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• Outsourcing
Organizations that outsource are seeking to realize benefits or address the following

      Cost savings — The lowering of the overall cost of the service to the business. This will
       involve reducing the scope, defining quality levels, re-pricing, re-negotiation, cost re-
       structuring. Access to lower cost economies through offshoring called "labor arbitrage"
       generated by the wage gap between industrialized and developing nations.[15]
      Focus on Core Business — Resources (for example investment, people, infra structure)
       are focused on developing the core business. For example often organizations outsource
       their IT support to specialised IT services companies.
      Cost restructuring — Operating leverage is a measure that compares fixed costs to
       variable costs. Outsourcing changes the balance of this ratio by offering a move from
       fixed to variable cost and also by making variable costs more predictable.
      Improve quality — Achieve a steep change in quality through contracting out the service
       with a new service level agreement.
      Knowledge — Access to intellectual property and wider experience and knowledge.[16]
      Contract — Services will be provided to a legally binding contract with financial penalties
       and legal redress. This is not the case with internal services.[17]
      Operational expertise — Access to operational best practice that would be too difficult or
       time consuming to develop in-house.
      Access to talent — Access to a larger talent pool and a sustainable source of skills, in
       particular in science and engineering.[3][18]
      Capacity management — An improved method of capacity management of services and
       technology where the risk in providing the excess capacity is borne by the supplier.
      Catalyst for change — An organization can use an outsourcing agreement as a catalyst for
       major step change that can not be achieved alone. The outsourcer becomes a Change
       agent in the process.
      Enhance capacity for innovation — Companies increasingly use external knowledge
       service providers to supplement limited in-house capacity for product innovation.[19][20]
      Reduce time to market — The acceleration of the development or production of a product
       through the additional capability brought by the supplier.[21]
      Commodification — The trend of standardizing business processes, IT Services, and
       application services which enable to buy at the right price, allows businesses access to
       services which were only available to large corporations.
      Risk management — An approach to risk management for some types of risks is to
       partner with an outsourcer who is better able to provide the mitigation.[22]
      Venture Capital — Some countries match government funds venture capital with private
       venture capital for start-ups that start businesses in their country.[23]
      Tax Benefit — Countries offer tax incentives to move manufacturing operations to
       counter high corporate taxes within another country.
      Scalability — The outsourced company will usually be prepared to manage a temporary
       or permanent increase or decrease in production.
      Creating leisure time — Individuals may wish to outsource their work in order to optimise
       their work-leisure balance.[24]

Specific examples of corporate outsourcing

There are situations when a firm may consider outsourcing some of its R&D work to a contract
research organizations or universities. In this context, the two most populous countries in the
world, China and India, provide huge pools from which to find talent. Both countries produce
over 200,000 engineers and science graduates each year. Moreover both countries are low cost
sourcing countries.

Outsourcing in the information technology field has two meanings.[25] One is to commission the
development of an application to another organization, usually a company that specializes in the
development of this type of application. The other is to hire the services of another company to
manage all or parts of the services that otherwise would be rendered by an IT unit of the
organization. The latter concept might not include development of new applications.


Management, the corporation and consumers

Quality risk

Quality risk is the propensity for a product or service to be defective, due to operations-related
issues. Quality risk in outsourcing is driven by a list of factors. One such factor is opportunism by
suppliers due to misaligned incentives between buyer and supplier, information asymmetry, high
asset specificity, or high supplier switching costs. Other factors contributing to quality risk in
outsourcing       are     poor      buyer-supplier      communication,        lack      of    supplier
capabilities/resources/capacity, or buyer-supplier contract enforceability. Two main concepts
must be considered when considering observability as it related to quality risks in outsourcing:
the concepts of testability and criticality.

Quality fade is the deliberate and secretive reduction in the quality of labor in order to widen
profit margins. The downward changes in human capital are subtle but progressive, and usually
unnoticeable by the out sourcer/customer. The initial interview meets requirements, however,
with subsequent support, more and more of the support team are replaced with novice or less
experienced workers. Some IT shops[who?] will continue to reduce the quality of human capital,
under the pressure of drying up labor supply and upward trend of salary, pushing the quality
limits. Such practices are hard to detect, as customers may just simply give up seeking help from
the help desk. However, the overall customer satisfaction will be reduced greatly over time[citation
        . Unless the company constantly conducts customer satisfaction surveys, they may
eventually be caught in a surprise of customer churn, and when they find out the root cause, it
could be too late. In such cases, it can be hard to dispute the legal contract with the outsourcing
company, as their staff are now trained in the process and the original staff made redundant. In
the end, the company that outsources may find that it is worse off than before it outsourced its

Quality of service

Quality of service is measured through a service level agreement (SLA) in the outsourcing
contract. In poorly defined contracts there is no measure of quality or SLA defined. Even when
an SLA exists it may not be to the same level as previously enjoyed. This may be due to the
process of implementing proper objective measurement and reporting which is being done for the
first time. It may also be lower quality through design to match the lower price.

There are a number of stakeholders who are affected and there is no single view of quality. The
CEO may view the lower quality acceptable to meet the business needs at the right price. The
retained management team may view quality as slipping compared to what they previously
achieved. The end consumer of the service may also receive a change in service that is within
agreed SLAs but is still perceived as inadequate. The supplier may view quality in purely
meeting the defined SLAs regardless of perception or ability to do better.

Quality in terms of end-user-experience is best measured through customer satisfaction
questionnaires which are professionally designed to capture an unbiased view of quality. Surveys
can be one of research.[26] This allows quality to be tracked over time and also for corrective
action to be identified and taken.


Offshore outsourcing for the purpose of saving cost can often have a negative influence on the
real productivity of a company. Rather than investing in technology to improve productivity,
companies gain non-real productivity by hiring fewer people locally and outsourcing work to less
productive facilities offshore that appear to be more productive simply because the workers are
paid less. Sometimes, this can lead to strange contradictions where workers in a developing
country using hand tools can appear to be more productive than a U.S. worker using advanced
computer controlled machine tools, simply because their salary appears to be less in terms of U.S.

In contrast, increases in real productivity are the result of more productive tools or methods of
operating that make it possible for a worker to do more work. Non-real productivity gains are the
result of shifting work to lower paid workers, often without regards to real productivity. The net
result of choosing non-real over real productivity gain is that the company falls behind and
obsoletes itself overtime rather than making investments in real productivity.

Staff turnover

The staff turnover of employee who originally transferred to the outsourcer is a concern for many
companies. Turnover is higher under an outsourcer and key company skills may be lost with
retention outside of the control of the company. In outsourcing offshore there is an issue of staff
turnover in the outsourcer companies call centers. It is quite normal for such companies to
replace its entire workforce each year in a call center.[27] This inhibits the build-up of employee
knowledge and keeps quality at a low level.[citation needed]

Language skills

In the area of call centers end-user-experience is deemed to be of lower quality when a service is
outsourced. This is exacerbated when outsourcing is combined with off-shoring to regions where
the first language and culture are different.[28] The questionable quality is particularly evident
when call centers that service the public are outsourced and offshored.[citation needed]

The public generally find linguistic features such as accents, word use and phraseology different
which may make call center agents difficult to understand. The visual clues that are present in
face-to-face encounters are missing from the call center interactions and this also may lead to
misunderstandings and difficulties.[29] In addition to language and accent differences, a lack of
local social and geographic knowledge is often present, leading to misunderstandings or mis-
communications.[citation needed]

Failure to deliver business transformation

Business transformation promised by outsourcing suppliers often fails to materialize. In a
commoditised market where many service providers can offer savings of time and money, smart
vendors have promised a second wave of benefits that will improve the client‘s business
outcomes. According to Vinay Couto of Booz & Company ―Clients always use the service
provider‘s ability to achieve transformation as a key selection criterion. It‘s always in the top
three and sometimes number one.‖ While failure is sometimes attributed to vendors overstating
their capabilities, Couto points out that clients are sometimes unwilling to invest in
transformation once an outsourcing contract is in place.[30][unreliable source?]


Before outsourcing an organization is responsible for the actions of all their staff and liable for
their actions. When these same people are transferred to an outsourcer they may not change desk
but their legal status has changed. They no-longer are directly employed or responsible to the
organization. This causes legal, security and compliance issues that need to be addressed through
the contract between the client and the suppliers. This is one of the most complex areas of
outsourcing and requires a specialist third party adviser.

Fraud is a specific security issue that is criminal activity whether it is by employees or the
supplier staff. However, it can be disputed that the fraud is more likely when outsourcers are
involved, for example credit card theft when there is scope for fraud by credit card cloning. In
April 2005, a high-profile case involving the theft of $350,000 from four Citibank customers
occurred when call center workers acquired the passwords to customer accounts and transferred
the money to their own accounts opened under fictitious names. Citibank did not find out about
the problem until the American customers noticed discrepancies with their accounts and notified
the bank.[31]
Qualifications of outsourcers

The outsourcer may replace staff with less qualified people or with people with different non-
equivalent qualifications.[32]

In the engineering discipline there has been a debate about the number of engineers being
produced by the major economies of the United States, India and China. The argument centers
around the definition of an engineering graduate and also disputed numbers. The closest
comparable numbers of annual graduates of four-year degrees are United States (137,437) India
(112,000) and China (351,537).[33][34]

Company knowledge

Outsourcing could lead to communication problems with transferred employees. For example,
before a transfer the staff has access to broadcast company e-mail that informs them of new
products, procedures etc. An outsourcing organization may not have the same e-mail access
available to them. To reduce costs, outsourced employees may have new information delivered to
them in team meetings.

Public opinion

There is a strong public opinion in the United States against outsourcing (especially when
combined with offshoring) because it leads to job displacement.[citation needed] It is difficult to
dispute that outsourcing has a detrimental effect on individuals who face job disruption and
employment insecurity.[citation needed] However, outsourcing supporters[who?] draw on mainstream
economics to argue that outsourcing should bring down prices, providing greater economic
benefit to all. There are legal protections in the European Union regulations called the Transfer of
Undertakings (Protection of Employment). Labor laws in the United States are not as protective
as those in the European Union.[35] On June 26, 2009, Jeff Immelt, the CEO of General Electric,
called for the United States to increase its manufacturing base employment to 20% of the
workforce commenting that the U.S. has outsourced too much and can no longer rely on
consumer spending to drive demand.[36]

Standpoint of labor

From the standpoint of labor outsourcing may represent a new threat, contributing to rampant
worker insecurity, and reflective of the general process of globalization.[37] While the
"outsourcing" process may provide benefits in some form and to some degree it may undermine
the ability of labor to resist unwanted changes in the workplace. For example, a corporation may
outsource a division of the company to a service provider, that may retain the workforce on worse
conditions or discharge them in the short term. The affected workers thus often feel they are
being "sold down the river." Outsourcing is thus often criticized for violating the American

By country
United States

'Outsourcing' became a popular political issue in the United States during the 2004 U.S.
presidential election. The political debate centered on outsourcing's consequences for the
domestic U.S. workforce. Democratic U.S. presidential candidate John Kerry criticized U.S.
firms that outsource jobs abroad or that incorporate overseas in tax havens to avoid paying their
"fair share" of U.S. taxes during his 2004 campaign, calling such firms "Benedict Arnold

Criticism of outsourcing, from the perspective of U.S. citizens, by-and-large, revolves around the
costs associated with transferring control of the labor process to an external entity in another
country. A Zogby International poll conducted in August 2004 found that 71% of American
voters believed that ―outsourcing jobs overseas‖ hurt the economy while another 62% believed
that the U.S. government should impose some legislative action against companies that transfer
domestic jobs overseas, possibly in the form of increased taxes on companies that outsource.[38]
One given rationale is the extremely high corporate income tax rate in the U.S. relative to other
OECD nations,[39][40][41] and the practice of taxing revenues earned outside of U.S. jurisdiction, a
very uncommon practice. However, outsourcing is not solely a U.S. phenomenon as corporations
in various nations with low tax rates outsource as well, which means that high taxation can only
partially, if at all, explain US outsourcing. For example, the amount of corporate outsourcing in
1950 would be considerably lower than today, yet the tax rate was actually higher in 1950.[42]

It is argued that lowering the corporate income tax and ending the double-taxation of foreign-
derived revenue (taxed once in the nation where the revenue was raised, and once from the U.S.)
will alleviate corporate outsourcing and make the U.S. more attractive to foreign companies.
However, while the US has a high official tax rate, the actual taxes paid by US corporations may
be considerably lower due to the use of tax loopholes, tax havens, and attempts to "game the
system".[43] Rather than avoiding taxes, outsourcing may be mostly driven by the desire to lower
labor costs (see standpoint of labor above). Sarbanes-Oxley has also been cited as a factor for
corporate flight from U.S. jurisdiction. Policy solutions to outsourcing are also criticized.

Outsourcing to the Philippines

Awarded as the top outsourcing destination for the years 2007 and 2009,[44] the Philippine
government has implemented several laws that will grant tax holidays and other benefits to
multinational companies who wish to setup operations in the country. It has export processing
zones all over the country and is currently the host of several manufacturing firms including
Texas Instruments, MOOG, and Microsoft.

The country also boasts of a high literacy rate, providing a large base of skilled and highly
educated workers. Along with Filipino, English is recognized as an official language of the
country and a de facto standard for official and commercial transactions. Most outsourced work
to the Philippines consists of customer support services, web development and website design.

Outsourcing refers to a company that contracts with another company to provide services that
might otherwise be performed by in-house employees. Many large companies now outsource jobs
such as call center services, e-mail services, and payroll. These jobs are handled by separate
companies that specialize in each service, and are often located overseas.

There are many reasons that companies outsource various jobs, but the most prominent advantage
seems to be the fact that it often saves money. Many of the companies that provide outsourcing
services are able to do the work for considerably less money, as they don't have to provide
benefits to their workers and have fewer overhead expenses to worry about.

Outsourcing also allows companies to focus on other business issues while having the details
taken care of by outside experts. This means that a large amount of resources and attention,
which might fall on the shoulders of management professionals, can be used for more important,
broader issues within the company. The specialized company that handles the outsourced work is
often streamlined, and often has world-class capabilities and access to new technology that a
company couldn't afford to buy on their own. Plus, if a company is looking to expand,
outsourcing is a cost-effective way to start building foundations in other countries.

There are some disadvantages to outsourcing as well. One of these is that outsourcing often
eliminates direct communication between a company and its clients. This prevents a company
from building solid relationships with their customers, and often leads to dissatisfaction on one or
both sides. There is also the danger of not being able to control some aspects of the company, as
outsourcing may lead to delayed communications and project implementation. Any sensitive
information is more vulnerable, and a company may become very dependent upon its outsource
providers, which could lead to problems should the outsource provider back out on their contract

Dapatkan Keunggulan Kompetitif dengan Outsourcing

Outsourcing dapat menjadi suatu strategi brilian bagi perusahaan, karena dengan outsourcing
perusahaan memperoleh keuntungan finansial secara langsung, yaitu pemangkasan biaya secara
dramatis. Tapi outsourcing bukanlah sekedar pemangkasan biaya saja. Outsourcing sangat
berkaitan pula dengan masalah peningkatan efisiensi, pengurangan biaya modal dan biaya
operasional, serta tentunya untuk lebih meningkatkan fokus bisnis suatu perusahaan. Sebuah
perusahaan dapat memperoleh banyak manfaat ketika masalah teknologi informasi (TI) mereka
diserahkan kepada ahli-ahli TI eksternal yang telah teruji, handal dan profesional.

Saltanera menawarkan solusi TI yang bersifat lengkap dan komprehensif. Dengan dukungan
tenaga TI yang handal dan profesional, Saltanera dapat menjadi mitra tepat outsourcing TI
perusahaan Anda. Kami dapat memberika sebuah solusi yang akan disesuaikan dengan
kebutuhan perusahaan Anda, scalable, dengan biaya yang efisien, dan ditunjang dengan
metodologi kami yang telah terbukti tangguh dan teruji, yaitu Saltanera Collaborative Process

Dengan Layanan Outsourcing dari Saltanera, kami akan membantu Anda dalam menghadirkan
solusi e-business dengan budget yang dapat diprediksi dan tanpa hidden-cost, meningkatkan
performansi proses bisnis, meningkatkan cash flow, mengoptimalkan penggunaan resource yang
tersedia, serta yang terpenting, mengembalikan fokus bisnis Anda kembali pada core business
sesungguhnya, tanpa perlu memikirkan lagi masalah TI yang tentunya bukan merupakan core
business Anda.

• Food services
Food service is a large industry which deals with the preparation and service of food outside the
home. Catering a wedding, establishing a restaurant, and running a cafeteria are all forms of food
service. Many people take advantage of the range of options provided by this industry all over the
world, ranging from stopping at a franchise to pick up a burger and fries to eating a prescription
diet while in the hospital.

A number of goods and services fall under the umbrella of food service, such as companies which
transport food and related products like kitchen equipment, silverware, and so forth.
Restauranteurs, waiters, bussers, chefs, and dietitians are some examples of people who work in
the food service industry, along with people like architects who design facilities where food is
made and served, company representatives who travel the road selling products related to the
service and sale of food, and consultants who help people coordinate events at which food will be

Some people in this industry receive special training so that they can work in food service. Some
colleges and trade schools offer hospitality programs which can include things like restaurant
management, and people can also receive special training in issues like nutrition for hospitalized
patients or children in schools. Other people start from the ground up, driving trucks for food
distributors, waiting tables at restaurants, and so forth, gaining an understanding of the industry
by working from within it.

Work in the food service industry can be grueling and demanding, even for managers and
executives. The hours are often long and irregular, and people tend to spend a lot of time on their
feet, dealing with varied and complex situations. As with other facets of the hospitality industry,
people must also be highly attuned to the need for customer satisfaction, whether they are
developing menus for a college dining hall or providing service at four star French restaurants.

Foodservice (US English) or catering industry (British English) defines those businesses,
institutions, and companies responsible for any meal prepared outside the home. This industry
includes restaurants, school and hospital cafeterias, catering operations, and many other formats.

Types of companies

The companies that supply foodservice operators are called foodservice distributors. Foodservice
distributors sell goods like small wares (kitchen utensils) and bulk foods. Some companies
manufacture products in both consumer and foodservice versions. The consumer version usually
comes in individual-sized packages with elaborate label design for retail sale. The foodservice
version is packaged in a much larger industrial size and often lacks the colorful label designs of
the consumer version.

Foodservice sales to restaurants and institutions are estimated to be approximately $400 Billion,
about equal with consumer sales of foods through grocery outlets. Major foodservice providers
include Aramark, Brinker International, Compass Group, the Crown Group, Darden Restaurants,
Sysco, McLane Company, US Foodservice and 3663 First for Foodservice.

Employment statistics

The foodservice industry is one of the largest employers in the United States. Over 805,360
people are currently working as servers and managers alone. 59% of these workers are under the
age of 30, and over 66% hold only a high school diploma or less.[1]

Counter service

A food counter service

Counter service is a form of service in restaurants, pubs, and bars where food or drinks are
ordered at the counter. Counter service is also called "bar service" in the case of pubs and bars
where the counter is also called the bar. Counter service is compared with table service where
service is provided at the table. With counter service, the customer generally pays before
consuming the food or drink. Some fast food restaurants offer only counter service while table
service is the common form in most restaurants. For pubs and bars, bar service is the norm in the
United Kingdom and the Republic of Ireland whereas table service is the norm in the United
States and Continental Europe.

Table service

Table service is food service served to the customer's table by waiters. Table service is the norm
in most restaurants, while for some fast food restaurants counter service is the common form. For
pubs and bars, table service is the norm in the United States whereas counter service is the norm
in the United Kingdom. With table service, the customer generally pays at the end of meal.
Various methods of table service can be provided. See, for instance, silver service.

Gueridon service

Gueridon service is a form of food service provided by restaurants to their guests. This type of
service encompasses preparing food (primarily salads, main dishes such as beef stroganoff, or
desserts) in direct view of the guests, using a "Gueridon". A gueridon typically consists of a
trolley that is well equipped to prepare, cook and serve the food to the guest. There will be a gas
hob, chopping board, cutlery drawer, cold store (depending on the trolley type) and general
working area.

• Environmental services
To my knowledge, the literature so far does not formally define PES, which contributes to some
conceptual confusion. For our field work in Bolivia and Vietnam, we used five relatively simple
criteria to describe the PES principle.
A PES is:
1. a voluntary transaction where
2. a well-defined ES (or a land-use likely to secure that service)
3. is being ‗bought‘ by a (minimum one) ES buyer
4. from a (minimum one) ES provider
5. if and only if the ES provider secures ES provision (conditionality).

First, PES is a voluntary, negotiated framework, which distinguishes it from command-and-
control measures. This presupposes that potential ES providers have real land-use
choices, something which in Vietnam, for instance, typically was not the case: payments
here were more to be seen as in integral part of the predominating command-and-control
system (Wunder, The, and Ibarra 2005). Secondly, what is bought needs to be well-
defined — it can be a directly measurable service (e.g. additional tons of carbon stored)
or land-use caps that are likely to help providing that service (e.g. ―forest conservation provides
clean water‖). In fact, here the word ―likely‖ hides important scientific insecurities and popular
perceptions. Especially hydrological services are often based on beliefs rather than scientific
proof (e.g. ―forest cover always increases water availability‖) (Kaimowitz 2004).
Also, external factors can interfere; Nature is not always ‗well-behaved‘. For instance, even if
forest conservation indeed increases the likelihood of clean local water provision, this increase
may be subordinate if the general frequency of tropical storms and flooding is high, thus
dominating water-quality outcomes. Payments that build on scientifically unlikely relationships,
on likely relationship being unlikely to affect significantly the desired outcome, or on what has
outright been proven to be a myth, might persist over a long time.
In many cases, we lack the knowledge base to classify objectively which ES provision cases are
real and which ones are ‗imaginary‘. However, we assume that a poor underpinning of ES will
tend to decrease PES robustness and sustainability: the less realistic the scientific basis of a PES
scheme, the more exposed it is to the risk of buyers questioning its rationale and abandoning
In any PES, there should be resources going from at least one ES buyer (criterion 3) to at least
one provider (criterion 4), though the transfer often occurs through an intermediary. Last but not
least, in a PES scheme user payments need to be truly contingent upon the service being
continuously provided (criterion 5). ES buyers thus normally monitor compliance, e.g. has
hunting, deforestation or slash-and-burn agriculture really been contained in the manner
stipulated in a given contract? In developed countries, supporting legal and enforcement
apparatus can create the conditions for once-
off payments to provide future ES flows, for instance in permanent easements (e.g. Bayon 2004;
Sokolow and Zurbrugg 2003). But in developing countries, this option is usually lacking — more
so in agricultural frontier areas with weak governance. This feature implies that in the tropics
PES normally need to be periodic (often with an infinite horizon) and tied to monitored
compliance. Service buyers thus need to be able to withdraw from a PES contract if they do not
get what they paid for.
Conversely, service providers may also have an interest in flexible contracts, so they can
pull out (or alter the terms) of a PES scheme if changing context conditions induce them to do so.
How many PES schemes with these five basic principles can one find in the tropics? In our
assessment of two countries, Bolivia and Vietnam, no single scheme satisfied all five criteria,
although several satisfi ed more than one (Robertson and Wunder 2005; Wunder, The, and Ibarra
2005). For instance, watershed payments were being made, but there was no free land-use choice
(criterion 1). The more precise nature of the service provided often remained fuzzy (criterion 2).
The money often came from donors rather than from service users (criterion 3). Conversely,
sometimes users were charged, but the money had not been spent so far to pay potential ES
suppliers (criterion 4).
However, clearly the hardest criterion to meet is conditionality (criterion 5): many initiatives are
loosely monitored or not at all, payments are up front instead of periodic, and they are made in
good faith rather than being truly contingent on monitored service provision. The business-like
feature of contingent conservation payments raised some resistance in all study countries.
In sum, while the number of tropical PES-like initiatives is thus considerable — (Landell-
Mills and Porras 2002) reviewed 287 such schemes — there are probably very few ‗true
PES‘ conforming to the theoretical concept developed in the literature and described in
the simple definition above.
If our field search thus produced barely any ‗true PES‘ hits, is it perhaps because the
above PES definition was simply too narrow? Historically, many schemes of reforestation and
soil-conservation subsidies were clearly justified in part by environmental services, even though
the provision of the latter typically was assumed rather than monitored. Alternatively, one could
choose to define PES by the additive meaning of the terms it contains: any ―payment‖ somehow
intended to promote ―environmental services‖
could be PES. In addition to reforestation and soil-conservation subsidies, things like salaries for
local protected-area guards, wages for people working in conservation projects, and certainly all
ICDPs would qualify. If, nevertheless, I prefer to maintain the above ‗pure PES‘ definition, it is
out of a belief that these five principles represent something new — a more direct approach that
deserves to be tested on its own terms, before being added to the big pool of well-tested
environmental spending types. Evaluating the different degrees of compliance with these five
criteria of specific cases — though sometimes a task with subtle distinctions — can serve as an
indicator to what extent these cases truly represent the underlying PES principle.

• Plant operations
Physical plant or mechanical plant (and where context is given, often just plant) refers to the
necessary infrastructure used in support and maintenance of a given facility. The operation of
these facilities, or the department of an organization which does so, is called "plant operations" or
facility management. It should not be confused with manufacturing plant.

Plant usually includes air conditioning (both heating and cooling systems and ventilation) and
other mechanical systems. It often also includes the maintenance of other systems, such as
plumbing and lighting. The facility itself may be an office building, a school campus, military
base, apartment complex, or the like.[1]

In broadcast engineering, the term transmitter plant is the part of the physical plant associated
with the transmitter and its controls and inputs, the studio/transmitter link (if the radio studio is
off-site), the radio antenna and radomes, feedline and desiccation/nitrogen system, broadcast
tower and building, tower lighting, generator, and air conditioning. These are often monitored by
an automatic transmission system, which reports conditions via telemetry (transmitter/studio link)

• Information technology
Information technology (IT) is "the study, design, development, implementation, support or
management of computer-based information systems, particularly software applications and
computer hardware", according to the Information Technology Association of America
(ITAA).[1] IT deals with the use of electronic computers and computer software to convert, store,
protect, process, transmit, and securely retrieve information.

Today, the term information has ballooned to encompass many aspects of computing and
technology, and the term has become very recognizable. IT professionals perform a variety of
duties that range from installing applications to designing complex computer networks and
information databases. A few of the duties that IT professionals perform may include data
management, networking, engineering computer hardware, database and software design, as well
as the management and administration of entire systems. Information technology is starting to
spread farther than the conventional personal computer and network technology, and more into
integrations of other technologies such as the use of cell phones, televisions, automobiles, and
more, which is increasing the demand for such jobs.

When computer and communications technologies are combined, the result is information
technology, or "infotech". Information technology is a general term that describes any technology
that helps to produce, manipulate, store, communicate, and/or disseminate information.

Information Technology – A Definition:

We use the term information technology or IT to refer to an entire industry. In actuality,
information technology is the use of computers and software to manage information. In some
companies, this is referred to as Management Information Services (or MIS) or simply as
Information Services (or IS). The information technology department of a large company would
be responsible for storing information, protecting information, processing the information,
transmitting the information as necessary, and later retrieving information as necessary.

History of Information Technology:

In relative terms, it wasn't long ago that the Information Technology department might have
consisted of a single Computer Operator, who might be storing data on magnetic tape, and then
putting it in a box down in the basement somewhere. The history of information technology is
fascinating! Check out these history of information technology resources for information on
everything from the history of IT to electronics inventions and even the top 10 IT bugs.

Modern Information Technology Departments:

In order to perform the complex functions required of information technology departments today,
the modern Information Technology Department would use computers, servers, database
management systems, and cryptography. The department would be made up of several System
Administrators, Database Administrators and at least one Information Technology Manager. The
group usually reports to the Chief Information Officer (CIO).

Popular Information Technology Skills:

Some of the most popular information technology skills at the moment are:

      Computer Networking
      Information Security
      IT Governance
      ITIL
      Business Intelligence
      Linux
      Unix
      Project Management

For more information about technical skills that are popular in the job market, check out the IT
Career Skills List..

Information Technology Certifications:

Having a solid education and specific specialty certifications is the best way to progress in an
information technology career. Here are some of the more popular information technology

      Information Security Certifications
      Oracle DBA Certifications
      Microsoft Certifications
      Cisco Certifications
      PMP Certification

Jobs in IT:

There can be a lot of overlap between many of the job descriptions within information technology
departments. In order to clarify the descriptions, skills and career paths of each, I have put
together a Jobs in IT listing. The jobs in IT listing includes information on education and training
required for each position. It also includes lists of companies that typically have IT jobs open, as
well as links to IT-specific resumes, cover letters and IT interview questions.
Information Technology - Trends:

Information Technology Departments will be increasingly concerned with data storage and
management, and will find that information security will continue to be at the top of the priority
list. Cloud computing remains a growing area to watch. The job outlook for those within
Information Technology is strong, with data security and server gurus amongst the highest paid
techies. Check out the Information Security Certifications and Highest Paying Certifications for
more information. In order to stay current in the Information Technology Industry, be sure you
subscribe to top technology industry publications.

Information Technology - Find a New Job

      Resume Tips
      Cover Letters
      Job Search Sites

Information Technology - Also of Interest

      Job Interviews
      Salary Calculators
      Professional Information Security Organizations

Information Technology - Other Job Search Information

      Resignation Letters
      Thank You Letters
      Job Fairs

Related Articles

      Find a Job - How to Find a Job in the Technology Industry
      Operations / Technology Privacy Statement
      Computer Jobs - Information Technology System Network Programming
      IT Outsourcing - Information Technology Outsourcing and Your Career
      Information Technology - Careers in Information Technology

• Clinical services

Detailed Definitions

i) Publicly Funded Teaching

      UK award/credit bearing courses
      All teaching activities like ESF, Erasmus, Tempus
      All levels of teaching - sub-degree, degree, Postgraduate Teaching (but not Postgraduate
      Higher education, further education, teacher training, NHS (nursing) etc
      Holding lectures, seminars, tutorials
      Project, workshop and laboratory supervision
      Preparing materials for lectures, tutorials and laboratory classes
      Preparing materials for an agreed new course
      Editing and updating course materials
      Organising and visiting placements, fieldwork
      Supervision/contact time relating to projects and dissertations; and assessment
      Other student contact time relating to educational matters including remedial classes
      Preparing and marking examination papers, including re-sits
      Oral examinations/vivas
      Reading and assessing student dissertations, reading and marking essays and any other
       student work
      Invigilation of examinations including external examining
      Mentee meetings
      Outreach where Teaching is the underlying activity

ii) Non-Publicly Funded Teaching

      Short courses (full cost short courses; non credit/award bearing courses; overseas courses
       and other Non-Publicly Funded commercial teaching)
      Teaching carried out through trading units/commercial companies
      Activities as in Publicly Funded Teaching: preparing and running short courses where the
       institution receives the income


All research sponsors including Research Councils, UK Charities, European Union & Others

For all the above:

Research is to include research and experimental development

      Fieldwork, laboratory, studio, classroom work
      Management of projects, informal discussions, progress reports etc.
      Recruitment and supervision of research staff
      Attendance at conferences, seminars and society meetings that are directly connected with
       specific research projects
      Production of research reports, papers, books
      Collaboration with other departments or institutions in any of the above
      Outreach where research is the underlying activity; Teaching Company Scheme

Institution/Own Funded Research
Institution/own funded or HEFCE funded work where there is no external sponsor
commissioning the work

Activities as in Research Councils, whether identified as projects or not, including speculative
research undertaken to investigate the potential of ideas before preparing grant or contract bids;
or for publication

Training and Supervision of Postgraduate Research Students

Training and supervision of Postgraduate Research students including training in research
methodology, review of drafts and preparation of thesis, and external examining

Other Activities

Activities other than Teaching, Research or Support.

DO NOT include long-term sickness and holidays, sabbaticals or maternity leave under this
heading. See FAQ for additional guidance

Consultancy and Other Services

Consultancy (excluding private) i.e. that is contracted to the institution and carried out in
institution time, including advisory work, journal editing, feasibility studies

Continuing education should be classified as Non-Publicly Funded Teaching

Work carried out through trading units/commercial companies that is not Teaching or Research

Technology transfer work if remunerated through the university (e.g. directorships of start-up
companies and/or consultancy contracts for the companies). (If not remunerated then use Support
for Other)

Outreach (where the outreach activity is not Teaching or Research)

Clinical Services

Services provided to the NHS under "Knock for Knock" arrangements with the Medical and
Dental Services.

"Knock for Knock" is a term to reflect the interdependent relationship between the NHS and

Clinical Academics provide patient services to the NHS, under contract, through local
arrangements or as identified under job plans.

NHS Clinicians provide teaching sessions to HEIs
No formal cross-charging exists for these arrangements on the basis that

The presumption is that across the NHS as a whole the net effect is neutral (both NHS/HEIs
receive the same level of service). This does not mean that in an individual arrangement between
an NHS Trust and a HEI there is not an imbalance in the services provided and received.

The costs and bureaucracy of implementing a charging regime are onerous and would not provide
significant benefit.

