Keeping tabs on all that clinical and non-clinical stuff your facility acquires, stores and uses – as well as loses through theft and waste or merely misplaces – can be a frustrating task. Automated processes that involve computers, bar-code scanners and radiofrequency identification tags, and outsourcing capabilities to consulting and services firms either have eased some of the pressure or created a host of new headaches.

With increased emphasis on the bottom line – and supply chain management activities, in particular – emanating from an executive suite concerned about cash flow, inventory tracking represents an art that must be mastered and taken seriously. Yet while inventory tracking may not be rocket science it seems to require some rocket science thinking to perform it accurately and reliably. Or does it?

That’s what Healthcare Purchasing News wanted to know.

Although inventory tracking represents one of the key fundamentals to sound supply chain management techniques, it can be taken for granted. All that’s required to turn useable and useful information in your facility into dirty data is one miscount from shelved or consumed stock and those benchmarking figures become skewed. And the materials management director skewered among the C-suite crowd.

Healthcare Purchasing News Senior Editor Rick Dana Barlow asked some of the acute observers, key players and industry experts in the area of inventory management to share a few sage words of advice on tracking tips to tame any turmoil that may be encountered. Some of these tips that follow may be new revelations; others might be useful reminders. Either way, we’ve collected more than 35 helpful hints from experienced and knowledgeable industry sources you won’t find anywhere else.

Ken Kleinberg, Senior Director, Healthcare Solutions Division,
Symbol Technologies Inc., Holtsville, NY

It’s all about the database. Any type of successful inventory tracking application depends on an accurate, and preferably, central electronic database – trying to piece together various word documents, spreadsheets and paper documents is asking for trouble.

Real-time is real accurate. It’s a surprise that so many organizations that have decided to use electronic inventory methods still attempt to use a batch approach. A batch approach increases the chance that duplicate work is performed, that work is lost if not properly synched, or that conflicts are not properly resolved. Real-time access (via wireless networks) ensures that all inventory personnel are operating in concert against a common database.

Numbing numbers lead to inconsistent inventories. It’s safe to say that people reading and then typing in long inventory/part/asset numbers for hours on end are bound to make a few mistakes. The use of data capture technologies, such as laser or imager-based bar code scanning, have been proven to produce more accurate data entry in less time for lower cost. Organizations are also increasingly exploring the use of radio frequency identification (RFID) technology, which allows multiple asset tags to be read simultaneously without the line-of-site limitations of bar codes.

Location, location, location. Just knowing you have an asset is valuable, but in healthcare, knowing where the asset is can be even more important – when locating an asset in an emergency, or proving that an asset was used for billing purposes, or to ensure that an asset has been properly calibrated/cleaned, and also to help reduce shrinkage (theft). Real-time locating systems are now available that utilize existing WLAN infrastructure in combination with Wi-Fi active tags for cost-effective tracking of an organization’s most valuable assets.

You’re going to get dirty. Inventory and assets in hospitals are not always in easily accessible or pleasant places. Having a mobile hand-held computer that can withstand being dropped or knocked, that will hold up over a wide temperature range, that is sealed against dust and liquid and can be wiped clean of dirt/grime, and that has a long-lasting (preferably hot swappable) battery that will keep the device in the field (and not in the charger) are key to maximizing worker productivity and inventory tracking.

John Kautzer, Director, Distribution, Patient Care Services,
MedAssets SCS Inc., Bridgeton, MO

The use of technology and automation for the control and management of supply and equipment inventories has certainly brought a number of efficiencies to the internal supply chain at hospitals and other healthcare facilities. Technology from MMIS software to RFID tags can be terrific tools that add value and efficiencies to inventory management. However, technology is not a replacement for sound inventory control policies, procedures and practices. Here are some of the basic principles that have helped me with inventory management over my career.

Policies. Establish clear, concise policies and procedures. These could range from who has access and authority to enter a storeroom to how remote inventories are managed. The procedures themselves need to be written in a manner that they can be used as a tool to train new employees. Remember the procedures are the how and policies are the why we do things.

Goals. In conjunction with finance or internal audit, develop goals for the inventory. Items such as cycle counts, inventory stratification, turn rates, inventory valuation and variance rates would be at the top of my list. These are some of the tools and measurements that are used across multiple industries to help manage inventories. Once established these goals need to be shared and embraced by the entire materials management team.

Focus on the big stuff. Whether it is a supply item or a piece of equipment, the higher the value, the more attention it needs to get. This is particularly true when managing storeroom or remote inventories in a hospital. "A" items and how efficiently and accurately they are managed can make or break an inventory management program. High value, high turn rate items also tend to be of a critical nature for patient care, they need to be a focus for you and your staff.

