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It’s no surprise the use of technology in hospitals, from EHRs to patient portals, is at an all-time high. It may be surprising, however, that hospitals haven’t fully embraced technology in one area: inventory management or what is commonly referred to as supply chain management (SCM).

According to a recent survey of 100 hospital supply chain leaders, nearly half of respondents still use a somewhat manual process such as Excel spreadsheets and other less sophisticated/outdated tools to manage inventory, supply expenses and other supply chain activities.

It’s no wonder supply chain costs consistently rank near the top for hospitals and healthcare systems, with predictions that they will finally surpass labor costs for the number 1 position in 2020 (The Association for Healthcare Resource & Materials Management).

On this subject, there is good news. The referenced and similar surveys show there is a potential for significant SCM cost savings for hospitals. An analysis by Navigant Consulting, for example, estimates that hospitals could save an average of 17.7 percent or $11 million per hospital annually by streamlining and standardizing their supply chain processes.

All of this means that investing in supply chain technology and managing supply chain costs should be a number one priority for healthcare and supply chain leaders, especially as they position themselves for the shift to value-based care and look for ways to further deliver top quality care for less.

View Infographic: Investing in Your Healthcare Inventory and Supply Chain Management

What is Supply Chain Management in Healthcare?

Healthcare SCM generally refers to the procurement and distribution of products and services as they move from the receiving dock to the patient.

While SCM comes with a variety of challenges, the major issues include hoarding of supplies, demand for specific types of product in inventory, product expirations, out-of-stock issues that may lead to expensive delivery charges, pilferage and an unwarranted increase in inventory dollars based on demand. These and other issues contribute to out-of-budget supply costs.

Clearly, healthcare SCM is extremely complex. Inadequate data reporting, poor product standardization, increasing regulatory requirements, and a lack of automation throughout the process only add to the complexities.

Automating Healthcare Supply Chain Management

Supply chain software simplifies and automates repetitive manual tasks performed within healthcare organizations in pursuit of a simple goal: achieve a more efficient supply chain process. The many benefits of software automation include streamlining inventory; minimizing waste; enabling timely, data-based decision-making; and reducing supply, labor and operational costs.

Supply chain decision makers can generally choose from two types of SCM technology solutions. The first, enterprise resource planning (ERP) systems, are not always the best choice for hospitals because the systems are used across a broad range of industries and the vendors often don’t have significant healthcare expertise. Because ERP systems are typically implemented by larger, non-healthcare related businesses, they may take longer to implement and require dedicated customization resources, which yields a largely inflexible system that healthcare personnel must adapt to instead of it adapting to their workflows.

The second type, so-called “best-of-breed”or niche healthcare inventory and supply chain solutions, tend to be more affordable and incorporate deeper industry knowledge, thereby providing flexible, healthcare-directed solutions. These types of systems tend to focus on specific areas, e.g., surgery, interventional medicine, and other healthcare departments where expenses amount to 60-70 percent of a facility’s total supply costs.

What to Look for in Healthcare Supply Chain Management Solutions

Some fundamental features to confirm when selecting a supply chain automation system include the following:

• Communication: Integrates systems and manages hospital workflows and processes by sending and receiving files for both clinical and financial systems.
• Ease-of-use: Enables managers, operators, and care providers to achieve efficient system operations and maintain the standardization of processes.
• Scalability: Includes consolidated management tools for both single and multiple site locations.
• Open, flexible design: Helps users achieve data integrity for the devices in use.
• Reporting and analytics: Generates accurate, real-time inventory reporting information from receiving to patient care.  
• Supply chain methodologies: Includes PAR, Kanban, ROP/ROQ, EOQ/ROP, Min/Max and Consignment capabilities; utilizes sound processes and practices for specific department requirements related to supply chain demands.
• Superior service: Creates effective clinical and financial workflow design, defines implementation requirements, and provides support before, during, and after implementation.

The Facts of Healthcare Supply Chain

If you’re still unsure about utilizing SCM software for your hospital, you might find it helpful to consider these additional facts:

• Almost all (98 percent) hospital and supply chain leaders believe supply chain optimization improves hospital margins; 60 percent say supply chain analytics positively impact care quality (Sage Growth Partners).
• Hospitals cumulatively can save $25.4 billion in supply chain costs, with all hospitals capable of supply chain savings regardless of size, location, and status (Navigant Consulting).
• In the surgery department, 40 percent of surgical staff and supply chain decision-makers said a surgery was cancelled due to missing supplies, while 27 percent were aware of patient harm because of supply chain issues (Cardinal Health).
• Sixty-nine percent of healthcare information technology (IT) managers said supply chain is “the most valuable asset for actionable data mining” (Black Book).

Automation and data analytics play a vital role in managing an efficient healthcare supply chain. Because close attention to supply chain is one of the most effective cost-reducing strategies in hospitals, investing in state-of-the-art technology can offer huge ROI.

To learn more about modernizing your hospital’s supply chain processes, or to watch a demo of Medsphere’s HealthLine inventory and supply chain management solutions, click here.

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About HealthLine: Designed for the unique requirements of healthcare, the HealthLine inventory and supply chain solution boosts revenue by reducing labor costs, making inventory more precise and automatically capturing more charges. Foundational components include applications that utilize both bar code and RFID technology, a variety of hardware system options (PDA/handheld computer devices, fixed interactive TouchStation technology) and user-defined user-specific interfaces—to improve efficiencies, lower costs and ensure resource availability.