Therefore Clinical Services is services provided to patients in the NHS. There may be some
teaching also taking place but that is not the principal action.

i) Support for Teaching

      Timetabling
      Examination boards
      Preparing prospectuses
      Interviewing taught students, admissions and induction
      Course and other committees related to teaching
      Schools liaison
      Pastoral support (outside timetabled tutorials), counselling
      Initial course development (where the future of the course is not certain; preparing
       materials for an agreed new course is Teaching)
      Module reviews (but subsequent updating and editing etc. is Teaching)
      Institutions might also wish to include here scholarship/professional development and
       other Support (which are covered below) such as:
      Writing books and other publications for teaching purposes
      Advancement of knowledge and skills related to teaching
      Secondment to/academic exchanges with other universities for teaching activities
      Publicity for teaching facilities and opportunities.

ii) Support for Research

Interviewing research students, admissions and induction

Drafting and redrafting proposals for new work and supporting bids to external bodies where bids
involve a significant amount of speculative research, that element can be attributed to Research)

Refereeing papers

Again this might also include scholarship/professional development and other Support to
Research (which are covered below) such as:

      Advancement of knowledge and skills related to Research
      Unpaid work advising government departments or committees, professional bodies or
       agencies in relation to research matters
      Institute and department committee work supporting Research
      Block time in other institutions on research exchange schemes
      Publicity for research facilities and opportunities.

iii) Support for Other

Drafting and re-drafting proposals for new work and supporting bids to external bodies for
consultancy and other services rendered activities (where bids involve a significant amount of
speculative research, that element can be attributed to Research)

Negotiating contract terms and conditions with external bodies

Technology transfer work that is not private, nor remunerated through the institution (e.g.
supporting patent applications, licence negotiations, formation of start-up companies)

iv) Management and Administration

      Membership of or participation at, school boards, senate, institution committees etc.
      Management duties such as deans, head of admissions, assistant deans etc.
      Staff management; appraisal etc.
      Publicity; representative work on behalf of the institution or department
      Careers advice
      Information returns
      Quality assurance

v) Professional Development and Scholarship

Maintenance and advancement of own personal knowledge and skills (reading literature,
attending professional conferences, maintaining professional or clinical skills, acquiring new
skills etc.)

Consultancy that is carried out in institute normal working hours, in agreement to the institution,
but is not contracted to the institution, i.e., private consultancy in institutional time - e.g.
maintenance and development of clinical or professional skills

Clinical services provided under knock-for-knock arrangements are not to be recorded here, but
as described in Clinical Services.

Private consultancy, carried out in private time - is not to be included here (or anywhere).

vi) Contribution to the Sector and Economy as a Whole

      (Unpaid) committees
      Secondments to RAE panels
Emergency medical services (abbreviated to the initialism "EMS" in some countries) are type of
emergency service dedicated to providing out-of-hospital acute medical care and/or transport to
definitive care, to patients with illnesses and injuries which the patient, or the medical
practitioner, believes constitutes a medical emergency.[1] The use of the term emergency medical
services may refer solely to the pre-hospital element of the care, or be part of an integrated
system of care, including the main care provider, such as a hospital.

Emergency medical services may also be locally known as: first aid squad,[2] emergency squad,[3]
rescue squad,[4] ambulance squad,[5] ambulance service,[6] ambulance corps[7] or life squad.[8]

The goal of most emergency medical services is to either provide treatment to those in need of
urgent medical care, with the goal of satisfactorily treating the presenting conditions, or arranging
for timely removal of the patient to the next point of definitive care. This is most likely an
emergency department at a hospital or another place where physicians are available. The term
emergency medical service evolved to reflect a change from a simple system of ambulances
providing only transportation, to a system in which actual medical care is given on scene and
during transport. In some developing regions, the term is not used, or may be used inaccurately,
since the service in question does not provide treatment to the patients, but only the provision of
transport to the point of care.[9]

In most places in the world, the EMS is summoned by members of the public (or other
emergency services, businesses or authority) via an emergency telephone number which puts
them in contact with a control facility, which will then dispatch a suitable resource to deal with
the situation.[10]

In some parts of the world, the emergency medical service also encompasses the role of moving
patients from one medical facility to an alternative one; usually to facilitate the provision of a
higher level or more specialised field of care. In such services, the EMS is not summoned by
members of the public but by clinical professionals (e.g. physicians or nurses) in the referring
facility. Specialized hospitals that provide higher levels of care may include services such as
neonatal intensive care (NICU),[11] pediatric intensive care (PICU), state regional burn centres,[12]
specialized care for spinal injury and/or neurosurgery,[13] regional stroke centers,[14] specialized
cardiac care[15][16] (cardiac catherization),[17] and specialized/regional trauma care.[18]

In some jurisdictions, EMS units may handle technical rescue operations such as extrication,
water rescue, and search and rescue.[19] Training and qualification levels for members and
employees of emergency medical services vary widely throughout the world. In some systems,
members may be present who are qualified only to drive the ambulance, with no medical
training.[9] In contrast, most systems have personnel who retain at least basic first aid
certifications, such as Basic Life Support (BLS). Additionally many EMS systems are staffed
with Advanced Life Support (ALS) personnel, including paramedics, nurses, or, less commonly,


Main article: History of the ambulance
Emergency care in the field has been rendered in different forms since the beginning of recorded
history. The New Testament contains the parable of the Good Samaritan, where a man who was
beaten is cared for by a Samaritan. Luke 10:34 (NIV) - "He went to him and bandaged his
wounds, pouring on oil and wine. Then he put the man on his own donkey, took him to an inn
and took care of him." Also during the Middle Ages, the Knights Hospitaller were known for
rendering assistance to wounded soldiers in the battlefield.[21]

A 1973 Cadillac Miller-Meteor ambulance. Note the higher roof, with more room for the
attendants and patients

The first use of the ambulance as a specialized vehicle, in battle came about with the ambulances
volantes designed by Dominique Jean Larrey (1766–1842), Napoleon Bonaparte's chief
physician.[22][23] Larrey was present at the battle of Spires, between the French and Prussians, and
was distressed by the fact that wounded soldiers were not picked up by the numerous ambulances
(which Napoleon required to be stationed two and half miles back from the scene of battle) until
after hostilities had ceased, and set about developing a new ambulance system.[22][23][24] Having
decided against using the Norman system of horse litters, he settled on two- or four-wheeled
horse-drawn wagons, which were used to transport fallen soldiers from the (active) battlefield
after they had received early treatment in the field.[23] These 'flying ambulances' were first used
by Napoleon's Army of the Rhine is 1793. Larrey subsequently developed similar services for
Napoleon's other armies, and adapted his ambulances to the conditions, including developing a
litter which could be carried by a camel for a campaign in Egypt.[23]

In civilian ambulances, a major advance was made (which in future years would come to shape
policy on hospitals and ambulances) with the introduction of a transport carriage for cholera
patients in London during 1832.[25] The statement on the carriage, as printed in The Times, said
"The curative process commences the instant the patient is put in to the carriage; time is saved
which can be given to the care of the patient; the patient may be driven to the hospital so speedily
that the hospitals may be less numerous and located at greater distances from each other". [24] This
tenet of ambulances providing instant care, allowing hospitals to be spaced further apart, displays
itself in modern emergency medical planning.

The first known hospital-based ambulance service operated out of Commercial Hospital,
Cincinnati, Ohio (now the Cincinnati General) by 1865.[24] This was soon followed by other
services, notably the New York service provided out of Bellevue Hospital which started in 1869
with ambulances carrying medical equipment, such as splints, a stomach pump, morphine, and
brandy, reflecting contemporary medicine.
In June 1887 the St John Ambulance Brigade was established to provide first aid and ambulance
services at public events in London.[26] It was modelled on a military-style command and
discipline structure.

The earliest emergency medical service was reportedly the rescue society founded by Jaromir V.
Mundy, Count J. N. Wilczek, and E. Lamezan-Salins in Vienna after the disastrous fire at the
Vienna Ring Theater in 1881. Named the "Vienna Voluntary Rescue Society," it served as a
model for similar societies worldwide.[27]

A 1948 Cadillac Meteor ambulance. The Meteor Motor company purchased this car from
Cadillac, then modified it to turn it into an ambulance. The resemblance to a hearse is obvious.
(see text)

Also in the late 19th century, the automobile was being developed, and in addition to horse-
drawn models, early 20th century ambulances were powered by steam, gasoline, and electricity,
reflecting the competing automotive technologies then in existence. However, the first motorized
ambulance was brought into service in the last year of the 19th century, with the Michael Reese
Hospital, Chicago, taking delivery of the first automobile ambulance, donated by 500 prominent
local businessmen, in February 1899.[24] This was followed in 1900 by New York city, who
extolled its virtues of greater speed, more safety for the patient, faster stopping and a smoother
ride. These first two automobile ambulances were electrically powered with 2 hp motors on the
rear axle.[24]

American historians claim that the first component of pre hospital care on scene began in 1928,
when "Julien Stanley Wise started the Roanoke Life Saving and First Aid Crew in Roanoke,
Virginia, Virginia, which was the first land-based rescue squad in the nation." However the city
of Toronto takes this claim stating "The first formal training for ambulance attendants was
conducted in 1892."

During World War One, further advances were made in providing care before and during
transport – traction splints were introduced during World War I, and were found to have a
positive effect on the morbidity and mortality of patients with leg fractures.[28] Two-way radios
became available shortly after World War I, enabling for more efficient radio dispatch of
ambulances in some areas. Shortly before World War II, then, a modern ambulance carried
advanced medical equipment, was staffed by a physician, and was dispatched by radio. In many
locations, however, ambulances were hearses - the only available vehicle that could carry a
recumbent patient - and were thus frequently run by funeral homes. These vehicles, which could
serve either purpose, were known as combination cars.[29][30]

Prior to World War II, hospitals provided ambulance service in many large cities. With the severe
manpower shortages imposed by the war effort, it became difficult for many hospitals to maintain
their ambulance operations. City governments in many cases turned ambulance services over to
the police or fire department. No laws required minimal training for ambulance personnel and no
training programs existed beyond basic first aid. In many fire departments, assignment to
ambulance duty became an unofficial form of punishment.

Advances in the 1960s, especially the development of CPR & defibrillation as the standard form
of care for out-of-hospital cardiac arrest, along with new pharmaceuticals, led to changes in the
tasks of the ambulances.[31] In Belfast, Northern Ireland the first experimental mobile coronary
care ambulance successfully resuscitated patients using these technologies. One well-known
report in the USA during that time was Accidental Death and Disability: The Neglected Disease
of Modern Society. This report is commonly known as The White Paper.[32] These studies, along
with the White Paper report, placed pressure on governments to improve emergency care in
general, including the care provided by ambulance services. Part of the result was the creation of
standards in ambulance construction concerning the internal height of the patient care area (to
allow for an attendant to continue to care for the patient during transport), and the equipment (and
thus weight) that an ambulance had to carry, and several other factors.

In the USA prior to the 1970s, ambulance service was largely unregulated. While some areas
ambulances were staffed by advanced first-aid-level responders, in other areas, it was common
for the local undertaker, having the only transport in town in which one could lie down, to
operate both the local furniture store (where he would make coffins as a sideline) and the local
ambulance service. However, after the release of the National Highway Traffic Safety
Administration's study, "Accidental Death and Disability: The Neglected Disease of Modern
Society", (known in the EMS trade as the White Paper)[33] a concerted effort was undertaken to
improve emergency medical care in the pre-hospital setting.

In the late 1960s, Dr. R Adams Cowley was instrumental in the creation of the country's first
statewide EMS program, in Maryland.[34]

Service providers

A volunteer ambulance crew in Modena, Italy
A city fire service ambulance from the Tokyo Fire Department.

ACT Ambulance Service Command Vehicle

Some countries closely regulate the industry (and may require anyone working on an ambulance
to be qualified to a set level), whereas others allow quite wide differences between types of

   1. Government Ambulance Service – Operating separately from (although alongside) the
      fire and police service of the area, these ambulances are funded by local, provincial or
      national government. In some countries, these only tend to be found in big cities, whereas
      in countries such as Great Britain almost all emergency ambulances are part of a national
      health system.[35]
   2. Fire or Police Linked Service – In countries such as the U.S., Japan, France, and parts of
      India; ambulances can be operated by the local fire or police service. This is particularly
      common in rural areas, where maintaining a separate service is not necessarily cost
      effective. In some cases this can lead to an illness or injury being attended by a vehicle
      other than an ambulance, such as a fire truck.
   3. Volunteer Ambulance Service – Charities or non-profit companies operate ambulances,
      both in an emergency and patient transport function. This may be along similar lines to
      volunteer fire companies, providing the main service for an area, and either community or
      privately owned. They may be linked to a voluntary fire service, with volunteers
      providing both services. There are charities who focus on providing ambulances for the
      community, or for cover at private events (sports etc.). The Red Cross provides this
      service across the world on a volunteer basis.[36] (and in others as a Private Ambulance
      Service), as do other smaller organisations such as St John Ambulance[37] and the Order of
      Malta Ambulance Corps.[38] These volunteer ambulances may be seen providing support
      to the full time ambulance crews during times of emergency. In some cases the volunteer
        charity may employ paid members of staff alongside volunteers to operate a full time
        ambulance service, such in some parts of Australia, Ireland and most importantly
        Germany and Austria.
   4.   Private Ambulance Service – Normal commercial companies with paid employees, but
        often on contract to the local or national government. Private companies may provide
        only the patient transport elements of ambulance care (i.e. non urgent), but in some
        places, they are contracted to provide emergency care, or to form a 'second tier' response,
        where they only respond to emergencies when all of the full-time emergency ambulance
        crews are busy. This may mean that a government or other service provide the
        'emergency' cover, whilst a private firm may be charged with 'minor injuries' such as cuts,
        bruises or even helping the mobility impaired if they have for example fallen and just
        need help to get up again, but do not need treatment. This system has the benefit of
        keeping emergency crews available all the time for genuine emergencies. These
        organisations may also provide services known as 'Stand-by' cover at industrial sites or at
        special events .[39]
   5.   Combined Emergency Service – these are full service emergency service agencies,
        which may be found in places such as airports or large colleges and universities. Their
        key feature is that all personnel are trained not only in ambulance (EMT) care, but as a
        firefighter and a peace officer (police function). They may be found in smaller towns and
        cities, where size or budget does not warrant separate services. This multi-functionality
        allows to make the most of limited resource or budget, but having a single team respond
        to any emergency.
   6.   Hospital Based Service – Hospitals may provide their own ambulance service as a
        service to the community, or where ambulance care is unreliable or chargeable. Their use
        would be dependent on using the services of the providing hospital.
   7.   Charity Ambulance – This special type of ambulance is provided by a charity for the
        purpose of taking sick children or adults on trips or vacations away from hospitals,
        hospices or care homes where they are in long term care. Examples include the UK's
        'Jumbulance' project.[40]
   8.   Company Ambulance - Many large factories and other industrial centres, such as
        chemical plants, oil refineries, breweries and distilleries have ambulance services
        provided by employers as a means of protecting their interests and the welfare of their
        staff. These are often used as first response vehicles in the event of a fire or explosion.

6 points on the Star of Life

Emergency medical services exists to fulfill the basic principles of first aid, which are to Preserve
Life, Prevent Further Injury, and Promote Recovery.

This common theme in medicine is demonstrated by the "star of life". The Star of Life shown
here, where each of the 'arms' to the star represent one of the 6 points. These 6 points are used to
represent the six stages of high quality pre-hospital care, which are:[41]

   1. Early Detection[41] - Members of the public, or another agency, find the incident and
      understand the problem
   2. Early Reporting[41] - The first persons on scene make a call to the emergency medical
      services and provide details to enable a response to be mounted
   3. Early Response[41] - The first professional (EMS) rescuers arrive on scene as quickly as
      possible, enabling care to begin
   4. Good On Scene Care[41] - The emergency medical service provides appropriate and
      timely interventions to treat the patient at the scene of the incident
   5. Care in Transit[41] - the emergency medical service load the patient in to suitable
      transport and continue to provide appropriate medical care throughout the journey
   6. Transfer to Definitive Care[41] - the patient is handed over to an appropriate care setting,
      such as the emergency department at a hospital, in to the care of physicians

Levels of care
Responding to an emergency

EMS in Ireland

Patient arriving at hospital

Emergency Medical Service is provided by a variety of individuals, using a variety of methods.
To some extent, these will be determined by country and locale, with each individual country
having its own 'approach' to how EMS should be provided, and by whom. In some parts of
Europe, for example, legislation insists that efforts at providing advanced life support (ALS)
Mobile Intensive Care Units (MICU)services must be physician-staffed, while other permit some
elements of that skill set to specially trained nurses, but have no paramedics. Elsewhere, as in
North America, the UK and Australia, ALS services are performed by paramedics, but rarely
with the type of direct "hands-on" physician leadership seen in Europe. Increasingly, particularly
in the UK and in South Africa, the role is being provided by specially-trained paramedics who are
independent practitioners in their own right. Beyond the national model of care, the type
Emergency Medical Service will be determined by local jurisdictions and medical authorities,
based upon the needs of the community, and the economic resources to support it.
A category of emergency medical service which is known as 'medical retrieval' or rendez vous
MICU protocol in some countries (Australia, NZ, Great Britain) refers to critical care transport of
patients between hospitals (as opposed to pre-hospital). Such services are a key element in
regionalised systems of hospital care where intensive care services are centralised to a few
specialist hospitals. An example of this is the Emergency Medical Retrieval Service in Scotland.

Generally speaking, the levels of service available will fall into one of three categories; Basic
Life Support (BLS), Advanced Life Support (ALS), and care by traditional healthcare
professionals, meaning nurses and/or physicians working in the pre-hospital setting and even on
ambulances. In some jurisdictions, a fourth level, Intermediate Life Support (ILS), which is
essentially a BLS provider with a moderately expanded skill set, may be present, but this level
rarely functions independently, and where it is present may replace BLS in the emergency part of
the service. When this occurs, any remaining staff at the BLS level is usually relegated to the
non-emergency transportation function. Job titles typically include Emergency Medical
Technician, Ambulance Technician, or Paramedic. These ambulance care givers are generally
professionals or paraprofessionals and in some countries their use is controlled through training
and registration]. While these job titles are protected by legislation in some countries, this
protection is by no means universal, and anyone might, for example, call themselves an 'EMT' or
a 'paramedic', regardless of their training, or the lack of it.[42] In some jurisdictions, both
technicians and paramedics may be further defined by the environment in which they operate,
including such designations as 'Wilderness', 'Tactical', and so on.

Basic Life Support

First Responder

A first responder is a person who arrives first at the scene of an incident, and whose job is to
provide early critical care such as CPR or using an AED.[43] First responders may be dispatched
by the ambulance service, may be passers-by, citizen volunteers, or may be members of other
agencies such as the police, fire department, or search and rescue who have some medical
training—commonly CPR, basic first aid, and AED use.[44]

Scottish Ambulance Service "First Responder" vehicle

Ambulance Driver
Some jurisdictions separate the 'driver' and 'attendant' functions, employing ambulance driving
staff with no medical qualification (or just a first aid certificate), whose job is to drive the
ambulance. While this approach persists in some countries, such as India, it is generally
becoming increasingly rare. Ambulance drivers may be trained in radio communications,
ambulance operations and emergency response driving skills.[45]

Ambulance Care Assistant (ACA)

Ambulance Care Assistants have varying levels of training across the world. In many countries,
such staff are usually only required to perform patient transport duties (which can include
stretcher or wheelchair cases), rather than acute care. However, there remain both countries and
individual jurisdictions in which economics will not support ALS service, and the efforts of such
individuals may represent the only EMS available. Dependent on the provider (and resources
available), they may be trained in first aid or extended skills such as use of an AED, oxygen
therapy and other live-saving or palliative skills. In some services, they may also provide
emergency cover when other units are not available, or when accompanied by a fully qualified
technician or paramedic.[46][47]

EMT's loading a patient

Emergency Medical Technician (EMT)

Emergency medical technicians, also known as Ambulance Technicians in the UK and EMT in
the United States. Technicians are usually able to perform a wide range of emergency care skills,
such as Automated defibrillation, care of spinal injuries and oxygen therapy.[48][49] In few
jurisdictions, some EMTs are able to perform duties as IV and IO cannulation, administration of a
limited number of drugs, more advanced airway procedures, CPAP, and limited cardiac
monitoring.[50] Most advanced procedures and skills are not within the national scope of practice
for an EMT-B.[51] As such most states require additional training and certifications to perform
above the national curriculum standards.[52][53]

Emergency Medical Dispatcher (EMD)
An increasingly common addition to the EMS system is the use of highly trained dispatch
personnel who can provide "pre-arrival" instructions to callers reporting medical emergencies.
They use carefully structured questioning techniques and provide scripted instructions to allow
callers or bystanders to begin definitive care for such critical problems as airway obstructions,
bleeding, childbirth, and cardiac arrest. Even with a fast response time by a first responder
measured in minutes, some medical emergencies evolve in seconds. Such a system provides, in
essence, a "zero response time," and can have an enormous impact on positive patient outcomes.

Advanced Life Support (ALS)

Paramedic (EMT-P)

A paramedic has a high level of prehospital medical training and usually involves key skills not
performed by technicians, often including cannulation (and with it the ability to use a range of
drugs such as morphine), cardiac monitoring, tracheal intubation, needle decompression and
other skills such as performing a cricothyrotomy.[54] In many countries, this is a protected title,
and use of it without the relevant qualification may result in criminal prosecution.[55] In the
United States, paramedics represent the highest licensure level of prehospital emergency care. In
addition, several certifications exist for Paramedics such as Wilderness ALS Care,[56] Flight
Paramedic Certification (FP-C),[57] and Critical Care Emergency Medical Transport Program

Critical Care Paramedic (CCEMTP)

A critical care paramedic, also called an advanced practice Paramedic in some US States,
represents a higher level of licensure above that of the DOT and NREMT-Paramedic
curriculum.[58] These Paramedics receive additional training beyond normal EMS medicine in a
Critical Care Emergency Medical Transport Program,[58] including critical care use of devices
and life support systems normally restricted to the ICU or critical care hospital setting, placement
and use of UVCs (Umbilical Venous Catheter), UACs (Umbilical Arterial Catheter), surgical
airways, Rapid Sequence Intubation (RSI), blood administration, and chest tube insertion. The
Critical Care Transport role exists in the U.S., and also in a number of other countries (including
Canada). The training, permitted skills, and certification requirements vary from one jurisdiction
to the next.

Paramedic Practitioner or Emergency Care Practitioner

In the United Kingdom and South Africa, some serving paramedics receive additional university
education to become practitioners in their own right, which gives them absolute responsibility for
their clinical judgement, including the ability to autonomously prescribe medications, including
drugs usually reserved for doctors, such as courses of antibiotics. An emergency care practitioner
is a position sometimes referred to as a 'super paramedic' and is designed to bridge the link
between ambulance care and the care of a general practitioner. ECPs are university graduates in
Emergency Medical Care or qualified paramedics who have undergone further training,[59] and
are authorized to perform specialized techniques. Additionally some may prescribe medicines
(from a limited list) for longer term care, such as antibiotics. With respect to a Primary Health
Care setting, they are also educated in a range of Diagnostic techniques.

'Traditional' Healthcare Professions

Registered Nurse (RN)

The use of registered nurses in the pre-hospital setting is more common in countries that have a
limited EMS infrastructure in place. Some European countries such as France or Italy, which do
not use paramedics as we understand them, also use nurses as a means of providing ALS
services. These nurses may work under the direct supervision of a physician, or, in rarer cases,
independently. In some places in Europe, notably Norway, paramedics do exist, but the role of
the 'ambulance nurse' continues to be developed,[60] as it is felt that nurses may bring unique
skills to some situations encountered by ambulance crews. In North America, and to a lesser
extent elsewhere in the English-speaking world, some jurisdictions use specially trained nurses
for medical transport work. These are mostly air-medical personnel or critical care transport
providers, often working in conjunction with a technician or paramedic or physician on
emergency interfacility transports. In the United States, the most common uses of ambulance-
based Registered nurses is in the Critical Care/Mobile Intensive Care transport, and in
Aeromedical EMS. Such nurses are normally required by their employers (in the US) to seek
additional certifications beyond basic nursing registration. In Estonia 60% of ambulance teams
are led by nurse. Ambulance nurses can do almost all emergency procedures and administer
medicines pre-hospital such as physicians in Estonia.


There are many places in Europe, most notably in France, Italy, and the German-speaking
countries (Germany, Switzerland, Austria) where the model of EMS is different, and physicians
take a more direct, 'hands-on' approach to pre-hospital care. In France and Italy, response to high-
acuity emergency calls is physician-led, as with the French SMUR teams. Paramedics do not
exist within those systems, and most ALS is performed by physicians. In the German-speaking
countries, paramedics do exist, but special physicians (called Notarzt) respond directly to high-
acuity calls, supervising the paramedics ALS procedures directly. Indeed, in these countries
paramedics are not typically legally permitted to practice their ALS procedures unless the
physician is physically present, unless they face immediate life-threatening emergencies.[61] Some
systems - most notably air ambulances in the UK.[62][63] will employ physicians to take the
clinical lead in the ambulance; bringing a full range of additional skills such as use of
medications that are beyond the paramedic skill set. The response of physicians to emergency
calls is routine in many parts of Europe, and not uncommon in the UK.

This 'hands-on' approach is less common in the United States. While one will occasionally see a
physician with an ambulance crew on an emergency call, this is much more likely to be the
Medical Director or an associate, precepting newly trained paramedics, or performing routine
medical quality assurance. In some jurisdictions adult or pediatric critical care transports
sometimes use physicians, but generally only when it appears likely that the patient may require
surgical or advanced pharmacologic intervention beyond the skills of an EMT, paramedic or
nurse during transport. Physicians are leaders of medical retrieval teams in many western
countries, where they may assist with the transport of a critically ill, injured, or special needs
patient to a tertiary care hospital, particularly when longer transport times are involved.

A typical Rescue Unit for a fire department

Prehospital Delivery of care

Depending on country, area within in country, or clinical need, emergency medical services may
be provided by one or more different types of organisation. This variation may lead to large
differences in levels of care and expected scope of practice.

The most basic emergency medical services are provided as a transport operation only, simply to
take patients from their location to the nearest medical treatment. This was often the case in a
historical context, and is still true in the developing world, where operators as diverse as taxi
drivers[9] and undertakers may operate this service.

Most developed countries now provide a government funded emergency medical service, which
can be run on a national level, as is the case in the United Kingdom, where a national network of
ambulance trusts operate an emergency service, paid for through central taxation, and available to
anyone in need,[64] or can be run on a more regional model, as is the case in the United States,
where individual authorities have the responsibility for providing these services.

Typical scene at a local emergency room

Ambulance services can be stand alone organisations, but in some cases, the emergency medical
service is operated by the local fire[65] or police[66] service. This is particularly common in rural
areas, where maintaining a separate service is not necessarily cost effective. This can lead, in
some instances, to an illness or injury being attended by a vehicle other than an ambulance, such
as fire truck.[67][68][69] In some locales, firefighters are the first responders to calls for emergency
medical aid, with separate ambulance services providing transportation to hospitals when

Some charities or non-profit companies also operate emergency medical services, often alongside
a patient transport function.[71] These often focus on providing ambulances for the community, or
for cover at private events, such as sports matches. The Red Cross provides this service in many
countries across the world on a volunteer basis (and in others as a Private Ambulance Service), as
do some other smaller organizations such as St John Ambulance.[37] and the Order of Malta
Ambulance Corps.[72] In some countries, these volunteer ambulances may be seen providing
support to the full time ambulance crews during times of emergency, or simply to help cover
busy periods.[73]

There are also private ambulance companies, with paid employees, but often on contract to the
local or national government. Many private companies provide only the patient transport
elements of ambulance care (i.e. non urgent), although in some places these private services are
contracted to provide emergency care, or to form a 'second tier' response, where they only
respond to emergencies when all of the full-time emergency ambulance crews are busy or to
respond to non-emergency home calls.[citation needed] Private companies are often contracted by
private clients to provide event specific cover, as is the case with voluntary EMS crews.[74]

Many colleges and universities, especially in the United States, maintain their own EMS
organizations. These organizations operate at capacities ranging from first response to ALS
transport. Campus EMS in the United States is overseen by the National Collegiate Emergency
Medical Services Foundation.

Strategies for delivering care

The essential decision in prehospital care is whether the patient should be immediately taken to
the hospital, or advanced care resources are taken to the patient where they lie. The "scoop and
run" approach is exemplified by the MEDEVAC aeromedical evacuation helicopter, whereas the
"stay and play" is exemplified by the French and Belgian SMUR emergency mobile resuscitation

Ambulance in Ottawa, Ontario, Canada
The strategy developed for prehospital trauma care in North America is based on the Golden
Hour theory, i.e., that a trauma victim's best chance for survival is in an operating room, with the
goal of having the patient in surgery within an hour of the traumatic event. This appears to be true
in cases of internal bleeding, especially penetrating trauma such as gunshot or stab wounds. Thus,
minimal time is spent providing prehospital care (spine immobilization; "ABCs", i.e. ensure
airway, breathing and circulation; external bleeding control; endotracheal intubation) and the
victim is transported as fast as possible to a trauma centre.[75]

The aim in "Scoop and Run" treatment is generally to transport the patient within ten minutes of
arrival, hence the birth of the phrase, "the platinum ten minutes" (in addition to the "golden
hour"), now commonly used in EMT training programs. The "Scoop and Run" is a method
developed to deal with trauma, rather than strictly medical situations (e.g. cardiac or respiratory
emergencies), however, this may be changing. Increasingly, research into the management of S-T
segment elevation myocardial infarctions (STEMI) occurring outside of the hospital, or even
inside community hospitals without their own PCI labs, suggests that time to treatment is a
clinically significant factor in heart attacks, and that trauma patients may not be the only patients
for whom 'load and go' is clinically appropriate. In such conditions, the gold standard is the door
to balloon time. The longer the time interval, the greater the damage to the myocardium, and the
poorer the long-term prognosis for the patient.[76] Current research in Canada has suggested that
door to balloon times are significantly lower when appropriate patients are identified by
paramedics in the field, instead of the emergency room, and then transported directly to a waiting
PCI lab.[77] The STEMI program has reduced STEMI deaths in the Ottawa region by 50 per
cent.[78] In a related program in Toronto, EMS has begun to use a procedure of 'rescuing' STEMI
patients from the Emergency Rooms of hospitals without PCI labs, and transporting them, on an
emergency basis, to waiting PCI labs in other hospitals.[79]

A new ambulance in Italy

Models of care

Although a variety of differing philosophical approaches are used in the provision of EMS care
around the world, they can generally be placed into one of two categories; one physician-led and
the other led by pre-hosital specialists such as emergency medical technicians or paramedics
(which may, or may not have accompanying physician oversight). These models are typically
identified by their locations of origin.[80]
The Franco-German model is physician-led, with doctors responding directly to all major
emergencies requiring more than simple first aid. In some cases in this model, such as France,
paramedics, as they exist in the Anglo-American model, are not used, although the term
'paramedic' is sometimes used generically, and those with that designation have training that is
similar to an U.S. EMT-B.[81] The team's physicians and in some cases, nurses, provide all
medical interventions for the patient, and non-medical members of the team simply provide the
driving and heavy lifting services. In other applications of this model, as in Germany, a
paramedic equivalent does exist, but is sharply restricted in terms of scope of practice; often not
permitted to perform Advanced Life Support (ALS) procedures unless the physician is physically
present, or in cases of immediate life-threating conditions.[61] Ambulances in this model tend to
be better equipped with more advanced medical devices, in essence, bringing the emergency
department to the patient. High-speed transport to hospitals is considered, in most cases, to be
unnecessarily unsafe, and the preference is to remain and provide definitive care to the patient
until they are medically stable, and then accomplish transport. In this model, the physician and
nurse may actually staff an ambulance along with a driver, or may staff a rapid response vehicle
instead of an ambulance, providing medical support to multiple ambulances.

The second care structure, termed the Anglo-American model, utilizes pre-hospital care
specialists, such as emergency medical technicians and paramedics, to staff ambulances, which
may be classified according to the varying skill levels of the crews. In this model it is rare to find
a physician actually working routinely in the pre-hospital setting, although they may be utilised
on complex or major injuries or illnesses. In this system, a physicians involvment is most likely
to be the provision of medical oversight for the work of the ambulance crews, which may be
accomplished in terms of off-line medical control, with protocols or 'standing orders' for certain
types of medical procedures or care, or on-line medical control, in which the technician must
establish contact with the physician, usually at the hospital, and receive direct orders for various
types of medical interventions. In some cases, such as in the UK, South Africa and Australia, a
paramedic may be an autonomous health care professional, and does not require the permission
of a physician to administer interventions or medications from an agreed list, and can perform
roles such as suturing or prescribing medication to the patient.[82]

In this model, patients may still be treated at the scene up to the skilll level of the attending crew,
and subsequently transported to definitive care, but in many cases the reduced skill set of the
ambulance crew and the needs of the patient indicate a shorter interval for transport of the patient
than is the case in the Franco-German model.

