Inventory on hand is a huge pain point, and expense, for the industry. Organizations need to build an action plan that establishes true transparency and visibility for supply chain partners. This will ensure that the right supplies are on hand based on the schedule. This visibility will also afford greater flexibility when the schedule changes. All partners can adjust in unison. 

I would also look for opportunities to create lean facilities. Opportunities are limited in older institutions where the original structure wasn’t designed to optimize inventory storage and movement. Greenfield facilities can be designed both for optimal patient and physical flows. Look for both within your acute and sub-acute facilities.

John Freund, CEO and Chief Technologist, Jump Technologies Inc.

We have all heard it a thousand times that the job of supply chain managers is to ensure that the right product is available in the right place, at the right price, at the right time. This job is made much easier by the fact that the vast majority of vendors (McKesson, Cardinal, Owens & Minor, etc.) do the "heavy lifting" regarding distribution logistics, allowing hospitals to typically receive orders within hours and certainly no longer than a day or two from the time an order is placed. However, the software that runs most hospitals today is rooted in manufacturing where the supply chain is far more complicated and difficult to manage. As a result, hospital supply chain management processes are bloated, out of date and expensive for a typical hospital environment due to the high labor costs associated with them.

So my "reboot" would be to get rid of healthcare’s archaic supply chain management technology and the processes that go with it. I would replace it with systems that are quick to implement, simple to use, and powerful in their ability to provide data analytics. Doing this would allow healthcare facilities to cut requisitioning costs, increase contract compliance, reduce inventory, eliminate stock outs, and cut back on waste caused by expiring products — all while getting the right product to the right place at the right time at the right price.

This new system leverages current technology like the cloud and mobile computing to enable simple implementation, use and updates. Vendors of these systems manage their applications in the cloud rather than burdening the hospital with the cost of the hardware and IT expenses associated with managing the software.

Finally, clinicians and supply techs embrace this system because it allows them to do their jobs more efficiently. In today’s outcome-based reimbursement world, clinicians will need to get more and more involved in the materials process. In my new world, clinicians willingly accept their new role in supply chain management because the system actually makes their their job easier rather than burdening them with complicated processes that they will never follow.

Charles Hodge, President, BlueBin

The biggest issue that we see in the healthcare supply chain world is that clinicians are spending a significant amount of patient care time managing inventory, especially in the OR, labs and ancillary service areas of the hospital. Just recently we have had the chance to start from scratch — a clean slate — with a couple of newly built hospitals in Florida. In the BlueBin playbook, a major focus of ours is giving back full control of the supply chain to the Supply Chain department. This not only gives the clinical time wasted on managing supplies back to the patient, it also drives significant cost savings and end-user satisfaction. This is exactly what we did with the Greenfield hospitals we assisted this year, implementing a visually managed kanban system that manages all medical supplies in all departments.

In many hospitals, the current state of inventory management is a result of evolving circumstances and changes over the years, and for many of them it is absolutely warranted to "reboot" the inventory management practices. A blueprint for rebooting starts with reevaluating the key ingredients: Processes, people and technology associated with inventory management function.

Reengineering of processes is the first and most important step. Each inventory-related process is evaluated to address the following questions:

• Are the functional spaces organized to obtain maximum labor productivity? This may call for the redesign of the physical layouts and storage methodologies for improved picking and put-away productivity in storerooms and shorter search time for clinical customers in the PAR areas. For example, reorganizing supplies by categories in collaboration with clinical staff.

• Do you have right levels of right supplies in each of the functional areas? In many main and surgical storerooms there are inactive products that are not used for months and years that are taking valuable space. Also, many PAR areas have supplies that are rarely used. These supplies are taking valuable space that is needed for more frequently used supplies. Going forward, managing inventory needs to be an ongoing process and is best achieved by a data driven analytical methodology beyond what is found in a Materials Management Information System.

• Are the replenishment frequencies for each inventory area set for best labor productivity? The vast majority of inventory areas inside a hospital are replenished more than necessary. By reducing the frequency while resetting the stock levels accordingly, a 40-percent to 60-percent gain in labor productivity could, in most cases, be accomplished.

• Are you using Lean concepts to process redesign? Use of Lean concepts in process redesign helps eliminate redundant steps in a process which ultimately helps minimize number of "touches" and helps assure having the right inventory levels in the right places at the right times.

• Are you using indicators to measure and evaluate inventory performance and management? An inventory turns ratio provides a snapshot into how well supplies are being managed, but it is the parsing of the data that identifies changes that will improve the performance. For example, what items have not moved in the past year and which of them can be eliminated? The labor associated with the acquisition, storage, processing and distribution of inventory is another important area. Yet detailed productivity measures are not commonly used in healthcare.

