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Materials Management

Materials Management


aterials Management in Health Care serves department managers who are responsible for purchasing and managing health care supplies and equipment.


Materials Management educates these managers on the cost-effective purchase, management and use of supplies, equipment and resources. It also provides information on infection control, operating room equipment, sterilization and infection control, product evaluation, distribution systems, state and federal regulatory developments, medical technology, total quality management and other topics related to the delivery of top-quality patient care.

Recommended by the American Hospital Association, Materials Management bridges the information gap between materials management, central service, administration, and clinicians and delivers valuable information on infection control issues. Materials Management is published with the cooperation of the Association for Healthcare Resource & Materials Management (AHRMM) and the American Society for Healthcare Central Service Professionals (ASHCSP), endorsed by the American Hospital Association. It is not necessary to be a member of AHRMM, ASHCSP or AHA to subscribe to this publication and benefit from this tremendous expertise.

The Association for Healthcare Resource & Materials Management (AHRMM) is the premier healthcare resource and materials management association. We are committed to educating our members by providing information and resources to help you remain at the top of your field. The American Society for Healthcare Central Service Professionals (ASHCSP) is the premier professional organization that promotes effective health care central service, sterile processing and inventory management practices through education, professional and organization development, advocacy and communication.

The American Hospital Association (AHA) is the national organization that represents and serves all types of hospitals, health care networks, and their patients and communities. Close to 5,000 hospitals, health care systems, networks, other providers of care and 37,000 individual members come together to form the AHA. Founded in 1898, the AHA provides education for health care leaders and is a source of information on health care issues and trends. The Health Forum was created in the fall of 1998 through the union of The Healthcare Forum and the American Hospital Association's publishing and data and information subsidiaries. Quality Excellence supply chain is characterized by just-in-time inventory management in manufacturing, distribution and hospital operations. Having an abundance of inventory is simply no longer good financial management. Investments in inventory dollars, while recorded as an asset (the same as cash), are a warning sign to bond rating agencies and investors who might want to buy our bonds.

Inventory dollars indicate a degree of risk for obsolescence, theft and loss due to outdated products. The reality of inventory value is that if we were forced to liquidate our assets, inventory would be the lowest return of value, often with a dime-on-a-dollar return. So the questions become, "How do I prepare for the unknown without an investment in inventory?" and "How can I still be assured that I have the ability to manage should an event of significant size occur?"

Today's pressure of potential disaster response requirements in health care also is a little different than it used to be. Natural disasters are no longer the only disasters for which we must be prepared. Now we are expected to receive mass casualties from what the government classifies as CBRNE events (chemical, biologic, radiological, nuclear and explosive including pandemics). So in a time of shrinking resources, hospitals need to be prepared to manage the supply chain needs for the unknown.

Meeting Expectations

You may ask, "How in the world can I meet this expectation and be successful?" One of the first things that a materials manager has to do is recognize that most of us can get through the normal disasters such as a school bus incident that drops more casualties in our emergency room than we can manage without help. Not many of us can single-handedly manage thousands of casualties within a short period of time. An event of this type is simply not a hospital event; it is a community event. As such, it demands a coordinated plan that involves more resources than what a hospital can provide.

Materials managers should work with area emergency planners. Identify where additional sources of supplies and medicines might be located within our community. Home health companies, outpatient surgery centers, county health offices, schools and colleges might be alternative sources of medical supplies and equipment that can be pressed into service in the event of a severe community event. Local and area hospitals that are not impacted also might be considered in a reciprocating letter of understanding. One of the most critical pieces of the puzzle might be evacuation plans. Contracting for transport and having access to vehicles such as school buses that can be converted to transport vehicles also can be a significant help in disaster planning.

Minimize Stockpiling

Most hospitals have a significant amount of inventory even if they are using just-in-time inventory. While the statement might be illogical, a careful examination of the internal supply chain within the hospital needs to be conducted to identify areas of the hospital that might be closed in the event of a disaster. Areas such as outpatient surgery and other outpatient or elective types of procedures will most likely be closed as both the medical staff and the clinical staff should be reassigned to more emergent areas.

Supplies in these areas can be diverted to the point of first contact, usually the emergency department. Floor stocks are most likely set at a level to support 48 hours or more of care, so some of this material might be diverted. If you want to conduct a supply experiment, identify the total use of medium exam gloves. Once this is known, add all this type of glove supply in all areas of the hospital and divide the total number by the daily use.

The next exercise will be to work with the medical team to try to estimate flow. The question here is how fast internal supply will be depleted. The calculation of inventory demand can be performed with some simple math. Take the total number of products used per day and divide this by the average daily census. This then becomes your normal daily consumption. Then estimate the multiplier of intensity for the event and multiply that by the average daily use. Estimate the number of expected casualties times the items and you have the quantity that needs to be shipped. With the help of the calculation of intensity per casualty, your list can be populated with quantity that is closest to case quantity. Based on flow and the intensity demand, the issue becomes whether you need to increase the circulating (not stockpile) inventory to manage in the event of a disaster.

It is critical to know how long you have to be able to sustain materials flow to the areas of treatment and how intense the product demand will be in those areas. This has to be ascertained by the clinical staff and each will have their own definitions of product demand. Realism is of value in these exercises and if the decisions are made in planning, they are less likely to be chaotic in an event. Once the amount of inventory is determined, a materials manager will be faced with a decision based on the information calculated. Will a facility need to increase circulating inventory to support the facility through the time until the distributor can respond with additional supplies?

The object of all this planning will be to have orders prepared with your preferred distributor so that those items identified with these events can be ordered with a phone call. The distributor also must identify if they can support an emergency order of this size. The distributor contacts have to advise the facility on the time frame they can expect to have the merchandise and the facility has to use that information to calculate the extra supplies that might be needed. If they have to bring in additional inventory, it might mean an increased cost of goods.

It also might mean that the distributor will have to work with their network of distribution locations to identify how much they can supply in a specific amount of time and how much additional time it will take to deliver the rest of the order from another regional location. While it sounds complicated, with enough effort, it is a manageable task. The Association of Healthcare Resource & Materials Managers (AHRMM) has done some significant work in collaborating with outside organizations to provide some tools for disaster planning.

Inventory Ins and Outs

Just as an inventory float exists in a hospital, an inventory float also exists at the distribution level. Each of the more than 500 supply distribution centers within the continental United States has a circulating inventory that varies hour by hour but normally contains some excess in various locations at different times.

As materials managers already know, the lack of standards makes communications even more difficult during a disaster. The numbering system without universal identifiers compounds the management of supplies during peak demand periods. A helpful tip for preparation is to have your most-needed items on a Microsoft Excel spreadsheet populated with various distributors' product identifiers highlighted. This will allow the rapid placement of orders to alternate sources if your primary source is temporarily out of stock or closed during an emergency. In the event of a national disaster, it is important to know what agencies will be doing with medical equipment and supplies. MMCG has provided advice that circulating inventory can be redistributed during a time of national emergency with some assistance in transport and perhaps vertical distribution.