Clinical governance

Paramedics normally function under the authority (medical direction) of one or more physicians
charged with legally establishing the emergency medical directives for a particular region.
Paramedics are credentialed and authorized by these physicians to use their own clinical
judgment and diagnostic tools to identify medical emergencies and to administer the appropriate
treatment, including drugs that would normally require a physician order. Credentialing may
occur as the result of a State Medical Board examination (U.S.) or the National Registry of
Emergency Medical Technicians (U.S.). In England, and in some parts of Canada, credentialing
may occur by means of a College of Paramedicine.[83] In these cases, paramedics are regarded as
a self-regulating health profession. The final common method of credentialing is through
certification by a Medical Director and permission to practice as an extension of the Medical
Director's license to practice medicine. The authority to practice in this semi-autonomous manner
is granted in the form of standing order protocols (off-line medical control) and in some cases
direct physician consultation via phone or radio (on-line medical control). Under this paradigm,
paramedics effectively assume the role of out-of-hospital field agents to regional emergency
physicians, with clinical decision-making authority using standing orders or protocols. In some
parts of Europe and the United States, most notably in Germany, those in the paramedic role are
only permitted to practise many of their advanced skills while assisting a physician who is
physically present, or they face cases of immediately life-threatening emergencies.[61] In other
parts of Europe, most notably in France, all ALS skills in the pre-hospital setting are performed
by physicians and nurses, and the role of paramedic is unknown. In certain other jurisdictions,
such as the United Kingdom and South Africa, paramedics may be entirely autonomous
practitioners capable of prescribing medications.[84] In other jurisdictions, such as Australia and
Canada this expanded scope of practice is under active consideration and discussion.[85]

Equipment and practices

      Ambulance
      Cardiopulmonary resuscitation (CPR)

Similar practices and professions

      Prehospital Medicine
      Emergency medicine
      Battlefield medicine
      Wilderness medicine

Emergency telephone numbers

      Emergency telephone numbers
         o 1-1-2 (European Union, Colombia, Croatia, GSM networks)
         o 1-1-9 (parts of Asia, and in Jamaica)
         o 999 (emergency telephone number) (many nations)
         o 9-1-1 (North American Numbering Plan)
         o 000 Australia
         o 100 India This is the number to call the police.
         o 100 Israel This is the number to call the police.
         o 101 India This number is used for medical emergency and fire emergency.
         o 101 Israel This number is used to call for medical emergency services.
         o 190 Brazil This number is used to call for medical emergency services, fire
             emergency and call to police.

Legal and reports

      Good Samaritan law
       CEN 1789
       The White Paper (Official title "Accidental Death and Disability: The Neglected Disease
        of Modern Society" - a 1966 report that prompted the development of organized EMS in
        the United State)


       In case of emergency, a programme that enables EMS workers to identify victims and
        contact their next of kin to obtain important medical information
       Public Utility Model, a model for organizing Emergency Medical Services

Case Management - Definition

social clinical care services clients assessment providers managers client process

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There has been considerable discussion about what is an appropriate name for case management.
In some programs the case management function is called "care management," "care
coordination," or "care planning." There is an ongoing concern that the term "case management,"
conveys an undesired sense of bureaucracy. Clients and caregivers have expressed their view that
they "are not cases and do not want to be managed." Although widely used, the term "case
management" remains unclear and confusing, describing benefit management, management of an
acute event or of communitybased interventions, or other types of client management across the
continuum of care.

The overall goal of care or case managers is to facilitate collaborative and cost-efficient
interactions among providers that effectively integrate medical, psychological, and social services
in order to provide timely, appropriate, and beneficial service delivery to the client. Such
integration can encompass clients and their families, health care providers, community agencies,
legal and financial resources, third-party payers, and employers (Gross and Holt).
At the most general level, case management can be defined as a coordinating function that is
designed to link clients with various services based on assessed need. Case management has
evolved in recognition of the fact that the fragmented and complex systems of care create
formidable obstacles for older, disabled individuals and their families. There is a need for
coordination of care because caregivers and chronically ill older persons may require services
from several providers. Although operationalized in various ways, case management has a
common set of core components that includes outreach, screening, comprehensive assessment,
care planning, service arrangement, monitoring, and reassessment (Applebaum and Austin;

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Outreach activities are designed to identify persons likely to qualify for and need health and
social support services as well as case management. Case-finding efforts help ensure that eligible
individuals are served. Screening is a preliminary assessment of the client's circumstances and
resources to determine presumptive eligibility. Potential clients are screened by means of
standardized procedures to determine whether their status and situation meet the program's target
population definition. Accurate screening is critical. Effective outreach and screening are
necessary for efficient program operation and management.

Comprehensive assessment is a systematic and standardized process for collecting detailed
information about a person's physical, mental, and psychological functioning and informal
support system that facilitates the identification of the person's strengths and care needs
(Schneider and Weiss; Gallo et al.). Typically, comprehensive assessment focuses on physical
health, mental functioning, ability to perform activities of daily living, social supports, physical
environment, and financial resources. Many programs have adopted rigorous standardized
multidimensional instruments.

Information collected during the assessment process is used to develop a plan of care. Care
planning requires clinical judgment, creativity, and sensitivity as well as knowledge of
community resources. Case managers consider the willingness and availability of informal
caregivers to provide care. Balance between formal and informal services is a major
consideration in the care planning process. Clients and caregivers participate in the process. The
care plan specifies services, providers, and frequency of delivery. Costs of the care plan are also
determined. Care planning is a key resource allocation process and is a critical case management
function. Service arrangement involves contacting formal and informal providers to arrange
services specified in the care plan. Case managers often must negotiate with providers for
services when making referrals to other agencies. When they have the authority to purchase
services on their clients' behalf, case managers order services directly from providers.

Case managers monitor changes in clients' situations and modify care plans to meet clients'
needs. Ongoing monitoring combined with timely modification of care plans helps ensure that
program expenditures reflect current client needs and are not based on outdated assessment data.
Reassessment involves determining whether there have been changes in the client's situation
since the last assessment. Systematic and regularly scheduled reassessment also helps in
evaluating the extent to which progress has been made toward accomplishing outcomes specified
in the care plan.

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Read more: Case Management - Definition - Social, Clinical, Care, Services, Clients,
Assessment, Providers, and Managers http://medicine.jrank.org/pages/250/Case-Management-

At Mount Auburn, our patients receive care that is first-rate, as well as compassionate. Mount
Auburn Hospital's Clinical Services include:

Anesthesiology                    Midwifery
Bariatric                Medicine Nephrology
Cancer                      Care Neurology
      Cancer   Treatment   Center      Multiple Sclerosis Care Center
Hematology/Oncology/Radiology                 Sleep                      Clinic
      Patient and Caregiver Support           Stroke                     Center
      The Barron Center for Men's      Nursing
Health                                 Nutrition                       Services
      The Hoffman Breast Center        Obstetrics
Cardiac                          Care  Occupational                      Health
      Cardiac Electrophysiology Unit   Orthopedic                       Surgery
      Zir Cardiac Catheterization      Ophthalmology
Laboratory                             Otolaryngology
      Cardiothoracic          Surgery  Pediatrics
      Stress                  Testing  Pharmacy
      Vascular            Laboratory   Plastic                         Surgery
Diabetes      Education      Program   Prevention          and        Recovery
Emergency                 Department   Primary                            Care
Employee       Assistance    Program   Psychiatry
Endocrinology       &     Metabolism   Pulmonary                      Medicine
Family                       Practice  Quality             and          Safety
Gastroenterology                       Radiology
General                      Surgery   Rehabilitation
Geriatrics                             Rheumatology
Gynecology                             Travel                         Medicine
                                       Vascular                         Surgery
Hand                           Surgery Walk-In Clinic
Home                              Care
Intensive        Care         Service
Infectious                   Diseases
Laboratory and Pathology Services

Outsourcing Clinical Services to O2I

Healthcare organizations in the U.S and U.K are facing an acute shortage of clinical experts.
Outsourcing clinical services to India can help you overcome this shortage and at the same time
you can benefit from cost-effective services. Outsource clinical services to O2I and benefit from
high-quality services. Since we are strategically located in India, you can benefit from the time
zone advantage between U.S and India. We can provide clinical services within a quick
turnaround time because our day is your night. Outsource to India and benefit from a seamless
and efficient clinical process.

Outsource2india's Clinical Services
At Outsource2india, we offer a wide range of clinical services. Apart from providing proficient
and efficient services, we also offer innovative solutions to help you optimize your clinical

      3D Reconstruction & Processing Services - We provide 3D anatomical models for MR /
       CT Angiographies, on a 'per case basis'.
      Collaborative Reporting Solution - We provide collaborative web based reporting
       workflow to help you enhance the productivity gains of Radiology groups up to 40%.
      Teleradiology services - We have a certified team of teleradiologists who can provide
       proficient services on a 24x7x365 basis.
      Oncology Services - Our oncology services include IMRT Treatment Planning and 2D/
       3D Conformal Therapy Planning.
      Orthopedics Services - Our orthopedics services include 3D anatomical models, Implant
       assessments and digital prosthetic templates.
      Medical Management Services - Our medical management services include nurse call
       centers with medical management devices.

Why is there a growing need for clinical services?

The following factors have increased the need for clinical services. Outsourcing clinical services
to O2I can help you avail of competent services at a cost-effective price.

      National cancer rate is expected to grow faster than the national population growth.
      Overall costs for cancer estimated at $107 billion p.a.
      Direct Medical Costs: 40%
      Cost of low productivity due to illness: 12%
      Lost productivity due to death: 64%
      Estimated new cancer cases and deaths: 1,334,100.
      Lack of availability of trained manpower to meet these growing needs.
      Start up costs for new technology cancer treatments (IMRT etc) are not available in many
       treatment centers.

Why outsource clinical services to O2I?

At Outsource2india, we offer the following specialized clinical services

      IMRT Treatment Planning
      2D/ 3D Conformal Therapy Planning
      Training and Consulting Service


      Specialized applications which enhance the speed of surgical planning
      Visualization and analysis of complex orthopedic problems
      Advanced Measurements and digital prosthetic templates
What are the benefits of outsourcing clinical services to O2I?

      Increase your patient volume, with Outsource2india's increased work efficiency.
      Get access to more flexibility and convenience in your workflow (Web-based remote
       planning and viewing).
      Get access to advanced clinical application packages (e.g. advanced spine planning).
      Benefit from reduced materials and storage costs.

Outsourcing Clinical Services to India

Find out more about the need to outsource radiology and the specialized teleradiology services
that Outsource2india's radiologists can offer.

If you would like to outsource any part of your clinical process to O2I, please fill in our inquiry
form. Outsource2india's Client Engagement Team will contact you within 24 hours or by the next
working day.

• Use of pharmaceutical and medical supply formularies


Managing Drug Supply: The Selection, Procurement, Distribution, and Use of Pharmaceuticals.
2nd edition. Management Sciences for Health in collaboration with the World Health
Organization. Kumarian Press. 1997. ISBN 1-56449-047-9.

TOPIC              READINGS
Session 1: The Global Context of Pharmaceutical Products and Under-served Populations
Required           MSH Managing Drug Supply: Part 1 Introduction

                           Toward Sustainable Supply and Rational Use of Drugs (pp. 3-16)
                           Historical and Institutional Perspectives (pp. 17-25)
                           Economics for Drug Management (pp.26-37)
                           Pharmaceutical Supply System Management (pp. 38-52)

Recommended         WHO       Essential   Medicines    Library (EMLib).     Available    at:
                    http://mednet3.who.int/eml/ - contains a Model Formulary, Model list of
                    Essential Drugs

                    Lofland JH and Lyles A. Pharmacy Practice and Health Policy within the
                    United States: An Introduction and Overview [Chapter 20] in Managing
                    Pharmacy Practice: Principles, Strategies, and Systems, Andrew Peterson,
                    Editor. CRC Press LLC. Boca Raton, Fl. 2004.

                    Health, United States, 2004. With Chart book on Trends in the Health of
                     Americans with Special Feature on Drugs. Available                  at:
Session 2: International Policy and Legal Framework
Required             MSH Managing Drug Supply Part II: Policy and Legal Framework

                         National Drug Policies (pp. 55-67)
                             o Country Study 5.1 The Philippines
                             o Country Study 5.2 Australia

                         Drug Supply Strategies (pp. 68-88)
                             o Country Study 6.3 Direct Delivery, Prime Vender and Mixed
                                 Supply Arrangements
                         Pharmaceutical Legislation and Regulation (pp. 89-100)
                         Legal Aspects of Drug Management (pp. 101-107)

                   Explore and familiarize yourself with this resource for future use: WHO
                   Essential    Drugs     and     Medicines      Policy.    Available    at:
Recommended        National Institute for Clinical Excellence (NICE). Available at:

                 Canadian Agency for Drugs and Technology in Health. Available at:
Session 3: Drug Manufacture, Industrial Pharmacy Considerations, Quality Assurance, and
Required         MSH Managing Drug Supply: Part 1 Introduction

                         Pharmaceutical Production Policy (pp. 108-115)
                             o Country Study 9.3 Promoting Local Production of Essential
                                 Drugs in Bangladesh
                         Small-scale local production (pp. 288-303)
                         Small Scale Hospital Pharmaceutical Production 592

                   JE and Trueman P. 'Fourth Hurdle Reviews,' NICE and Database
                   Applications. Pharmacoepidemiology and Drug Safety 2001;10:429-438.
Recommended        U.S. Food and Drug Administration: Good Manufacturing Practices (GMP) /
                   Quality       System      (QS)       Regulation.      Available     at:
Session 4: The Drug Management Cycle: Selection
Required           MSH Managing Drug Supply Part III: Section A. Selection

                         Managing Drug Selection (pp. 121-136)
                            o Country Study 10.1 Approaches to updates essential drugs *
                                formulary lists
                            o Country Study 10.2 Updating the National Essential Drugs
                                List of Kenya
                          Treatment Guidelines and Formulary Manuals (pp. 137-149)
                              o Note Figure 11.2 Sample annotated Page from Malawi
                                  Standard Treatment Guidelines
                          Essential Medical Supplies and Equipment (pp. 150-160)
                              o Note Box 12.1 ECHO: Nonprofit Equipment Supplier, but
                                  see Dec 2002: http://www.echohealth.org.uk/intro.html

Recommended        Lyles A. Formulary Decision-Maker Perspectives: Responding to Changing
                   Environments [Chapter 7] in Economic Evaluation in U.S. Health Care.
                   Jones and Bartlett Publishers, Boston. 2006. ISBN 0-7637-2746-6

                   Sullivan SD, Lyles A, Luce B and Gricar J. AMCP Guidance for Submission
                   of Clinical and Economic Evaluation Data to Support Formulary Listing in
                   United States Health Plans and Pharmacy Benefits Management
                   Organizations. Journal of Managed Care Pharmacy 7(4):272-282,2001.

                     The AMCP Format for Formulary Submissions,Version 2. 1 April 2005. A
                     Format for Submission of Clinical and Economic Data in Support of
                     Formulary Consideration by Health Care Systems in the United States.
                     Available                                                            at:
Session 5: Forecasting and Quantification
Required             MSH Managing Drug Supply Part III: Section B. Procurement

                          Inventory Management (pp. 207-231)
                              o Country Study 15.1 Scheduled Purchasing in the Eastern
                          Quantifying Drug Requirements (pp. 184-206)
                          Use these methods to estimate actual need and

                   Action Programme on Essential Drugs and Vaccines. Essential Drugs
                   Monitor: Managing Drug Supply. 1998, No.s 25 & 26.
Recommended        Management Sciences for Health. International Drug Price Indicator Guide,
                   2004                 edition.                Available                at:
Session 6: The Drug Management Cycle: Procurement
Required           MSH Managing Drug Supply Part III: Section B. Procurement

                          Managing Procurement (pp. 163-183)
                             o Country Study 13.2 Pooled Procurement through the Eastern
                                 Carribean Drug Service
                             o Country Study 13.3 Problems with Lack of Transparency in
                          Managing the Tender Process (pp. 232-255)
                             o Note Annex 16.2 Criteria for Evaluating Current or Past
                         Action Programme on Essential Drugs and Vaccines. Essential Drugs
                          Monitor: Managing Drug Supply. 1998, No.s 25 & 26. Contracting
                          for Drugs and Services (pp. 256-270)
                         Quality Assurance for Drug Procurement (pp. 271-287)
                              o Country Study 18.2 Quality Assurance in Selected Countries
                              o Figure 18.7 Sample Drug and Supply Evaluation Form

Session 7: Drug Donations
Required           MSH Managing Drug Supply Part III: Section B. Procurement

                         Drug donations (pp. 304-312)
                             o Note: Country Study 19.1 The role of Private NGOs in
                                Providing Health Care Services in Zaire

                   WHO Guidelines for Drug Donations, revised 1999. Available at:
Session 8: The Drug Management Cycle: Distribution
Required           MSH Managing Drug Supply Part III: Section C. Distribution

                         Managing Distribution (pp. 315-333)
                         Importation and Port Clearing (pp. 334-340)
                         Medical Stores Management (pp. 341-363)
                         Drug Management for Health Facilities (pp. 364-377)
                              o Country Study 24.1 Zimbabwe Monthly Ordering System
                         Discuss cold chain for vaccines
                         Transport Management (pp. 393-406)
                         Kit System Management (pp. 407-418)
                              o Country Study 27.4 Cambodia
                              o Country Study 27.5 Solomon Islands

Recommended       MSH Managing Drug Supply

                         Planning and Building Storage Facilities (pp. 378-392)
                             o Note: Figure 25.3 Typical Elements of a Project Brief

Session 9: Drug Management Cycle: Use
Required           MSH Managing Drug Supply Part III: Section D. Use

                         Managing for Rational Drug Use (pp. 421-429)
                         Investigating Drug Use (pp.430-449)
                         Drug and Therapeutics Information (pp. 450-463)
                         Promoting Rational Drug Prescribing (pp. 464-482)
                         Ensuring Good Dispensing Practices (pp. 483-495)
                             o Note: Figure 32.10 Sample Inspection Checklist
                         Encouraging Appropriate Drug Use by the Public and Patients (pp.
                              o   Country Study 33.1 Mexico

Recommended      Lyles A. Direct Marketing of Pharmaceuticals to Consumers. Annual
                 Review of Public Health 2002;23:73-91.

                    Cabana MD, Rand CS, Powe NR, et al. Why Don't Physicians Follow
                    Clinical Practice Guidelines? A Framework for Improvement. JAMA
Session 10: Budgeting and Cost Control
Required            MSH Managing Drug Supply Part IV: Section B. Financing and

                          Drug Financing Strategies (pp. 607-627)
                          Analyzing and Controlling Drug Expenditures (pp. 628-653)
                          Financial Planning and Management (pp. 654-672)

Session 11: Management Support Systems: Planning Cycle
Required          MSH Managing Drug Supply Part IV: Section A. Organization and

                          Managing Drug Programs (pp. 517-534)
                              o Country Study 34.1 Kenya
                          Planning for Drug Management (pp. 535-552)
                              o Focus = 35.4
                          Monitoring and Evaluation (pp. 553-568)
                              o Country Study 36.1 Zimbabwe
                              o Country Study 36.2 Kenya

                 Tutorial: Gantt Chart and Timeline: Available at:



Recommended      MSH Managing Drug Supply Force Field Analysis (pp. 527-528, 533, 544)

                    Sample         Gantt      Chart       (Excel). Available   at:
Session 12: Access to Essential Drugs
Required            MSH Managing Drug Supply Part IV: Section A. Organization and

                          Community Participation (pp. 569-581)
                             o Focus = 37.5 Facilitating community participation in health
                                 o    Country Study 37.1 Canada
                                 o    Country Study 37.2 Thailand

Recommended        MSH. Strategies for Enhancing Access to Medicines. Available at:
Session 13: Pharmaceutical Care and Drug Utilization in an HIV/AIDS Clinic
Recommended        Lyles CA, Zuckerman IH, DeSipio SM and Fulda T. When Warnings Are
                   Not Enough: Primary Prevention through Ambulatory Drug Use Review.
                   Health Affairs, 17(4):175-183; 1998.

                     Harjivan C and Lyles A. Improved Medication Use in Long Term Care:
                     Building on the Consultant Pharmacist's Drug Regimen Review. American
                     Journal of Managed Care 2002;8(4):318-326.

                    Lyles A, Sleath B, Fulda TR and Collins TM. Ambulatory Drug Utilization
                    Review: Opportunities for Improved Prescription Drug Use. [Continuing
                    Medical Education] American Journal of Managed Care 7(1):75-81, 2001.
Session 14: Financing and Sustainability
Required            MSH Managing Drug Supply Part IV: Section B. Financing and

                            Donor Financing (pp. 673-685)
                            Revolving Drug Funds (pp. 687-710)

                     Umenai T and Narula IS. Revolving Drug Funds: A Step Towards Health
                     Security. Bulletin of the World Health Organization 1999;77(2):167-171
Recommended          Emmanuel Healthcare. Medicines for Overseas Programme. Available at:

yang di bawah ini akan ditambahin kemudian (itupun kalau sempat):

• Establishment of a committee to evaluate new medical products

                        Provisions for Clinical Trials of Medical Devices

                                     Chapter I General Provisions

Article 1 The provisions are formulated to strengthen the administration of clinical trials of
medical devices and to ensure the rights and benefits of testing subjects protected and assuring
the truthfulness and reliability of the trials result is based on the Regulations for the Supervision
and Administration of Medical Devices.

Article 2 The implementation of, supervision over, and examination into clinical trials of medical
devices shall be conducted in accordance with the provisions.
Article 3 Clinical trial under the provisions refers to the process in which the medical institutions
qualified for conducting clinical trial of medical devices (medical institutions, for short
hereunder) testing and verifying the safety and effectiveness of the medical device submitted to
register in normal condition.

The purpose of clinical trials of medical devices is to evaluate the intended safety and
effectiveness of the testing products.

Article 4 Clinical trials of medical devices should be conducted in accordance with the ethical
principles contained in World Medical Association Declaration of Helsinki (see Appendix 1),
respecting human dignity, striving for maximal benefit for the testing subject, and avoiding harm
as best one may.

Article 5 The clinical trials of medical devices are divided into clinical testing and clinical

Clinical testing refers to verifying if such factors as the theoretical principle, basic structure and
performance of the concerned medical devices are able to guarantee their operating safety and
effectiveness, by means of clinical application.

Clinical verification refers to verifying the testing products and the products already in the market
are virtually the same in terms of the basic structure, performance, safety and effectiveness.

Scope of clinical testing: those medical devices that have not yet been available in the market, or
whose safety and effectiveness are subject to verification.

Scope of clinical verification: those medical devices whose identical products of similar kinds
have already been launched onto the market, or whose safety and effectiveness need to be further

Article 6 Medical devices entering clinical trials must possess the following conditions:
(1) The concerned product has measured up to the registered product standard or corresponding
state or industrial standard undergoing re-examination.
(2) The concerned product is accompanied by a self-examination report.
(3) The concerned product possess qualified testing report from the testing center recognized by
SFDA or State National Quality Standard Supervision department.
(4) If the product to be tested is some medical device that is implanted into human body for the
first time, it is necessary to present the animal experiment report for the product.
For other products whose safety to human body in the clinical trials has to be verified by means
of animal experiment, it is required to render an animal testing report, too.
                 Chapter II Assurance of Rights and Interests of Human Subjects

Article 7 It is not allowed to levy any charges upon the testing subjects involved in the clinical
trials of medical devices.

Article 8 The person responsible for clinical trials of medical devices or his or her authorized
proxy must explain the following to the testing subjects or their authorized legal representatives:
(1) The testing subjects participating the clinical trials are voluntary and may withdraw from
clinical trials at any stage.
(2) The personal information and data of the testing subjects participating in the clinical trials are
confidential. The Ethics committee, the department of (food and) drug administration, and the
implementer may look up the personal information and data of the testing subjects, but must not
disclose to the outside.
(3) The Clinical trials proposal for Medical Devices, in particular the purpose, process and time
duration of the clinical trials; the expected benefits and possible risks that may occur in the
testing subjects.
(4) During the course of clinical trials, medical institutions shall have the obligation to provide
the testing subjects with information and data in relation to the clinical trials.
(5) Implementer should provide appropriate compensation for the testing subject. The related
content of compensation should be described in the clinical trials contract of the medical devices.

Article 9 After sufficient understanding of content of clinical trials, testing subjects may receive
―Notice of Informed Consent‖. The content of ―Notice of Informed Consent‖ shall include the
related content stipulated under Article Eight.
(1) Signature and date of signature of the person responsible for clinical trials of medical devices.
(2) Signature and date of signature of each of the testing subjects or his or her authorized legal
(3) In case of any unexpected clinical results discovered by medical institutions, ―Notice of
Informed Consent‖ should be amended and such amendments shall sign again by the testing
subjects or their authorized legal representatives.

                                   Chapter III Clinical Trials Protocol

Article 10 The clinical trials protocol is a document, which includes contents illustrating testing purpose, risks
analysis, overall scheme and testing methods and steps. Prior to start of the clinical trials , it is required to
formulate a test protocol. Clinical trials must be carried out in accordance with the clinical Trials protocol.

Article 11 The clinical trials protocol shall stick to a primary principle of protecting the rights and interests,
safety and health of the testing subjects to the maximum degree, and must be designed and formulated jointly
by the medical institution liable for the clinical trials and the implementer as the stipulated format (see
Appendix 2), as well as be submitted to the ethical committee for ratification. Any amendments should be
approved by the ethics committee.

Article 12 With regard to those class III medical devices implanted into human body, which is not available yet
in the market or those medical device based on the theory of traditional Chinese medicines, the clinical trials
protocol shall be filed with the technical evaluation agency of medical Devices.

Article 13 If adverse event occurs from the same category of marketed medical device, or the product whose
curative effects remain uncertain, State Food and Drug Administration may set a unified guideline on clinical
trials protocol.

To conduct the clinical trials of such medical devices, the implementer, the medical institutions and the clinical
trials personnel shall follow the unified guideline.

Article 14 The clinical trials protocol for medical devices shall refer to the characteristics of the concerned
products to be tested, determine the number of testing case, time duration of the test and clinical evaluation
standard, and to make the test results to be of statistical significance.

The Clinical trials protocol shall verify the general descriptions of such factors as the theoretical principle,
basic structure, performance, safety and effectiveness of the testing products.

The clinical trials protocol shall verify the testing products and the products already in the market are virtually
the same in terms of the basic structure, performance, safety and effectiveness.

Article 15 The clinical trials protocol shall include the following content:
(1) Title of the clinical trials.
(2) Purpose, background and contents of the clinical trials.
(3) Clinical evaluation standard.
(4) Analysis of risks and benefits of clinical trials.
(5) Name, title, post and the corresponding department of the clinical personnel.
(6) Overall scheme, including success or failure feasibility analysis.
(7) Time duration of clinical trials and reasons for it.
(8) Number of testing cases of each disease category and reasons for it.
(9) Scope of selecting subjects, quantity of subjects and reasons for the selection, and setup control group when
(10) Specific indication or scope of application for those curative products.
(11) Evaluation method of clinical performance and statistical processing method.
(12) Expected adverse effects and the necessary measures to be taken.
(13) Notice of Informed Consent for testing subjects
(14) Descriptions of duties of the parties.

Article 16 Clinical trials institution and the implementer shall sign a clinical trials protocol that both parties
have agreed to, and sign the clinical trials contract.
Article 17 The clinical trials of medical devices shall be conducted in two or more medical institutions.

                                  Chapter IV Implementer of Clinical Trials

Article 18 The implementer shall be responsible for initiating, implementing, organizing, sponsoring and
supervising over the clinical trials. The implementer is the unit applying to register the concerned medical
device product.

Article 19 Duties of the implementer cover:
(1) To select a medical institution according to regulations
(2) To provide Medical Device Clinical Trials Notice for the medical institution.
(3) To work together with the medical institution to design and formulate the clinical trials protocol and sign
the clinical trials protocol and the contract which both parties have agreed to.
(4) To provide the medical institution with the products to be tested for free.
(5) To train the personnel for clinical trials.
(6) To render a guarantee for medical institutions.
(7) In case of occurrence of severe side effects, be sure to report to the department of (food and) drug
administration of the concerned province or autonomous region or municipality originally handling the
application of the registration and State Food and Drug Administration respectively in time and truthfully, and
also notify all the other medical institutions conducting the clinical trials.
(8) Before the implementer discontinues the clinical trials, it is necessary to notify the medical institution, ethic
committee and the department of (food and) drug administration of the concerned province or autonomous
region or municipality originally handling the application of the registration and State Food and Drug
Administration respectively, and explain the reasons.
(9) If the testing products have caused any damage to the testing subjects, the implementer shall compensate in
accordance with the contract of clinical trials.

Article 20 The ―Medical Device Clinical Trials Notice‖ shall cover the following contents:
(1) Description of functional principal of testing product, expected indications, functionality and expected aims,
description of operational requirement and description of installation requirement.
(2) Technical indicators of the testing products.
(3) Type testing report of testing products issued by testing institutions recognized by the regulatory
department of food and drug and the department of quality and technical supervision under the State Council.
(4) Risks that may arise, recommended preventive method and emergency treatment method;
(5) Confidentiality issues that may be involved.

                       Chapter V Medical Institutions and Personnel of Clinical Trials
Article 21 Medical institutions undertaking the clinical trials of medical devices refer to those institutions
liable for clinical trials of drugs recognized by the regulatory department of food and drug and the
administrative department of health under the State Council jointly.

Article 22 The personnel of clinical trials for medical devices must have the following qualifications:
(1) To have required the expertise, qualifications and capabilities for undertaking the clinical trials.
(2) To be acquainted with those documents and data in relation to the clinical trials provided by the

Article 23 The medical institution responsible for clinical trials of medical devices and the clinical personnel
shall undertake the following duties:
(1) To be acquainted with related documents rendered by the implementer, and to be familiar with application
of the testing product;
(2) To work with the implementer jointly to design and formulate a clinical trials protocol, sign the clinical
trials protocol and contract.
(3) To explain to the testing subjects the details of the products to be tested truthfully; before the clinical trials,
enough time should be given to the testing subjects to consider whether or not to get involved in the clinical
(4) To faithfully record the side effects and adverse events of the testing products, and analyze the causes; in
case of occurrence of any adverse events and severe side effects, be sure to report to the (food and) drug
administration of the concerned province or autonomous region or municipality originally handling the
application for registration of the medical devices and State Food and Drug Admonition respectively in time
and truthfully; in case of occurrence of severe side effects, be sure to report to these authorities within the
ensuing 24 hours.
(5) In case of occurrence of any side effects, the clinical personnel shall make clinical judgment in time, adopt
measures to protect the rights and interests of the testing subjects; when necessary, the ethic committee shall
have the right to discontinue the clinical trials immediately.
(6) When the clinical trials is discontinued, be sure to notify the testing subjects, the implementer, the ethic
committee and the (food and) drug administration of the concerned province or autonomous region or
municipality originally handling the application for registration of the medical devices and State Food and
Drug Admonition respectively of such a discontinuity case, and also explain the reasons.
(7) To present a clinical trials report, and be responsible for the correctness and reliability of the report.
(8) To be liable for keeping the documents rendered by the implementer as confidential.

Article 24 The medical institution responsible for the clinical trials of medical devices shall determine and
appoint a medical person in charge of the clinical trials as the person responsible for clinical trials. Such a
person responsible for clinical trials must possess a technical title at the physician-in-charge level or above.

                                        Chapter VI Clinical Trials Report

Article 25 After completion of the clinical trials, the medical institution shall present a clinical trials report in
the form as specified (see Appendix 3), and pursuant to the requirements under the clinical trials protocol for
medical devices. The report shall bear the signature of the testing personnel, the date, and comments made by
the management department of the clinical trials institution, plus the date of issuance of such comments and the
stamp of the same department.

Article 26 The clinical trials report shall include the following information:
(1) Categories of illnesses subject to test; total number of cases; gender, age and analysis by grouping of
patients; establishment of a control group (when necessary);
(2) Clinical trials method;
(3) Statistical method and evaluation method in use;
(4) Clinical evaluation standard;
(5) Clinical trials results;
(6) Clinical trials conclusion;
(7) Adverse event and side effect during the clinical trials and treatment measures
(8) Analysis of clinical trials effects.
(9) Indications, scope of application, contraindications and precautions.
(10) Existing problems and suggestions for improvement.

Article 27 Clinical trials data of medical devices must be kept in good conditions and controlled properly. The
medical institution shall keep clinical trials data within the ensuing five years after completion of the test. The
implementer shall keep clinical trials data within the ensuing ten years after the products that are produced
lastly have been put into use.

                                    Chapter VII Supplementary Provisions

Article 28 The State Food and Drug Administration is responsible for the interpretation of the provisions.

Article 29 The provisions shall go into effect as of April 1, 2004.

