The cost of healthcare has been increasing rapidly. Healthcare providers, clinics, hospitals are under pressure to reduce cost at the same time improve service and patient safety, reduce waiting time, minimize errors and optimize the use of available resources. A multi-pronged approach can help hospitals and health systems deliver more financially sustainable and patient oriented care.
One of the major challenges in the healthcare industry is to ensure that required supplies are readily available in right quantity at the right time. An effective and efficient inventory management system needs to be in place.
Operational Excellence (OE) can be deployed in variety of process improvement & change management approaches to increase operational efficiency; the ultimate objective is to drive the total medical care cost down while improving care quality. Several tools & concepts of OE, Inventory Management, Five S, Demand leveling (Also known as heijunka), etc can lead to dramatic improvement. The inefficiencies in the inventory management system are a major barrier to excellence.
Implementation of OE concepts can help address several issues concerning inventory management in healthcare industry such as:
-Scientifically calculated inventory levels can lead to improvement in medicine inventory management to avoid stock outs and over stocking
-Reduction in stock taking time
-Huge cost savings in inventory carrying costs
To tackle the issues in inventory management some of the concepts of OE that can be used include: Five S (physical workplace improvement), inventory level balancing, automation and technology.
Five S is a key foundation for reducing wasteful activities and one of the fundamental principles of efficient environment and effective material management system which assists in easy storage and retrieval systems also avoiding chances of mix up.
Inventory Level Balancing is the process of matching stock levels to actual demand. Instead of using gut feeling to determine right amount of inventory, this method uses actual consumption data as well as projections for future demand. Historical data for 12 months is studied for identifying patterns and next 12 months demand projections are used to arrive at the right inventory levels.
Based on the data analysis, the inventory levels are scientifically calculated via inventory management modules which not only help in reducing inventory carrying costs but aids in ensuring no stock outs of life saving drugs and no over stocking to avoid expiry or near to expiry scenarios. Savings thus made, worth millions, can be utilized to treat more patients.
With efficient inventory management techniques and tools, storage space which is a critical fixed asset can be freed up. Space management can also help to reduce the controlled environment expenses associated with storage of specific medicines or drugs.
Inventory can be planned and worked up to highest level of accuracies taking into consideration the variations or uncertainties in demand and supply up to 2 to 3 Sigma levels, based on the criticality of the medicine. This can also further be integrated to online modules for easy management and close controls.
Proper medical inventory management within healthcare systems is crucial for successful patient care. Today what healthcare systems need is just in time inventory management systems that can achieve efficiency in the operations through adoption of technology, standards, proven Operational Excellence models and methodologies.
Jalay Pandya is Director and one of the founding partners of Faber Infinite Consulting with operations in Asia Pacific, Africa & Middle East. He holds a masters degree in Marketing Management with his 1st degree being in Engineering.
This article was originally published in Economic Times – ETHealthworld.com as part of Operational Excellence in Healthcare Industry series. Original link available – here