More and more healthcare institutions seek to reduce costs while increasing the quality of care.
Accurate forecasts of the use of medical supplies represent an important element of this effort. Overordering supplies drives up costs, and under-ordering supplies also can drive up costs and compromise care.
The stakes can be high. Caldwell Memorial Hospital, a 110-bed hospital in North Carolina, saved $2.62 million in less than six months by consolidating and eliminating excess supplies (Belliveau 2016). The hospital used a Lean approach to inventory management, which involves streamlining and simplifying the inventory and ordering systems.
In addition, a number of hospitals have expanded their use of just-in-time inventory management (Green 2015). This method reduces, but does not eliminate, the need for forecasting accuracy. Some supplies are highly specialized and are used intermittently, so they must be ordered well in advance. The savings can be substantial. Mercy Hospital in Chicago was able to reduce its inventory by 50 percent using just-in-time inventory management (Green 2015).
Discussion Questions
• What share of hospital costs do supplies represent?
• Why would overordering supplies drive up costs?
• Why would underordering supplies drive up costs?
• Can you offer examples of Lean inventory management? Does it work well?
• Can you offer examples of just-in-time inventory management? Does it work well?
• Can you offer examples of supplies that have to be available at all times?
• What are the main challenges to making accurate forecasts of supply use in hospitals?
• How would you forecast supply use in the emergency department? Why?
• How would you forecast supply use in hospital clinics? Why?
• Would you use judgment in making these forecasts? Why?
• Would you use statistical models in making these forecasts? Why?
• How are supply chain forecasts different for hospitals than for retail? For manufacturing?
Sample Solution
• What are the best practices in supply chain management for hospitals?
Share of hospital costs that supplies represent: Supplies typically account for approximately 25-35% of a hospital’s total costs.
Overordering supplies drives up costs because it leads to higher inventory storage and carrying expenses, and often to expired products needing disposal. It also causes delays in service due to bulky inventories that can be hard to resupply when needed.
Sample Solution
• What are the best practices in supply chain management for hospitals?
Share of hospital costs that supplies represent: Supplies typically account for approximately 25-35% of a hospital’s total costs.
Overordering supplies drives up costs because it leads to higher inventory storage and carrying expenses, and often to expired products needing disposal. It also causes delays in service due to bulky inventories that can be hard to resupply when needed.
Underordering supplies drives up costs because it can lead to outages or insufficient stock levels which can lead to medical errors, patient harm, and/or additional administrative time spent searching for missing items or dealing with back orders. This lack of preparedness also affects staff morale as nurses have less time available for patient care activities due to hunting down needed supplies as well as increased stress from uncertainty about whether items will be available when needed.
Examples of Lean inventory management include: reducing product variety by standardizing products; streamlining ordering processes by automating orders; just-in-time delivery systems where suppliers deliver the exact quantity required at exactly the right time; implementing electronic health records (EHRs) so clinicians have real-time visibility into patient information during rounds; introducing barcode scanning technology so nurses only need one scan per item instead of manually documenting each item used during nursing care; utilizing store rooms rather than decentralized stocking strategies so all materials are stored centrally and delivered in accordance with established procedures; creating “pull” systems instead of “push” models where resources are pulled from central locations when needed rather than pushing them out indiscriminately regardless of demand. This type of system works very well if implemented correctly since it helps ensure that an adequate level of supplies is always on hand without overstocking or understocking material resources.
Examples of just-in-time inventory management include: using software technologies such as Enterprise Resource Planning (ERP) systems or Material Requirements Planning (MRP) tools which help automate ordering processes by forecasting future needs based on past trends and current usage patterns; placing small intermittent orders with suppliers who promise fast delivery times thus avoiding costly stockpiles while still ensuring availability when needed. This type of system has been successful at many hospitals such as Mercy Hospital in Chicago who was able reduce their inventory levels by 50 percent after implementing these types measures (Green 2015).
Supplies that must be available at all times include specialty medications, high cost devices such as pacemakers or ventilators, disposable equipment like IV lines / catheters etc., personal protective equipment like masks and gowns, laboratory reagents etc.. These items cannot easily be ordered on short notice nor do they usually come in bulk packs, thus requiring more accurate forecasts in order prevent potential shortages should there ever arise a need for them .
The main challenges faced making accurate forecasts lies mainly with understanding what specific items may get used most frequently within different departments like Emergency Departments versus regular clinic visits since each has its own unique set demands depending upon their caseload mix . In order make these predictions I would use both judgmental estimates alongside statistical models -such regression analyses -to assess how changing factors such changes demographics could impact supply utilization overtime.
Best practices in supply chain management involve aligning purchasing activities with departmental budgets ,standardizing product selection ,utilizing data driven decision making ,limiting waste & case spills through responsible ordering & storage methods ,ensuring compliance regulations related quality control & handling hazardous materials along leveraging digital technologies – such enterprise resource planning ERPs – improve efficiency throughout entire process supply cycle .