1. World Medical Association Declaration of Helsinki
2. Clinical trials Protocol for Medical Devices
3. Clinical Trials Report for Medical Devices


                    Ethical Principles for Medical Research Involving Human Subjects
Adopted by the 18th WMA General Assembly, Helsinki, Finland, June 1964, and amended by the
29th WMA General Assembly, Tokyo, Japan, October 1975
35th WMA General Assembly, Venice, Italy, October 1983
41st WMA General Assembly, Hong Kong, September 1989
48th WMA General Assembly, Somerset West, Republic of South Africa, October 1996
and the 52nd WMA General Assembly, Edinburgh, Scotland, October 2000
A. Introduction
1. The World Medical Association has developed the Declaration of Helsinki as a statement of ethical
principles to provide guidance to physicians and other participants in medical research involving human
subjects. Medical research involving human subjects includes research on identifiable human material or
identifiable data.
2. It is the duty of the physician to promote and safeguard the health of the people. The physician's knowledge
and conscience are dedicated to the fulfillment of this duty.
3. The Declaration of Geneva of the World Medical Association binds the physician with the words, "The
health of my patient will be my first consideration," and the International Code of Medical Ethics declares that,
"A physician shall act only in the patient's interest when providing medical care which might have the effect of
weakening the physical and mental condition of the patient."
4. Medical progress is based on research which ultimately must rest in part on experimentation involving
human subjects.
5. In medical research on human subjects, considerations related to the well-being of the human subject should
take precedence over the interests of science and society.
6. The primary purpose of medical research involving human subjects is to improve prophylactic, diagnostic
and therapeutic procedures and the understanding of the aetiology and pathogenesis of disease. Even the best
proven prophylactic, diagnostic, and therapeutic methods must continuously be challenged through research for
their effectiveness, efficiency, accessibility and quality.
7. In current medical practice and in medical research, most prophylactic, diagnostic and therapeutic
procedures involve risks and burdens.
8. Medical research is subject to ethical standards that promote respect for all human beings and protect their
health and rights. Some research populations are vulnerable and need special protection. The particular needs
of the economically and medically disadvantaged must be recognized. Special attention is also required for
those who cannot give or refuse consent for themselves, for those who may be subject to giving consent under
duress, for those who will not benefit personally from the research and for those for whom the research is
combined with care.
9. Research Investigators should be aware of the ethical, legal and regulatory requirements for research on
human subjects in their own countries as well as applicable international requirements. No national ethical,
legal or regulatory requirement should be allowed to reduce or eliminate any of the protections for human
subjects set forth in this Declaration.
B. Basic Principles For All Medical Research
10. It is the duty of the physician in medical research to protect the life, health, privacy, and dignity of the
human subject.
11. Medical research involving human subjects must conform to generally accepted scientific principles, be
based on a thorough knowledge of the scientific literature, other relevant sources of information, and on
adequate laboratory and, where appropriate, animal experimentation.
12. Appropriate caution must be exercised in the conduct of research which may affect the environment, and
the welfare of animals used for research must be respected.
13. The design and performance of each experimental procedure involving human subjects should be clearly
formulated in an experimental protocol. This protocol should be submitted for consideration, comment,
guidance, and where appropriate, approval to a specially appointed ethical review committee, which must be
independent of the investigator, the sponsor or any other kind of undue influence. This independent committee
should be in conformity with the laws and regulations of the country in which the research experiment is
performed. The committee has the right to monitor ongoing trials. The researcher has the obligation to provide
monitoring information to the committee, especially any serious adverse events. The researcher should also
submit to the committee, for review, information regarding funding, sponsors, institutional affiliations, other
potential conflicts of interest and incentives for subjects.
14. The research protocol should always contain a statement of the ethical considerations involved and should
indicate that there is compliance with the principles enunciated in this Declaration.
15. Medical research involving human subjects should be conducted only by scientifically qualified persons
and under the supervision of a clinically competent medical person. The responsibility for the human subject
must always rest with a medically qualified person and never rest on the subject of the research, even though
the subject has given consent.
16. Every medical research project involving human subjects should be preceded by careful assessment of
predictable risks and burdens in comparison with foreseeable benefits to the subject or to others. This does not
preclude the participation of healthy volunteers in medical research. The design of all studies should be
publicly available.
17. Physicians should abstain from engaging in research projects involving human subjects unless they are
confident that the risks involved have been adequately assessed and can be satisfactorily managed. Physicians
should cease any investigation if the risks are found to outweigh the potential benefits or if there is conclusive
proof of positive and beneficial results.
18. Medical research involving human subjects should only be conducted if the importance of the objective
outweighs the inherent risks and burdens to the subject. This is especially important when the human subjects
are healthy volunteers.
19. Medical research is only justified if there is a reasonable likelihood that the populations in which the
research is carried out stand to benefit from the results of the research.
20. The subjects must be volunteers and informed participants in the research project.
21. The right of research subjects to safeguard their integrity must always be respected. Every precaution
should be taken to respect the privacy of the subject, the confidentiality of the patient's information and to
minimize the impact of the study on the subject's physical and mental integrity and on the personality of the
22. In any research on human beings, each potential subject must be adequately informed of the aims, methods,
sources of funding, any possible conflicts of interest, institutional affiliations of the researcher, the anticipated
benefits and potential risks of the study and the discomfort it may entail. The subject should be informed of the
right to abstain from participation in the study or to withdraw consent to participate at any time without
reprisal. After ensuring that the subject has understood the information, the physician should then obtain the
subject's freely-given informed consent, preferably in writing. If the consent cannot be obtained in writing, the
non-written consent must be formally documented and witnessed.
23. When obtaining informed consent for the research project the physician should be particularly cautious if
the subject is in a dependent relationship with the physician or may consent under duress. In that case the
informed consent should be obtained by a well-informed physician who is not engaged in the investigation and
who is completely independent of this relationship.
24. For a research subject who is legally incompetent, physically or mentally incapable of giving consent or is a
legally incompetent minor, the investigator must obtain informed consent from the legally authorized
representative in accordance with applicable law. These groups should not be included in research unless the
research is necessary to promote the health of the population represented and this research cannot instead be
performed on legally competent persons.
25. When a subject deemed legally incompetent, such as a minor child, is able to give assent to decisions about
participation in research, the investigator must obtain that assent in addition to the consent of the legally
authorized representative.
26. Research on individuals from whom it is not possible to obtain consent, including proxy or advance
consent, should be done only if the physical/mental condition that prevents obtaining informed consent is a
necessary characteristic of the research population. The specific reasons for involving research subjects with a
condition that renders them unable to give informed consent should be stated in the experimental protocol for
consideration and approval of the review committee. The protocol should state that consent to remain in the
research should be obtained as soon as possible from the individual or a legally authorized surrogate.
27. Both authors and publishers have ethical obligations. In publication of the results of research, the
investigators are obliged to preserve the accuracy of the results. Negative as well as positive results should be
published or otherwise publicly available. Sources of funding, institutional affiliations and any possible
conflicts of interest should be declared in the publication. Reports of experimentation not in accordance with
the principles laid down in this Declaration should not be accepted for publication.
C. Additional Principles For Medical Research Combined With Medical Care
28. The physician may combine medical research with medical care, only to the extent that the research is
justified by its potential prophylactic, diagnostic or therapeutic value. When medical research is combined with
medical care, additional standards apply to protect the patients who are research subjects.
29. The benefits, risks, burdens and effectiveness of a new method should be tested against those of the best
current prophylactic, diagnostic, and therapeutic methods. This does not exclude the use of placebo, or no
treatment, in studies where no proven prophylactic, diagnostic or therapeutic method exists. See footnote
30. At the conclusion of the study, every patient entered into the study should be assured of access to the best
proven prophylactic, diagnostic and therapeutic methods identified by the study.
31. The physician should fully inform the patient which aspects of the care are related to the research. The
refusal of a patient to participate in a study must never interfere with the patient-physician relationship.
32. In the treatment of a patient, where proven prophylactic, diagnostic and therapeutic methods do not exist or
have been ineffective, the physician, with informed consent from the patient, must be free to use unproven or
new prophylactic, diagnostic and therapeutic measures, if in the physician's judgement it offers hope of saving
life, re-establishing health or alleviating suffering. Where possible, these measures should be made the object
of research, designed to evaluate their safety and efficacy. In all cases, new information should be recorded
and, where appropriate, published. The other relevant guidelines of this Declaration should be followed.


Appendix 2:
                                   Clinical Trials Protocol for Medical Devices

Product name:
Model and specification:
Medical institution undertaking the clinical trial:
Category of the clinical trial:

Person responsible for the clinical trial: (Signature)

_____ (Month) _____ (Date), ______ (Year)

1. Prior to putting medical device products to a clinical trial, it is required to formulate a clinical trials protocol.
2. The clinical trials protocol shall be designed and formulated jointly by the medical institution and the
implementer. The implementer and the medical institution shall sign a clinical trials protocol that they have
both agreed to, and also enter into a clinical trials contract.
3. With regard to those class III medical devices implanted into human body, which is not available yet in
market or those medical device based on the theory of traditional Chinese medicine, the clinical trials protocol
shall be filed with medical devices technical evaluation agency.
4. The medical institution and the implementer shall work together to settle the number of illness case of each
category for the clinical trial and the time duration of such a clinical trials, so as to ensure the anticipated test
objective to be attained.
5. The clinical trials of medical devices are divided into clinical testing and clinical verification.

-- Background of clinical trial:

-- Functional scheme, characteristics of the product and test scope:

-- Indications or functions of the product:

-- The content of the clinical trials and its objective:

-- Overall design (including success and failure feasibility analysis):

-- Clinical evaluation standard:

-- Time duration of clinical trials and reasons:
-- Number of case of each disease category for clinical trial and reasons:

-- Scope of subject selection (including selection of the control group when necessary), quantity of selection
and reasons:

-- Expected side effects and necessary measures to be taken:

-- Evaluation method and statistic processing method of clinical performance:

-- Notice of Informed Consent:

-- Duties undertaken by the parties:

Clinical personnel                 Post               Technical Title             Department

Comments of the Ethical Committee:


                          _____ (Month) _____ (Date), _____ (Year)

Comments of the medical institution undertaking the clinical trial:


                              _____ (Month) _____ (Date), _____ (Year)
Comments of the implementor:


                              _____ (Month) _____ (Date), _____ (Year)


Appendix 3:

                                       Clinical Trials Report

Product name:
Model and specification:
Medical institution undertaking the clinical trial:
Category of clinical trial:
Person responsible for the clinical trial: (signature)

_____ (Month) _____ (Date), _____ (Year)


1.      The medical institution liable for the clinical trials shall be of
       responsible attitude to conduct the clinical trials and fill in the present
       report pursuant to the clinical trials protocol in an impartial and
       objective manner.

2.      This report must bear the signature of the person responsible for the
       clinical trials, who is experienced and with a technical title at the
       physician-in-charge level or above in the clinical trials institution.

3.      Clinical trials are categorized into two types: clinical testing and
       clinical verification
-- General clinical data (illness types, total number of illness cases and selection of cases):

-- Clinical trials method (including establishment of a control group when necessary):

-- Statistical method and evaluation method in use:

-- Clinical evaluation standard:

-- Clinical trials results:

-- Adverse event and side effect during the clinical trials and treatment measures:

-- Analysis of clinical trials effects:

-- Clinical trials conclusion:

-- Indications, scope of application, contraindications and precautions

-- Existing problems and suggestion:

Clinical personnel               Post            Technical Title          Department

Comments of the clinical trials management department of the medical institution responsible for
                                                                 clinical trials


                                                  _____ (Month) _____ (Date), _____ (Year)

The National Institute for Health and Clinical Excellence is launching a new programme focusing
specifically on the evaluation of innovative medical technologies (including devices and
diagnostics). This new programme will both compliment and operate in conjunction with NICE‘s
existing technology appraisal capacity, which will continue to evaluate new pharmaceutical and
biotechnology products.

The Evaluation Pathway Programme for Medical Technologies will help enable new medical
technologies, or important modifications of existing ones, to be used more quickly and
consistently in the NHS. The types of products which might be included are medical devices that
deliver treatment such as those implanted during surgical procedures, technologies that give
greater independence to patients, and diagnostic devices or tests used to detect or monitor
medical conditions.

Andrew Dillon, Chief Executive of NICE said: ―We‘re very pleased to announce that the
Evaluation Pathway Programme for Medical Technologies is underway. ‗High quality care for
all‘ acknowledged the need to simplify the pathway by which medical technologies pass from
development into wider use, and develop ways to benchmark and monitor uptake. This new
programme takes forward that vision, and we look forward to helping patients and the NHS to
benefit more quickly and consistently from innovative medical technologies.‖

The Evaluation Pathway Programme will support the newly created Medical Technologies
Advisory Committee. MTAC will identify and select innovative medical technologies and route
them through the appropriate NICE guidance programme. It will also develop its own guidance.

Professor Bruce Campbell has been appointed to chair the Medical Technologies Advisory
Committee. As a Consultant Vascular Surgeon and Chair of NICE‘s Interventional Procedures
Advisory Committee since 2002, Professor Campbell has extensive experience of NICE‘s
evaluation processes and guidance production. He is on the Project Board for the Evaluation
Pathway Programme, providing advice and direction on the establishment of Programme.

Professor Bruce Campbell said: ―I am pleased to be chairing the new Medical Technologies
Advisory Committee which should be able to speed up the way that promising new technologies
start to be used in the NHS. We will select those devices and diagnostic technologies which claim
to have particular advantages and be sure that they are evaluated in the best possible way. That
may mean NICE evaluating them to produce guidance about their use, and it may also mean
helping them to be investigated more thoroughly in research. I am looking forward to working
with the wide range of independent experts and other members of the Committee in identifying
technologies which will benefit patients and use NHS resources in the best possible way‖.

Professor Campbell will chair the inaugural meeting of the new Medical Technologies Advisory
Committee on 20 November 2009. It is envisaged that draft methods and process guides will be
published for consultation in late spring 2010, with the first guidance published in autumn 2010.

Dr Carole Longson, Director of the Centre for Health Technology Evaluation at NICE said:
―This is an important new area of work for the Centre for Health Technology Evaluation. The
Centre has developed a world class reputation in the assessment and appraisal of health
technologies. The Evaluation Pathway Programme for Medical Technologies provides a great
opportunity for us to expand the use of this expertise.‖
Mark Samuels, British In-Vitro Diagnostics Association (BIVDA) said: ―The creation of the
Evaluation Pathway Programme has been a collaborative process, bringing together expertise
from NICE, the medical technologies industry, the Department of Health and the Centre for
Evidence-based Purchasing. This is a significant development in the relationship between
industry and NICE, which can only benefit the NHS. The Programme will make it easier for the
NHS to understand which new medical technologies, including devices and diagnostics,
potentially offer significant benefits to patients.‖

Welcoming the creation of the Evaluation Pathway Programme, Mike Wallace, Association
of British Healthcare Industries (ABHI) commented:―This is an exciting development for
everyone involved in the medical technologies industry. Having a clear pathway to identify and
evaluate promising innovative medical technologies is good for patients, the NHS and
manufacturers. I encourage the industry to contribute to the Evaluation Pathway Programme for
Medical Technologies when the process gets underway next year.

                         CHARTER AMENDMENT


The Secretary, and by delegation, the Assistant Secretary for the Office of Public Health and
Science and the Commissioner of Food and Drugs are charged with the administration of the
Federal Food, Drug, and Cosmetic Act (FFDC Act), the Fair Packaging and Labeling Act, and
various provisions of the Public Health Service Act. The Medical Devices Advisory Committee
consists of 18 panels. With the exception of the Medical Devices Dispute Resolution Panel, the
panels, according to their specialty area and authorization, advise the Commissioner in
discharging responsibilities as they relate to assuring safety and effectiveness of medical devices,
and, as required, any other product for which the Food and Drug Administration has regulatory


15 U.S.C. 1451 et seq.; 21 U.S.C. 321, 341, 342, 343-1, 344, 345, 346, 348, 349, 350, 350a, 351,
352, 353, 353(a), 355, 360b-360l (ell), 360bbb-1, 371, 375, 376, 378, 379e, 381, 393, 394,
881(b); 42 U.S.C. 217a, 241, 242, 242a, 262, 263a, 264; 21 C.F.R. Part 14, 21 C.F.R. §330.10(a).
The Committee and its panels are governed by the provisions of Public Law 92-463, as amended
(5 U.S.C. App. 2), which sets forth standards for the formation and use of advisory committees.


The Committee reviews and evaluates data on the safety and effectiveness of marketed and
investigational devices and makes recommendations for their regulation. The panels engage in a
number of activities to fulfill the functions the FFDC Act envisions for device advisory panels.
With the exception of the Medical Devices Dispute Resolution Panel, each panel, according to its
specialty area, advises the Commissioner of Food and Drugs regarding recommended
classification or reclassification of devices into one of three regulatory categories; advises on any
possible risks to health associated with the use of devices; advises on formulation of product
development protocols; reviews premarket approval applications for medical devices; reviews
guidelines and guidance documents; recommends exemption of certain devices from the
application of portions of the Act; advises on the necessity to ban a device; and responds to
requests from the agency to review and make recommendations on specific issues or problems
concerning the safety and effectiveness of devices. With the exception of the Medical Devices
Dispute Resolution Panel, each panel, according to its specialty area, may also make appropriate
recommendations to the Commissioner of Food and Drugs on issues relating to the design of
clinical studies regarding the safety and effectiveness of marketed and investigational devices.
The Committee also provides recommendations to the Commissioner or designee on complexity
categorization of in vitro diagnostics under the Clinical Laboratory Improvement Amendments of
1988 (CLIA).

The Dental Products Panel also functions at times as a dental drug panel. The functions of the
dental drug panel are to evaluate and recommend whether various prescription drug products
should be changed to over-the-counter status and to evaluate data and make recommendations
concerning the approval of new dental drug products for human use.

The Medical Devices Dispute Resolution Panel provides advice to the Commissioner on complex
or contested scientific issues between the FDA and medical device sponsors, applicants, or
manufacturers relating to specific products, marketing applications, regulatory decisions and
actions by FDA, and Agency guidance and policies. The Panel makes recommendations on issues
that are lacking resolution, are highly complex in nature, or result from challenges to regular
advisory panel proceedings or Agency decisions or actions.


The Medical Devices Advisory Committee with its 18 panels shall consist of a maximum of 159
standing members. Members are selected by the Commissioner or designee from among
authorities in clinical and administrative medicine, engineering, biological and physical sciences,
and other related professions. A maximum of 122 members shall be standing voting members and
37 shall be nonvoting members who serve as representatives of consumer interests (18 members)
and of industry interests (19 members). In addition, there also may be alternate consumer and
industry representatives.

With the exception of the Dental Products Panel and the Medical Devices Dispute Resolution
Panel, as noted below, each panel consists of a maximum of seven standing voting members
(including the chair) and two nonvoting members (a consumer representative and an industry

The Dental Products Panel shall consist of a maximum of seven standing voting members
(including the chair) and three nonvoting members. One of the nonvoting members shall be a
representative of consumer interests and two shall be representatives of dental industry interests
(one each to represent the medical device industry and the dental drug industry). Only one
representative of industry interests may participate in the panel review of a particular matter or
application unless it is a combination product (e.g., a device/drug system), then the
representatives of both may participate.

The Medical Devices Dispute Resolution Panel shall consist of six voting members and two
nonvoting members. Voting members shall include three standing voting members, one of whom
serves as the chair, and three temporary voting members selected to provide cross-cutting
scientific or clinical expertise concerning the particular issue in dispute. Nonvoting members
shall include a representative of consumer interests and a representative of the interests of the
device manufacturing industry.

With the exception of the Medical Devices Dispute Resolution Panel, the panels shall be
organized according to medical device specialty areas as follows: Anesthesiology and
Respiratory Therapy Devices Panel; Circulatory System Devices Panel; Clinical Chemistry and
Clinical Toxicology Devices Panel; Dental Products Panel; Ear, Nose, and Throat Devices Panel;
Gastroenterology and Urology Devices Panel; General and Plastic Surgery Devices Panel;
General Hospital and Personal Use Devices Panel; Hematology and Pathology Devices Panel;
Immunology Devices Panel; Microbiology Devices Panel; Molecular and Clinical Genetics
Panel; Neurological Devices Panel; Obstetrics and Gynecology Devices Panel; Ophthalmic
Devices Panel; Orthopaedic and Rehabilitation Devices Panel; and Radiological Devices Panel.

The Commissioner or designee shall have the authority to select members of other scientific and
technical FDA advisory panels or committees (normally not to exceed an additional 10 members)
to serve temporarily as voting members and to designate consultants to serve temporarily as
voting members on the panels when, (1) expertise is required that is not available among the
current voting standing members of the panels (when additional voting members are added to the
Committee to provide needed expertise, a quorum will be based on the combined total of regular
and added members), or (2) to comprise a quorum when, because of unforeseen circumstances, a
quorum is or will be lacking.

Standing members for each panel are invited to serve for overlapping four-year terms. A member
may serve after expiration of the member‘s term until a successor has taken office. A member
may serve after expiration of the member‘s term only if selection for replacement is still pending
with the Commissioner or designee.

Temporary subcommittees consisting of two or more committee members may be established by
the Commissioner or designee as needed to address specific issues within their respective areas of
expertise. One of the voting members will be designated as the chair.

Subcommittees make preliminary recommendations regarding specific issues for subsequent
action by the full committee. The Department Committee Management Officer shall be notified
upon establishment of each subcommittee, and shall be provided information on its name,
membership, function, and estimated frequency of meetings.

Management and support services shall be provided by the Center for Devices and Radiological
Health, Food and Drug Administration.

Meetings of the full committee or advisory panel chairpersons are called by the Food and Drug
Administration as necessary. Each of the 18 panels shall meet at a minimum of once a year or as
necessary at the call of the Designated Federal officer, who shall also approve the agenda. A
Designated Federal officer shall be present at all meetings.

Because of the size of the Committee and the variety in the types of issues that it will consider,
the FDA may, in connection with a particular committee meeting, specify a quorum that is less
than a majority of the current-voting members. The Agency‘s regulations (21 C.F.R. § 14.22(d))
authorize a committee charter to specify quorum requirements.

Meetings shall be open to the public except as determined otherwise by the Commissioner or
designee in accordance with the Government in the Sunshine Act (5 U.S.C. 552b (c)) and the
Federal Advisory Committee Act. Notice of all meetings shall be given to the public.

Meetings shall be conducted and records of the proceedings kept as required by applicable laws
and the Departmental regulations.


Members who are not full-time Federal employees shall be paid at the rate of the General
Schedule Grade 15, step 10, per day for time spent at meetings plus per diem and travel expenses
in accordance with Standard Government Travel Regulations.

Annual Cost Estimate

The estimated annual cost of operating the committee in FY 08, including compensation and
travel expenses for members but excluding staff support, will be $1,324,365. The estimated
person years of staff support required in FY 08 will be 14.95 at an estimated annual cost of
$1,560,880. Cost figures for subsequent years will be shown in the Annual Report as required by
PL 92-463.


In the event that the Commissioner or designee determines that a portion of a meeting is closed to
the public in accordance with the Government in the Sunshine Act (5 U.S.C. 552b (c)) and the
Federal Advisory Committee Act, a report shall be prepared not later than November 1 of each
year which contains at a minimum the function of the committee, a list of members and their
business addresses, the dates and places of meetings, and a summary of the committee‘s activities
and recommendations during the preceding year. A copy of the report shall be provided to the
Department Committee Management Officer.

Termination Date
Sec. 14 of the Federal Advisory Committee Act does not apply to the duration of this committee,
as stated in 21 U.S.C. 360c(b)(1).

This charter will remain in effect until amended or terminated by the Commissioner of Food and
Drugs or designee.

_ 7/15/08___

_________ /S/___________________
Randall W. Lutter, Ph.D. Deputy Commissioner for Policy



WASHINGTON — Solutions to some of the nation's most pressing health problems hinge on the ability to
identify which diagnostic, treatment, and prevention services work best for various patients and
circumstances. Spending on ineffective care contributes to rising health costs and insurance premiums.
Variations in how health care providers treat the same conditions reflect uncertainty and disagreement
about what the standards for clinical practice should be. Patients and insurers cannot always be confident
that health professionals are delivering the most effective care.

A new report from the Institute of Medicine offers a blueprint for a national program to assess the
effectiveness of clinical services and to provide credible, unbiased information about what really works in
health care. The report recommends that Congress direct the U.S. Department of Health and Human
Services to establish a program with the authority, expertise, and resources necessary to set priorities for
evaluating clinical services and to conduct systematic reviews of the evidence. This program would also
be responsible for developing and promoting rigorous standards for clinical practice guidelines, which
could help minimize the use of questionable services and target services to the patients most likely to
benefit, said the committee that wrote the report.

"We need a way to synthesize data about the effectiveness of health care products and services in a
standardized, objective fashion that will be considered reliable and trustworthy by all decision makers,"
said committee chair Barbara J. McNeil, Ridley Watts Professor and head, department of health care
policy, Harvard School of Medicine, and professor of radiology, Brigham and Women's Hospital, Boston.
"A system coordinated by a single, national entity that can prioritize and coordinate these evaluations
would enable us to sort the wheat from the chaff and make sense of it all."

Although several organizations conduct evidence reviews and develop clinical practice guidelines, a single
entity with the authority and resources is needed to determine what works and end confusion, the report
says. Lack of coordination has led to duplication of effort, dozens — and in some cases hundreds — of
competing practice guidelines, and uncertainty about which study results and guidelines are the most
reliable and objective. This situation complicates the push to empower individuals to become more
engaged in choosing and managing their care, the committee said.

If established in a way that ensures transparency, scientific rigor, and high standards for accountability
and objectivity, the proposed national program would be a trusted resource for reliable information on the
effectiveness of health services, the report says. With thousands of new clinical studies published every
year, the amount of medical data has become so vast that it is essentially unmanageable for providers,
patients, health plans, and others. Most people, including many health professionals, lack the scientific
training necessary to evaluate and interpret such clinical findings by themselves. Moreover, research has
shown that when evidence reviews are financed by manufacturers or vendors — as a significant
proportion are — they are more likely to show effectiveness, which leads some to question whether, or to
what extent, the cumulative body of evidence for any given health care product or service is biased.

The committee noted the relevance of cost and cost-effectiveness analysis to this issue, but did not make
cost-related recommendations. Many policymakers believe cost-effectiveness information could guide
more efficient use of health care resources, but the committee was asked to focus on other issues in its
study. The report notes that reliable cost-effectiveness analysis depends on having high-quality evidence
on the effectiveness of products and services.

The study was sponsored by the Robert Wood Johnson Foundation. Established in 1970 under the
charter of the National Academy of Sciences, the Institute of Medicine provides independent, objective,
evidence-based advice to policymakers, health professionals, the private sector, and the public. The
National Academy of Sciences, National Academy of Engineering, Institute of Medicine, and National
Research Council make up the National Academies. A committee roster follows.

Copies of Knowing What Works in Health Care: A Roadmap for the Nation are available from the National
Academies Press; tel. 202-334-3313 or 1-800-624-6242 or on the Internet at http://www.nap.edu.
Reporters may obtain a copy from the Office of News and Public Information (contacts listed above).

#     #    #
[ This news release and report are available at http://national-academies.org ]

Board on Health Care Services
Committee on Reviewing Evidence to Identify Highly Effective Clinical Services

Barbara J. McNeil, M.D., Ph.D. (chair) Ridley Watts Professor and Head
Department of Health Care Policy Harvard Medical School; and Professor of Radiology
Harvard Medical School Brigham and Women's Hospital Boston

Harold C. Sox, M.D., M.A.C.P. (vice chair) Editor Annals of Internal Medicine American College of
Physicians Philadelphia

Allen Daniels, LISW, Ed.D. Chief Executive Officer Alliance Behavioral Care; and Professor of Clinical
Psychiatry University of Cincinnati Cincinnati

Kay Dickersin, M.A., Ph.D. Professor of Epidemiology, and Director
Center for Clinical Trials Bloomberg School of Public Health Johns Hopkins University Baltimore

Robert S. Galvin, M.D. Director of Global Health Care General Electric Co. Fairfield, Conn.

Dana P. Goldman, Ph.D. Chair and Director of Health Economics, Finance, and Organization
RAND Corp. Santa Monica, Calif.

Richard A. Justman, M.D. National Medical Director United Healthcare Corp. Edina, Minn.

Arthur A. Levin, M.P.H. Director Center for Medical Consumers New York City

Richard E. Marshall, M.D. Medical Director for Research, and Pediatrician
Harvard Vanguard Medical Associates Boston

Wilhelmine Miller, M.S., Ph.D. Associate Research Professor School of Public Health and Health Services
George Washington University Washington, D.C.
Sally C. Morton, Ph.D. Vice President for Statistics and Epidemiology Research Triangle Institute
Research Triangle Park, N.C.

Samuel R. Nussbaum, M.D. Executive Vice President, and Chief Medical Officer WellPoint Inc.

Diana B. Petitti, M.D., M.P.H. Adjunct Professor Department of Preventive Medicine
Keck School of Medicine University of Southern California Los Angeles

Steven Shak, M.D. Chief Medical Officer Genomic Health Inc. Redwood City, Calif.

Lisa Simpson, M.B., B.Ch., M.P.H., F.A.A.P. Director Child Policy Research Center Cincinnati Children's
Hospital Medical Center; and Professor Department of Pediatrics University of Cincinnati Cincinnati

Glenn D. Steele Jr., M.D., Ph.D. President and Chief Executive Officer Geisinger Health System Danville,

INSTITUTE OF MEDICINE STAFF Jill S. Eden, M.B.A., M.P.H. Study Director

MDB Enquiries

Table of Contents


The Health Products and Food Branch
The Medical Devices Program

The Industry Environment
The Regulatory Environment and Program Pressures




Regulatory and Program Modernization
Human Resources - The Right People to Get the Job Done
Stable Adequate Funding
Governance and Business Transformation
Sound Partnerships, Effective Relationships and Open, Transparent Communications


Health Canada has a strong regulatory program for medical devices. Canadians can be confident
that medical devices sold in this country are safe, effective and of high quality. However, the
Medical Devices Program has faced a number of challenges over the past decade not the least of
which were the eight recommendations most recently outlined in the Auditor General's 2004
Report to Parliament.

The Auditor General's report has been a catalyst for change and has enabled us to focus on
making incremental enhancements to prepare for the future. The Auditor General recognized that
"medical devices play an important role in all stages of delivery of health care." Responding to
the Auditor General's report and recommendations has provided us with the opportunity to take a
critical look at the way we do business and take action to enhance and improve the program.

We need to be responsive, proactive and strategic. We need to get ahead of the issues before they
impact us. Our commitment to working together, sharing our knowledge and continuously
furthering our expertise will enable us to continue in the right direction.

The program has made recent progress by eliminating the pre-market review backlog and
achieving 81% of decisions within target for all Class II, III and IV applications in 2006, making
medical devices accessible to the Canadian market in a timely manner. Continued improvements
to our post-market surveillance and inspection programs have ensured that medical devices
continue to be in compliance of the Medical Devices Regulations and safe for Canadians.

We believe the Medical Devices Program Strategic Plan Building for the Future helps us define
our future direction. It emphasizes our commitment to improving our work environment and
ensuring the strategic management of our resources. Building for the Future is a "living"
document that will evolve as we achieve our goals and respond to emerging trends, challenges
and opportunities.

Thank you to all those involved for helping and contributing to this document that will move the
program to the next level and enable us to meet the challenges of the future.

It is with great pleasure that we welcome you to join us on this exciting and rewarding journey.

Supriya Sharma, Therapeutic Products Directorate
Diana Dowthwaite, Health Products and Food Branch Inspectorate
Chris Turner, Marketed Health Products Directorate

Over the past 15 years the Medical Devices Program (MDP) has been evolving to meet the needs
of Canadians. A 1992 Report by the departmentally commissioned Medical Devices Review
Committee began a course of reform within the program leading to the introduction of new
regulations in May 1998 which came into force in July of that same year. These regulations set
out classifications for medical devices and put in place procedures for review and licensing.

Canada has a strong regulatory program for medical devices. Canadians can be confident that
medical devices sold in this country are safe, effective and of high quality. However, scientific
and technological advances and a rapidly changing health care environment have led to an
exponential increase in the number of new devices being developed and submitted to Health
Canada for review. Canadians have high expectations for more and better devices to meet their
needs. They expect a program, delivered by Health Canada, that will improve their health and
minimize the risks associated with the devices that are made available to them through the health
care system. Health care professionals expect that new technologies will be available for them to
provide ever advancing levels of quality care to their patients.

In order to keep up with the pace of change, the Medical Devices Program must continue to plan
for the future and ensure that it has the most appropriate system in place to allow Canadians to
safely benefit from the medical devices of the future. Building for the Future has been prepared
based on input by the staff and management of the Medical Devices Program in the Health
Products and Food Branch of Health Canada. It lays out the program's vision and strategic plan
for five years - from 2007 to the end of 2012.

The Medical Devices Program is managed through the Health Products and Food Branch of
Health Canada. Working with a budget of just over $11 million and approximately 150 full-time
employees in the fiscal year 2005-2006, the program monitors and evaluates the safety, efficacy
and quality of diagnostic and therapeutic medical devices so that consumers and health care
professionals can use them with confidence. Building for the Future is an exploration of the
outstanding challenges faced by the program, potential means of meeting these challenges and a
roadmap that will lay the groundwork for the future of the program.

The plan outlined here is not an end in itself. It provides another important building block in a
process that will continue to involve Canadians, stakeholders, industry and health care
professionals to ensure that the program is able to grow and evolve to meet the ever-changing
demands of the health care environment.

The Health Products and Food Branch

The Health Products and Food Branch (HPFB) of Health Canada has a budget of $275 million
and close to 2400 employees. Its mandate is to take an integrated approach to the management of
the benefits and risks related to health products and food by:
      minimizing health risk factors to Canadian while maximizing the safety provided by the
       regulatory system; and
      promoting conditions that enable Canadians to make healthy choices and providing
       information so that they can make informed decisions about their health.

To support its mandate, the HPFB has articulated a 2007-2012 Strategic Plan and a Blueprint for
Renewal to help guide the modernization of the Canadian regulatory health system and achieve
its vision as an internationally recognized regulatory leader.

A number of objectives and initiatives being advanced under the HPFB Strategic Plan and the
Blueprint for Renewal will help inform the action plan to strengthen the Medical Devices

      regulatory interventions proportional to risk;
      strengthening safety oversight through the adoption of life cycle
      approaches;
      improving pre-market review performance;
      strengthening post-market surveillance and compliance/enforcement;
      long-term sustainability of the program through the renewal of the Cost Recovery regime.

The HPFB is also undertaking a Branch-wide Comprehensive Review of Programs and
Resources aimed at ensuring that the HFPB has adequate capacity and resources to deliver on its
mandated activities, as well as the development of a new Cost Recovery regime. The specific
needs of the Medical Devices Program are being considered as part of these initiatives.

The Medical Devices Program

The Medical Devices Program is co-managed by three Directors General within the Health
Products and Food Branch. A coordinating committee was created at the Director General level
to review the recommendations, develop appropriate responses and monitor the progress to
address all of the Auditor General's 2004 recommendations. This coordinating committee
continues and provides a forum for discussion and decision-making on issues for the Medical
Devices Program.

The mandate of the program is to evaluate and monitor the safety, efficacy and quality of
diagnostic and therapeutic medical devices, so that consumers and health care professionals
can use them with confidence.