Reevaluating technology should not always equate to newer technology. Often, maximizing use of existing technology delivers better dividends than major new investments. Here are some keys for evaluating existing technology options:

• In some instances, certain technology is purchased [but] not put to practice. Before investing in any new technology, evaluation of what is available is a must.

• Implementation of technology without changes to related processes also creates redundancy and waste. For instance, implementation of point-of-use systems without proper training and compliance monitoring could actually create extra steps in the process.

• The vast majority of MMIS’ are now offering mobile supply chain modules and handhelds. Many hospitals have already implemented mobile supply chain; however, very few are getting maximum benefit from such technology due to a lack of standardization, retraining and compliance monitoring.

• Many already use RFID for tracking durable medical equipment. Use of Active RFID technology more importantly and with appropriate training will help gain maximum benefit from such technology.

• Retraining of people is another major factor in rebooting the inventory management practices. Here are the key areas to address as part of the rebooting process.

• Standardization: Each of the functions directly tied to inventory management, such as receiving, put-away, picking, stocking, cycle counting, etc., need to be standardized as a first step in this process. In many operations, each person may have tendency to perform steps in the process slightly differently, which may have direct impact on the productivity. Part of this step has to be training employees to standardize the use of technology such as mobile supply chain handhelds.

• LMS: Labor Management Systems are commonly used in other industries to monitor labor performance and productivity. Use of LMS is not very common in the healthcare industry. Adopting LMS tools similar to other industries could significantly improve supply chain productivity and encourage higher employee productivity. In the current state, clinicians spend a certain amount of time in supply related activities. By improving Supply Chain labor productivity, Supply Chain staff could relieve clinical staff by reducing their supply-related activities and therefore [provide them] more time at bedside.

• Customer Service:Another step in rebooting process will be to retrain Supply Chain staff to build more credibility towards clinical staff by improving inventory performance and going beyond what is expected of them. Also, having a regular communication with clinical staff to obtain feedback and create continuous improvement cycle is a must.

Here are some key guidelines in implementing an inventory management rebooting process:

• Change has to be gradual so that it is not perceived as disruptive. For instance, for a surgical storeroom that is turning inventory four times, the next target could be six turns during the next quarter before you get to eight turns. Also, implementing of major reorganization of supply areas during off hours and weekends with proper communication briefs is critical.

• Communication with all parties involved throughout the process is the most critical function. Lack of communication is a key reason for failure in the change management process.

• Process compliance and dedication to change management is what leads to longer term sustainability which ultimately helps avoid another rebooting process.

---

Michelle Robbins, Industry Strategy Director, Healthcare, Infor

The consolidation of healthcare facilities and the emergence of the consolidated service centers (CSC) have, in fact, been providing a canvas for many organizations to rethink their inventory management and procedures. At Infor, we are talking with many of our clients today about our Warehouse Management Solution (WMS), and it is evident that the industry is thinking beyond managing the activities of the storeroom and shifting to developing strategies to control the movement and storage of materials within a warehouse environment.

Taking the cue from other industries, Vendor Managed Inventory (VMI) would be at the top of my playbook. This is not the traditional consignment agreements in hospitals today, but instead true VMI like Dell and Walmart, where the vendors stock and manage their products or designated space. Remarkably in other industries, vendors actually pay for that space in the warehouse!

Another item I would include in my playbook would be the implementation of demand/forecasting tools. The ability to plan and forecast aggregated demand for the entire integrated delivery network (IDN) to maximize purchasing strength, analyze trends and consolidating purchases is crucial for managing inventory practices and procedures.
 

Most organizations have so much going on already that they simply do not have the budget, resources or in-house expertise to implement these capabilities. Experience suggests that they will be better served by placing emphasis on creating strong partnership with distributors and manufacturers. Organizations should strive to give their supply chain partners visibility so that as the schedule changes, all parties can adjust accordingly and take advantage of these best practices. Distributors and manufacturers either have specialist capabilities or work with third-party organizations to bring them to bear. If providers can commit to working collaboratively, they work with each supply chain partner to keep down acquisition costs, which will help contain overall costs, and improve profitability where organizations are striving to be profitable at Medicare reimbursement levels.

FREUND: "Intermodal" is a freight-handling term that describes product being put in a single container that can be shipped via different methods without changing the container. Typically they are talking about a shipping container that can be put on a cargo ship, transported to a port where that same container is placed on a rail car, and taken to a terminal where it’s put on a truck that will take the goods to their final destination. Intermodal has proven to reduce shipping costs and increased merchandise security due to less handling of the goods in a container. As such, this applies to distributors who bring supplies to hospitals and clinics rather than most healthcare facilities. Their goods are transported via truck, usually from point to point.

