Improve the Efficiency of Inventory Management

By: Vicky Lyle

April 24, 2017

With the mounting attention on reducing costs and improving outcomes in today's healthcare market, providers are feeling the pressure. Savvy healthcare providers realize the importance of appropriately managing their inventory of medical and surgical supplies and the benefits of precise inventory management.

Supply chain management is a specialized function that can directly affect both the organization’s bottom line and patient outcomes, for better or for worse. In other words, effective control and management of medical and surgical supplies improves the delivery of healthcare services, patient care, and the provider’s financial performance. Owens & Minor can be an important partner in helping hospitals achieve these positive outcomes.

Historically, inventory management was not really viewed as a critical function—to have a whole process for managing sutures, for example, was an innovative idea. Traditionally, the focus was solely on the patient and patient care. However, the advancement of healthcare services and medical products has changed that, putting more focus on life-saving products, high-tech implants, and even organ transplants.

The biggest challenge is the environment for the operating room or perioperative care. In many hospitals, it is an area of significant waste and inefficiency, and for a number of reasons. The supplies for perioperative care include everything from the preparation for surgery, the surgery itself, and then to what is used to stabilize the patient in the recovery room.

In many hospitals, this is not a controlled environment. There may be multiple operating room suites directly connected to a single supply room, and there may be 25 clinicians using the same supply room on any given day. They may not always have the ability or the time to scan the whole room and do a thorough check of inventory availability or to check product expiration dates. Very few hospitals can manage a perpetual inventory for these suites—knowing every single time something goes into or out of inventory.

A related challenge is the entrance of new healthcare products. A hospital may order new products and put them into inventory. Thus, supplies that were previously ordered are no longer are used and begin to expire. This increases the chance of an expired or obsolete product cluttering valuable storage space.

Another significant challenge in managing and controlling the inventory of healthcare supplies is that multiple supply chains often feed an operating room or clinic environment. There’s never just one single owner. Some products may be owned by the hospital, for example. Others come direct from a manufacturer, and others come from a distributor. In many hospitals, there is no single overall control.

Hospitals typically try to plan for sporadic demand of medical supplies. They tend to over stock to compensate for the lack of control. Imagine having a room filled with office supplies, for example; it makes it a lot harder to find what you need when you are overwhelmed with shelves and boxes of unorganized supplies. Hospitals also establish procedures to prevent the risk of human error, but the lack of control makes this problematic.

There are significant consequences to the challenge of effective control and management over the inventory of medical products and supplies, and they have a direct bearing on the health of the patient and the hospital’s performance. A lack of control contributes to higher costs associated with managing that inventory.

Another outcome of poor inventory management is that out-of-control inventory typically requires more storage space. This is space that, if inventory was properly managed and controlled 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.

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. 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.

Finally, efficient management over the hospital supply chain can reduce expenses through reduced inventory, it can optimize processing, and it can contribute to better patient outcomes—better healthcare service delivery—because clinicians can devote more time to the patient.

Owens & Minor drives efficiencies within the hospital through people, processes, and technology. We offer a variety of services to help customers manage inventory including:

  • Specialized resources to manage inventory
  • Consultants to teach healthcare professionals how to manage and streamline inventory processes
  • Technology to automate the management of inventory

We can do one or all three. Our on site solutions include assigning our experienced teammates to work in the hospital five days a week to manage inventory in clinical and non-clinical areas. They are responsible for all ordering, receiving, and managing.

When we partner as a consultant, we provide resources to go into the hospital for a certain period of time to learn their inventory management practices—their ordering and receiving processes, what technology they use, and so on. We review their practices and recommend methods for efficient inventory management. We also provide documentation for standard operating procedures so when the consulting project is concluded they are equipped to do it on their own.

Owens & Minor also offers Inventory Solutions Services including tools and technology for inventory management—technology that can capture the associated information, manage it, and integrate it with the hospital’s other systems. Because we have proven that we can deliver improved inventory management performance to our healthcare provider customers, Owens & Minor is a valued partner in healthcare delivery and management.