The Medical Devices Program ensures, to the extent possible, the safety, effectiveness and
quality of medical devices in Canada by a combination of pre-market review, post-approval
surveillance and quality systems in the manufacturing process.

There are over 60,000 licensed medical devices on the market today that are governed by the
regulations administered under this program.
The three directorates involved in the program are the Therapeutic Products Directorate (TPD),
the Marketed Health Products Directorate (MHPD) and the Health Products and Food Branch
Inspectorate (HPFBI).

The Therapeutic Products Directorate (TPD) is the Canadian federal authority that regulates
pharmaceutical drugs and medical devices for human use. Prior to being given market
authorization, a manufacturer must present substantive scientific evidence of a product's safety,
efficacy and quality as required by the Food and Drugs Act and Regulations. The Medical
Devices Bureau (MDB) is one of 11 offices or bureaux within TPD.

The MDB undertakes the following activities:

      subjects Class III and IV medical devices, whether they are manufactured in Canada or
       abroad, to a rigorous scientific review of safety and effectiveness data before being
       authorized for sale in Canada;
      undertakes administrative reviews of Class II devices and reviews safety and effectiveness
       data of Class I and II devices if issues are identified;
      conducts device testing and research to monitor nature and severity of device problems
       and laboratory investigations of device-specific incident reports;
      assesses and recognizes third-party auditing organizations, manages the Canadian
       Medical Devices Conformity Assessment System (CMDCAS), and provides expert
       advice on quality system requirements;
      develops policy and guidance documents to assist industry in meeting regulatory
      works with international partners to share information, implement collaborative initiatives
       and develop international standards;
      works at the international level to harmonize regulatory requirements and to assist
       countries in developing regulatory systems for medical devices;
      manages requests for access to non-marketed medical devices under the Special Access
      reviews investigational testing/clinical trial applications;
      supports litigation activities pertaining to medical devices in cases involving Health
      conducts pre- and post-market risk-benefit assessments and makes recommendations on
       risk management options;
      communicates product related risks to health care professionals and the public in
       collaboration with MHPD; and
      identifies issues and develops regulatory changes.

The Marketed Health Products Directorate (MHPD) works to assure that HPFB programs take a
consistent approach to safety surveillance, assessment of signals and safety trends, and risk
communications concerning all regulated marketed health products that are available in the
Canadian market. The Marketed Pharmaceuticals and Medical Devices Bureau within MHPD
conducts the following activities related to devices:

      monitoring devices incident data;
      reviewing and analysing product safety data;
      detecting and evaluating signals;
      conducting benefit and risk assessments and making recommendations on risk
       management options;
      communicating product related risks to health care professionals and the public; and
      providing policies to effectively regulate marketed health products.

The Health Products and Food Branch Inspectorate (HPFBI) is responsible for delivery of a
national compliance and enforcement program for all products under the mandate of the HPFB
(except food), supporting the Branch's risk management approach to decision-making and senior
management's vision of a comprehensive regulatory strategy across all product classes. This is
accomplished through inspection, compliance verification and investigation, establishment
licensing and related laboratory functions. For medical devices the Inspectorate activities include:

      collection, review and follow-up on medical device problem reports;
      compliance verification and investigation of problem reports, recalls and complaints;
      inspections;
      establishment licensing; and
      policy and international activities on HPFBI-related responsibilities.

The Industry Environment

Canadians rely on a diverse range of medical devices to diagnose, prevent, or treat a disease,
disability, or physical condition. Products such as dialysis equipment, pacemakers, and baby
incubators have improved or saved the lives of many. Numerous medical devices such as medical
gloves, syringes, X-ray equipment, and surgical lasers are indispensable to today's health care

In the medical device industry, scientific disciplines and engineering merge in the creation of
innovations that benefit the health care system as well as society at large. Firms in this industry
approach the diagnosis and treatment of ailments by providing a wide range of products suited to
increasingly specialized needs. There were approximately 500 Canadian medical devices firms
which generated over $3.8 billion in sales in Canada and abroad in 2003. Seventy eight percent of
the industry's exports went to the United States, where tariffs were eliminated in 1998 under the
North American Free Trade Agreement1. This close trade relationship has likely provided the
impetus that has led to calls from Canadian industry for greater harmonization and cooperation
internationally, particularly with the United States Food and Drug Administration (U.S. FDA).

A recent study estimates the total number of foreign and domestic medical devices companies
operating in Canada at 1,500 employing over 35,000 people, not taking into account medical
imaging or assistive devices2. About 1,600 companies hold medical device establishment
licenses. This includes the 1,500 companies mentioned above, as well as others who import or
distribute medical devices, or manufacture Class I devices, such as toothbrushes and bandages.
There are approximately 60,000 licensed medical devices currently on the market in Canada, and
with this number continuing to grow exponentially, it is increasingly challenging to maintain the
level of service Canadians and industry require within the current budget.

Recent advances in technology and health research are contributing to the rapid development of
new medical devices. New technologies, such as nanotechnology and the combination of product
categories, such as drug-eluting stents, create new regulatory challenges. The program will
address these new challenges with regulatory foresight and the development of guidances for
industry to ensure Canadians continue to receive safe and timely access to medical devices.
    Industry Canada, http://strategis.gc.ca/epic/internet/inmd-am.nsf/en/Home
    MEDEC, http://www.medec.org/industry_overview.asp

The Regulatory Environment and Program Pressures

The Medical Devices Program continues to evolve to meet the needs and expectations of
Canadians to the extent possible under the current structure and level of resourcing. However, a
number of issues must now be addressed in order to ensure the program can adapt to the changing
environment, deal with increasing number of product submissions, provide adequate risk
information to users and health professionals and build the program that will ensure Canada's
system remains one of the most respected both in Canada and internationally.

Human Resources - Stringent human resource requirements and practices sometimes make it
difficult to attract the staff to the Medical Devices Program with both the required level of
scientific and management expertise along with appropriate language skills.

Financial Resources - Currently there is no stable funding that is directed toward activities
pertaining to medical devices on a yearly basis.

Procedures - Many staff have identified the need for better ongoing coordination between all
areas of the program including an integrated resource allocation and decision-making process.

Structure - The program is currently managed under a matrix structure within the HPFB where
decision-making authority is shared among three Directors General. If not managed carefully,
this can result in unclear direction and competition among the directorates for staff and funds.
There is increased emphasis on fostering a culture of greater inter-directorate collaboration and
undertaking a programmatic approach. The establishment of the Directors General Coordinating
Committee is a positive step in that direction.

Federal/Provincial/Territorial Issues - Health care issues continue to dominate discussions
between the federal government and the provinces and territories. However, medical device
issues do not figure prominently on the agenda. As the medical device industry continues to
evolve and become more sophisticated, the program must strengthen federal-provincial-territorial
cooperation to ensure issues are discussed at all the appropriate levels.
International Relationships - Health Canada continues to be an active participant of the Global
Harmonization Task Force (GHTF) in the efforts to create a harmonized regulatory system for
medical devices for use by all countries. In addition, as part of Health Canada's International
Harmonization efforts, two significant international projects are underway. Firstly, collaboration
between Health Canada and the U.S. FDA continues on developing a partnership where both
jurisdictions could utilize multi-purpose quality systems audits conducted by one auditor to cover
the regulatory requirements of both jurisdictions. Secondly, a Memorandum of Understanding is
under development between Health Canada and Australia's Therapeutic Goods Administration
(TGA) for the mutual recognition of Quality Management Systems certifications for medial
device manufacturers. Although much work is already being done at the international level, staff
must continue to foster relationships at all levels through participation at international fora,
negotiation and implementation of Memoranda of Understanding and building informal
information sharing partnerships.

Transparency - The need to build a better culture of transparency both internally and with
external stakeholders is an ongoing priority.

This time of rapid technological advancement along with increased emphasis on patient safety,
transparency, and calls for increased emphasis on the need for appropriately resourced and
managed regulatory programs can provide challenges to the program. However, the visibility of
these program challenges can also open up tremendous opportunities to reorient program
resources, identify new sources of funds and reinvigorate the program to meet the needs of the
future - creating a program that is vibrant, relevant and responsive to the needs of Canadians and
health professionals.

Simply stated......The Health Products and Food Branch monitors and evaluates the safety,
efficacy and quality of diagnostic and therapeutic medical devices in Canada so that consumers
and health care professionals can use them with confidence.

We envision a program that is internationally recognized for the high quality of its benefit-risk
decision-making process, its commitment to transparency and the provision of timely information
to industry, health professionals and patients and its leadership in acting as a catalyst for greater
international cooperation and harmonization.

We envision a program with a clear governance structure that will support management and
employees who are driven by excellence and a commitment to providing high quality and reliable
service for Canadians.

We envision a program that is a respected employer of choice for the best and the brightest
scientific and administrative staff who are supported by high quality, leading edge management
systems that enable them to meet targets and exceed the expectations of Canadians.
Supporting the program vision, a number of strategic objectives have been identified that further
elaborate on the vision:

1. Regulatory and Program Modernization - will enable the MDP to manage risk proactively and
efficiently and keep pace with the rapidly changing environment within which Health Canada

2. Human Resources - The Right People to Get the Job Done: Ensure the program is staffed with
the appropriate number of qualified people with the knowledge, skill and drive to meet the needs
of the users of medical devices in Canada.

3. Stable Adequate Funding - will ensure funds are in place to meet all program requirements,
standards, strategic improvements and challenges.

4. Governance and Business Transformation - will result in a flexible and integrated management
environment, and allow for clear and effective decisions to be made efficiently and on time. This
will ensure the program infrastructure and organizational structure can meet the growing needs of
the medical device industry and allow program staff to effectively meet performance targets.

5. Sound Partnerships, Effective Relationships and Open, Transparent Communications - will
result in strong strategic partnerships to help fulfill our mandate and Health Canada will be
regarded nationally and internationally as a highly respected source of accurate and timely

In order to achieve the strategic objectives, the program will implement the following activities
related to each strategic objective over the course of the next five years (2007 - 2012).

1. Regulatory and Program Modernization

Advances in science, medicine and technology will challenge the way medical devices are
regulated. In line with the HPFB Strategic Plan and Blueprint for Renewal, the Medical Devices
Program plans to take measures to ensure that regulatory interventions are proportional to risk
and to strengthen safety oversight through the adoption of life cycle approaches. Regulatory and
Program Modernization will allow the MDP to keep pace with the rapidly changing regulatory
and technical environment in which Health Canada works.

The Risk Management Framework provides the basis for all regulatory and health protection
work within Health Canada, and in particular the Health Products and Food Branch. It provides
the structure for a quality management process that integrates all elements of the program. In
support of the framework and the work of the program, and in consultation with relevant
stakeholders, the following will be undertaken:
Increase and Strengthen Regulatory Tools and Abilities - Opportunities for harmonized or shared
activities with other jurisdictions will continue to be identified, developed and implemented. Best
practices and lessons learned from other regulators will be examined and adopted. Health Canada
will develop regulations for the reuse of single-use devices. Regulatory tools and abilities to
enhance compliance and enforcement powers will be developed and implemented, in particular a
ticketing scheme to provide consequences for non-compliance with the Regulations.

Being More Proactive in All Stages of the Life Cycle of a Medical Device, including Early
Development Phases - The investigational testing regulations will be amended to increase the risk
management of this critical stage in the development of medical devices. This will include the
requirement of investigational testing to conform with Good Clinical Practices and the provision
that interim and/or final reporting to Health Canada will be required. In addition, an
investigational testing inspection strategy and program will be developed.

Strengthen Post-Market Activities, including Surveillance and Monitoring of Safety and
Effectiveness - Plans to develop and implement a risk-based approach to product vigilance will
allow the MDP to manage risks more proactively. Efforts will be made to implement common
practices across the program which, where possible, are consistent with other product lines, e.g.,
risk communications, health hazard evaluations, signal assessments. A laboratory needs analysis
will be conducted to investigate how the program can strengthen its laboratory capabilities and
ensure our lab facilities meet the requirements for the program. Some other specific activities
include the implementation of an action plan to increase the awareness of the regulatory
requirements for medical devices and decrease the number of unlicenced devices on the Canadian
market. The issue of counterfeit medical devices will be evaluated as well and a strategy
developed in order to address the inherent risks. The HPFBI will increase its capacity to perform
inspections to bring the frequency of inspections in line with international standards of practice.
A Sentinel System for Canada, designed to increase the quantity and quality of problem reports
from a smaller set of representative medical device users/facilities, will be developed and

2. Human Resources - The Right People to Get the Job Done

The MDP has a number of long-term employees with extensive historical knowledge of the
program and invaluable expertise and experience. The program will look for ways to encourage
and support knowledge transfer and the use of this expertise to develop talented staff who will be
ready to assume greater regulatory and management responsibility as other workers retire or
move on to new challenges. Maintaining a dynamic and supportive working environment that
will attract new employees and promote a workplace environment of learning and growth will be
imperative for the Medical Devices Program of the future. To this end, the program will work on
the following:

HR Planning - Utilizing a regularly updated HR plan consisting of short, medium and long-term
objectives will identify required resources, skills and experience levels needed to help the
program put in place a workforce that can meet the future's growing demands.
Training Plan - With the constant advances in science and technology, staff need access to
training to provide them with the knowledge to be able to do their jobs. A robust training plan for
all staff, including technical, language and basic training courses will be developed.

Developing a Culture of Cross-Training - Efforts will be made to develop cross-training
opportunities for staff to build a broader range of skills for employees and promote a better
understanding of the broader picture within the program and within the Branch.

Working Together - As staff are based in three different directorates and across the country,
efforts will be made to bring staff together for annual all-staff meetings to share ideas and build
better working relationships.

3. Stable Adequate Funding

In order to establish stable and adequate resources to meet all program requirements and
performance standards as well as undertake the activities outlined in the strategic objectives, the
MDP is engaging in two key Branch activities:

Cost Recovery - The HPFB's Cost Recovery Initiative is developing an up-to-date external
charging framework that covers the regulation, licensing and post-market surveillance of health
products, including medical devices. The system will be put in place to ensure charging covers all
allowable aspects of the program.

Comprehensive Review of Programs and Resources - The unique needs of the program will be
captured by the Branch's Comprehensive Review of Programs and Resources whose objective is
to ensure adequate funding is available to allow the program to deliver on its mandated activities.

Additionally, the program will identify current gaps in its activities and monitor for emerging
issues. An analysis of the funding required to meet the strategic objectives will be undertaken and
funding through a Memorandum to Cabinet and Treasury Board submissions will be sought to
finance activities not captured by cost recovery or A-Base initiatives.

4. Governance and Business Transformation

Governance and business transformation will result in a flexible and integrated management
environment where clear and effective decisions are made efficiently and the program is able to
consistently maintain or exceed performance standards. The current elements of the program
which are managed under three separate directorates will be examined to ensure that the structure
and supporting administrative processes are adequate and appropriate to suit the growing number
of medical devices and allow staff to meet performance targets. More specifically, work will be
undertaken as follows:

Managing Better Within the Current Structure - The program will look at management options
that could allow for more effective means of working under the current matrix management
system in the Health Products and Food Branch. A permanent program secretariat has been
established and regular program management meetings involving all three Directors General,
managers and staff are held to discuss issues for the Medical Devices Program. Additionally,
options for shared approaches to program representation at the Branch level and a horizontal
approach to funding requests that reflect the unique needs of the program within the Branch
structure will be explored.

Existing processes will be reviewed and revised to remove any unnecessary steps or activities
that are not value added and increase the time to decision. Efforts to integrate planning across
program elements will be made. Communicating key strategic direction for the program will be
improved and shared at annual program all-staff meetings.

Review of Structural Options for the Longer Term - The program will review alternative
governance and organizational structures that could be implemented over the longer term. This
review would be undertaken in conjunction with any similar Branch wide initiatives and will
examine how medical devices issues can be best represented at the Branch in order to have
equality with other product lines. The program must ensure that the structure and organization
suits the needs of the growing industry and allows staff to meet performance targets. By
improving processes and assigning the appropriate levels of delegation of authority will result in
improved timeliness and efficient decision making within the program. In particular, a system to
better track the issuance of establishment licences in order to meet service standards will be

An integrated Performance Measurement Framework (PMF) covering all aspects of the Medical
Devices Program will be developed. This will allow for effective performance reporting of
activities currently being conducted and highlight areas requiring improvements. The PMF will
help build a business case for the MDP by outlining current and anticipated activities related to
the functioning of the program and maintenance of performance sustainability.

5. Sound Partnerships, Effective Relationships and Open, Transparent Communications

Many different organizations and individuals contribute to health care in Canada including
Health Canada, provincial and territorial governments, health care providers, manufacturers and
consumers. Consumers have a responsibility to make informed choices about their health.
Because health care services and products are delivered through the provincial and territorial
programs, health care management initiatives must be carefully integrated across and between

Working in partnership with stakeholders, international regulatory authorities and other
departments and levels of government has always been an integral part of the work of MDP staff.
The following activities will be undertaken to supplement these ongoing relationships and

A Focussed Approach to International Cooperation - A strategic plan for international work will
be implemented and regularly revised. It will capture the current efforts being made with the
Global Harmonization Task Force (GHTF), the FDA and the TGA, and take a realistic work-
sharing strategy approach with international partners. Health Canada will be a major force in the
efforts to create a harmonized regulatory system for medical devices for use by all countries and
assist in the development of regulatory systems for medical devices in those countries looking to
develop them. Health Canada will continue to contribute its expertise to the development of
international and national standards.

Strong and Positive Partnerships with Stakeholders - are required to achieve the program's
mandate. Work will be undertaken with stakeholders and end-users to develop and implement
joint activities to increase the reach and effectiveness of communication products, in particular
develop and utilize partnerships with interested organizations and associations. Partnership with
the Canadian Border Services Agency will continue as the program looks for ways to address
border control issues to reduce the number of non-compliant medical devices entering Canada.
Program managers will engage stakeholders and provincial regulatory authorities in a discussion
of how best to improve end-user training, including the possibility of a requirement for the
manufacturer to provide training on certain high-risk devices. A commitment on the part of the
Branch is to strengthen federal-provincial-territorial interaction and cooperation. Other
relationships and partnerships will continue to be established.

Improve Communications with Stakeholders - in order to be regarded as a nationally and
internationally highly respected source of accurate and timely information. Program managers
will work with communications and public involvement staff to identify means of improving
timeliness of communications. With the aim to increase the openness and transparency of the
development and safety of medical devices several initiatives are being examined. One initiative
is the registration and disclosure of clinical trial information for health products regulated by
Health Canada, including medical devices. The HPFBI is working on the development of an
electronic transparency and accountability compliance kit (E-Tack), a web-based tool to facilitate
the posting of compliance and enforcement actions on a publicly accessible website as well as the
posting of information on problem reports. The recommendations of an Expert Advisory
Committee on how Health Canada can improve communications with stakeholders will be
utilized. A stakeholder relations framework is being developed to assist with identifying
mechanisms to improve communications with stakeholders.

The Medical Devices Program is developing a detailed Performance Measurement Framework
(PMF) for the program. This PMF will include performance measurement, monitoring,
evaluation and reporting strategies that will allow managers to track progress against objectives
set out in Building for the Future and ensure that work remains on course in support of the vision.

Performance measures and timelines for data collection have been identified for all regular
program activities (e.g., number of applications to be reviewed, number of stakeholder
complaints, etc.). Data will be collected at regular intervals by identified responsibility centres.
This data will be compared to outcome indicators to measure successes and identify areas for

By putting in place a formal performance evaluation process, the Medical Devices Program will
be able to benefit from an ongoing process of learning and improvement.
Drugs and Health Products Features

Drug Product Database

MedEffect Canada - Advisories, Warnings & Recalls

Special Access Programme - Drugs

Licensed Natural Health Products Database

Medical Use of Marihuana - Health Care Pr

• Supply chain management

Supply chain management (SCM) is the management of a network of interconnected
businesses involved in the ultimate provision of product and service packages required by end
customers (Harland, 1996).[1] Supply Chain Management spans all movement and storage of raw
materials, work-in-process inventory, and finished goods from point of origin to point of
consumption (supply chain).

Another definition is provided by the APICS Dictionary when it defines SCM as the "design,
planning, execution, control, and monitoring of supply chain activities with the objective of
creating net value, building a competitive infrastructure, leveraging worldwide logistics,
synchronizing supply with demand, and measuring performance globally."
More common and accepted definitions of Supply Chain Management are:

      Supply Chain Management is the systemic, strategic coordination of the traditional
       business functions and the tactics across these business functions within a particular
       company and across businesses within the supply chain, for the purposes of improving the
       long-term performance of the individual companies and the supply chain as a whole
       (Mentzer et. al., 2001).[2]

      Global Supply Chain Forum - Supply Chain Management is the integration of key
       business processes across the supply chain for the purpose of creating value for customers
       and stakeholders (Lambert, 2008)[3].

      According to the Council of Supply Chain Management Professionals (CSCMP), Supply
       chain management encompasses the planning and management of all activities involved
       in sourcing, procurement, conversion, and logistics management. It also includes the
       crucial components of coordination and collaboration with channel partners, which can be
       suppliers, intermediaries, third-party service providers, and customers. In essence, supply
       chain management integrates supply and demand management within and across
       companies. More recently, the loosely coupled, self-organizing network of businesses that
       cooperate to provide product and service offerings has been called the Extended

A supply chain, as opposed to supply chain management, is a set of organizations directly linked
by one or more of the upstream and downstream flows of products, services, finances, and
information from a source to a customer. Managing a supply chain is 'supply chain management'
(Mentzer et. al., 2001).[4]

Supply chain management software includes tools or modules used to execute supply chain
transactions, manage supplier relationships and control associated business processes.

Supply chain event management (abbreviated as SCEM) is a consideration of all possible events
and factors that can disrupt a supply chain. With SCEM possible scenarios can be created and
solutions devised.

Supply chain management problems
Supply chain management must address the following problems:

      Distribution Network Configuration: number, location and network missions of
       suppliers, production facilities, distribution centers, warehouses, cross-docks and
      Distribution Strategy: questions of operating control (centralized, decentralized or
       shared); delivery scheme, e.g., direct shipment, pool point shipping, cross docking, DSD
       (direct store delivery), closed loop shipping; mode of transportation, e.g., motor carrier,
       including truckload, LTL, parcel; railroad; intermodal transport, including TOFC (trailer
       on flatcar) and COFC (container on flatcar); ocean freight; airfreight; replenishment
       strategy (e.g., pull, push or hybrid); and transportation control (e.g., owner-operated,
       private carrier, common carrier, contract carrier, or 3PL).
      Trade-Offs in Logistical Activities: The above activities must be well coordinated in
       order to achieve the lowest total logistics cost. Trade-offs may increase the total cost if
       only one of the activities is optimized. For example, full truckload (FTL) rates are more
       economical on a cost per pallet basis than less than truckload (LTL) shipments. If,
       however, a full truckload of a product is ordered to reduce transportation costs, there will
       be an increase in inventory holding costs which may increase total logistics costs. It is
       therefore imperative to take a systems approach when planning logistical activities. These
       trade-offs are key to developing the most efficient and effective Logistics and SCM
      Information: Integration of processes through the supply chain to share valuable
       information, including demand signals, forecasts, inventory, transportation, potential
       collaboration, etc.
      Inventory Management: Quantity and location of inventory, including raw materials,
       work-in-progress (WIP) and finished goods.
      Cash-Flow: Arranging the payment terms and methodologies for exchanging funds
       across entities within the supply chain.

Supply chain execution means managing and coordinating the movement of materials,
information and funds across the supply chain. The flow is bi-directional.

Supply chain management is a cross-function approach including managing the movement of raw
materials into an organization, certain aspects of the internal processing of materials into finished
goods, and the movement of finished goods out of the organization and toward the end-consumer.
As organizations strive to focus on core competencies and becoming more flexible, they reduce
their ownership of raw materials sources and distribution channels. These functions are
increasingly being outsourced to other entities that can perform the activities better or more cost
effectively. The effect is to increase the number of organizations involved in satisfying customer
demand, while reducing management control of daily logistics operations. Less control and more
supply chain partners led to the creation of supply chain management concepts. The purpose of
supply chain management is to improve trust and collaboration among supply chain partners, thus
improving inventory visibility and the velocity of inventory movement.

Several models have been proposed for understanding the activities required to manage material
movements across organizational and functional boundaries. SCOR is a supply chain
management model promoted by the Supply Chain Council. Another model is the SCM Model
proposed by the Global Supply Chain Forum (GSCF). Supply chain activities can be grouped
into strategic, tactical, and operational levels . The CSCMP has adopted The American
Productivity & Quality Center (APQC) Process Classification FrameworkSM a high-level,
industry-neutral enterprise process model that allows organizations to see their business processes
from a cross-industry viewpoint[5].


      Strategic network optimization, including the number, location, and size of warehousing,
       distribution centers, and facilities.
      Strategic partnerships with suppliers, distributors, and customers, creating communication
       channels for critical information and operational improvements such as cross docking,
       direct shipping, and third-party logistics.
      Product life cycle management, so that new and existing products can be optimally
       integrated into the supply chain and capacity management activities.
      Information technology chain operations.
      Where-to-make and make-buy decisions.
      Aligning overall organizational strategy with supply strategy.
      It is for long term and needs resource commitment.


      Sourcing contracts and other purchasing decisions.
      Production decisions, including contracting, scheduling, and planning process definition.
      Inventory decisions, including quantity, location, and quality of inventory.
      Transportation strategy, including frequency, routes, and contracting.
      Benchmarking of all operations against competitors and implementation of best practices
       throughout the enterprise.
      Milestone payments.
      Focus on customer demand.


      Daily production and distribution planning, including all nodes in the supply chain.
      Production scheduling for each manufacturing facility in the supply chain (minute by
      Demand planning and forecasting, coordinating the demand forecast of all customers and
       sharing the forecast with all suppliers.
      Sourcing planning, including current inventory and forecast demand, in collaboration with
       all suppliers.
      Inbound operations, including transportation from suppliers and receiving inventory.
      Production operations, including the consumption of materials and flow of finished
      Outbound operations, including all fulfillment activities, warehousing and transportation
       to customers.
      Order promising, accounting for all constraints in the supply chain, including all
       suppliers, manufacturing facilities, distribution centers, and other customers.
      From production level to supply level accounting all transit damage cases & arrange to
       settlment at customer level by maintaining company loss through insurance company.
Supply chain management
Organizations increasingly find that they must rely on effective supply chains, or networks, to
compete in the global market and networked economy.[6] In Peter Drucker's (1998) new
management paradigms, this concept of business relationships extends beyond traditional
enterprise boundaries and seeks to organize entire business processes throughout a value chain of
multiple companies.

During the past decades, globalization, outsourcing and information technology have enabled
many organizations, such as Dell and Hewlett Packard, to successfully operate solid collaborative
supply networks in which each specialized business partner focuses on only a few key strategic
activities (Scott, 1993). This inter-organizational supply network can be acknowledged as a new
form of organization. However, with the complicated interactions among the players, the network
structure fits neither "market" nor "hierarchy" categories (Powell, 1990). It is not clear what kind
of performance impacts different supply network structures could have on firms, and little is
known about the coordination conditions and trade-offs that may exist among the players. From a
systems perspective, a complex network structure can be decomposed into individual component
firms (Zhang and Dilts, 2004). Traditionally, companies in a supply network concentrate on the
inputs and outputs of the processes, with little concern for the internal management working of
other individual players. Therefore, the choice of an internal management control structure is
known to impact local firm performance (Mintzberg, 1979).

In the 21st century, changes in the business environment have contributed to the development of
supply chain networks. First, as an outcome of globalization and the proliferation of multinational
companies, joint ventures, strategic alliances and business partnerships, significant success
factors were identified, complementing the earlier "Just-In-Time", "Lean Manufacturing" and
"Agile Manufacturing" practices.[7] Second, technological changes, particularly the dramatic fall
in information communication costs, which are a significant component of transaction costs, have
led to changes in coordination among the members of the supply chain network (Coase, 1998).

Many researchers have recognized these kinds of supply network structures as a new organization
form, using terms such as "Keiretsu", "Extended Enterprise", "Virtual Corporation", "Global
Production Network", and "Next Generation Manufacturing System".[8] In general, such a
structure can be defined as "a group of semi-independent organizations, each with their
capabilities, which collaborate in ever-changing constellations to serve one or more markets in
order to achieve some business goal specific to that collaboration" (Akkermans, 2001).

The security management system for supply chains is described in ISO/IEC 28000 and ISO/IEC
28001 and related standards published jointly by ISO and IEC.

Developments in Supply Chain Management
Six major movements can be observed in the evolution of supply chain management studies:
Creation, Integration, and Globalization (Lavassani et al., 2008a), Specialization Phases One and
Two, and SCM 2.0.
1. Creation Era

The term supply chain management was first coined by a U.S. industry consultant in the early
1980s. However, the concept of a supply chain in management was of great importance long
before, in the early 20th century, especially with the creation of the assembly line. The
characteristics of this era of supply chain management include the need for large-scale changes,
re-engineering, downsizing driven by cost reduction programs, and widespread attention to the
Japanese practice of management.

2. Integration Era

This era of supply chain management studies was highlighted with the development of Electronic
Data Interchange (EDI) systems in the 1960s and developed through the 1990s by the
introduction of Enterprise Resource Planning (ERP) systems. This era has continued to develop
into the 21st century with the expansion of internet-based collaborative systems. This era of
supply chain evolution is characterized by both increasing value-adding and cost reductions
through integration.

3. Globalization Era

The third movement of supply chain management development, the globalization era, can be
characterized by the attention given to global systems of supplier relationships and the expansion
of supply chains over national boundaries and into other continents. Although the use of global
sources in the supply chain of organizations can be traced back several decades (e.g., in the oil
industry), it was not until the late 1980s that a considerable number of organizations started to
integrate global sources into their core business. This era is characterized by the globalization of
supply chain management in organizations with the goal of increasing their competitive
advantage, value-adding, and reducing costs through global sourcing.

4. Specialization Era—Phase One: Outsourced Manufacturing and Distribution

In the 1990s industries began to focus on ―core competencies‖ and adopted a specialization
model. Companies abandoned vertical integration, sold off non-core operations, and outsourced
those functions to other companies. This changed management requirements by extending the
supply chain well beyond company walls and distributing management across specialized supply
chain partnerships.

This transition also re-focused the fundamental perspectives of each respective organization.
OEMs became brand owners that needed deep visibility into their supply base. They had to
control the entire supply chain from above instead of from within. Contract manufacturers had to
manage bills of material with different part numbering schemes from multiple OEMs and support
customer requests for work -in-process visibility and vendor-managed inventory (VMI).

The specialization model creates manufacturing and distribution networks composed of multiple,
individual supply chains specific to products, suppliers, and customers who work together to
design, manufacture, distribute, market, sell, and service a product. The set of partners may
change according to a given market, region, or channel, resulting in a proliferation of trading
partner environments, each with its own unique characteristics and demands.

5. Specialization Era—Phase Two: Supply Chain Management as a Service

Specialization within the supply chain began in the 1980s with the inception of transportation
brokerages, warehouse management, and non-asset-based carriers and has matured beyond
transportation and logistics into aspects of supply planning, collaboration, execution and
performance management.

At any given moment, market forces could demand changes from suppliers, logistics providers,
locations and customers, and from any number of these specialized participants as components of
supply chain networks. This variability has significant effects on the supply chain infrastructure,
from the foundation layers of establishing and managing the electronic communication between
the trading partners to more complex requirements including the configuration of the processes
and work flows that are essential to the management of the network itself.

Supply chain specialization enables companies to improve their overall competencies in the same
way that outsourced manufacturing and distribution has done; it allows them to focus on their
core competencies and assemble networks of specific, best-in-class partners to contribute to the
overall value chain itself, thereby increasing overall performance and efficiency. The ability to
quickly obtain and deploy this domain-specific supply chain expertise without developing and
maintaining an entirely unique and complex competency in house is the leading reason why
supply chain specialization is gaining popularity.

Outsourced technology hosting for supply chain solutions debuted in the late 1990s and has taken
root primarily in transportation and collaboration categories. This has progressed from the
Application Service Provider (ASP) model from approximately 1998 through 2003 to the On-
Demand model from approximately 2003-2006 to the Software as a Service (SaaS) model
currently in focus today.

6. Supply Chain Management 2.0 (SCM 2.0)

Building on globalization and specialization, the term SCM 2.0 has been coined to describe both
the changes within the supply chain itself as well as the evolution of the processes, methods and
tools that manage it in this new "era".

Web 2.0 is defined as a trend in the use of the World Wide Web that is meant to increase
creativity, information sharing, and collaboration among users. At its core, the common attribute
that Web 2.0 brings is to help navigate the vast amount of information available on the Web in
order to find what is being sought. It is the notion of a usable pathway. SCM 2.0 follows this
notion into supply chain operations. It is the pathway to SCM results, a combination of the
processes, methodologies, tools and delivery options to guide companies to their results quickly
as the complexity and speed of the supply chain increase due to the effects of global competition,
rapid price fluctuations, surging oil prices, short product life cycles, expanded specialization,
near-/far- and off-shoring, and talent scarcity.
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SCM 2.0 leverages proven solutions designed to rapidly deliver results with the agility to quickly
manage future change for continuous flexibility, value and success. This is delivered through
competency networks composed of best-of-breed supply chain domain expertise to understand
which elements, both operationally and organizationally, are the critical few that deliver the
results as well as through intimate understanding of how to manage these elements to achieve
desired results. Finally, the solutions are delivered in a variety of options, such as no-touch via
business process outsourcing, mid-touch via managed services and software as a service (SaaS),
or high touch in the traditional software deployment model.