Mobile computing is changing the way we inventory, requisition, manage and receive supplies in healthcare. Omni-channel supply chain management refers to the ability to store inventory in multiple locations but treat it as if it were all in one bucket in the facility. The key to a successful omni-channel strategy is visibility into all inventory at any given time in any and every place.

Many hospitals and clinics have launched aggressive iOS and Android-based mobile initiatives. The same devices running apps for patient drug interaction, X-ray review, physician reference and more can also run an app that provides total visibility into inventory across the entire facility. This app not only identifies where inventory is, but allows for the simple transfer of inventory to a particular location, or the requisition of inventory if it is not found anywhere in the facility.

From a receiving standpoint, I can use the mobile device to receive goods on my dock and track those goods to their final destination, including electronic signature capture, thus ensuring accurate inventory across all locations or "channels." Again, the same device that is managing the inventory in multiple locations is also receiving inventory and tracking it to its final destination. I believe that omni-channel supply chain management can be effectively done only on a mobile platform.

HODGE: Intermodal is all about visibility and flexibility, two things in which the healthcare supply chain could learn a great deal from industry. The integrating of "modes" requires a process or systems approach for execution. Intermodal transportation is a holistic focus on process vs. healthcare’s current focus on infrastructure "components." To move in this direction, our supply chain leaders need to develop a comprehensive understanding of their total supply chain capability and performance. Relational data between participants up and down [the] stream is needed for the transparency this methodology requires, but also flexibility (the ability to support through multiple "modes"). But keep in mind, no matter how much we integrate the various supply chain linkages, it all starts with the clinical end-user. Everything that happens in the supply chain should begin as the end-user "pulls" the supply into their operation (to the patient). And this gets back to Lean.

JAGDEV: Intermodal movements have been part of supply chain strategy for years and have delivered significant cost benefits across multiple industries. This concept is designed around putting freight in a container that could travel across multiple modes without having to transfer contents while reducing the need for additional handling. Use of rail has helped bring the costs down however sometimes meeting tight service windows are an issue with using intermodal.

In healthcare there are multiple areas where this concept could have an application. Recently, the use of "two-bin kanban" is being re-adopted by many healthcare organizations. A set of bins going to a PAR area that is filled at a distributor warehouse or service center (as part of a low-unit-of-measure program) could be placed in a secured container and transported on carts to a truck, to a hospital loading dock (or all orders going to a PAR area stored in a single container), to either a cart or other internal transport systems, such as Automated Guided Vehicle Systems (AGVS), to PAR areas for restocking, could be an application using an intermodal concept.

Another example of intermodal is already used in hospitals [where] small packages, such as medications and lab samples, are placed in Pneumatic Tube System (PTS) containers that are hand-carried to tube stations and then transported to a destination station and again taken to point of use. Recent advances, such as RFID [allow] secured packages to be sent, maintaining chain of custody requirements associated with medications.

Omni-channel fulfillment approach is mainly used for a smoother customer shopping experience, improved service time and inventory levels and lowered overall cost. In other industries this concept has evolved rapidly with the emergence of various ways customers could order a product, including using a mobile Internet device, online, via phone (TV, radio, direct mail, or catalog), via channel partners/distributors, or going to actual stores. In the past these channels operated as separate channels of fulfillment.

The supply chain challenges while managing these individual channels are particularly acute due to a lack of visibility into inventory through these channels. This increases pressure on inventory turns and margins making it difficult to continue to proliferate inventory to support multiple channels. [This] leads to businesses not only missing out on demand needs but also missing out on meeting service needs. Omni-channel fulfillment is concentrated more on a seamless approach to the consumer experience through all available ordering channels. Businesses are meeting the new customer demands by deploying specialized supply chain technology to obtain better visibility, streamlining of processes to support these channels as if they are a single channel.

In healthcare supply chain similar challenges are in play when there are various ways of ordering supplies or medications. A clinician in need of a supply item may use a mobile device connected to MMIS, or order to a clinical system like Cerner or Epic via PC or online portal or via phone call. No matter how an item is ordered, one of the key first steps is to bring the order into the MMIS similar to how an order is generated by a mobile supply chain device. This will help expense an item to the appropriate department or entity.

More importantly, if the product is picked from a perpetual inventory location, such as a storeroom, it will automatically deplete the stock and close the order upon delivery. In the current environment, many of these processes are manual and therefore leave room for data entry errors, timeliness on entry, which could affect inventory level and reordering of the item (if it falls below the reorder point). The omni-channel fulfillment approach will mainly improve inventory performance, and even more importantly improve service by measuring of order cycle time.