Hospitals have long used inventory turns as a metric to measure how they are managing their inventory. Typically, hospitals have measured inventory turns at the facility or system level. However, they are increasingly looking at inventory turns on a more granular level, at the department or even a product category level. And one of those product categories is sutures and endo-mechanical.
“Inventory turns of sutures and endo are a relatively easy way for a hospital to see how effectively they are managing their inventory,” says Freddie Faubion, Director of Service Line Strategy at Owens & Minor. “Sure, hospitals can and do look at the spend on sutures and whether it’s going up or down. But those numbers don’t tell you how well you’re managing sutures. Inventory turns do.”
Inventory turns have been around for a long time. It’s a key financial metric for many businesses, especially retail. Historically, inventory turns have been used to measure how quickly a company sells its inventory. That’s important because inventory is a type of working capital for a company. The company has already paid for the inventory and it’s an asset on the company’s books. But if the inventory is collecting dust and not being used, that’s money wasted.
Inventory turns will tell you how effectively you’re managing that inventory. A low number of inventory turns generally means that the hospital has too much inventory on hand. “One of the first things we look at in our PANDAC survey of sutures and endo is inventory turns,” says Faubion. He continues: “If we find a low number of turns, say two or three or four, that shows me they probably have more inventory on hand than they really need. What’s more, they usually have so much of it that is stashed away in all sorts of nooks and crannies of a hospital, presenting still another problem.”
How to calculate inventory turns of sutures
Calculating your inventory turns of sutures is a relatively straightforward process. Simply take how much you spent on sutures and endo-mechanical over the past year and divide that by your ending inventory for that year. Some people take it one step further and instead of using their ending inventory for the year, they take the inventory from the beginning of the year add that to the inventory at the end of the year, divide by two and divide that number into the spend.
Most hospitals can easily determine their spend on sutures by pulling the information from their MMIS or some other solution. It’s getting an accurate inventory that is often more problematic. “So many hospitals simply don’t track their physical inventory of sutures,” Faubion says. Making an accurate count even harder is the fact that staff tends to squirrel away supplies of sutures where ever they can find room.
“In a PANDAC survey of sutures, one of the things we do is a physical count of the sutures and endo inventory and get an accurate inventory count by SKU. Depending on the hospital, that can take a little bit of time, but armed with that information, we can quickly determine inventory turns for sutures,” Faubion added.
What’s a good inventory turn number for sutures
There is no magic number of turns a hospital should strive for in managing its inventory of sutures. Faubion says, “it really depends on the hospital. We’ve taken hospitals from three or four inventory turns to eight or nine. I’ve even seen hospitals go much higher, even in the teens.”
“Typically, you increase turns by consolidating and standardizing sutures and endo SKUs,” explains Faubion. “Some hospitals want to push that hard and can achieve a high inventory turn number. Others don’t want to be that aggressive. They might have a few high-performing surgeons who use a unique suture SKU that they don’t want to standardize that SKU. But overall, inventory turns number is probably in the high single digits.”
If you suspect that you’re carrying more inventory of sutures than you need or your suture and endo costs are too high, calculating your inventory turns is an easy way to quickly determine just how efficiently you’re managing your inventory. And even if you don’t have the time, the resources, or the staff to calculate turns for you, there are services like Owens & Minor’s PANDAC who will work with you to find ways to improve.
PANDAC: Wound Closure Inventory Management
PANDAC is a comprehensive, on-site product inventory program that helps control purchases and eliminates excess inventory, all the while maintaining inventory levels. Schedule a free assessment today, and we’ll work with you to determine how much you can save with PANDAC. Fill out the form to the right to schedule an assessment.