Supply chain business process integration
Successful SCM requires a change from managing individual functions to integrating activities
into key supply chain processes. An example scenario: the purchasing department places orders
as requirements become known. The marketing department, responding to customer demand,
communicates with several distributors and retailers as it attempts to determine ways to satisfy
this demand. Information shared between supply chain partners can only be fully leveraged
through process integration.

Supply chain business process integration involves collaborative work between buyers and
suppliers, joint product development, common systems and shared information. According to
Lambert and Cooper (2000), operating an integrated supply chain requires a continuous
information flow. However, in many companies, management has reached the conclusion that
optimizing the product flows cannot be accomplished without implementing a process approach
to the business. The key supply chain processes stated by Lambert (2004) [9] are:

      Customer relationship management
      Customer service management
      Demand management
      Order fulfillment
      Manufacturing flow management
      Supplier relationship management
      Product development and commercialization
      Returns management

Much has been written about demand management. Best-in-Class companies have similar
characteristics, which include the following: a) Internal and external collaboration b) Lead time
reduction initiatives c) Tighter feedback from customer and market demand d) Customer level

One could suggest other key critical supply business processes which combine these processes
stated by Lambert such as:
   a.   Customer service management
   b.   Procurement
   c.   Product development and commercialization
   d.   Manufacturing flow management/support
   e.   Physical distribution
   f.   Outsourcing/partnerships
   g.   Performance measurement

a) Customer service management process

Customer Relationship Management concerns the relationship between the organization and its
customers. Customer service is the source of customer information. It also provides the customer
with real-time information on scheduling and product availability through interfaces with the
company's production and distribution operations. Successful organizations use the following
steps to build customer relationships:

       determine mutually satisfying goals for organization and customers
       establish and maintain customer rapport
       produce positive feelings in the organization and the customers

b) Procurement process

Strategic plans are drawn up with suppliers to support the manufacturing flow management
process and the development of new products. In firms where operations extend globally,
sourcing should be managed on a global basis. The desired outcome is a win-win relationship
where both parties benefit, and a reduction in time required for the design cycle and product
development. Also, the purchasing function develops rapid communication systems, such as
electronic data interchange (EDI) and Internet linkage to convey possible requirements more
rapidly. Activities related to obtaining products and materials from outside suppliers involve
resource planning, supply sourcing, negotiation, order placement, inbound transportation, storage,
handling and quality assurance, many of which include the responsibility to coordinate with
suppliers on matters of scheduling, supply continuity, hedging, and research into new sources or

c) Product development and commercialization

Here, customers and suppliers must be integrated into the product development process in order
to reduce time to market. As product life cycles shorten, the appropriate products must be
developed and successfully launched with ever shorter time-schedules to remain competitive.
According to Lambert and Cooper (2000), managers of the product development and
commercialization process must:

   1. coordinate with customer relationship management to identify customer-articulated needs;
   2. select materials and suppliers in conjunction with procurement, and
   3. develop production technology in manufacturing flow to manufacture and integrate into
      the best supply chain flow for the product/market combination.
d) Manufacturing flow management process

The manufacturing process produces and supplies products to the distribution channels based on
past forecasts. Manufacturing processes must be flexible to respond to market changes and must
accommodate mass customization. Orders are processes operating on a just-in-time (JIT) basis in
minimum lot sizes. Also, changes in the manufacturing flow process lead to shorter cycle times,
meaning improved responsiveness and efficiency in meeting customer demand. Activities related
to planning, scheduling and supporting manufacturing operations, such as work-in-process
storage, handling, transportation, and time phasing of components, inventory at manufacturing
sites and maximum flexibility in the coordination of geographic and final assemblies
postponement of physical distribution operations.

e) Physical distribution

This concerns movement of a finished product/service to customers. In physical distribution, the
customer is the final destination of a marketing channel, and the availability of the
product/service is a vital part of each channel participant's marketing effort. It is also through the
physical distribution process that the time and space of customer service become an integral part
of marketing, thus it links a marketing channel with its customers (e.g., links manufacturers,
wholesalers, retailers).

f) Outsourcing/partnerships

This is not just outsourcing the procurement of materials and components, but also outsourcing of
services that traditionally have been provided in-house. The logic of this trend is that the
company will increasingly focus on those activities in the value chain where it has a distinctive
advantage, and outsource everything else. This movement has been particularly evident in
logistics where the provision of transport, warehousing and inventory control is increasingly
subcontracted to specialists or logistics partners. Also, managing and controlling this network of
partners and suppliers requires a blend of both central and local involvement. Hence, strategic
decisions need to be taken centrally, with the monitoring and control of supplier performance and
day-to-day liaison with logistics partners being best managed at a local level.

g) Performance measurement

Experts found a strong relationship from the largest arcs of supplier and customer integration to
market share and profitability. Taking advantage of supplier capabilities and emphasizing a long-
term supply chain perspective in customer relationships can both be correlated with firm
performance. As logistics competency becomes a more critical factor in creating and maintaining
competitive advantage, logistics measurement becomes increasingly important because the
difference between profitable and unprofitable operations becomes more narrow. A.T. Kearney
Consultants (1985) noted that firms engaging in comprehensive performance measurement
realized improvements in overall productivity. According to experts, internal measures are
generally collected and analyzed by the firm including

   1. Cost
   2.   Customer Service
   3.   Productivity measures
   4.   Asset measurement, and
   5.   Quality.

External performance measurement is examined through customer perception measures and "best
practice" benchmarking, and includes 1) customer perception measurement, and 2) best practice

h)Warehoising Management : As a case of reducing company cost & expenses, warehousing
management is carrying the valuable role against operations. In case of perfect storing & office
with all convenient facilities in company level, reducing manpower cost, dispatching authority
with on time delivery, loading & unloading facilities with proper area, area for service station,
stock management system etc.

Components of Supply Chain Management are as follows: 1. Standardization 2. Postponement 3.

Theories of supply chain management
Currently there is a gap in the literature available on supply chain management studies: there is
no theoretical support for explaining the existence and the boundaries of supply chain
management. A few authors such as Halldorsson, et al. (2003), Ketchen and Hult (2006) and
Lavassani, et al. (2008b) have tried to provide theoretical foundations for different areas related to
supply chain by employing organizational theories. These theories include:

       Resource-Based View (RBV)
       Transaction Cost Analysis (TCA)
       Knowledge-Based View (KBV)
       Strategic Choice Theory (SCT)
       Agency Theory (AT)
       Institutional theory (InT)
       Systems Theory (ST)
       Network Perspective (NP)

Supply Chain Centroids
In the study of supply chain management, the concept of centroids has become an important
economic consideration. A centroid is place that has a high proportion of a country‘s population
and a high proportion of its manufacturing, generally within 500 miles. In the U.S., two major
supply chain centroids have been defined, one near Dayton, Ohio and a second near Riverside,

The centroid near Dayton is particularly important because it is closest to the population center of
the US and Canada. Dayton is within 500 miles of 60% of the population and manufacturing
capacity of the U.S., as well as 60 percent of Canada‘s population[10]. The region includes the
Interstate 70/75 interchange, which is one of the busiest in the nation with 154,000 vehicles
passing through in a day. Of those, anywhere between 30 percent and 35 percent are trucks
hauling goods. In addition, the I-75 corridor is home to the busiest north-south rail route east of
the Mississippi. [11]

Tax efficient supply chain management
Tax Efficient Supply Chain Management is a business model which consider the effect of Tax
in design and implementation of supply chain management. As the consequence of
Globalization, business which is cross-nation should pay different tax rates in different countries.
Due to the differences, global players have the opportunity to calculate and optimize supply chain
based on tax efficiency[12] legally. It is used as a method of gaining more profit for company
which owns global supply chain.

Supply chain sustainability
Supply chain sustainability is a business issue affecting an organization‘s supply chain or
logistics network and is frequently quantified by comparison with SECH ratings. SECH ratings
are defined as social, ethical, cultural and health footprints. Consumers have become more aware
of the environmental impact of their purchases and companies‘ SECH ratings and, along with
non-governmental organizations ([NGO]s), are setting the agenda for transitions to organically-
grown foods, anti-sweatshop labor codes and locally-produced goods that support independent
and small businesses. Because supply chains frequently account for over 75% of a company‘s
carbon footprint[13] many organizations are exploring how they can reduce this and thus improve
their SECH rating.

For example, in July, 2009 the U.S. based Wal-Mart corporation announced its intentions to
create a global sustainability index that would rate products according to the environmental and
social impact made while the products were manufactured and distributed. The sustainability
rating index is intended to create environmental accountability in Wal-Mart's supply chain, and
provide the motivation and infrastructure for other retail industry companies to do the same.[14]

Components of supply chain management integration
The management components of SCM

The SCM components are the third element of the four-square circulation framework. The level
of integration and management of a business process link is a function of the number and level,
ranging from low to high, of components added to the link (Ellram and Cooper, 1990; Houlihan,
1985). Consequently, adding more management components or increasing the level of each
component can increase the level of integration of the business process link. The literature on
business process re-engineering,[15] buyer-supplier relationships,[16] and SCM[17] suggests various
possible components that must receive managerial attention when managing supply relationships.
Lambert and Cooper (2000) identified the following components:
      Planning and control
      Work structure
      Organization structure
      Product flow facility structure
      Information flow facility structure
      Management methods
      Power and leadership structure
      Risk and reward structure
      Culture and attitude

However, a more careful examination of the existing literature[18] leads to a more comprehensive
understanding of what should be the key critical supply chain components, the "branches" of the
previous identified supply chain business processes, that is, what kind of relationship the
components may have that are related to suppliers and customers. Bowersox and Closs states that
the emphasis on cooperation represents the synergism leading to the highest level of joint
achievement (Bowersox and Closs, 1996). A primary level channel participant is a business that
is willing to participate in the inventory ownership responsibility or assume other aspects of
financial risk, thus including primary level components (Bowersox and Closs, 1996). A
secondary level participant (specialized) is a business that participates in channel relationships by
performing essential services for primary participants, including secondary level components,
which support primary participants. Third level channel participants and components that support
the primary level channel participants and are the fundamental branches of the secondary level
components may also be included.

Consequently, Lambert and Cooper's framework of supply chain components does not lead to
any conclusion about what are the primary or secondary (specialized) level supply chain
components (see Bowersox and Closs, 1996, p. 93). That is, what supply chain components
should be viewed as primary or secondary, how should these components be structured in order
to have a more comprehensive supply chain structure, and how to examine the supply chain as an
integrative one (See above sections 2.1 and 3.1).

Reverse Supply Chain Reverse logistics is the process of managing the return of goods. Reverse
logistics is also referred to as "Aftermarket Customer Services". In other words, any time money
is taken from a company's warranty reserve or service logistics budget one can speak of a reverse
logistics operation.

Global supply chain management
Global supply chains pose challenges regarding both quantity and value:

Supply and Value Chain Trends

      Globalization
      Increased cross border sourcing
      Collaboration for parts of value chain with low-cost providers
      Shared service centers for logistical and administrative functions
      Increasingly global operations, which require increasingly global coordination and
       planning to achieve global optimums
      Complex problems involve also midsized companies to an increasing degree,

These trends have many benefits for manufacturers because they make possible larger lot sizes,
lower taxes, and better environments (culture, infrastructure, special tax zones, sophisticated
OEM) for their products. Meanwhile, on top of the problems recognized in supply chain
management, there will be many more challenges when the scope of supply chains is global. This
is because with a supply chain of a larger scope, the lead time is much longer. Furthermore, there
are more issues involved such as multi-currencies, different policies and different laws. The
consequent problems include:1. different currencies and valuations in different countries; 2.
different tax laws (Tax Efficient Supply Chain Management); 3. different trading protocols; 4.
lack of transparency of cost and profit.

See also
      Beer distribution game                            Offshoring Research Network
      Bullwhip effect                                   Operations management
      Calculating demand forecast accuracy              Order fulfillment
      Customer-driven supply chain                      Procurement
      CRM                                               Haulage
      Demand chain management                           Procurement outsourcing
      Distribution                                      Radio-frequency identification
      Enterprise resource planning                      Reverse logistics
      Industrial engineering                            Service management
      Information technology management                 Strategic information system
      Integrated business planning                      Supply chain management software
      Inventory                                         Supply chain network
      Inventory control system                          Supply chain security
      Inventory management software                     Supply chain
      Liquid logistics                                  Supply management
      Logistic engineering                              Tendering
      Logistics                                         Value chain
      Logistics management                              Value grid
      Logistics officer                                 Vendor-managed inventory
      Management information system                     Warehouse management system
      Military supply chain management

• Supply chain automation (e-commerce)

• Inventory management (reduced warehousing, increased just-in-time

Inventory is a list for goods and materials, or those goods and materials themselves, held
available in stock by a business. It is also used for a list of the contents of a household and for a
list for testamentary purposes of the possessions of someone who has died. In accounting,
inventory is considered an asset.

In business management, inventory consists of a list of goods and materials held available in

Labels: Inventory Management, Procurement, Supply Chain, Supply Chain Management

the monitoring of material moved into and out of stockroom locations and the reconciling of the
inventory balances. Also may include ABC analysis, lot tracking, cycle counting support etc.



[edit] Inventory Management
Inventory management is primarily about specifying the size and placement of stocked goods.
Inventory management is required at different locations within a facility or within multiple
locations of a supply network to protect the regular and planned course of production against the
random disturbance of running out of materials or goods. The scope of inventory management
also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset
management, inventory forecasting, inventory valuation, inventory visibility, future inventory
price forecasting, physical inventory, available physical space for inventory, quality management,
replenishment, returns and defective goods and demand forecasting. Balancing these competing
requirements leads to optimal inventory levels, which is an on-going process as the business
needs shift and react to the wider environment.

Inventory management involves a retailer seeking to acquire and maintain a proper merchandise
assortment while ordering, shipping, handling, and related costs are kept in check.

Systems and processes that identify inventory requirements, set targets, provide replenishment
techniques and report actual and projected inventory status.
Handles all functions related to the tracking and management of material. This would include

Management of the inventories, with the primary objective of determining/controlling stock
levels within the physical distribution function to balance the need for product availability against
the need for minimizing stock holding and handling costs. See inventory proportionality.

[edit] Business inventory
[edit] The reasons for keeping stock

There are three basic reasons for keeping an inventory:

   1. Time - The time lags presetainties in demand, supply and movements of goods.
   2. Economies of scale - Ideal condition of "one unit at a time at a place where a user needs
      it, when he needs it" principle tends to incur lots of costs in terms of logistics. So bulk
      buying, movement and storing brings in economies of scale, thus inventory.

All these stock reasons can apply to any owner or product stage.

      Buffer stock is held in individual workstations against the possibility that the upstream
       workstation may be a little delayed in long setup or change over time. This stock is then
       used while that changeover is happening. This stock can be eliminated by tools like

These classifications apply along the whole Supply chain, not just within a facility or plant.

Where these stocks contain the same or similar items, it is often the work practice to hold all
these stocks mixed together before or after the sub-process to which they relate. This 'reduces'
costs. Because they are mixed up together there is no visual reminder to operators of the adjacent
sub-processes or line management of the stock, which is due to a particular cause and should be a
particular individual's responsibility with inevitable consequences. Some plants have centralized
stock holding across sub-processes, which makes the situation even more acute.

[edit] Special terms used in dealing with inventory

      Stock Keeping Unit (SKU) is a unique combination of all the components that are
       assembled into the purchasable item. Therefore, any change in the packaging or product is
       a new SKU. This level of detailed specification assists in managing inventory.
      Stockout means running out of the inventory of an SKU.[1]
      "New old stock" (sometimes abbreviated NOS) is a term used in business to refer to
       merchandise being offered for sale that was manufactured long ago but that has never
       been used. Such merchandise may not be produced anymore, and the new old stock may
       represent the only market source of a particular item at the present time.

[edit] Typology
   1. Buffer/safety stock
   2. Cycle stock (Used in batch processes, it is the available inventory, excluding buffer stock)
   3. De-coupling (Buffer stock that is held by both the supplier and the user)
   4. Anticipation stock (Building up extra stock for periods of increased demand - e.g. ice
      cream for summer)
   5. Pipeline stock (Goods still in transit or in the process of distribution - have left the factory
      but not arrived at the customer yet)

[edit] Inventory examples

While accountants often discuss inventory in terms of goods for sale, organizations -
manufacturers, service-providers and not-for-profits - also have inventories (fixtures, furniture,
supplies, ...) that they do not intend to sell. Manufacturers', distributors', and wholesalers'
inventory tends to cluster in warehouses. Retailers' inventory may exist in a warehouse or in a
shop or store accessible to customers. Inventories not intended for sale to customers or to clients
may be held in any premises an organization uses. Stock ties up cash and, if uncontrolled, it will
be impossible to know the actual level of stocks and therefore impossible to control them.

While the reasons for holding stock were covered earlier, most manufacturing organizations
usually divide their "goods for sale" inventory into:

       Raw materials - materials and components scheduled for use in making a product.
       Work in process, WIP - materials and components that have begun their transformation to
        finished goods.
       Finished goods - goods ready for sale to customers.
       Goods for resale - returned goods that are salable.

For example:

[edit] Manufacturing

A canned food manufacturer's materials inventory includes the ingredients to form the foods to be
canned, empty cans and their lids (or coils of steel or aluminum for constructing those
components), labels, and anything else (solder, glue, ...) that will form part of a finished can. The
firm's work in process includes those materials from the time of release to the work floor until
they become complete and ready for sale to wholesale or retail customers. This may be vats of
prepared food, filled cans not yet labeled or sub-assemblies of food components. It may also
include finished cans that are not yet packaged into cartons or pallets. Its finished good inventory
consists of all the filled and labeled cans of food in its warehouse that it has manufactured and
wishes to sell to food distributors (wholesalers), to grocery stores (retailers), and even perhaps to
consumers through arrangements like factory stores and outlet centers.

Examples of case studies are very revealing, and consistently show that the improvement of
inventory management has two parts: the capability of the organisation to manage inventory, and
the way in which it chooses to do so. For example, a company may wish to install a complex
inventory system, but unless there is a good understanding of the role of inventory and its
perameters, and an effective business process to support that, the system cannot bring the
necessary benefits to the organisation in isolation.

Typical Inventory Management techniques include Pareto Curve ABC Classification[2] and
Economic Order Quantity Management. A more sophisticated method takes these two techniques
further, combining certain aspects of each to create The K Curve Methodology[3]. A case study of
k-curve[4] benefits to one company shows a successful implementation.

Unnecessary inventory adds enormously to the working capital tied up in the business, as well as
the complexity of the supply chain. Reduction and elimination of these inventory 'wait' states is a
key concept in Lean[5]. Too big an inventory reduction too quickly can cause a business to be
anorexic. There are well-proven processes and techniques to assist in inventory planning and
strategy, both at the business overview and part number level. Many of the big MRP/and ERP
systems do not offer the necessary inventory planning tools within their integrated planning

[edit] Principle of inventory proportionality
[edit] Purpose

Inventory proportionality is the goal of demand-driven inventory management. The primary
optimal outcome is to have the same number of days' (or hours', etc.) worth of inventory on hand
across all products so that the time of runout of all products would be simultaneous. In such a
case, there is no "excess inventory," that is, inventory that would be left over of another product
when the first product runs out. Excess inventory is sub-optimal because the money spent to
obtain it could have been utilized better elsewhere, i.e. to the product that just ran out.

The secondary goal of inventory proportionality is inventory minimization. By integrating
accurate demand forecasting with inventory management, replenishment inventories can be
scheduled to arrive just in time to replenish the product destined to run out first, while at the same
time balancing out the inventory supply of all products to make their inventories more
proportional, and thereby closer to achieving the primary goal. Accurate demand forecasting also
allows the desired inventory proportions to be dynamic by determining expected sales out into
the future; this allows for inventory to be in proportion to expected short-term sales or
consumption rather than to past averages, a much more accurate and optimal outcome.

Integrating demand forecasting into inventory management in this way also allows for the
prediction of the "can fit" point when inventory storage is limited on a per-product basis.

[edit] Applications

The technique of inventory proportionality is most appropriate for inventories that remain unseen
by the consumer. As opposed to "keep full" systems where a retail consumer would like to see
full shelves of the product they are buying so as not to think they are buying something old,
unwanted or stale; and differentiated from the "trigger point" systems where product is reordered
when it hits a certain level; inventory proportionality is used effectively by just-in-time
manufacturing processes and retail applications where the product is hidden from view.

One early example of inventory proportionality used in a retail application in the United States is
for motor fuel. Motor fuel (e.g. gasoline) is generally stored in underground storage tanks. The
motorists do not know whether they are buying gasoline off the top or bottom of the tank, nor
need they care. Additionally, these storage tanks have a maximum capacity and cannot be
overfilled. Finally, the product is expensive. Inventory proportionality is used to balance the
inventories of the different grades of motor fuel, each stored in dedicated tanks, in proportion to
the sales of each grade. Excess inventory is not seen or valued by the consumer, so it is simply
cash sunk (literally) into the ground. Inventory proportionality minimizes the amount of excess
inventory carried in underground storage tanks. This application for motor fuel was first
developed and implemented by Petrolsoft Corporation in 1990 for Chevron Products Company.
Most major oil companies use such systems today.[6]

[edit] Roots

The use of inventory proportionality in the United States is thought to have been inspired by
Japanese just-in-time (business) parts inventory management made famous by Toyota Motors in
the 1980s.[3]

[edit] High-level inventory management
It seems that around 1880[7] there was a change in manufacturing practice from companies with
relatively homogeneous lines of products to vertically integrated companies with unprecedented
diversity in processes and products. Those companies (especially in metalworking) attempted to
achieve success through economies of scope - the gains of jointly producing two or more
products in one facility. The managers now needed information on the effect of product-mix
decisions on overall profits and therefore needed accurate product-cost information. A variety of
attempts to achieve this were unsuccessful due to the huge overhead of the information
processing of the time. However, the burgeoning need for financial reporting after 1900 created
unavoidable pressure for financial accounting of stock and the management need to cost manage
products became overshadowed. In particular, it was the need for audited accounts that sealed the
fate of managerial cost accounting. The dominance of financial reporting accounting over
management accounting remains to this day with few exceptions, and the financial reporting
definitions of 'cost' have distorted effective management 'cost' accounting since that time. This is
particularly true of inventory.

Hence, high-level financial inventory has these two basic formulas, which relate to the
accounting period:

   1. Cost of Beginning Inventory at the start of the period + inventory purchases within the
      period + cost of production within the period = cost of goods available
   2. Cost of goods available − cost of ending inventory at the end of the period = cost of goods
The benefit of these formulae is that the first absorbs all overheads of production and raw
material costs into a value of inventory for reporting. The second formula then creates the new
start point for the next period and gives a figure to be subtracted from the sales price to determine
some form of sales-margin figure.

Manufacturing management is more interested in inventory turnover ratio or average days to sell
inventory since it tells them something about relative inventory levels.

       Inventory turnover ratio (also known as inventory turns) = cost of goods sold / Average
       Inventory = Cost of Goods Sold / ((Beginning Inventory + Ending Inventory) / 2)

and its inverse

       Average Days to Sell Inventory = Number of Days a Year / Inventory Turnover Ratio =
       365 days a year / Inventory Turnover Ratio

This ratio estimates how many times the inventory turns over a year. This number tells how much
cash/goods are tied up waiting for the process and is a critical measure of process reliability and
effectiveness. So a factory with two inventory turns has six months stock on hand, which is
generally not a good figure (depending upon the industry), whereas a factory that moves from six
turns to twelve turns has probably improved effectiveness by 100%. This improvement will have
some negative results in the financial reporting, since the 'value' now stored in the factory as
inventory is reduced.

Whilst these accounting measures of inventory are very useful because of their simplicity, they
are also fraught with the danger of their own assumptions. There are, in fact, so many things that
can vary hidden under this appearance of simplicity that a variety of 'adjusting' assumptions may
be used. These include:

      Specific Identification
      Weighted Average Cost
      Moving-Average Cost
      FIFO and LIFO.

Inventory Turn is a financial accounting tool for evaluating inventory and it is not necessarily a
management tool. Inventory management should be forward looking. The methodology applied is
based on historical cost of goods sold. The ratio may not be able to reflect the usability of future
production demand, as well as customer demand.

Business models, including Just in Time (JIT) Inventory, Vendor Managed Inventory (VMI) and
Customer Managed Inventory (CMI), attempt to minimize on-hand inventory and increase
inventory turns. VMI and CMI have gained considerable attention due to the success of third-
party vendors who offer added expertise and knowledge that organizations may not possess.

[edit] Accounting for inventory

                       Key concepts

   Accountant · Bookkeeping · Cash and accrual basis ·
  Constant Item Purchasing Power Accounting · Cost of
goods sold · Debits and credits · Double-entry system · Fair
 value accounting · FIFO & LIFO · GAAP / International
Financial Reporting Standards · General ledger · Historical
  cost · Matching principle · Revenue recognition · Trial

                   Fields of accounting

   Cost · Financial · Forensic · Fund · Management · Tax

                  Financial statements

  Balance sheet · Statement of cash flows · Statement of
 changes in equity · Statement of comprehensive income ·


 Auditor's report · Financial audit · GAAS / ISA · Internal
                audit · Sarbanes–Oxley Act

                Professional Accountants

            ACCA · CA · CGA · CMA · CPA

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Each country has its own rules about accounting for inventory that fit with their financial-
reporting rules.

For example, organizations in the U.S. define inventory to suit their needs within US Generally
Accepted Accounting Practices (GAAP), the rules defined by the Financial Accounting Standards
Board (FASB) (and others) and enforced by the U.S. Securities and Exchange Commission
(SEC) and other federal and state agencies. Other countries often have similar arrangements but
with their own GAAP and national agencies instead.
It is intentional that financial accounting uses standards that allow the public to compare firms'
performance, cost accounting functions internally to an organization and potentially with much
greater flexibility. A discussion of inventory from standard and Theory of Constraints-based
(throughput) cost accounting perspective follows some examples and a discussion of inventory
from a financial accounting perspective.

The internal costing/valuation of inventory can be complex. Whereas in the past most enterprises
ran simple, one-process factories, such enterprises are quite probably in the minority in the 21st
century. Where 'one process' factories exist, there is a market for the goods created, which
establishes an independent market value for the good. Today, with multistage-process companies,
there is much inventory that would once have been finished goods which is now held as 'work in
process' (WIP). This needs to be valued in the accounts, but the valuation is a management
decision since there is no market for the partially finished product. This somewhat arbitrary
'valuation' of WIP combined with the allocation of overheads to it has led to some unintended and
undesirable results.

[edit] Financial accounting

An organization's inventory can appear a mixed blessing, since it counts as an asset on the
balance sheet, but it also ties up money that could serve for other purposes and requires additional
expense for its protection. Inventory may also cause significant tax expenses, depending on
particular countries' laws regarding depreciation of inventory, as in Thor Power Tool Company v.

Inventory appears as a current asset on an organization's balance sheet because the organization
can, in principle, turn it into cash by selling it. Some organizations hold larger inventories than
their operations require in order to inflate their apparent asset value and their perceived

In addition to the money tied up by acquiring inventory, inventory also brings associated costs for
warehouse space, for utilities, and for insurance to cover staff to handle and protect it from fire
and other disasters, obsolescence, shrinkage (theft and errors), and others. Such holding costs can
mount up: between a third and a half of its acquisition value per year.

Businesses that stock too little inventory cannot take advantage of large orders from customers if
they cannot deliver. The conflicting objectives of cost control and customer service often pit an
organization's financial and operating managers against its sales and marketing departments.
Salespeople, in particular, often receive sales-commission payments, so unavailable goods may
reduce their potential personal income. This conflict can be minimised by reducing production
time to being near or less than customers' expected delivery time. This effort, known as "Lean
production" will significantly reduce working capital tied up in inventory and reduce
manufacturing costs (See the Toyota Production System).

[edit] Role of inventory accounting
By helping the organization to make better decisions, the accountants can help the public sector
to change in a very positive way that delivers increased value for the taxpayer‘s investment. It
can also help to incentivise progress and to ensure that reforms are sustainable and effective in
the long term, by ensuring that success is appropriately recognized in both the formal and
informal reward systems of the organization.

To say that they have a key role to play is an understatement. Finance is connected to most, if not
all, of the key business processes within the organization. It should be steering the stewardship
and accountability systems that ensure that the organization is conducting its business in an
appropriate, ethical manner. It is critical that these foundations are firmly laid. So often they are
the litmus test by which public confidence in the institution is either won or lost.

Finance should also be providing the information, analysis and advice to enable the
organizations‘ service managers to operate effectively. This goes beyond the traditional
preoccupation with budgets – how much have we spent so far, how much do we have left to
spend? It is about helping the organization to better understand its own performance. That means
making the connections and understanding the relationships between given inputs – the resources
brought to bear – and the outputs and outcomes that they achieve. It is also about understanding
and actively managing risks within the organization and its activities.

[edit] FIFO vs. LIFO accounting

Main article: FIFO and LIFO accounting

When a merchant buys goods from inventory, the value of the inventory account is reduced by
the cost of goods sold (COGS). This is simple where the CoG has not varied across those held in
stock; but where it has, then an agreed method must be derived to evaluate it. For commodity
items that one cannot track individually, accountants must choose a method that fits the nature of
the sale. Two popular methods that normally exist are: FIFO and LIFO accounting (first in - first
out, last in - first out). FIFO regards the first unit that arrived in inventory as the first one sold.
LIFO considers the last unit arriving in inventory as the first one sold. Which method an
accountant selects can have a significant effect on net income and book value and, in turn, on
taxation. Using LIFO accounting for inventory, a company generally reports lower net income
and lower book value, due to the effects of inflation. This generally results in lower taxation. Due
to LIFO's potential to skew inventory value, UK GAAP and IAS have effectively banned LIFO
inventory accounting.

[edit] Standard cost accounting

Standard cost accounting uses ratios called efficiencies that compare the labour and materials
actually used to produce a good with those that the same goods would have required under
"standard" conditions. As long as similar actual and standard conditions obtain, few problems
arise. Unfortunately, standard cost accounting methods developed about 100 years ago, when
labor comprised the most important cost in manufactured goods. Standard methods continue to
emphasize labor efficiency even though that resource now constitutes a (very) small part of cost
in most cases.
Standard cost accounting can hurt managers, workers, and firms in several ways. For example, a
policy decision to increase inventory can harm a manufacturing manager's performance
evaluation. Increasing inventory requires increased production, which means that processes must
operate at higher rates. When (not if) something goes wrong, the process takes longer and uses
more than the standard labor time. The manager appears responsible for the excess, even though
s/he has no control over the production requirement or the problem.

In adverse economic times, firms use the same efficiencies to downsize, rightsize, or otherwise
reduce their labor force. Workers laid off under those circumstances have even less control over
excess inventory and cost efficiencies than their managers.

Many financial and cost accountants have agreed for many years on the desirability of replacing
standard cost accounting. They have not, however, found a successor.

[edit] Theory of constraints cost accounting

Eliyahu M. Goldratt developed the Theory of Constraints in part to address the cost-accounting
problems in what he calls the "cost world." He offers a substitute, called throughput accounting,
that uses throughput (money for goods sold to customers) in place of output (goods produced that
may sell or may boost inventory) and considers labor as a fixed rather than as a variable cost. He
defines inventory simply as everything the organization owns that it plans to sell, including
buildings, machinery, and many other things in addition to the categories listed here. Throughput
accounting recognizes only one class of variable costs: the truly variable costs, like materials and
components, which vary directly with the quantity produced.

Finished goods inventories remain balance-sheet assets, but labor-efficiency ratios no longer
evaluate managers and workers. Instead of an incentive to reduce labor cost, throughput
accounting focuses attention on the relationships between throughput (revenue or income) on one
hand and controllable operating expenses and changes in inventory on the other. Those
relationships direct attention to the constraints or bottlenecks that prevent the system from
producing more throughput, rather than to people - who have little or no control over their

[edit] National accounts
Inventories also play an important role in national accounts and the analysis of the business cycle.
Some short-term macroeconomic fluctuations are attributed to the inventory cycle.

[edit] Distressed inventory
Also known as distressed or expired stock, distressed inventory is inventory whose potential to be
sold at a normal cost has passed or will soon pass. In certain industries it could also mean that the
stock is or will soon be impossible to sell. Examples of distressed inventory include products that
have reached their expiry date, or have reached a date in advance of expiry at which the planned
market will no longer purchase them (e.g. 3 months left to expiry), clothing that is defective or
out of fashion, and old newspapers or magazines. It also includes computer or consumer-
electronic equipment that is obsolete or discontinued and whose manufacturer is unable to
support it. One current example of distressed inventory is the VHS format.[8]

In 2001, Cisco wrote off inventory worth US $2.25 billion due to duplicate orders [9]. This is one
of the biggest inventory write-offs in business history.

