Inventory Management: Adjusting the Approach

Health systems are adjusting their approach to inventory management to combat supply chain disruptions and other challenges to patient care.

How a shift in approach could help with inventory management.

We recently examined the impact of supply chain disruption on patient care. Despite the challenges, many hospitals and health systems are adapting in several ways. A deeper dive shows that many health systems are evolving their inventory management practices to combat the operational challenges of the COVID-19 pandemic. Here are some of the areas where they are adjusting their approach.

Managing costs

Health systems focused on cost savings and managing their spending before the current pandemic. This is still the case, but the approach is less on aspects like lean management and just-in-time inventory and more on other areas. The challenges stemming from COVID-19 have driven many to focus on balancing expense and cash flow optimization with the ability to dramatically ramp up inventory as needed. We’re seeing health systems increase the focus of their processes on supply assurance, resiliency, getting the products they need when they need them, and supplier diversification.

New processes

In addition to a continued focus on cost savings, many health systems have established processes to address newly created or updated critical and safety stock item lists. Here are some key actions they have taken:

Housing items in a central location within the health system as opposed to having them distributed throughout the entire health system and monitoring that segregated inventory with escalated scrutiny
Maintaining and monitoring inventory levels for items on a real-time basis
Using extensive predictive analytics technology to assist in managing inventory levels and refill points based on usage patterns

Evaluating delivery methods

Many health systems are evaluating the costs and benefits of moving away from the traditional just-in-time approach to inventory management.

In addition to the par levels in critical and safety stock, health systems have also increased items to minimize stockouts due to manufacturer supply constraints and/or disruptions created by other issues in the supply chain such as weather events. Health systems house this extra inventory in system-owned facilities or off-site in contracted space or owned centralized distribution centers.

Increased usage of data and analytics

Health systems are placing greater emphasis on the value of data and analytics to optimize inventory management and forecast demand. The heightened focus stems from the need for the following:

Smarter, faster and predictive information to mitigate shortages and stockouts
Use of data to fine-tune ordering processes and optimize par levels
Automate ordering functions based on usage patterns
Advanced technology

In addition to more data and analytics, hospitals are adopting technology solutions to increase efficiency and offset labor shortages. Some of the ways they are doing so are through perpetual inventory systems and other automation and robotics. Additionally, many are utilizing RFID solutions as an inventory management solution for tracking and reordering high-dollar medications and supplies.

Other actions

Throughout the pandemic, government intervention has also played a pivotal role, enacting a variety of initiatives to reduce drug shortages, increase domestic drug production and expand the size and scope of the Strategic National Stockpile (SNS). Moving forward, we anticipate further intervention to help health systems combat inventory management challenges.

Learn more about how we help health systems manage inventory.

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