Inventory: A Hidden Asset in Healthcare

It is estimated that up to 30% of hospitals’ and IDNs’ supply chain spend expires, becomes obsolete, or is wasted.

Are you treating inventory like an asset?

How much of your inventory do you lose due to expiration? What does that cost the average hospital, urgent care center, doctor’s office, or other healthcare facility every year? Thousands? Perhaps millions?

The bulk of value in your inventory sits in med-surg supplies, such as sutures and procedure trays, and pharmacy items, and it’s estimated that anywhere from 10 to 30 percent of products expire on hospital shelves. Health systems are losing as much as one percent of their potential annual net revenue due to various issues associated with charge capture[1].

A 2012 report by the National Academy of Medicine estimated that systems lose $765 billion a year due to inventory waste. While the future of the Affordable Care Act is uncertain, health systems remain committed to value-based care for the foreseeable future. There’s no room for waste—if you don’t treat your supply chain as a strategic asset, your organization may be at a disadvantage!

Health System Inventory Management Challenges

Let’s not oversimplify the problem—successful inventory management isn’t easy. You must have enough on your shelves to meet demand (and attempt to anticipate emergency situations), but not overstock or waste valuable square footage.

Along with shelf life, additional challenges include:

• Consignment Inventory: Rarely an effective supply chain technique, consignment inventory is expensive for the supplier to manage, and thus those costs are passed along to the customer. It’s also inefficient and allows limited visibility into the supply chain

• Patient Needs: Your patients are not one-size-fits-all, and inventory must meet the needs of each individual. An automated management system helps control complex inventory needs

• Demand: Inventory demands fluctuate due to various reasons, such as the outbreak of a contagious illness, or an emergency situation such as a weather event, leading to unexpected shortages

• Organization/Visibility: A lack of organization and/or visibility into inventory means nurses and other healthcare professionals spend valuable time just looking for products, and overall analysis of inventory management is difficult

• Security: Security measures are essential, including tools such as barcodes, to keep inventory safe and to hold staff accountable

Lean Management

Taking control of your inventory will help your hospital or health system reduce its supply spend—a goal that should be on the list of every medical facility dedicated to value-based care. This may be a multi-step process, depending on how your hospital or system currently manages inventory.

One move with the most reward is investing in an inventory management and tracking software program. This will give you visibility for day-to-day inventory management and enable long-term inventory planning. Ideally, the solution should integrate with electronic medical records and other hospital IT systems for complete interoperability and data analytics.

Consider the advantages of just-in-time (JIT) delivery to reduce or eliminate stockpiling. While this requires skillful planning, JIT inventory management requires less warehousing or storage space, prevents unnecessary or expired stock, and requires a smaller investment.

There are also simpler, less costly ways to improve inventory management. Be sure to place the most frequently used supplies in the most easily accessible locations. Be sure everything is accurately labeled and staff members are well trained, and add new inventory to the back of the shelf to ensure the oldest product is used first.

RESET PAR Optimization Program

If you have completed some of these steps and still see room for improvement, then perhaps it is time to bring in outside help. At Suture Express, we offer just-in-time delivery that eliminates stockpiling, and brings you actionable intelligence on product usage and inventory value. Our RESET PAR Optimization program could help you reduce inventory up to 30 percent in one year, double your inventory turns, increase space and capacity, and return excess and no-move inventory for full credit.

Mercy Hospital in Chicago, IL lowered costs and maximized efficiency in suture and endomechanical supply by switching to Suture Express. It decreased annual spend by 5-10 percent, reduced on-hand inventory dollars by 30-50 percent, and cut obsolete stock by 10 percent. With the assistance of Suture Express, University of Vermont Medical Center maintains a stockless suture and endomechanical supply model, relying on high next-day fill rates and low on-hand inventory.

For more information on how Suture Express may be able to help you take control of your inventory, visit or call 877-790-1893.




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