[edit] Inventory credit
Inventory credit refers to the use of stock, or inventory, as collateral to raise finance. Where
banks may be reluctant to accept traditional collateral, for example in developing countries where
land title may be lacking, inventory credit is a potentially important way of overcoming financing
constraints. This is not a new concept; archaeological evidence suggests that it was practiced in
Ancient Rome. Obtaining finance against stocks of a wide range of products held in a bonded
warehouse is common in much of the world. It is, for example, used with Parmesan cheese in
Italy.[10] Inventory credit on the basis of stored agricultural produce is widely used in Latin
American countries and in some Asian countries.[11] A precondition for such credit is that banks
must be confident that the stored product will be available if they need to call on the collateral;
this implies the existence of a reliable network of certified warehouses. Banks also face problems
in valuing the inventory. The possibility of sudden falls in commodity prices means that they are
usually reluctant to lend more than about 60% of the value of the inventory at the time of the

[edit] See also
      Cash conversion cycle
      Consignment stock
      Cost of goods sold
      Economic order quantity
      Inventory investment
      Inventory management software
      Operations research
      Pinch point (economics)
      Service level
      Stock management

[edit] References
   1. ^ Financial dictionary, formerly at http://www.specialinvestor.com/terms/1072.html,
      Special Investor
   2. ^
   3. ^ http://citeseerx.ist.psu.edu/viewdoc/summary?doi=
   4. ^
   5. ^ http://www.phitch.com/LinkClick.aspx?fileticket=mWpeMu89r5Q=&tabid=64
   6. ^ aspenONE® Supply & Distribution for Refining & Marketing,
   7. ^ Relevance Lost, Johnson and Kaplan, Harvard Business School Press, 1987, p126
   8. ^ Boucher, Geoff (2008-12-22). "VHS era is winding down". Los Angeles Times.
       2008dec22,0,5852342.story. Retrieved 2008-12-28.
   9. ^ {|last=Armony |first=Mor |title=The Impact of Duplicate Orders on Demand Estimation
       and Capacity Investment
   10. ^ Italian Notebook.com [1]"Who moved my parmigiano?" 24 February 2009


Inventory management, or inventory control, is an attempt to balance inventory needs and
requirements with the need to minimize costs resulting from obtaining and holding inventory.
There are several schools of thought that view inventory and its function differently. These will
be addressed later, but first we present a foundation to facilitate the reader's understanding of
inventory and its function.

Inventory is a quantity or store of goods that is held for some purpose or use (the term may also
be used as a verb, meaning to take inventory or to count all goods held in inventory). Inventory
may be kept "in-house," meaning on the premises or nearby for immediate use; or it may be held
in a distant warehouse or distribution center for future use. With the exception of firms utilizing
just-in-time methods, more often than not, the term "inventory" implies a stored quantity of
goods that exceeds what is needed for the firm to function at the current time (e.g., within the
next few hours).

Why would a firm hold more inventory than is currently necessary to ensure the firm's operation?
The following is a list of reasons for maintaining what would appear to be "excess" inventory.

Table 1
                    January February March April May June
Demand              50      50       0     100 200 200
Produce             100     100      100   100 100 100
Month-end inventory 50      100      200   200 100 0


In order for a retailer to stay in business, it must have the products that the customer wants on
hand when the customer wants them. If not, the retailer will have to back-order the product. If the
customer can get the good from some other source, he or she may choose to do so rather than
electing to allow the original retailer to meet demand later (through back-order). Hence, in many
instances, if a good is not in inventory, a sale is lost forever.


A manufacturer must have certain purchased items (raw materials, components, or
subassemblies) in order to manufacture its product. Running out of only one item can prevent a
manufacturer from completing the production of its finished goods.

Inventory between successive dependent operations also serves to decouple the dependency of
the operations. A machine or workcenter is often dependent upon the previous operation to
provide it with parts to work on. If work ceases at a workcenter, then all subsequent centers will
shut down for lack of work. If a supply of work-in-process inventory is kept between each
workcenter, then each machine can maintain its operations for a limited time, hopefully until
operations resume the original center.


Lead time is the time that elapses between the placing of an order (either a purchase order or a
production order issued to the shop or the factory floor) and actually receiving the goods ordered.

If a supplier (an external firm or an internal department or plant) cannot supply the required
goods on demand, then the client firm must keep an inventory of the needed goods. The longer
the lead time, the larger the quantity of goods the firm must carry in inventory.

A just-in-time (JIT) manufacturing firm, such as Nissan in Smyrna, Tennessee, can maintain
extremely low levels of inventory. Nissan takes delivery on truck seats as many as 18 times per
day. However, steel mills may have a lead time of up to three months. That means that a firm that
uses steel produced at the mill must place orders at least three months in advance of their need. In
order to keep their operations running in the meantime, an on-hand inventory of three months'
steel requirements would be necessary.

Inventory can also be used as a hedge against price increases and inflation. Salesmen routinely
call purchasing agents shortly before a price increase goes into effect. This gives the buyer a
chance to purchase material, in excess of current need, at a price that is lower than it would be if
the buyer waited until after the price increase occurs.


Often firms are given a price discount when purchasing large quantities of a good. This also
frequently results in inventory in excess of what is currently needed to meet demand. However, if
the discount is sufficient to offset the extra holding cost incurred as a result of the excess
inventory, the decision to buy the large quantity is justified.


Sometimes inventory is used to smooth demand requirements in a market where demand is
somewhat erratic. Consider the demand forecast and production schedule outlined in Table 1.

Notice how the use of inventory has allowed the firm to maintain a steady rate of output (thus
avoiding the cost of hiring and training new personnel), while building up inventory in
anticipation of an increase in demand. In fact, this is often called anticipation inventory. In
essence, the use of inventory has allowed the firm to move demand requirements to earlier
periods, thus smoothing the demand.

Firms that carry hundreds or even thousands of different part numbers can be faced with the
impossible task of monitoring the inventory levels of each part number. In order to facilitate this,
many firm's use an ABC approach. ABC analysis is based on Pareto Analysis, also known as the
"80/20" rule. The 80/20 comes from Pareto's finding that 20 percent of the populace possessed 80
percent of the wealth. From an inventory perspective it can restated thusly: approximately 20
percent of all inventory items represent 80 percent of inventory costs. Therefore, a firm can
control 80 percent of its inventory costs by monitoring and controlling 20 percent of its
inventory. But, it has to be the correct 20 percent.

The top 20 percent of the firm's most costly items are termed "A" items (this should
approximately represent 80 percent of total inventory costs). Items that are extremely inexpensive
or have low demand are termed "C" items, with "B" items falling in between A and C items. The
percentages may vary with each firm, but B items usually represent about 30 percent of the total
inventory items and 15 percent of the costs. C items generally constitute 50 percent of all
inventory items but only around 5 percent of the costs.

By classifying each inventory item as an A, B or C the firm can determine the resources (time,
effort and money) to dedicate to each item. Usually this means that the firm monitors A items
very closely but can check on B and C items on a periodic basis (for example, monthly for B
items and quarterly for C items).
Another control method related to the ABC concept is cycle counting. Cycle counting is used
instead of the traditional "once-a-year" inventory count where firms shut down for a short period
of time and physically count all inventory assets in an attempt to reconcile any possible
discrepancies in their inventory records. When cycle counting is used the firm is continually
taking a physical count but not of total inventory.

A firm may physically count a certain section of the plant or warehouse, moving on to other
sections upon completion, until the entire facility is counted. Then the process starts all over

The firm may also choose to count all the A items, then the B items, and finally the C items.
Certainly, the counting frequency will vary with the classification of each item. In other words, A
item may be counted monthly, B items quarterly, and C items yearly. In addition the required
accuracy of inventory records may vary according to classification, with A items requiring the
most accurate record keeping.

As stated earlier, inventory management is an attempt to maintain an adequate supply of goods
while minimizing inventory costs. We saw a variety of reasons companies hold inventory and
these reasons dictate what is deemed to be an adequate supply of inventory. Now, how do we
balance this supply with its costs? First let's look at what kind of costs we are talking about.

There are three types of costs that together constitute total inventory costs: holding costs, set-up
costs, and purchasing costs.


Holding costs, also called carrying costs, are the costs that result from maintaining the inventory.
Inventory in excess of current demand frequently means that its holder must provide a place for
its storage when not in use. This could range from a small storage area near the production line to
a huge warehouse or distribution center. A storage facility requires personnel to move the
inventory when needed and to keep track of what is stored and where it is stored. If the inventory
is heavy or bulky, forklifts may be necessary to move it around.

Storage facilities also require heating, cooling, lighting, and water. The firm must pay taxes on
the inventory, and opportunity costs occur from the lost use of the funds that were spent on the
inventory. Also, obsolescence, pilferage (theft), and shrinkage are problems. All of these things
add cost to holding or carrying inventory.

If the firm can determine the cost of holding one unit of inventory for one year ( H ) it can
determine its annual holding cost by multiplying the cost of holding one unit by the average
inventory held for a one-year period. Average inventory can be computed by dividing the amount
of goods that are ordered every time an order is placed ( Q ) by two. Thus, average inventory is
expressed as Q /2. Annual holding cost, then, can be expressed as H ( Q /2).

Set-up costs are the costs incurred from getting a machine ready to produce the desired good. In a
manufacturing setting this would require the use of a skilled technician (a cost) who disassembles
the tooling that is currently in use on the machine. The disassembled tooling is then taken to a
tool room or tool shop for maintenance or possible repair (another cost). The technician then
takes the currently needed tooling from the tool room (where it has been maintained; another
cost) and brings it to the machine in question.

There the technician has to assemble the tooling on the machine in the manner required for the
good to be produced (this is known as a "set-up"). Then the technician has to calibrate the
machine and probably will run a number of parts, that will have to be scrapped (a cost), in order
to get the machine correctly calibrated and running. All the while the machine has been idle and
not producing any parts (opportunity cost). As one can see, there is considerable cost involved in

If the firm purchases the part or raw material, then an order cost, rather than a set-up cost, is
incurred. Ordering costs include the purchasing agent's salary and travel/entertainment budget,
administrative and secretarial support, office space, copiers and office supplies, forms and
documents, long-distance telephone bills, and computer systems and support. Also, some firms
include the cost of shipping the purchased goods in the order cost.

If the firm can determine the cost of one set-up ( S ) or one order, it can determine its annual
setup/order cost by multiplying the cost of one set-up by the number of set-ups made or orders
placed annually. Suppose a firm has an annual demand ( D ) of 1,000 units. If the firm orders 100
units ( Q ) every time it places and order, the firm will obviously place 10 orders per year ( D / Q
). Hence, annual set-up/order cost can be expressed as S ( D / Q ).


Purchasing cost is simply the cost of the purchased item itself. If the firm purchases a part that
goes into its finished product, the firm can determine its annual purchasing cost by multiplying
the cost of one purchased unit ( P ) by the number of finished products demanded in a year ( D ).
Hence, purchasing cost is expressed as PD.

Now total inventory cost can be expressed as:
Total = Holding cost + Set-up/Order cost + Purchasing cost
Total = H ( Q /2) + S ( D / Q ) + PD

If holding costs and set-up costs were plotted as lines on a graph, the point at which they intersect
(that is, the point at which they are equal) would indicate the lowest total inventory cost.
Therefore, if we want to minimize total inventory cost, every time we place an order, we should
order the quantity ( Q ) that corresponds to the point where the two values are equal. If we set the
two costs equal and solve for Q we get:
H ( Q /2) = S ( D / Q )
Q = 2 DS / H

The quantity Q is known as the economic order quantity (EOQ). In order to minimize total
inventory cost, the firm will order Q every time it places an order. For example, a firm with an
annual demand of 12,000 units (at a purchase price of $25 each), annual holding cost of $10 per
unit and an order cost of $150 per order (with orders placed once a month) could save $800
annually by utilizing the EOQ. First, we determine the total costs without using the EOQ method:
Q = $10(1000/2) + $150(12,000/1000) + $25(12,000) = $306,800
Then we calculate EOQ:
EOQ = 2(12,000)($150)/$10= 600
And we calculate total costs at the EOQ of 600:
Q = $10(600/2) + $150(12,000/600) + $25(12,000) = $306,000
Finally, we subtract the total cost of Q from Q to determine the savings:
$306,800 − 306,000 = $800

Notice that if you remove purchasing cost from the equation, the savings is still $800. We might
assume this means that purchasing cost is not relevant to our order decision and can be eliminated
from the equation. It must be noted that this is true only as long as no quantity discount exists. If
a quantity discount is available, the firm must determine whether the savings of the quantity
discount are sufficient to offset the loss of the savings resulting from the use of the EOQ.

There are a number of assumptions that must be made with the use of the EOQ. These include:

      Only one product is involved.
      Deterministic demand (demand is known with certainty).
      Constant demand (demand is stable through-out the year).
      No quantity discounts.
      Constant costs (no price increases or inflation).

While these assumptions would seem to make EOQ irrelevant for use in a realistic situation, it is
relevant for items that have independent demand. This means that the demand for the item is not
derived from the demand for something else (usually a parent item for which the unit in question
is a component). For example, the demand for steering wheels would be derived from the demand
for automobiles (dependent demand) but the demand for purses is not derived from anything else;
purses have independent demand.

There are a number of other lot-sizing techniques available in addition to EOQ. These include the
fixed-order quantity, fixed-order-interval model, the single-period model, and part-period

EOQ is an example of the fixed-order-quantity model since the same quantity is ordered every
time an order is placed. A firm might also use a fixed-order quantity when it is captive to
packaging situations. If you were to walk into an office supply store and ask to buy 22 paper
clips, chances are you would walk out with 100 paper clips. You were captive to the packaging
requirements of paper clips, i.e., they come 100 to a box and you cannot purchase a partial box. It
works the same way for other purchasing situations. A supplier may package their goods in
certain quantities so that their customers must buy that quantity or a multiple of that quantity.


The fixed-order-interval model is used when orders have to be placed at fixed time intervals such
as weekly, biweekly, or monthly. The lot size is dependent upon how much inventory is needed
from the time of order until the next order must be placed (order cycle). This system requires
periodic checks of inventory levels and is used by many retail firms such as drug stores and small
grocery stores.


The single-period model is used in ordering perishables, such as food and flowers, and items with
a limited life, such as newspapers. Unsold or unused goods are not typically carried over from
one period to another and there may even be some disposal costs involved. This model tries to
balance the cost of lost customer goodwill and opportunity cost that is incurred from not having
enough inventory, with the cost of having excess inventory left at the end of a period.


Part-period balancing attempts to select the number of periods covered by the inventory order
that will make total carrying costs as close as possible to the set-up/order cost.

When a proper lot size has been determined, utilizing one of the above techniques, the reorder
point, or point at which an order should be placed, can be determined by the rate of demand and
the lead time. If safety stock is necessary it would be added to the reorder point quantity.
Reorder point =
Expected demand during lead time + Safety stock

Thus, an inventory item with a demand of 100 per month, a two-month lead time and a desired
safety stock of two weeks would have reorder point of 250. In other words, an order would be
placed whenever the inventory level for that good reached 250 units.
Reorder point =
100/month × 2 months + 2 weeks' safety stock = 250

There are a number of techniques and philosophies that view inventory management from
different perspectives.


MRP and MRP II are computer-based resource management systems designed for items that have
dependent demand. MRP and MRP II look at order quantities period by period and, as such,
allow discrete ordering (ordering only what is currently needed). In this way inventory levels can
be kept at a very low level; a necessity for a complex item with dependent demand.


Just-in-time (JIT) is a philosophy that advocates the lowest possible levels of inventory. JIT
espouses that firms need only keep inventory in the right quantity at the right time with the right
quality. The ideal lot size for JIT is one, even though one hears the term "zero inventory" used.


Theory of constraints (TOC) is a philosophy which emphasizes that all management actions
should center around the firm's constraints. While it agrees with JIT that inventory should be at
the lowest level possible in most instances, it advocates that there be some buffer inventory
around any capacity constraint (e.g., the slowest machine) and before finished goods.

The advent, through altruism or legislation, of environmental management has added a new
dimension to inventory management-reverse supply chain logistics. Environmental management
has expanded the number of inventory types that firms have to coordinate. In addition to raw
materials, work-in-process, finished goods, and MRO goods, firms now have to deal with post-
consumer items such as scrap, returned goods, reusable or recyclable containers, and any number
of items that require repair, reuse, recycling, or secondary use in another product. Retailers have
the same type problems dealing with inventory that has been returned due to defective material or
manufacture, poor fit, finish, or color, or outright "I changed my mind" responses from

Finally, supply chain management has had a considerable impact on inventory management.
Instead of managing one's inventory to maximize profit and minimize cost for the individual
firm, today's firm has to make inventory decisions that benefit the entire supply chain.

SEE ALSO: Aggregate Planning ; Inventory Types ; Lean Manufacturing and Just-in-Time
Production ; Manufacturing Resources Planning ; Reverse Supply Chain Logistics ; Supply Chain

R. Anthony Inman
Biederman, David. "Reversing Inventory Management." Traffic World (12 December 2004): 1.

Stevenson, William J. Production Operations Management. Boston, MA: Irwin/McGraw-Hill,

Sucky, Eric. "Inventory Management in Supply Chains: A Bargaining Problem." International
Journal of Production Economics 93/94: 253.

Read more: Inventory Management - levels, system, model, type, business, system, What is
inventory?, Why keep inventory?, Controlling inventory, Balancing inventory and costs, Other
lot-sizing techniques http://www.referenceforbusiness.com/management/Int-Loc/Inventory-

• Accounts payable and supply chain audits

10 ways to improve healthcare cost management: if your hospital hasn't been achieving cost
savings, maybe you need to make—or renew—a commitment to cost management
by Steven H. Berger
Healthcare Financial Management, August, 2004

As a healthcare CFO, you know that effective financial control has enormous impact on a
hospital's bottom line. But how do you maintain that financial control? Well, a few simple
improvements in cost management techniques--assigning accountability, adopting useful
monitoring and reporting methods, and reducing resource consumption, among others--can reap
significant benefits.

Although not new in the lexicon of healthcare buzzwords, "cost management" is currently being
tossed around in discussions of ways to help improve hospital bottom lines. CEOs are showing
up at conferences that feature cost management topics, and COOs are pinning down CFOs for
one-on-one primers on where the money is "hidden." Meanwhile, CFOs are scrambling to locate
that elusive pot of cost management gold at the end of the rainbow.

Several issues are at the heart of managing cost: the quality of a healthcare organization's overall
management, cost accounting issues that affect cost management, techniques that help
organizations to save "real money," and tools that can help organizations achieve cost
management goals.

Cost Management as a Subset of General Management

Before we can discuss cost management improvement techniques, it is important to recognize
that cost management is a subset of overall management. As such, cost management will be only
as good as the general management techniques applied throughout the organization. This is not a
small matter. In any organization, the quality of the overall management determines whether cost
=management techniques—or any other management techniques, for that matter—will succeed
or fail.

First, it is imperative that the organization set management goals. This may seem simplistic;
however, experience has shown that many organizations' management goals are contained within
their budgeted expense line items. Such "goals" are not particularly helpful because they have
been set in a fixed budgeting methodology, which does not take into account higher or lower
volumes--a key element in the success or failure of a healthcare organization. Best-practice
organizations set goals for cost per workload unit across the spectrum and have developed
excellent reporting and monitoring techniques to ensure that their managers are meeting those

Another primary requirement for effective management--one that is often overlooked,
unfortunately—is accountability. Although many organizations claim to perform cost
management, they haven't always assigned accountability for the results. Accountability means
the organization has developed consequences, both positive and negative, for the managers
responsible for achieving the organization's goals. Positive consequences include salary increases
as well as incentive compensation; negative consequences include discipline, remediation,
retraining, demotion, and even dismissal if goals are not met.

Improvement 1: Enforce accountability. Ensure that the healthcare system adopts management
accountability techniques that include specific positive and negative consequences for achieving
(or not achieving) goals. Ask the following question: Have any managers been demoted or
dismissed from the organization over the past two years for not meeting cost-management goals?
If not, it may be because your organization has exemplary managers, but it may also be that
accountability is lacking and the managers are aware that they are not required to meet the
organization's goals—a sure sign that the organization will not be able to thrive.

Improvement 2: Monitor goals in a timely manner. Adopt effective monitoring techniques that
highlight the goals and actual outcomes. Report these results to the affected parties on a periodic
basis that allows managers and executives to rationally discuss results. The reports should be
produced daily, weekly, monthly, quarterly, or annually as appropriate. For example, labor
productivity should be reported as often as daily (even shift by shift), while payroll analysis is
reported according to the payroll schedule.

Improvement 3: Report results using a balanced scorecard technique. On a monthly basis,
develop and report financial and other results (clinical, operational, volumes, patient satisfaction)
in a balanced scorecard format--that is, with aggregate information reported on a cover page with
drill downs to specific indicators. These reports should be developed at both the organization and
department manager levels. To achieve its cost management goals, the organization needs 1o set
those goals, monitor the results, and report the results to the appropriate managers in a simple yet
powerful way.
Cost Accounting Issues Affecting Cost Management
If a healthcare organization is seriously considering cost management, it must adopt a cost
accounting system that is reliable, verifiable, understandable, and useful to the final user—the
manager who will be held accountable for the results.

Cost accounting involves determining whether costs are variable (costs that vary in direct
proportion to changes in volume of operations) or fixed (costs that do not vary with volume
changes). These types of costs have significant impact on the organization's cost base. Cost
accounting also involves determining whether costs are direct (directly related to the user
department) or indirect (also known as overhead costs).

Knowing which costs are direct and indirect allows an organization to set standards relating to
how much overhead (or support) costs it wants to carry, in relation to the costs allowed for
revenue-producing departments. In this way, the organization knows it is spending the right
amount for overhead costs, and is able to manage those costs.

Improvement 4: Establish a goal for overhead costs as a percentage of total costs. Doing so will
allow individual hospital organizations to objectively evaluate the resources being consumed for
services that support the revenue-generating operation. Overhead costs generally should not
exceed 40 percent of total costs.

Improvement 5: Adopt flexible budgeting. Flexible budgeting ensures management
accountability at the cost-per-unit of service level. Healthcare organizations need to consider
adopting flexible budgeting and reporting techniques that allow administration and management
to understand whether differences between budgeted and actual costs are related to a variance in
the reported volumes or other elements, such as rate or efficiency variances. Flexible budgeting
techniques remove volume as a variance factor by using cost per unit of service as a value,
allowing the organization to focus its attention on the other areas.

Unscientific surveys suggest that less than 50 percent of hospitals have adopted flexible
budgeting as a management technique. One reason often mentioned by CFOs and CEOs is a lack
of comfort with flexible budgeting outcomes, For example, when volumes are down in a hospital
department, flexible budgets will allow lower amounts of variable cost in that department's
budget column. Thus, to stay within budget parameters, the managers must spend less money, or
their performance against the goal will be unfavorable. Administrators typically like this side of
the flexible budgeting equation because it allows them to make sure that managers have spent
fewer dollars. However, these same administrators generally do not like the budget to provide
more money, as when the volumes go up. Thus healthcare organizations often choose to retain
fixed budgeting techniques. (If used properly, fixed budgeting would still take volumes into

Improvement 6: Adopt benchmarking. Use benchmarking to set goals around the cost per unit of

Improvement 7: Develop percentile goals. When setting benchmarks, particular care should be
taken regarding what percentile the organization will use. For example, most benchmarks are
reported as the median results of the total number of organizations in the sample. If there are 99
hospitals in the sample, the results of the 50th hospital value (sorted in descending order) would
be reported as the median (the 50th percentile). Still, that means that 49 hospitals achieved better
results and 49 hospitals achieved worse. Administrators need to decide if they want to set goals at
the median or better; best practice hospitals typically set goals between the 75th and 90th
percentile. With percentile goals in increasing increments over time, the hospital can strive for,
and achieve, continuous improvements in its cost per unit of service.

Cost Management Techniques that Can Save Real Money
It is important to remember that having a num her of technical components (fixed/variable costs,
direct/indirect costs, flexible/fixed budgeting) in place does not guarantee great or even good cost
management. Healthcare organizations still need to get down to the nitty-gritty cost. management
techniques that save the hospital "real money," defined as dollars that can be saved through
reduction in labor or supplies.

Among these techniques, the two areas that offer the greatest opportunity for cost management
are labor productivity and reductions in resource consumption.

Improvement 8: Determine labor ratio goals. Develop and use labor productivity management
techniques to support the overall labor ratio and benchmark practice staffing ratios.

Labor is the largest component of cost in hospitals. According to information released in July
2003 by bond rating agency Fitch IBCA, the median percentage of salaries, contract labor, and
fringe benefits divided by total operating revenue (labor ratio) across its more than 200 rated not-
for-profit hospitals is 52 percent. In comparison, the 200-hospital HCA for-profit system has
reported on its web site a level of approximately 40 percent over most of its existence. This
dramatic 12-point variance highlights the major difference between not-for profit and for-profit
hospital management.

The author has discussed the reasons for the difference with hundreds of for-profit and not-for-
profit financial and operating administrators in the financial management classes he has
conducted over the past several years. The three principal reasons are:

      The for-profit systems are setting goals around this labor ratio.
      The for-profit systems are using management accountability to achieve the goals.
      The for-profit systems are using labor productivity management systems on a minimum
       daily basis to monitor the results of the set goals.

Unscientific survey results indicate that only 20 to 30 percent of not-for-profit hospitals have
adopted labor productivity management techniques, and even fewer are aware of the all important
labor ratio. It is imperative that hospitals focus on labor costs and develop and implement plans to
reduce them, according to benchmarks and best practices.

Improvement 9: Reduce resource consumption. Develop and implement action plans that move to
reduce areas of excess resource consumption, as derived from benchmarks and best practices.
Hospitals tend to use resources haphazardly. For example, patients with the same diagnosis can
consume widely varying resources, contributing to significant excess costs to hospitals. The
largest contributors to this variability are physicians, most of whom established their practice
patterns during their medical school and residency training.

Hospitals have abundant opportunities to manage costs through clinical resource cost reviews,
particularly at the individual physician level. With the right tools, hospitals can perform physician
reviews that include net revenues, relevant costs (fixed, variable, direct, indirect), contribution
margins, and net margins. The outcomes are often surprising. If the goal is to reduce consumption
of resources, it is relatively easy, with the proper information, to determine the variability of the
cost components controlled by each physician. The table above shows a striking variability
among the top five attending physicians treating DRG 89--simple pneumonia.

Imagine if Dr. Jones, the physician with the most cases (eight) during the first quarter of the year,
were able to reduce his variable cost per case from $4,205 down to the mean, $3,606. That alone
would decrease the "real" variable costs in the hospital from $33,640 ($4,205 x 8) to $28,848
($3,606 x 8), or a difference of $4,792. Over a full year, the difference amounts to $19,168.
Further, imagine if all the physicians in this grouping were able to reduce their variable costs to
the level of Dr. Chen, at $3,000 per case. The difference between the current variable costs and
the internal "best practice" costs would be $203,616 ($50,904 x 4), for just five physicians, over
one year, for one DRG. It is obvious that the savings opportunities are substantial.

Cost Management Tools that Help Hospitals Meet Their Goals
Healthcare organizations that practice cost management will find their cost base shrinking, both
in cost per unit of services and total costs. But to realize the benefits of those reductions,
organizations will likely need to invest in automated tools designed to process large amounts of
cost data and report value-added results to the user. A variety of effective tools on the market
allow the reviewer to develop information and reports to determine financial outcomes at
physician, payer, patient, and clinical levels.

Improvement 10: Purchase and use effective cost-management tools. To achieve high-level
outcomes, the following tools are mandatory:

      A cost-accounting system, developed at the chargemaster level, designed to provide
       information at the procedure code level for direct, indirect, variable, and fixed costs
      A contract-management system, designed to provide immediate and accurate net revenue
       information at the patient level
      A decision-support system, designed (through the use of drill-down capabilities) to allow
       end-users to manipulate cost accounting, contract management, budgeting, and
       benchmark data to produce information they believe will be productive in reducing the
       clinical cost variability and potentially change physician patterns of resource consumption

Again, unscientific class survey results indicate only about 30 percent of hospitals have availed
themselves of contract-management systems. Thus, at least 70 percent of hospitals are not
maximizing their information levels, nor do they have the systems to do so. Those healthcare
executives must ask, "How can we expect our hospital to improve its financial and clinical
outcomes if we do not have the information to manage it?"
Hospitals have substantial opportunities to manage their costs effectively and efficiently. Some
hospitals are practicing cost management, others have invested in certain tools to assist in the
effort, and still others have not yet fully committed to a cultural change that demands
accountability and provides a full range of tools and techniques to ensure success. Those
hospitals that have made the commitment to cost management have realized that the opportunities
for improvement are abundant and proven.


Financial Perspective                                 2.19       Needs Improvement
 Return on net assets                                 3.60       Good
 Competitive position                                 0.83       Unsatisfactory
 Volume growth                                        1.00       Poor
 Reduced cash outlays                                 3.50       Good
 Improved cash receipts                               2.00       Needs Improvement

Customer Perspective                                  2.20       Needs Improvement
 Patient satisfaction                                 2.20       Needs Improvement

Internal Perspective                                  3.31       Good
 Product innovation                                   3.00       Good
 Perfect orders (reduce errors)                       2.50       Needs Improvement
 Quality indicators                                   4.00       Excellent
 Clinical outcomes                                    3.75       Good

Learning and Growth                                   3.00       Good
 Strategic awareness                                  3.00       Good
 Leadership surveys                                   3.20       Good
 Mandated education hours
  per employee                                        2.80       Needs Improvement

Brilliant Overall Performance             Score       Weight     Weighted Score
 Financial Perspective                    2.19        25%        0.55
 Customer Perspective                     2.20        25%        0.55
 Internal Perspective                     3.31        25%        0.83
 Learning and Growth                      3.00        25%        0.75

             Total Score                              2.67       Needs Improvement


Physician Name      Cases      Length        Gross       Expected       Variable
                              of Stay      Revenue        Payment           Cost
                                          per Case       per Case       per Case

Dr. Jones                8        7.14       13,610            6,244      4,205
Dr. Smith                7        5.54       10,453            4,052      3,189
Dr. Brown                6        7.33       15,325            5,404      3,414
Dr. Garcia               5       10.67       22,255            9,898      6,633
Dr. Chen                 5        5.33        8,225            4,884      3,000
Others                  53        5.92       12,059            5,865      3,364
Total                   84        6.51       13,076         5,899         3,606

Physician Name       Contribution           Fixed         Net          Quarterly
                           Margin        Cost per      Margin         Difference
                                             Case                 between Actual
                                                                 VC per Case and
                                                                   Best Practice

Dr. Jones                    2,039         2,701        (662)                9,640
Dr. Smith                      863         3,771      (2,908)                1,323
Dr. Brown                    1,990         2,617        (627)                2,484
Dr. Garcia                   3,265         4,874      (1,609)               18,165
Dr. Chen                     1,884         2,391        (507)                  --
Others                       2,501         3,620      (1,119)               19,292

Total                        2,293         3,475      (1,182)               50,904

For a list of HFMA technical documents, audio webcasts, seminars, and articles pertaining to cost
control, go to www.hfma.org/resource/cost_control.htm.


       Outsourcing
           o Food services
           o Environmental services
           o Plant operations
           o Information technology
           o Clinical services
       Use of pharmaceutical and medical supply formularies
       Establishment of a committee to evaluate new medical products
       Supply chain management
           o Supply chain automation (e-commerce)
           o Inventory management (reduced warehousing, increased just-in-time processing)
           o Accounts payable and supply chain audits
       Use of operational audits to support cost management efforts
       Overhead cost reduction review and analysis
       Training that supports cost-management efforts

Steven H. Berger, FHFMA, CPA is founder and president of Healthcare Insights, LLC,
Libertyville, Ill, and a member of HFHA's First Illinois Chapter.

Questions and comments about this article may be sent to the author at sberger@hcillc.com.

COPYRIGHT 2004 Healthcare Financial Management Association
COPYRIGHT 2004 Gale Group
• Use of operational audits to support cost management efforts


• Overhead cost reduction review and analysis

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With economic slowdown predominating throughout this year, the boards and            Favorites
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Internal auditors are expected to maximize the assurance provided to the Board,
the Audit Committee and Management, and contribute to the continuous improvement strategies
of the organization without impairing its objectivity and independence. Internal auditor‘s role
involves providing guidance and expertise in areas including, but not limited to, corporate
governance, ERM, fraud policies and prevention, and information technology systems, in
addition to the traditional area of internal controls. Audit departments are realizing that paper-
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gives the true status of a company‘s exposure to risk.

Internal Audit Management - The Challenges
                                                             A survey by Ernst & Young titled
                                                             'The Shifting Internal Audit
                                                             Landscape' reveals that:

                                                             Stakeholder expectations are
                                                             increasing with greater focus on
                                                             enterprise-wide risk assessment and
                                                             business and operational risk.
The current business environment has turned the spotlight     In implementing enterprisewide risk
on the role that a robust internal audit system must play     assessments, as well as covering of
within the larger drive towards effective governance, risk,   key risk areas, there is an
compliance and quality management. An internal auditor        opportunity for Internal Audit to
has to work as a savvy in-house cop who not only reports      improve coordination
problems, but also gives constructive suggestions to line     with other risk management groups
managers about how to                                         within the company.
improve the performance of the business. As a result, the
internal auditing and corporate control environment are  There is an opportunity for Internal
receiving increased attention and resources, necessary toAudit to better leverage technology
comply with the regulations.                             and knowledge collection and
                                                         sharing tools to improve
Despite the increased exposure and buy-in from executive effectiveness and
management, internal audit departments face many         efficiency significantly.
challenges. A few of them have been discussed below:

Immature Implementation of Risk Strategies: The credit crisis and resulting uncertain
economic conditions have forced organizations to scrutinize their risk exposures in greater detail.
Most of the organizations, however, support perfunctorily developed risk management strategies.
According to a survey of audit committee members attending the 4th Annual Audit Committee
Issues Conference , 44% of conference attendees said that their company's processes to identify
significant business risks need improvement, and 18% said the risk reports that management
provides to the audit committee are not meaningful/useful. "Audit committees are taking a hard
look at risk management processes, with a particular focus on the quality of risk inventories and
assessments, as well as the usefulness of management's risk reports," said one of the directors at
the conference. He says, "Key challenges include identifying risks early-on, and maintaining a
'big picture' view of the risks facing the business."

Top-Down View: A careful analysis of frauds, which led to the genesis of SOX legislation,
exposed major weaknesses in the top management and the control environment. This put
spotlight on internal auditors to view the business from the top-down, and increase scope of
reviews at corporate offices. The purview should not only include day to day transactions, but
specific monthly, quarterly, and yearly management processes that strongly influence the
financial statements.

