Medicine's Inventory Nightmare

In a recent survey, 40 percent of surgeons admitted to having cancelled a case due to a lack of available supplies. What inefficiencies need to be addressed in the healthcare supply chain to make sure this kind of thing doesn’t happen?

In the pharmaceutical industry, supply chain disruptions can mean the difference between life and death for patients whose survival depends on consistent, timely access to the right medications and medical supplies. However, many hospitals and medical institutions struggle to provide adequate care due to inventory issues resulting from a dependence on outdated and inefficient supply chain management systems.

In a recent survey of surgical staff and hospital supply chain managers conducted by Cardinal Health, an astounding 40 percent of respondents admitted to having cancelled a case due to missing supplies, while 69 percent had delayed a case for the same reason. Perhaps more shocking, 27 percent disclosed that they had seen or heard of an expired product being used on a patient, and 23 percent had seen or heard of a patient harmed due to a lack of supplies.

These figures can be attributed to the fact that inventory management poses a particularly challenging task in the healthcare industry, where inventory needs constantly fluctuate, requiring meticulous tracking methods. The majority of frontline clinicians believe that existing systems are too complicated and many have admitted to hoarding supplies, only to end up wasting or overusing them. Many of the current processes involve manually entering records into databases—and in some of the worst scenarios, data entry is still being done via pen and paper.

Obstacles to Medical Inventory Management
When it comes to medicine inventory management, one of the biggest challenges is maintaining efficient processes in the face of complex and volatile patient needs. This means that hospitals must take a diversified approach to inventory management that takes into account variables such as how frequently different products are ordered and how easy they are to replace, and is also able to distinguish between specialized equipment and more general bulk items.

Further compounding the challenge of inventory management are shelf life limitations, which, in addition to age, can be contingent upon factors such as temperature. Implementing simple practices like labelling can help hospital staff keep track of any irregularities, reducing stockpiles, waste, and expired products.

Lastly, feeble security practices contribute to the inconsistency of available supplies, as drugs and chemicals can easily be stolen or tampered with when inventory isn’t properly managed. Inventory barcodes and logging systems allow hospitals to bolster accountability among staff while also safeguarding against the risk of breaches from external threats.

"Fixing these challenges requires thinking beyond the shelf," says John Roy, vice president and general manager at Cardinal Health Inventory Management Solutions. "We believe streamlining processes and gathering real-time data through automated inventory systems can transform inventory management from a 'necessary evil' to a powerful tool that supports better quality of care."

A Look into Inventory Management Systems
There are several different methods of inventory management used by hospitals and medical practitioners.

Among the most common of these methods is the vendor-managed inventory system (VMI). In a VMI system, hospitals rely on vendors and distributors to ensure a steady stream of supplies. They pay only for the items they actually use, with a supplier rep coming at regular intervals, rotating stock to ensure that the oldest inventory is used first and recommending changes to stocking levels based on observed usage patterns. This type of system tends to be suitable for high-volume and low-cost items, in addition to items with a short shelf life.

Just-in-Time (JIT) inventory management systems, on the other hand, involves the frequent delivery of smaller orders, in quantities based on the rate of use. Within a JIT system, the supplier delivers exactly the quantity needed, plus whatever safety allowance  the hospital requests, the day before or the day of the scheduled procedures. In the face of tighter profit margins resulting from rising cost of care and cuts in reimbursement rates, JIT provides the advantage of minimizing overall investment in inventory, without the fear of running short.

At the same time, these two methods are heavily reliant on trusted partners relationships, and are also subject to human error. Instead, automated systems allow better accuracy and allow hospitals to ensure that there is minimal error in inventory management by providing real-time visibility into inventory levels without the need for constant human intervention. This is critical to managing daily procedures and ensuring that inventory levels are in sync with scheduled operations. Furthermore, automated systems adapt more easily to changes brought on by emerging technologies. Ideally, inventory management solutions should have the ability to anticipate changes, and should be built on a flexible framework that allows for innovation in tangentially related areas.

In today's retail landscape, consumers expect to be able to buy the products they need, whenever they want and wherever they want. In order for the same type of shift in mentality to materialize in the healthcare field, hospital supply chains must first undergo a drastic transformation with regard to inventory management. If the industry fails to overhaul how medical inventory is managed, the forces currently reshaping the healthcare industry will continue to pose a threat to the wellbeing of patients, in addition to eating into increasingly thin profit margins and subjecting healthcare institutions to legal liabilities.

For more about flexible inventory management, read our recent blog.


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