PROPOSAL FOR CONSIGNMENT EFFICIENCY IMPROVEMENT, RELATING TO

MEDICINE PROCUREMENT IN THE PROVINCIAL GOVERNMENT OF LAGUNA

RATIONALE

Consignment system ensures availability of medicine stocks, it allows the suppliers,

manufacturers and dealers of the items to commend its goods to the provincial and district
hospitals, pharmacy or other participating division and offices of the receiver for sale. The
prices of the consigned items should not be higher than the actual procurement price and shall be
paid only for the actual quantity consumed using the money generated from the sale of the goods
within the agreed period of [Link] of income of the consigned items should be allocated for
the payment of used consigned items after the inventory. In addition, revenue generated from the
program should also be deposited directly to the hospital general fund. Quality of the
consignment items may be subjected to random sampling, inspection and testing by the
receiver/consignee for quality assurance.

Government procurement of medicines in the Philippines is subject to the Government

Procurement Reform Act (RA 9184/2003; GPR Act) which requires prescribing the necessary
rules and regulation of the methods to be used in public procurement activities. All procurement
is supposed to be undertaken as competitive bidding except under “highly exceptional
circumstances”.

There are conditions that may be used as alternatives such as

Limited source bidding

Also called selective bidding. This is wherein a direct invitation to bid is conducted
by the Procuring Entity from a set of pre-selected suppliers that has experience, capability
and can potentially deal with the requirements; specialized types of Goods are known to be
obtainable from a limited number of sources and limiting the bidding maintains an optimum
and uniform level of quality and performance.

Direct Contracting

Otherwise known as single source procurement. With direct contracting, only a price
quotation or a pro-forma invoice together with the conditions of sale is needed depending on
the negotiation of the following transaction.
 Repeat Order

A method of Procurement wherein there is direct procurement from the previous winning
bidder. Repeat Order may be allowed when there is a need to replenish Goods procured
under a contract previously awarded through Competitive Bidding through a post-
qualification process, provided all the following conditions are present:

(a) The unit price must be equal to or lower than that provided in the original
contract;
(b) The repeat order does not result in splitting of requisitions or purchase orders;
EHA
(c) Except in special circumstances defined in the IRR, the repeat order shall be
availed of only within six (6) months from the date of the Notice to Proceed
arising from the original contract; and,
(d) The repeat order shall not exceed twenty-five percent (25%) of the quantity of
each item of the original contract.
Shopping

A method of procurement whereby the procuring entity simply requests for the price
quotations of readily available goods from suppliers.

(a) When there is an unforeseen contingency requiring immediate purchase:

Provided, however, That the amount shall not exceed Fifty thousand pesos
(P50,000); or
(b) Procurement of ordinary or regular office supplies and equipment not available in
the Procurement Service involving an amount not exceeding Two hundred fifty
thousand pesos (P250,000):

Local government procurement: LGUs, whether at provincial or city/municipal level,

arerequired by the GPR Act to establish bids and awards committees. These function in
conjunction with the General Services Office (GSO) to perform procurement of medicines for
the health facilities.
PROCESS FLOW

Products upon acceptance are encoded to the system. After requests have been received,
warehouse transfers through Requisition Issuance Slip and is recorded. Warehouse staffs are
required to give reports of the items of inventory which is forwarded to Accounting office for
payment [Link] finishing accounting process, auditing and completion of papers,
inventory of stock replenishment request within departments are then distributed as seen on
the image, until it reaches the end user which is the patient.
CURRENT STATE ANALYSIS

Effective consignment inventory involves careful management and within control, the
system leverages the benefits and incentives for both the consignee and consignor. Consignment
is a just-in-time (JIT) system in which the medical facility retains their stock items and the needs
are met without incurring the cost of purchase until the stock is consumed.

Provincial Government of Laguna practices consignment system by doing tracking and

monitoring of medicines and medical supplies that are used by Laguna Medical Center.

PGL started adapting consignment system since year [Link] aim of adapting the consignment
system is to provide efficiency to the patients by offering them affordable medicines and medical
supplies which will help them attain better physical, mental and emotional welfare. But there are
still struggles and issues that need improvement so the system will be executed properly.

Medicines and medical supplies are purchased using the Provincial Government’s funds.
Warehouse staffs use LCIS (Laguna Consignment Inventory System) which was developed by
the Management Information Systems Office to track the supplies that are being transferred to
the end user.

