Supply Chain Specialist

Types of Inventory Management costs :

1. Ordering Costs

Ordering costs include payroll taxes, benefits and the wages of the procurement department, labor costs etc. These costs are typically included in an overhead cost pool and allocated to the number of units produced in each period.

*Transportation costs
*Cost of finding suppliers and expediting orders
*Receiving costs
*Clerical costs of preparing purchase orders
*Cost of electronic data interchange

2. Inventory Holding Costs

This is simply the amount of rent a business pays for the storage area where they hold the inventory. This can be either the direct rent the company pays for all the warehouses put together or a percentage of the total rent of the office area utilized for storing inventory.

*Inventory services costs
*Inventory risk costs
*Opportunity cost - money invested in inventory
*Storage space costs
*Inventory financing costs

3. Shortage Costs

Shortage costs, also known as stock-out costs, occurs when businesses become out of stock for various reasons. Some of the reasons might be as below :

*Emergency shipments costs
*Disrupted production costs
*Customer loyalty and reputation

4. Spoilage Costs

Perishable inventory stock can rot or spoil if not sold in time, so controlling inventory to prevent spoilage is essential. Products that expire are a concern for many industries. Industries such as the food and beverage, pharmaceutical, healthcare and cosmetic industries, are affected by the expiration and use-by dates of their products.

5. Inventory Carrying Costs

This is the lesser-known aspect of inventory cost. This cost requires a certain amount of calculation to understand the extent of its impact on your P&L statement. Inventory carrying costs refers to the amount of interest a business loses out on the unsold stock value lying in the warehouses.

REVOLVING DRUG FUND:

Pharmaceuticals are essential for preventive and therapeutic health services. Unfortunately, significant demand, limited funds and high prices contribute to frequent shortages of drugs in many public health programs especially in low and middle income countries.

One method for financing pharmaceuticals is the establishment of Revolving Drug Funds (RDFs) in which, after an initial capital investment, drug supplies are replenished with revenue collected from the sale of drugs.

In other words, a revolving drug fund is a scheme where quality drugs are sold at cost-price plus a mark-up, and the revenue is used to replenish the drug stock.

Let's look at some of the pros and cons of RDF.

Benefits of RDFs are:

1. Potential raise in revenue for central allocation.
2. Promotion of pharmaceutical quality, availability and equity of access.
3. Decentralisation through more control of resources at local level.
4. Reduction of expenditures incurred on pharmaceutical supply for referral hospitals.


However, some of the challenges faced by RDFs are:

1. Collection costs may exceed revenue due to administrative and infrastructural spending.
2. Deploying user charges for substitution rather than supplementing central allocation.
3. Deterioration of existing pharmaceutical distribution setup.
4. Pushing back lower income groups (who may need free medicines) from accessing quality health care.

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Procurement, purchasing and sourcing— what’s the difference?
Terms like procurement, purchasing, and sourcing are often used interchangeably. Purchase orders and requisition documents are another set of similarly confused terms. And furthermore, there are even compound versions like purchase requisitions and procurement orders. While the terminology is all related, each has a distinct meaning, and a working understanding of the distinctions helps us gain a better understanding of the overarching procurement cycle. So here we’ll take a closer look at procurement, purchasing and sourcing to answer the question, “What’s the difference?” We’ve also dropped in a quick set of reference statistics about each term to help illustrate its importance to the organization.

Facilitate Competitive Bidding - Streamline your procurement process with a smooth, easy to use procurement system.
What is Procurement?
Procurement is the business function concerned with acquiring (procuring) the goods and services that are vital to an organization. So, procurement is essentially the umbrella term under which you’ll find purchasing, sourcing, requisitions and purchase orders.

