UNIVERSITY OF CAPE COAST

COLLEGE OF HUMANITIES AND LEGAL STUDIES

SCHOOL OF BUSINESS

COURSE TITLE: PROJECT WORK

COURSE CODE: PCM 499

LECTURER: DR. DOMINIC OWUSU

TOPIC: IMPACT OF INVENTORY MANAGEMENT ON

SERVICE DELIVERY IN THE HEALTH SECTOR, A CASE OF CAPE

COAST TEACHING HOSPITAL.

INTRODUCTION

Background of the study

Every organization must have some inputs and raw materials in order to

serve its customers. Inventory refers to raw materials, work-in-progress, finished

goods and supplies required for creation of a company’s goods and services. It is

also the number of units or value of the stock of goods a company holds (Coyle,

Bardi and Langley, 2003). Inventory management is a complex aspect of Supply

Chain Management that is frequently discussed and deliberated upon due to the

fact that it has a high impact on customer satisfaction as well as financial

performance. Inventory management has become necessary in modern businesses

in order to achieve excellent customer service, cost reduction, enhancing supply

chain competitiveness and performance, gaining market share, growth and

expansion of businesses as well as profitability (De Leeuw, Holweg and Williams

2011). Stevenson (2009) on the other hand indicated that, poor inventory

management hampers operations, diminishes customer satisfaction and increases

operating costs. Inventory management is principally about specifying the size

and placement of stocked goods. Corporate profitability therefore can be

improved by increasing sales volume or cutting down inventory costs, due to this,

organizations adapt to various inventory management control practices based on

the environments they operate (Mentzer and Krishnanl, 2001).

The inventory investment for most businesses takes up a big

percentage of the total budget, yet inventory control is one of the most neglected
management areas in most firms. Many firms have excess amount of inventory

due to poor inventory management practices. (Jessop & Morrison 1994) stated

that, keeping Inventory value at the lowest practicable level is to economize the

use of working capital and to minimize the cost of storage. However, there is

always the challenge of managing inventory to balance supply with demand in

order to ensure quality service delivery. Firms would ideally want to have enough

inventories to satisfy the demands of its customers, and ensure no lost sales due to

inventory stock-outs. At the same time, they want to avoid too much inventory on

hand because of the cost of carrying inventory (stock keeping/warehousing); the

trade-off is always difficult to manage. However, managing healthcare

organizations require high level of inventory management. Because without

enough stock representing the largest single investment and its proper

management of healthcare organizations, health services to patients will come to a

halt.

Operating and managing healthcare systems therefore depends on the

magnitude of inventory, a robust financing mechanism, a well-trained and

adequately paid workforce, reliable information on which to base decisions and

policies and well maintained facilities and logistics to deliver quality medicines

and technologies (WHO, 2013). Countries all over the world have different

policies and plans in relations to the personal and population-based healthcare

goals within their societies. Healthcare systems are mechanisms established by

healthcare organizations to meet the health needs of target populations. Inventory

management therefore is needed as being a portion of supply chain network to

departments depend heavily on supplies, inventory management can ease or

cramp a health facility’s operations from a low-cost needle to a high-end

orthopaedic implant, micro steel instruments and supplies (health commodities)

during a patient’s stay at the health facility. Quality healthcare cannot be provided

on time unless required health commodities are available in adequate quantities.

Inventory management plays a crucial role in providing efficient healthcare in

relation to three vital aspects of medical supplies used in the health facilities;

availability, safety and affordability.

Ghana health service has a policy that all public hospitals sourced all

drugs and non-drugs consumable from the Regional Medical Stores as a first step

to replenish stock, however most hospitals do not get their required inventories at

the RMS translating into no supplies in the hospitals and the result is needless

deaths of patients, prolonged ailments and poor healthcare delivery. It is against

these backgrounds that the researcher developed interest in investigating

inventory management to try to identify inventory practices that ensures efficient

delivery and based on the above factors, the Cape Coast Teaching Hospital was

chosen as a case study.

Statement of the research problem

The major aim of inventory management is to ensure availability of

materials to user departments without delay and the prevention of stock-out. The

control of inventories has become such a heavy task that needs the attention of not

only inventory practitioners but also top management to provide the right
structures for inventory operation. This has become more prevailing in today`s

strategic management decisions, which is geared towards profitability and adding

value. Bozarth and Handfield (2007), inventory is such a critical resource in many

organizations and efforts must be made to devote tools and techniques to manage

it. In health service providing organizations including the Cape Coast Teaching

Hospital, the desire is to implement the right policies and procedures that will best

determine and regulate production schedules to establish requirements, parts, and

materials needed to support service delivery and improve upon efficiency.