Training, communication and staff expectation. Once the above have been developed the staff needs to be trained. They need to understand what is expected of them and regularly receive communication on how they are doing. I suggest routinely posting cycle count and turn rates. Let the staff see the results of their hard work. Be sure administration knows how things are going as well.

Embrace technology and automation. It can be a great tool to help you reach your goals and improve efficiency. The proper selection and application of technology is paramount. This must be a team effort. Materials management needs to work with IT, finance and other appropriate departments to evaluate and implement technology. Do not adopt technology for its own sake, be sure that what you are looking at will deliver the results you need.

Mike Braatz, Senior Vice President of Marketing,
PanGo Networks Inc., Framingham, MA

Get smart and creative with spending equipment dollars. Every year, hospitals waste millions buying extra IV pumps, ventilators, portable monitors, wheelchairs, and just about anything else on wheels – just to ensure that lifesaving equipment is available when and where it’s needed. Instead, hospitals can break the costly cycle of over-procuring and losing equipment by tapping mature technologies: Radio frequency identification (RFID) tags constantly emit signals to pinpoint the exact location of critical assets. The prices of these standards-based tags are falling – today, ranging from $50-$75 apiece. In this scenario, the choice becomes whether to spend the extra $3,000 average cost for each additional biomedical device, or get smarter about tracking these assets.

Work with your IT department. Great solutions come from inter-departmental collaboration. For example, chances are good that your hospital has already deployed standards-based Wi-Fi networking, or is considering it. Campus-wide hot-spots create a natural infrastructure foundation for asset-tracking technologies like RFID tagging.

Remember that you support multiple constituencies. There are many different constituencies within a hospital, all of whom have pressing demands for more effective inventory tracking:
• Nurses and other care-giving staff need to know precisely where to find a ventilator, EKG device, IV pump or wheelchair not already in-use. A dirty little secret common to most hospitals: Nurses can spend up to 30 percent of their shift locating needed medical equipment. The bigger the hospital and the larger the campus, the greater the problem.
• Biomedical engineers perform timely equipment maintenance to meet stringent Joint Commission on Accreditation of Health-care Organizations (JCAHO) regulations. They state that if a service order takes 8 hours to complete, 6-7 of those hours are spent simply finding the asset. Some hospitals have created a staff of ‘spotters,’ whose sole task is finding equipment for this routine service and maintenance.
• Patients experience unnecessarily long wait times because of ‘asset invisibility.’ This compromises a hospital’s ability to achieve high quality patient service and care and increases capital expenditures, collectively amounting to millions of dollars a year.

When making the case for better inventory tracking systems or technologies, these workflow inefficiencies and patient care compromises create a powerful argument, with implications ranging far beyond the dollar cost of lost or misplaced inventory.

Carola Endicott, Vice President,
Hospital Services, WaveMark, Littleton, MA

Technology is available to help you manage your inventory. Relatively new technologies, such as RFID, are beginning to be very helpful in improving inventory management. RFID frees up clinicians who manage field departmental stock because it allows for the constant reading and reporting of the inventory levels and usage patterns of high-value consumables, such as stents. Similarly, it can track assets like portable X-ray machines and IV poles.

Information is king. Using technology can provide you with a substantial amount of information to help you manage and control your inventory. Information from RFID products can help you optimize your inventory at the SKU level, reduce out of stocks, improve patient safety, improve your capture of billing information and reconcile issues with your vendors.

High-cost inventory needs to be managed at the SKU level. Too often people make decisions based on aggregate product family and not at the level of the individual SKUs that make up that category. You may be on target for the total number of drug-eluting stents you carry, but you may be way over or under on a number of SKUs, which can seriously impact patient service (if you do not have enough on hand when they are needed) or your hospital’s financial position (if you have money tied up in carrying excess inventory that will not be used).

There is such a thing as having too much inventory. Hospitals tend to over-stock certain key items (stents, balloons) for fear of not having something when it’s needed, which can impact patient safety and/or incur the wrath of the operating physician. However, being always overstocked usually only benefits the vendor. If you have too much inventory invested in slow-moving product you run the risk of having that product expire on the shelf (waste), using too much of your precious storage space or limiting your ability to use the money tied up in that inventory for better purposes.

Try to partner with your vendor. Although buyers and vendors traditionally have adversarial relationships, it is possible to create a partnership with them. Sharing and understanding each of your goals can go a long way towards building a strong partnership that will ultimately put you in a win-win situation.