Procurement involves a number of steps, with each step in the procurement process presenting both risks and opportunities for efficiency gains. To add another term to the mix, the process of purchasing goods and services is often referred to as the Procure-to-Pay Cycle. The commonly acknowledged major steps in the cycle include:

1.Needs recognition
2.Requesting goods and services
3.Review and approval
4.Sourcing
5.Purchase order
6.Receipt of goods or services
7.Receipt of invoice
8.Pay invoice
Leverage Technology for Mutual Benefit
Why is Procurement Important?
A well-designed procurement process helps an organization:

Gain control over and insight into spend.
Minimize errors and fraudulent spending.
Boost efficiency by streamlining procure-to-pay cycle.
Understand (and honor) contractual obligations
What is Purchasing?
Purchasing refers to the portion of the procurement cycle that is actively engaged in buying a product or service from a supplier. Think of purchasing as the transactional portion of procurement. If procurement is the subject, then purchasing is the verb. Tasks that directly relate to the process of how goods and services are ordered are purchasing while activities such as strategic sourcing and vendor contract negotiation constitute procurement.

Budget Adherence - for Government Agencies - Cut back on unmanaged procurement and purchasing activities.
Why is Purchasing Important?
Purchasing is a subset of procurement where the savings can really add up:

Save money by organizing, consolidating and optimizing purchases.
Increase visibility with requisitions and purchase orders that organize, identify and track purchase requests.
Boost efficiency with tools including guided buying catalogs, mobile requisitions and automated approval routing.
Managing construction and maintenance contracts - effective purchasing and project management
What is Sourcing?
As the term implies, sourcing is concerned with finding the best supplier for goods and services. Sourcing is the subset of procurement that comes before any purchases are made. Here we can tack on another term: strategic sourcing. Strategic sourcing generally refers to a process of developing supply channels at the greatest value, not just the lowest purchase price. While it might sound simple, it is a broad and far-reaching subject. It’s noteworthy that there are certification programs and even degree programs available to teach the specifics of strategic sourcing.

Why is Sourcing Important?
Sourcing adds value to the procurement cycle:

1.Strong supplier relationships help ensure consistent quality and availability.
2.Vendor contracts and purchase orders spell out terms and eliminate potential misunderstandings.
3.Businesses with the most advanced collaboration with suppliers outperform peers by a twofold margin.
Managing construction and maintenance contracts - effective purchasing and project management.

Is it a Purchase Order or a Requisition?
These two terms are often used interchangeably, but they serve different purposes and are used in different stages of the procurement cycle.

Requisitions are internal documents. A requisition is a form that an internal department or individual submits listing items it wants to order from an outside vendor. Once these requests are approved, the organization issues purchase orders to suppliers for the requested goods or services.


Purchase Orders are official documents issued to your suppliers, and when accepted form legally binding contracts. Purchase orders detail the items a purchaser agrees to purchase at a certain price point. Among other information, the purchase order also outlines the delivery date, shipping arrangements and payment terms.
Whatever we call it — it adds value
While correct terminology is important, what’s more important is the understanding of the vital role procurement and its related sub-components play in the success of an organization.

Research shows that companies with high performing procurement organizations have profit margins 15% higher than the average company. Deloitte has found that strategic sourcing and procurement improvements can yield savings of 5-20% across multiple categories.

Becoming a high performing procurement organization first requires an understanding of how the elements of procurement work together and how each contributes to the overall success of the procurement function.

Related: Glossary of Terminology in Procure-to-Pay Lifecycle
Related: Integrating Purchasing and Payables.

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DRUG MANAGEMENT: it's a process of overseeing the medication prescribed for a patient to ensure they're taken properly and achieving their planned, therapeutic outcome.
What is a Drug? A drug can be defined as below:
1. Any chemical compound used on or administered to humans or animals as an aid in the diagnosis, treatment or prevention of disease, or any other abnormal condition, for the relief of pain or suffering, or to control or improve any physiologic or pathologic state.
2. Chemical substances that affects the processes of the body or mind.

What is Management? It is the act of being responsible or in charge and conducting or supervising something (as in the case medicines and medical supplies)

WHY MANAGE DRUGS: three reasons why,
1. Drugs are part of the link between the patient and health services. Availability or absence will contribute to the positive or negative impact on health.
2. Proper management of drugs save money and improve access.

