be generated to alert the doctors on the anticipated expiry of the shelf life. There should be contractual arrangement with the vendors for drugs supplied to the hospitals without the loss of shelf life. Such material should have the longest ‘remaining’ life, and if possible, arrangement for replacement within some agreed months of the remaining life may be had with the suppliers.

The materials manager interacts with a variety of external agencies such as vendors, transporters, government agencies and other local bodies (Unions) and has to satisfy a large number of internal customers, such as doctors, services, house keeping, canteens, movements etc.

The Manager in obtaining an exceptional service and commitment from the external agencies in satisfying the needs of our internal customers through whom we provide complete satisfaction to our ultimate customer namely the patients who look for a healthy future life.⁵

Supply Chain Management (S C M)

For larger image, please click here

The ‘Logistics Manager’ is the most important actor behind the scene in achieving the hospital’s objective.^4-6

Conclusions

Supply Chain Management is not merely a buzzword, it is a concept, strategy and approach that is proving its worth in hospital management all over the world. Hospitals which implemented SCM successfully have recorded a 50% inventory reduction, 40% increase in on-time delivery, doubling of inventory returns coupled with nine-fold reduction in out of stock rates.

Every touch point to hospital has to be converted into a bond through which close relationships could be established and maintained. The multifaceted technologies are in the forefront of new logistic applications. Vehicles will become warehouses and order status will be visible along the entire supply chain, even when a truck is caught in a snowstorm.

The supply chain, currently, has become a glass pipe where information about an order is completely visible, from supplier to manufacturer to distribution centre to transporter to customer. A fully computerized inventory will let the hospital to run the SCM at the speed of thought. The tomorrow’s supply chain management will be completely a virtual organization with advent of rapid implementation of internet biotechnologies, integrated through effective sharing of data and cost saving at every point.

References

1. McGinnis M, Stark E, O’Leesky K. Supply and Conquer. Health and Finance Manager, 2005;59(3):82-6.
2. Wooster L. Is Health care ready for supply chain standards? Industry groups collaborate with NAHIT to identify Protocols. Material Manager Health Care.2007 Mar;16(3):17-9.
3. Murray MF. Improving access to speciality care. Jt Comn J Qual Patient Saf 2007; 33(3):125-35.
4. Stenger T, Constantin C. Managing Supply Chain costs with technology. Mater Manager Health Care, 2007;16(2):18-22.
5. Bossert T J, Bowser DM, Amenyah JK. Is decentralization good for Logistics System? Evidence on essential medicine logistics in Ghana and Guatemala.Health Policy Plan. 2007; 22(2):73-82.
6. Coulondre A. The Supply chain is everybody’s business. Transfus Clin Biol, 2007;18:.54-73.