The stores departments of Ghana Health Service are responsible for

providing the necessary goods and services to all of their customers and

individuals by keeping the stock levels at most economical costs possible. The

effectiveness of stock control is directly measurable by how successful an

organization is providing services to its customers. There have been a lot of

difficulties in determining the desired stock levels that ensures a free flow of

materials without incurring heavy expenses in stocking those materials and

without any stock being rendered obsolete. There was some evidence of suppliers

who cannot meet delivery schedules and thus cause delivery uncertainty thus

negatively impacting procurement performance. It was therefore important to

expand knowledge on internal inventory control practices, their adoption and

benefits to organizations. This study is intended to bridge this gap by reviewing

the relationship between effective inventory management practices and

performance for public health delivery in Ghana.

The main objective of this study is to look at what inventory management

is and to come out with relevant criteria to improve upon inventory management

practices in relation to health service delivery in the Cape Coast Teaching

hospital.

The specific objective includes:

1. To identify inventory management practices at the Cape Coast Teaching

Hospital.

2. To investigate the challenges confronting the management of inventory in

the Hospital.

3. To investigate the internal control systems employed to overcome the

challenges confronting inventory management

Research questions

This research seeks to provide answers to the following questions:

1. What are the inventory management practices used in Cape Coast

Teaching Hospital?

2. What are the specific challenges confronting management of inventory in

the hospital?

3. What internal control systems are in place to help overcome the challenges

of inventory management in the hospital?

Significance of the study.

inventory management and its impact on service delivery in the health sector of

Ghana and how the problem can be solved or minimized through efficient

management of the health commodities available.

The findings from the study are going to be of immense benefit to the

Ghana Health Services, Government and the economy at large. It will help

provide practical information on the need for effective inventory management

practices in order to improve in service delivery in the health sector of Ghana. It

will also contribute to the body of knowledge on inventory management. Students

as well can use this research work as a reference material for further studies.

Scope of the study

The research was carried out at Cape Coast Teaching Hospital because the

researchers want the inventory management of the hospital to be abreast of

current trends. The work focuses on inventory management. All information was

gathered from the stores section and other related department. The population for

the study included all workers of the case study area. The research was also to

find out how effective management practice contribute to the public health service

delivery.

Definition of Terms

Lysons and Gillingham (2003) in their book, Purchasing and Supply

Chain Management (6th Edition), defined Inventory as an American accounting

term for the value or quantity of raw materials, components, assemblies,

consumables, work-in-progress and finished stock that are kept or stored for use
as need arises. Coyle et al (2003), defines Inventory as raw materials, work-in-

progress, finished goods and supplies required for creation of a company’s goods

and services. The number of units and/or value of the stock of goods a company

holds. Rick (1998), defines Inventory as piles of money on the shelf and profit for

the company or organization.

According to an article written by Pollick (2011), Inventory is the total

amount of commodities or materials contained in a storehouse or warehouse at a

given time. The word “Inventory” can refer to both the total amount of

commodities and the act of counting them. The relevance of these theories to the

study is that Inventory is to be seen as the largest investment in assets and

represents one of the primary sources of revenue generation and subsequent

earnings for an organization, therefore it has to be efficiently and effectively

managed to reduce cost and increase profitability in the organization.

Organization of the study.

The research work was divided into five main chapters. The first chapter

gave an introduction to the study and it comprised of background of the study,

statement of the research problem, objective of the study, research questions,

research methodology, limitation of the study, and organization of the study.

Chapter two will deal with the literature review aspect of the study on inventory

management and models. Chapter three will cover the methodology employed

and a profile of Cape Coast Teaching Hospital. The method of data collection that

will be used for the study will also be explained, including sampling technique,

population, primary and secondary data collection instruments. The research

from the field will be dealt with in chapter four. Finally, the fifth chapter will

summarize the findings, conclusion and recommendations that will be made for

an improved inventory management in health service delivery.

References

Coyle, J. J., Bardi, E. J., and Langley, C. J. Jr (2003). The Management of

Business Logistic: A Supply Chain Perspective (7th ed.). Mason: South-

Western

De Leeuw, S., Holweg, M. and Williams, G. (2011), “The impact of decentralized

control on firm-level inventory: Evidence from the automotive industry”,

International journal of Physical Distribution & Logistics Management,

Vol. 41 No. 5, pp. 435-436.

Lysons, K, and Gillingham, M (2003), Purchasing and Supply Chain

Management, 6th Edition, Harlow, Financial Times/ Prentice Hall, London.

Rick, L. (1998), “Can you profit from improved Inventory Control?” – Journal of

Association of Automated Services Management Institute, Vol. 5.