DRUGS MANAGEMENT CYCLE:
1. Selection of Drugs
2. Procurement of Drugs
3. Storage and Distribution of Drugs
4. Uses of Drugs (Dispensing and issued)
All of these are supported by Solid Management support.

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The main goal of the health supply chain is to ensure every person is able to obtain and use quality medicines and medical supplies whenever needed.
Health Supply Chain Systems has three main objectives:

- Increased health service/program impact - When a logistics system provides a reliable supply of products, customers (e.g. patients or health facilities) are more encouraged to make use of them. In the case of medicines, this could mean more patients coming forward for treatment.

- Enhance the quality of care - It is not just the patient who benefits from the availability of high-quality care services, the staff do too. Trained staff are more motivated when they have the right commodities to do their job for which they are trained. They are also more likely to provide a high-quality service.

- Improve the cost efficiency and effectiveness - A streamlined logistics system saves money as it reduces losses due to overstocking, waste, expiry, damage and theft. It also protects investments and provides a mechanism for cost reduction. Supply chain management of medicines can be complex.

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WAREHOUSE MANAGEMENT IN SUPPLY CHAIN:

The role of a supply chain system is to deliver the right products, in the correct quantity, to the right customer, at the right place, at the right time, in the right condition and at the right price.

The WAREHOUSE plays a significant part in this and WAREHOUSE MANAGEMENT is essential to improving supply chain operations.

Delivering the right product in the right quantity relies on the warehouse picking, packing, and dispatching accurately.
The objectives of warehousing are to:
• Maximize effective use of space
• Maximize effective use of equipment
• Maximize effective use of information
• Maximize effective use of labor
• Maximize accessibility of all items
• Maximize protection of all items
• Minimize goods handling
• Minimize company operating costs

Warehousing main functions have been defined as follows (Tompkins and White, 1984):

What is "LMIS TOOLS" In LIBERIA PUBLIC HEALTH SUPPLY CHAIN SYSTEM.

LMIS data is related to the primary data that should be captured, cleaned, aggregated, and transmitted using appropriate tools purposefully designed for LMIS.
LMIS Tools are tools used to capture, aggregate, and report essential supply chain LMIS data.
They include:
1. consumption (DDR, & SSRR) records,
2. Stock-keeping records (Stock Cards, & Bin Cards), and
3.Transaction records (IRRF).

The objectives of the Liberia LMIS Tools is to ensure that adequate and user-friendly LMIS data are capture, aggregate, and
report critical supply chain information for decision-making and action. Example of supply chain decision is "Drugs Resupply Decision"

Consumption recording tool - It records the actual quantity
of health products given to clients. Clients could be patients or health workers. For example,
since gloves are used by health workers, they would be the clients in this case. It also captures
stock data, such as opening balance, quantity received, losses/adjustments and stock on hand (SOH) to ensure
transparency and accountability at dispensing units.

Stock-keeping records - Stock-keeping records are used to provide critical information about products in the store, such as quantity of the stock available, shelf-life of products, batch number, quantity issued or received, date of transaction, losses/adjustments, and where products are received from, or issued to, including transaction references.

Transaction records - Transaction records move with products wherever they go. They will capture and communicate information about products when they are received, issued, and when information about products is reported. In the Liberia supply chain system there are three types of transaction records: the SSRR, the
IRRF, and Emergency Order (EO) form. The type of data being communicated, the frequency, the number of copies, and the roles and responsibilities for completing them is different for each
transaction record.

To be continue........

WHAT IS LOGISTICS MANAGEMENT?

Logistics management may be defined as “the art and science of obtaining, producing, and distributing material and product in the proper place and in proper quantities.” It is a rapidly evolving business discipline that involves management of order processing, warehousing, transportation, materials handling, and packaging—all of which should be integrated throughout a network of facilities.

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