Carl Brewer, President,
Integrated Warehousing Solutions LLC, Downers Grove, IL

Remember that items have a shelf life. When dealing with medicines that expire there’s increased pressure to track and move the right inventory. Serial, lot, expiry numbers and location need to be managed for easy access – down to the vial level.

Look outside for funding. From federal funding to private and community monies supporting the healthcare industry, there’s opportunity to invest in advanced technology and infrastructure to build out tracking solutions.

Track inventory at multi-levels to improve efficiency. When departments use the same supplies, on-demand visibility into inventories helps manage and maintain a more flexible supply chain – one where demand spikes in one area can be met by excess supply in another. For example, if the ER runs out of type-o blood, knowing which departments can be tapped as a resource at any given time is critical to saving lives.

Automate Control. Systemize the picking, pulling and putting away of inventory. Using technology like bar codes, scanners, RFID tags to recorder, track and locate items at a very granular level ensures processing accuracy and eliminates the human errors of tracking.

Michael Ferris, Managing Partner,
Management Health Solutions Inc., Wayne, PA

Do not think that technology is the solution to any supply related problems. All technology, whether it is information technology or automation technology, involves tools that can assist in developing a process that will resolve inventory and supply related issues. Too often money is spent putting in technology tools to fix a problem, and there is no focus on identifying the root cause of the problem and redesigning the process.

Data is the most important tool in any kind of inventory management program. Clean, accurate and complete data files are necessary to identify opportunities for inventory management and supply chain efficiencies. Too often there is a disconnect between the purchasing staff creating the item records and the inventory staff using the item records. The use of X type or free form items is common practice to get an item on a purchase order but creates havoc in the world of inventory management. Again, a process needs to be implemented that focuses on data configuration.

Get involved with the clinical staff and leadership and create a customer focused relationship. Many times the inventory staff feels that the clinical staff is the enemy instead of the customer. You must build a trusting relationship with the key stakeholders and customers.

Conduct a complete inventory of the supplies that are in the non-perpetual locations in order to set a baseline inventory value. Set goals for reduction, consolidation and management of the identified inventory. You don’t know what the opportunity is until you identify the baseline.

Work with your finance department to understand their goals before undertaking inventory reduction programs. Many times materials management takes on an inventory reduction program in a department that finance carries on the books as an inventory asset. A reduction in this asset can mean that an increase in expense may be required at the end of the year, which can make a significant impact on the profitability of the organization. Inventory reduction programs should be coordinated with finance throughout the year so that expense adjustments can be made over the course of the year.

Mike Rudomin, Vice President, Supply Chain Consulting,
OMSolutions, Owens & Minor Inc., Glen Allen, VA

Review the results of past physical inventories. Look at the overall book-to-physical discrepancies (percentage, dollars, categories) to see what has been problematic in the past and whether or not things have improved.

Conversion factors, conversion factors, conversion factors. Your inventory will never be accurate if you can’t manage purchases, issues, and receipts cleanly relative to converting cases, boxes, packages, etc.

The 80/20 rule really does matter. Spend most of your time and energy on the 20 percent of the expensive items that account for the large majority of your dollars.

Cycle count. Regardless of whether or not you officially perform an annual inventory, cycle counting is an excellent way of ensuring you keep a pulse on your inventory and can address problems sooner rather than later.

Watch out for temporary product substitutions and permanent product changes. They are part of life, but the new product often is packaged differently (e.g., from a case of 12 to a case of 10, throwing off your lowest-unit-of-measure pricing) or has a different purchase price.

Jamie Kowalski, Managing Director,
OMSolutions, Owens & Minor Inc., Glen Allen, VA

Develop an inventory management strategy. Objectives, targets, tactics and processes.

Define/redefine ‘inventory,’ and therefore, what needs to be managed. (Note: O.R. inventory is typically 7-10 times greater than inventory in the storeroom.)

Determine what inventory needs managing via perpetual inventory and the tools/information systems available and needed to do so.

Identify who is responsible and accountable for inventory management performance. (Note: User departments are in the best position to manage their inventories – they will need assistance; give it to them). Make sure the CEO and CFO are in agreement on this and that they hold those managers accountable.

Set up metrics for measuring performance and the means by which the data will be captured, analyzed, reported. Use such measures as: Dollar value of on-hand inventory, annual turns (days of supply on-hand), variances (on-hand count vs. recorded on-hand; aggre-gate items and dollars) and adjustments (+/-, percent value per value of total inventory; dollar value of variance).

Source: Healthcare Purchasing News

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