Complex Financial Disclosures: The board shoulders the ultimate responsibility for the integrity
of the corporation's financial disclosure. The challenge for internal auditors is to identify if there
are discrepancies in company‘s financial statements, confirm whether they are abiding by the
financial reporting standards, verify whether sufficient controls are in place, and affirm whether
shareholders or potential investors or lenders have sufficient information to make informed
decisions. The Management is responsible for a fair presentation of the financial statements but
the internal audits department must ensure that the financial statements do pass the litmus test.

Complex Business Models: The board and management are responsible for ensuring the
integrity of the business, while the internal auditor is responsible for validating, directly or
indirectly, whether the company's business model is sound. Internal audits confront issues like:
―Will the company be able to survive, or compete in the market?‖ ―Does it adhere to sound
business practices?‖ ―Does it have appropriate place for risk management and corporate
governance programs in organization?‖ Moreover, with communication shrinking the world, and
global economies growing ever more intricately connected, organizations operate in a far more
complex fashion than before. This increases the potential for negative circumstances like
inconsistency in enforcing audit processes across business units, erroneous data collection, and
various gaps that result from isolated silos of information. It is difficult to gain the
comprehensive visual map of the entire business, essential to effective management of risk,
governance, compliance and quality issues. The audit lifecycle can often meet a variety of
roadblocks that drag deadlines and jeopardize the quality and legal safeguards.

Growing Regulatory Guidelines and Compliance Demands: The global regulatory
environment is in an arena of constant change. Stipulations and guidelines are regularly reviewed
and refined to retain their effectiveness. Very often, different countries may have distinct
recommendations or legal expectations that can complicate the role and consistency of internal
audit process across a geographically spread enterprise. Whether it is ISO, SEC or SOX
guidelines, companies are now expected to proactively initiate internal, IT-enabled enterprise-
wide audit solutions that ensure compliance.

Risk Quantification: Risk is an integral part of any endeavor. The risk management unit and the
risk management committee are responsible for risk management, but it is the internal auditor's
task to ensure the risk management program works. An effective internal audit management
system depends on the ability to build process cycles against an accurate matrix of assessed risk.
However, given the dynamic regulatory environment and the complex inter-connectedness of
business functionalities, it is often extremely difficult to assess the multi-faceted nature of
business risk.

Governance: An ideal corporate governance framework consists of seven entwined elements: the
board and its committees, legal and regulatory concerns, business practices and ethics, disclosure
and transparency, ERM, monitoring, and communication. It is the task of internal auditors to
review each of these elements, and report their findings on a scorecard, rating their maturity
along a scale as "compliant", "developed", or "advanced." At the outset, the CAEs need to review
key organizational documents such as articles of incorporation, board and committee minutes, the
annual report, investor relations policy, code of conduct and ethics, shareholder rights, and board
calendar of events.

                                                            According to PwC research, internal
                                                            auditors will be sharpening their
                                                            focus on continuous auditing
                                                            now and 2012 in an effort to
                                                            streamline the audit process. As risk
                                                            assessments and risk monitoring
                                                            assume a more real-time dimension,
                                                            audit timing will become more
                                                            dynamic. Audits will be conducted
Tone- at-the- Top: Top-to-down ‗buy in‘ for internal audit on
is something that can only be achieved when the leadership an as-needed basis, triggered more
of the company is sensitized to and convinced of the vital by changes to organizational risk
impacts it has on compliance, quality, business continuity, profiles than by set plans.
and operational profitability. Internal auditors should work closely with the audit committee to
establish the audit department's responsibilities, and the board and management should support
those duties. However, internal audit processes can sometimes be ignored by the top
management, who may chose to focus time and resources on areas they deem to be more pressing
to bottom lines.

Monitoring and Oversight: Most organizations expect internal audits department to provide
additional input to management, the board of directors, and the audit committee in form of
monitoring and oversight; ensuring compliance monitoring and enforcement of essential
requirements. To address the issue of weaknesses in oversight programs, the department needs to
establish the minimum standards for monitoring compliance and risk management programs.
These standards should address compliance monitoring activities; technical assistance;
enforcement; and documentation, analysis, and reporting of results. Stiff penalties for non-
compliance have prompted employers and employees to take a proactive approach to reduce the
risks of fraud within their organizations. With an increase in awareness and interest in corporate
governance, the audit function faces rise in the number of special requests. In
addition to this ascend in demand for services, implementing a system to evaluate and prioritize
the nature and timing of reviews will provide an additional challenge for businesses and their
audit function.

Information Sharing and Communication: Although              The survey by Ernst & Young ('The
some companies, primarily in financial services,             Shifting Internal Audit Landscape')
incorporated the COSO (Committee of Sponsoring               reveals that when asked how they
Organizations) framework model into their audit process expect their Internal Audit function
over a decade ago, many companies are still working          will expand the use of leading
towards implementing COSO or a similar model into their practices and benchmarking data to
organization. The length of COSO implementation should support audit activities, 47% of
be reduced by sharing information and communicating          respondents indicated that they
throughout the industry. Organizations assist each other by maintain a library of leading
sharing experiences and lessons. It would also be            practices. Thirty-six percent
advantageous for boards and executive management to          indicated that they maintain industry-
drive the implementation of such a model throughout the based business rocess models.
business. This should provide those who lag behind with a
better perspective on risks and controls and what areas need to be considered in the everyday
conduct of business to allow employees to take a proactive approach in enhancing the control

Progressive companies are increasingly seeing the answer to these challenges in a unified
approach that integrates the audit cycle within closed loop systems and affords end-to-end
functionality across the board.

Overcoming Challenges
To address the rising expectations of chief stakeholders, internal audit needs to find new ways to
deploy its risk and control-based skills to help the organization achieve its strategic objectives
and enable value creation. That effort extends to activities such as:

Board of Directors and Senior Management Oversight: Internal Auditor‘s assessment of the
role of the top management in overseeing a company‘s efforts should address objective
considerations, such as whether the necessary resources (people and otherwise) and tools have
been dedicated to the compliance and risk management effort, whether the tone-at-the-top is
inclined towards having tighter internal controls, and whether the board of directors and senior
management, through their words and actions, are communicating the importance of risk
awareness across the company. This also includes instituting communication channels, including
a whistleblower hotline to encourage reporting of compliance issues and risk concerns. Here the
internal audit department should evaluate the processes in place to establish and enforce
accountability for compliance deficiencies. If evidence suggests that there are discrepancies in
internal controls and risk management structure, this should be a cause for concern.

Risk Identification and Assessment: The audit should examine whether the risk assessment
process synchronizes with latest changes in the organization, addresses all activities conducted by
the company, includes all applicable regulatory requirements, and documents the methodology
used to conduct the risk assessment.

Role Accountability and Responsibility: During this part of the evaluation, it is important to
consider the credibility, qualifications, and experience of key personnel who have been assigned
the critical tasks. Internal auditors are charged with the responsibility of assuring the board of
directors that management, financial systems, and processes are working effectively. In all other
matters, the CEO represents management to the board of directors. However, in this case, the
CEO belongs to the group that is being audited, so it is important for the internal auditors to have
direct reporting channels to the board.

The audit should examine the plan these individuals have developed for directing the company‘s
Compliance effort. This plan should be updated on regular basis, should set forth the goals of
compliance and its tactics, including monitoring, training, policy and procedure review and
updating, for realizing these goals.

Policies and Procedures: Internal Auditor‘s assessment should focus on the company‘s process
for ensuring that policies and procedures are comprehensive, reviewed and updated on a periodic
and reasonably frequent basis as well as accessible and understandable. This should also verify
that the company has a process in place for communicating important changes between periodic
updates. In forming this assessment, internal auditors can test the process by selecting a
significant and relatively new regulatory requirement and determining how effectively and
efficiently the requirement has been incorporated into policies and procedures and communicated
to affected personnel.

Internal Controls: Consideration of whether or not there is a system of adequate internal
controls should be second nature to any internal auditor. The considerations are much the same as
they would be in any other auditable area: separation of duties, access limitations, second review
processes and proper documentation of review and approval, etc. Another consideration would be
whether the controls are manual or automated. Where internal controls are manual, internal
auditors need to inspect whether the controls are addressing the requirements of the organization.
On the other hand where they are automated, the internal auditors need to confirm that the
workforce understands the technology.

Self-Monitoring and Remediation: Internal auditor‘s evaluation of a company‘s self-monitoring
and remediation activities should begin with verifying that the monitoring program incorporates
requirements specifically mandated by laws or regulations, and that it is appropriately aligned
with Compliance‘s risk assessment.

Reporting and Record Keeping: IA should also review how the company manages the myriad
of reporting and record keeping requirements faced by financial services companies. This
requires validating that all such applicable requirements have been identified, responsibilities are
assigned, and controls are put into place to ensure required information is retained and retrievable
for prescribed periods.

Need of the hour is an internal audits framework that provides a strategic model, for internal
auditors and stakeholders, to understand the elements necessary to achieve a high quality and
effective internal audit function.

Internal Audits Framework
Ever growing complex regulations have had significant implications on Internal Audits function
– changing the environment within which the rules for security, reliability, and permissible
margin of inaccuracy were formed. Internal auditors, today, need to adopt an integrated auditing
approach while evaluating the internal controls, processes and procedures of an organization. The
COSO while defining internal control, in its report titled ―Internal Control- Integrated
Framework‖, emphasized on the role of internal audits to help management monitor the control
system and make them aware of its strengths and weaknesses. It holds internal auditors as a form
of internal control that functions by evaluating other forms of internal controls. Similarly there
are other generic frameworks that internal auditors can use to determine the scope of the audit,
including: the Federal Sentencing Guidelines, the Basel Committee principles on compliance (as
documented in its publication entitled The Compliance Function in Banks), in addition to general
guidance published by various other sources. While none of these frameworks is identical, there
is a high degree of commonality among them suggesting a number of key program elements that
should be included in an effective internal audit program. Each of the following is a key area to

Structure and Resources: Before embarking upon the auditing process, internal auditors
establish the structure of the internal audit function and assess the key internal audit personnel to
be audited, and their respective roles and responsibilities. Where the function is outsourced, the
focus includes the terms of the outsourced arrangement and how this is monitored.

Independence: The board should ensure that the independence of the internal audit function is
maintained. The internal auditor should maintain dual reporting relationship to management and
the organization's most senior oversight group. The internal auditor should report to executive
management for assistance in establishing support, and administrative interface; and typically to
the audit committee for strategic direction, reinforcement, and accountability.

Approach: The approach taken by internal audit should be clear and may be one, or a
combination of risk-based focus on the high-risk areas of the institution; and review-based focus
on reviews of various parts of the institution. The board should endorse the approach and it
should be scalable to future change, such that it adapts agilely to issues requiring internal audit

Segregation of Duties: Segregation of Duties ensures that no one person is solely responsible for
the entire process end-to-end, without effective checks and balances. For example, key
authorization processes should have appropriate checks and balances. The person, who
documents the transaction, should not be the same person who conducts the transaction. These
simple checks and balances ensure effective controls and reduce organizational error rates.

Policies and Procedures: Written policies and procedures codify management's criteria for
executing an organization's operations. They document business processes, personnel
responsibilities, departmental operations, and promote uniformity in executing and recording
transactions. Thorough policies and procedures serve as effective training tools for employees.
Having a documented repository of your standard operating procedures at the operational,
financial, manufacturing unit levels, ensures consistency of processes and reduces audit failures.

Internal Audit Plan: The internal audit plan, which usually details the proposed internal audit
work for the next 12 months, should be documented and endorsed by the board. Importantly, the
plan should be consistent with the type of approach to be taken and should be adequate for the
scale and complexity of the institution‘s operations.

Audit Data: The internal audit should capture audit-related data on a single database for the
entire enterprise, so that all data mining, benchmarking, and trend analysis processes are
significantly improved.

Reviews and Approvals: When a process is performed within a department, there should always
be another level of review and approval performed by a knowledgeable individual independent of
the process. The approval should be documented to verify that a review was done. Review and
approval are controls that help management gauge whether operational and personnel goals and
objectives are being met. In this time and age of emails and web technologies, it is easier to
document your approvals if you can refrain from verbal approvals and use electronic methods to
approve key policies and processes.

Reporting: Internal auditor should report findings to the Audit Committee (or board) regularly.
Serious issues should be elevated to senior management and the Audit Committee (or board)
without delay. The reporting infrastructure is not just a way to create visibility into the status of
key processes and activities, it also enables the management and the auditors a way to get
possibly real-time visibility into the key indicators of your organization. Reporting of key
Corrective Actions and Preventive Actions, Process KPI's, employee training status to key
processes, supplier and partner scorecards, quality maintenance reports on critical equipments
and plants is a simple example of a well-designed management reporting system.

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Chapter 3

Environmental Program Management

1. Scope. This chapter establishes U.S. Geological Survey (USGS or Bureau) policy and
responsibilities for compliance with the statutory and procedural requirements that pertain to
environmental program management. Effective program management enables USGS
organizations and facilities to achieve and maintain environmental compliance and protection
nationwide. In addition, this chapter provides overall direction and consistency for environmental
compliance and protection programs, along with technical, legal, and data management support.

A. Applicability.

(1) This chapter applies to all USGS facilities and organizations.

(2) The major Federal environmental statutes contain waivers of sovereign immunity that require
USGS facilities to comply not only with Federal but also with State and local procedural

(3) State and local regulatory programs may establish regulations that are more stringent than the
Federal requirements. Each USGS facility should obtain copies of its respective State and local
regulations to determine if the facility is subject to requirements that go beyond the Federal laws
and regulations.

B. Background.

(1) USGS environmental programs protect the health of USGS staff working at USGS facilities
and protect the environmental quality of the facility and adjacent communities to support future
activities. Environmental programs strengthen USGS relationships with regulatory agencies and
the public and reduce the long-term costs of maintaining and operating facilities by avoiding
penalties, cleanup costs, and the risk of future liability.

(2) Federal agencies must comply with applicable environmental compliance requirements. The
major environmental statutes contain waivers of sovereign immunity that require compliance
with Federal, State, and local requirements. The fundamental test of a "requirement" is that it is
an objective, quantifiable standard and is subject to uniform application. The application of
sovereign immunity waivers varies somewhat across states and localities.

(3) The USGS faces a difficult challenge in its effort to achieve compliance with Federal, State,
and local laws, rules, and regulations that affect USGS facilities. Contributing to the challenge is
the fact that environmental compliance is an area of continuous change. New requirements can
emerge from many sources, and the regulatory priorities of Federal, State, and local agencies can
vary. The USGS must implement a methodical approach to achieving compliance, which
involves the following:

(a) Identifying environmental requirements applicable to USGS facilities.

(b) Implementing programs to achieve compliance.

(c) Conducting assessments at USGS facilities to identify areas, in which improvements are
needed, prioritizing implementation and abatement actions to correct deficiencies, and
monitoring overall compliance performance.

2. Authorities/References.
A. National Environmental Policy Act (NEPA) of 1969 (42 U. S. C. 4321 et seq.)

B. Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) of
1980, as Amended (42 U. S. C. 9601 et seq.)

C. Clean Air Act (CAA) of 1970, as amended (42 U. S. C. 7401 et seq.)

D. Federal Water Pollution Control Act of 1972, as amended (33 U. S. C. 1251 et seq.)

E. Clean Water Act (CWA) of 1977, as amended (Public Law 95-217, 33 U. S. C. 1251 et seq.)

F. Resource Conservation and Recovery Act (RCRA) of 1976, as amended (42 U. S. C. 6901 et

G. Endangered Species Act of 1973 (16 U. S. C. 1531 et seq.)

H. Toxic Substances Control Act (TSCA) of 1976 (15 U. S. C. 2601 et seq.)

I. Pollution Prevention Act (PPA) of 1990 (42 U. S. C. 13101 et seq.)

J. Executive Order (EO), 13148, Greening the Government Through Leadership in
Environmental Management, April 2000

3. Requirements.

A. General. The USGS will:

(1) Actively protect and enhance the quality of the environment through strict compliance with
all applicable regulatory requirements through a process of continual improvement.

(2) Assess the potential environmental impact of the proposal in the earliest stages of formulating
plans, actions, and programs. NEPA provides a mechanism for considering environmental
compliance and protection issues as embodied in appropriate statutory, regulatory, and USGS
policy guidelines.

(3) Promote environmental training and education, pollution prevention, and the integrated
management of natural resources as the long-term strategy for achieving and maintaining
environmental compliance.

(4) Ensure the protection, conservation, and management of watersheds, wetlands, natural
landscapes, soils, forests, fish and wildlife, and other natural resources.

(5) The number of environmental regulations has increased dramatically in recent years. USGS
facilities are regulated by a wide array of Federal, State, regional, and local agencies.
Requirements and interpretations vary greatly. To ensure consistent responses to the various
agencies and to avoid adverse precedents, particularly those with funding implications, facilities
must coordinate permit conditions, demand for payment of USGS funds, compliance agreements,
settlements, negotiations, and responses to Notices of Violation (NOV) from environmental
agencies with the Bureau Safety and Environmental Management Branch (BSEMB).

B. Environmental Management System (EMS).

(1) Purpose of the EMS. To establish what an organization needs to do in order to manage itself
so as to meet its environmental, economic and sustainable development goals. Such a system will
decide what the goals, policies, and strategies should be for implementation and will create the
necessary linkages between environmental concerns and the economic considerations.

(2) Background.

(a) In August 1993, EO 12856, "Federal Compliance with Right-to-Know Law and Pollution
Prevention," required the EPA to "establish a 'Federal Government Environmental Challenge
Program." One component was to "challenge Federal agencies - to agree to a code of
environmental principles to be developed by EPA, in cooperation with other agencies, that
emphasizes pollution prevention, sustainable development and state-of-the-art environmental
management program."

(b) EO 13148, "Greening the Government through Leadership in Environmental Management,"
was signed in April 2000 requiring Federal agencies to develop and implement EMS's. The EMS
should "ensure that strategies are established to support environmental leadership programs,
policies, and procedures and the agency senior level managers explicitly and actively endorse
these strategies."

(3) EMS Implementation. USGS facilities and organizations will:

(a) Management Commitment. Make a written commitment to improved environmental
performance by establishing policies that emphasize the need to comply with environmental
requirements and pollution prevention.

(b) Compliance Assurance and Pollution Prevention. Implement proactive programs that
aggressively identify and address potential compliance problem areas and use pollution
prevention approaches to correct deficiencies and improve environmental performance.

(c) Enabling Systems. Develop and implement the necessary measures to enable personnel to
perform their functions consistent with regulatory requirements, USGS policies, and the overall
organizational mission.

(d) Performance and Accountability. Develop measures to address employee environmental
performance and full accountability of environmental functions.

(e) Measurement and Improvement. Utilize, implement, and fully support the Environmental
Compliance Auditing program to assess its progress toward meeting its environmental goals and
use the results to improve environmental performance.
(4) Management Reviews. The Bureau will conduct an environmental management review of
Regional Headquarters on a 3-year rotating cycle.

C. Environmental Compliance Audit Program.

(1) The Bureau Environmental Manager shall conduct regional environmental program and
compliance audits every 3 years. Regional Environmental Coordinators shall conduct and
document environmental management and compliance program evaluations of regional discipline
level programs and regional discipline field locations that fall under the EMS or baseline audit
location umbrella every 4 years. All other field level environmental compliance audits will be
conducted based on compliance risk and past program deficiencies. All deficiencies noted and
audit at least annually.

(2) The Environmental Assessment Management (TEAM) Guide, State Supplements,
29CFR1910 and 1926, and agency-specific supplements (see Appendix A for Department of the
Interior environmental compliance auditing policy) provide the basis for external environmental
compliance audits and this Handbook will be the basis for the annual self-audits.

D. Pollution Prevention. The preferred method of environmental protection is to eliminate or
control the pollutant source. Responsible parties must identify means and methods for the
elimination or minimization of pollutants and, where possible, incorporate them at the earliest
stages of planning, design, and procurement of facilities, equipment, and material. Dedicated
efforts are necessary to eliminate or minimize the use of hazardous material (HM) and the
generation of hazardous waste (HW).

(1) When assessing solutions to compliance requirements, facilities will make use of the
environmental management hierarchy. The Pollution Prevention Act (PPA) of 1990 established
the following order of preference for the environmental management hierarchy:

(a) Source reduction

(b) Material recycling

(c) Treatment

(d) Disposal

(2) Each USGS organization will make every effort to meet or exceed the goals published in the
Strategic Plan for Greening the Interior Through Waste Prevention, Recycling, and Federal

E. Personal Liability For Violation of Environmental Laws. In most cases, Federal employees are
named as defendants in their official capacities because the actions in question are usually
undertaken by virtue of their official authority. These cases generally proceed without risk of
personal liability for the employee. In some cases, however, a Federal employee may be sued in
his/her individual capacity for injuries or damages to persons or property. Individuals who violate
environmental laws or who injure or damage the persons or property of others as a result of
carelessness may be personally liable for the consequences. Environmental cases involving the
USGS may be brought against the USGS itself, some smaller component, or individual
employees. The individual employees may be named because the USGS can act only through its

(1) Personal Liability for Injuries or Damages to Persons or Property. Where the actions of a
Federal employee cause injuries or damage to the person or property of another, the injured party
may bring an action to recover the cost of the damage.

(a) In such cases, the Department of Justice may substitute the United States for the individual if
it determines that the individual was acting within the scope of official duties. An individual
exercising official authority to carry out Bureau business per applicable USGS regulations
normally is determined to be acting within the scope of official duties.

(b) Any employee who is served with a complaint, subpoena, or other legal paper relating to
activities undertaken pursuant to official duties must immediately report this information to the
Safety and Environmental Management Branch for guidance on how to proceed.

(2) Civil Liability for Fines. Many of the environmental statutes impose civil penalties for the
violation of requirements. Some of the statutes, such as the Clean Air Act (CAA), the Clean
Water Act (CWA), and the Safe Drinking Water Act (SDWA), provide varying degrees of
immunity from civil penalties to individual Federal employees. Liability under other statutes is
not as clearly delineated. However, it appears that Federal officials who have made good faith
efforts to know and to comply with environmental requirements and who act within the scope of
their employment do not face the likelihood of civil penalties imposed under Federal law.

(3) Criminal Liability. Most of the environmental statutes impose criminal liability for willful or
knowing violations. Some statutes impose criminal liability for negligent violations. Individual
Federal employees may be charged with criminal liability if their actions or inactions meet the
requirements for imposing liability. Federal or State prosecutors may bring criminal charges.
Liability often does not depend on knowledge of, or personal participation in, the acts made
criminal. With respect to violations that occur, the term "knowing" is defined as knowledge that
the requirement or regulation exists, more so than to actual knowledge of specific violations. The
Supreme Court has said "where dangerous or noxious waste materials are involved, the
probability of regulation is so great that anyone who is aware that he is in possession of them
must be presumed to be aware of the regulations."

F. Reporting Notices of Violation (NOV). Immediately upon discovery of failure or potential
failure to comply with the requirement of the law, all USGS personnel must report these matters
to the next highest USGS authority. USGS policy is to complete prompt corrective action or the
coordination of a plan for such corrective action with regulatory authorities regarding areas not in
compliance with applicable requirements. Such prompt attention is the best approach to avoiding
possible criminal charges or individual penalties.
G. Site Inspections. Upon the presentation of proper credentials, authorized EPA, State, or local
regulators or representatives must be allowed to enter a USGS facility at reasonable times to
examine or copy records, inspect monitoring equipment, or sample any effluents or emissions
that the officials have the authority to regulate. Such inspections will comply with the
information and facility security requirements.

H. Information Security. Periodically, representatives of Federal, State, and local agencies who
are exercising their regulatory authority under environmental laws visit USGS facilities.
Particular attention is needed to ensure that facilities comply with directives governing the
control and protection of sensitive information. Before permitting access, it is important for the
information holder to ensure that the recipient understands and complies with applicable security
regulations governing the dissemination and protection of the information.

I. Government-Owned/Contractor-Operated (GO/CO) Facilities. USGS offices or facilities
sponsoring GO/CO facilities must oversee facility use or management contracts to ensure:

(1) The operating contractor complies with the environmental regulations

(2) The operating contractor participates in the USGS Environmental Compliance Auditing
program. USGS facilities sponsoring GO/CO facilities should also encourage GO/CO facilities to
assess and implement pollution prevention solutions using the environmental management

J. Operations, Facility Use, or Lease Agreements. The owner of facilities leased or rented by the
USGS or a USGS contractor is responsible for ensuring that the facilities comply with all
applicable environmental requirements. Contractors must advise the USGS of any permit and its
conditions, must provide periodic compliance status reports as required by the managing USGS
office, and must participate in the USGS Environmental Compliance Auditing Program.

K. Community Programs. The USGS supports its employees' participation in community
programs to address pollution and waste management issues. Such participation may include
advisory functions or the planning of pollution control facilities where USGS facilities contribute
to the problem in question. Before committing to participation, USGS facilities should consult
and seek the advice of management and the BSEMB.

L. Environmental Manager and USGS Organization and Tenant Coordination. USGS facilities
should develop Memorandums of Agreement or similar mechanisms to detail responsibilities of
USGS organizations and tenants on the facility. The USGS facilities should maintain close
coordination with tenants to ensure that the USGS organization and tenants meet the
requirements of the support agreements, maintain compliance with all applicable environmental
requirements, and participate in the host Environmental Compliance Auditing Program.

M. Release of Information.

(1) The senior management official at the USGS facility has the authority to release facility-
specific information to Government agencies.
(2) Release of information regarding the USGS to the news media or the general public must be
coordinated with the public affairs office.

(3) Public requests for information should be coordinated with the public affairs and/or Freedom
of Information Act (FOIA) offices to ensure that these requests are handled expeditiously and in
accordance with established procedures.

N. Records Disposition.

(1) Destroy hazardous substance records required by CERCLA when they are 50 years old.

(2) Retain all documentation in support of management plans mandated in this Handbook until
obsolete or superseded, whichever is later.

(3) Destroy all reports, documentation, correspondence, and forms not covered by the paragraphs
above after they are 10 years old.

(a) Such records include:

(i) Environmental assessments (EA);

(ii) Environmental impact statements (EIS);

(iii) Life-cycle cost analyses;

(iv) Documentation of compliance/noncompliance;

(v) Site inspections;

(vi) Communications with Federal, State, local, and foreign environmental authorities;

(vii) All other documentation required by law, regulation, and Executive Order, including reports
to the EPA.

(b) Such records will cover the effects of USGS activities on:

(i) Air quality;

(ii) Tideland and freshwater wetland resources;

(iii) Wildlife;

(iv) Protected, threatened, and endangered species;

(v) Woodland resources;
(vi) Coastal contiguous zone waters;

(vii) Noise levels;

(viii) Farm land;

(ix) Private property;

(x) Land or property of historic/archaeological value;

(xi) Toxic waste sites.

O. Management's Environmental Statement. The Director will publish an environmental
statement outlining the USGS policy on compliance and other environmental policy issues. Based
on the Director's statement, each level of management will publish a statement delineating the
manager's policy to achieve and maintain compliance with the applicable environmental
requirements to preserve our facilities. This document should be prepared in a manner similar to
other policy statements.

P. Standard Operating Procedures (SOP's).

(1) Facility managers will publish an environmental compliance and protection SOP. The
instructions contained in the SOP need not contain all USGS organizational functions, but they
must be sufficiently clear, completely applicable at the organizational level, and sufficiently
detailed to ensure that each facility organization can perform in an environmentally protective
manner. The SOP should be a guide to the method of response and management plans which may
apply to the uses, along with specific facility-or organizational-unique requirements not covered
by these plans.

(2) Facility managers are encouraged to publish a single SOP instead of multiple SOP's. A single
SOP ensures continuity of effort and prevents conflicts in policies between various environmental
media programs.

(3) SOP's will be prepared in a manner complementary or supplementary to, but not repetitive of,
this Handbook.

4. Responsibilities.

A. Designated Agency Safety and Health Official (DASHO).

(1) Exercises the authority of the Director for the management and administration of the USGS
environmental program.

(2) Directs USGS environmental program activities through a USGS Safety and Environmental
Manager and ensures that adequate resources are provided to the Safety and Environmental
Management Branch to develop and administer the program.
(3) Promulgates policy, directives, and alternate or supplemental standards applicable for
implementation of an effective environmental program.

B. Bureau Safety Manager.

(1) Issues environmental planning policies and procedures to ensure that decision makers are
informed of the consequences, alternatives, costs, and mitigating factors that must be considered
regarding decisions that have potentially significant environmental impacts. Ensures that decision
makers consider constraints imposed by applicable Federal, State, and local environmental laws
and regulations.

(2) Includes in all environmental policies and procedures specific provisions that encourage
facilities to engage in environmental planning, including the development of environmental
baseline information.

(3) Develops the long-range forecast necessary for planning, programming, and budgeting for
USGS environmental requirements.

(4) Prepares annual reports to DOI on the status of environmental compliance and protection.

(5) Manages a Bureau-wide environmental management system and environmental compliance
auditing programs and oversees the development of planned activities to correct environmental
management and compliance deficiencies promptly.

(6) Identifies and conducts special environmental compliance and protection studies in areas
where little information has been assembled to be used in establishing policy or initiating actions.

(7) Participates as the USGS representative on intraagency and interagency committees and
working groups. Coordinates and cooperates with the heads of DOI Bureaus regarding
environmental issues of common interest.

(8) Coordinates with EPA Headquarters and other Federal and State agency representatives on
USGS environmental compliance and protection issues.

(9) Develops an environmental campaign plan to outline long-term objectives and special
environmental compliance and protection goals for the USGS.

(10) Ensures that environmental protection and pollution prevention alternatives are considered in
the decision making process for USGS actions.

C. Bureau Environmental Protection Specialist.

(1) Develops and periodically updates this Handbook. This Handbook is the primary USGS
policy document, guiding USGS facilities and organizations in complying with Federal, State,
and local environmental laws.
(2) Provides support to USGS facilities and organizations in:

(a) Interpreting Federal, State, and local environmental regulatory requirements and in uniformly
applying USGS policy as set forth in this Handbook;

(b) Assisting facilities with resolving disputes with Federal, State, and local regulatory agencies
as required;

(c) Supporting outreach processes for environmental planning and analysis and other
environmental areas.

(3) Notifies USGS facilities and organizations of available environmental training.

D. Regional Directors.

(1) Provide oversight for the Regional Program and assist Regional Safety Officers,
organizational managers, supervisors and employees in program implementation.

(2) Provide annual executive summaries of regional activities, success stories, and issues to the

(3) Ensure the consistent interpretation and application of environmental policies at USGS
facilities within their region.

E. Regional Safety Managers, Regional Safety Officers, Regional Environmental Protection

(1) Advise and support regional organizational management in carrying out environmental
management responsibilities.

(2) Serve as the focal point for information and the coordination of issues related to USGS
activities in the region.

(3) Monitor and coordinate the consistent application of environmental policies at USGS
facilities within their region and elevates issues of interest to the SEMB.

(4) Coordinate and/or conduct an environmental management system assessment to identify
shortfalls or "gaps" in the current system. Recommend appropriate actions to correct deficiencies.

(5) Provide, as a region's technical environment management and compliance advisor, assistance
and guidance to regional and field management in implementation of an effective environmental
management and compliance program.

(6) Recommend program policies, directives, alternate or supplemental standards, and guidelines
for adoption at the Bureau level.
(7) Serve as a region's principal representative to the EPA and other agencies on technical matters
pertaining to Regional environmental programs.

(8) Coordinate the identification, development and conduct of general and specialized
environmental training to meet regional needs programs aimed at large audiences across the

(9) Coordinate regional management and provide collateral environmental coordinator support.

(10) Develop and maintain regional environmental protection promotional programs aimed at
providing information to large target audiences, to include making available and recommending
training materials, journals, reference documents, posters, signs, etc.

F. Organizational Managers and Supervisors.

(1) Implement program requirements within the scope of their authority.

(2) Provide and/or secure appropriate environmental training for employees.

(3) Monitor the consistent application of environmental policies within the scope of their
authority region and elevate issues of interest to the appropriate Regional Safety Officer or

(4) Implement an environmental management system assessment to identify shortfalls or "gaps"
in their respective current organizational environmental management system. Recommend
appropriate actions to correct deficiencies.

(5) Coordinate the implementation of an environmental awareness campaign that includes an
award and recognition program.

G. Collateral Duty Environmental Program Coordinators.

(1) Coordinate the environmental management and compliance program of their organizations.

(2) Advise management on matters related to implementation of this policy.

(3) Coordinate an environmental management system assessment to identify shortfalls or "gaps"
in their respective current organizational environmental management system.

(4) Provide program coordination with the regional, State, and Federal regulators as needed.

(5) Coordinate the implementation of an environmental awareness campaign that includes an
award and recognition program.

5. Additional Resources.
A. Office of Environmental Policy and Compliance

B. Environmental Protection Agency (EPA)

C. EPA Rules and Regulations

D. Federal Facilities Enforcement Office (FFEO)

E. EPA Office of Federal Activities - NEPA Review and International Enforcement/Compliance

F. The Yellow Book: Guide to Environmental Enforcement and Compliance at Federal Facilities

SM 445-1-H Table of Contents || Handbooks || Survey Manual Home Page

U.S. Department of the Interior, U.S. Geological Survey, Reston, VA, USA
URL: http://www.usgs.gov /usgs-manual/handbook/hb/445-1-h/ch3.html
Contact: APS, Office of Policy and Analysis
Content Information Contact: wrmiller@usgs.gov
Last modification:20-Apr-2004@07:15 (kk)

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