Controlling Out-of-Control Inventory

March 1, 2022

Looking back on COVID-19, the importance of an effectively managed healthcare supply chain is clear. Inside of a hospital, changing safety regulations and changing demand have made inventory management particularly challenging. Yet inventory management is a critical component of the patient care journey, as well as a critical component of a hospital’s financial stability. “As the past two years have demonstrated to everyone in the industry, it is impossible to control or predict the circumstances that dictate inventory demand,” Angela McNally, Regional Vice President Southeast at Owens & Minor. “But what we can control is building an inventory management infrastructure that has the flexibility and resiliency to help healthcare providers do what they do best—deliver the best possible care in every situation.”

A common indicator of poor inventory management is ineffective space use within a hospital system. Out-of-control inventory typically requires more storage space; however, if the inventory was properly managed and controlled, that space could be used for patient care. In the case of a hospital, for example, that may be space for another operating room or perioperative suite that would generate more revenue. “You can see this problem easily becomes a vicious cycle,” continued McNally. “There is too much inventory, requiring more storage space, but that space limits the capacity for the very procedures that would use that excess inventory.”

From a financial perspective, if a healthcare provider doesn’t know what they have in inventory, the assets listed on their balance sheet could be considerably lower. Owens & Minor partnered with a hospital organization that thought it had $6 million worth of inventory on the shelf. After conducting a physical inventory, we learned they had $15 million worth of medical supplies, more than double the inventory they thought they had. That discovery enabled the organization to improve its bond rating because the value of their assets was so much higher.

“We worked with another healthcare organization that faced challenges in inventory management,” said McNally. “They didn’t know what products were ready to expire or what to order. With the use of one of our tools, they were able to reduce their inventory by $1 million.”

Many hospital systems are still trying to recover from the crushing loss of revenue and high staff turnover prevalent throughout the pandemic, so every dollar of inventory is essential for ensuring a stable future. In all of these cases, the key to gaining control over a runaway inventory process came down to having the proper insight about what inventory was needed, where it would need to go, and when.

According to McNally, coming up with a useful inventory management process can look different depending on the healthcare system and its needs. For some, conducting an initial assessment can shine a light on necessary updates that solve inefficiencies in their supply chain. For others, implementing a comprehensive inventory management system that tracked every product, including expirations and recalls, helped support patient safety measures and automate manual processes for their teams. With staffing and funding shortages in the wake of COVID-19, many hospital systems are finding relief by securing dedicated inventory management experts embedded within their teams.

No matter the steps taken to get there, efficient management over the hospital supply chain is an imperative area of focus for industry leaders in this next phase of pandemic response. Inventory control can reduce expenses, optimize processing, support patient safety by tracking essential product data, and it can ultimately contribute to a more secure supply chain across an entire health system. Because while healthcare will always be navigating the unexpected, a secure supply chain can serve as a foundation for critical patient care when it matters most.