PROBLEM ANALYSIS

Consignment in the Provincial Government of Laguna faces issues that need improvement
such as:

1. Records of the allocation of medicines distributed are not properly monitored.

Recording of the distributed medicines every once in a while assures and keeps
the systematic order and the availability of supplies. One of the main problems that the
consignment encounters is the lack of systematic inventory at the stockrooms, CSR and
wards which are necessary for tracking of supplies.
2. Medicines and medical supplies are of high cost.
Fluctuating cost of medicines primary affects the market. High cost will result to
lower number of supplies since the usual and standard budgeting remains as it is.
3. Medicines are disposed to unknown or unregistered users.
Medicines are to be disposed only to the registered users. Effective monitoring
will make it impossible for the supplies to reach the unknown users.
4. Supplies are limited due to supplier deficiency.
Suppliers have limited capacity to supply and the number of suppliers as well
reaches deficiency at some point. A safe and secured consignment facility has to have
certain numbers of supplier to avoid supply deficiency.
5. Lack of safe and secured storage control
Good storage practices are applicable in all circumstances wherein products are
stored up to process of distribution.
 a) Precautions must be taken to prevent unauthorized persons from entering
storage areas. Employees should comply with the company policies to
maintain a safe, secure and efficient working environment.
b) Storage areas should be of sufficient capacity to allow the orderly storage
of the various categories
c) Storage areas should be of proper design to ensure appropriate and good
storage conditions. In particular, they should be clean and dry and
maintained within acceptable temperature limits. Products should be
stored off the floor and suitably spaced to permit cleaning and inspection.
Storage areas should be clean and free from accumulated waste to ensure
quality and avoid contamination.
d) Validated segregation should be provided for the storage of rejected,
expired, recalled or returned products and suspected counterfeits. Separate
storage areas should be assigned for their temporary storage.
e) Hazardous, sensitive and/ or dangerous products, as well as products
presenting special risks of abuse, fire or explosion such as flammable
liquids and solids and pressurized gases should be stored in a dedicated
area(s) that is subject to appropriate additional safety and security
measures.
f) First expiry/ first out/ FEFO system should be conducted to ensure that the
products due to expire first are sold and/or distributed first. Exceptions
may be permitted as appropriate, provided that adequate controls are in
place to prevent the distribution of expired products.
g) Broken or damaged items should be sorted from usable stock and stored
separately.
h) Storage and handling conditions should comply with applicable national
and local regulations and products should be in compliance with the
recommendations of the manufacturer
i) Records of temperature monitoring data should be available for review.
There should be intervals for checking temperature. All monitoring
records should be kept for at least the shelf-life of the stored product plus
one year, or as required by national legislation.

STRATEGIES/RECOMMENDATIONS

STRATEGIES:

1. Create set of policies and procedures on:

a. Creation of formalized Consignment Office in the Province of Laguna
Consignment will be a useful tool for inventory management and will in
fact if implemented will bring huge benefits to the hospitals owned and managed
by the Provincial Government though its arrangement as a whole will not be easy.
Set of rules that must be followed has to be prioritized and a consignment office
shall be composed of responsible staffs, knowledgeable about their assigned tasks
which is all related to managing and keeping on track what supplies and items
comes in and out of the office.
 b. Consignor Accreditation
A stable and trusted connection between the consignor and consignee will
bring a more convenient undertaking and will result to successful transactions.
Regulations and agreement with the consigner must be in a form of contract and
all contents must be legal and has been agreed upon.
c. Consignment Agreement
As to what is stated above, agreement is composed of the two parties with
consent of the agreement. The conditions shall be arranged with careful,
reasonable and explainable reasons.
d. Laws Governing Drug Procurement in Government Hospitals
(read the article of REPUBLIC ACT NO. 9184)

2. Each department in the Hospitals must have their own endorsement

Endorsement of supplies has to be updated within a periods of time, the items to
be acquired aren’t actually fixed and needs control. The consumption demands are not
always the same and fluctuates, stable stock and supplies has to be assured.
3. Monitor the incoming and outgoing stocks (do triple check) to control the stocks.
Continuous record of the allocation of distributed items has to be properly
monitored. The stake of stocks must not be risked and neglected for the safety and
security purposes of the hospitals and consumers. Also, it is for the avoidance of
medicine distribution to unknown or unregistered users.
4. Set a benchmark
Benchmarks will serve as the standard and basis of measure. Replenishment of
supplies always depends on the control of orders.
5. Before approving orders, all departments must submit an inventory.
Final inventory are then sent and submitted for the final check of the availability
of all stocks and also for further information about the condition of items before
acquirement.