Web-based materials management saves money, aids in contract talks and even helps boost quality of care
Without automated supply chain systems, hospitals tend to overstock inventory items, storage space is wasted, accurate inventory counts are unavailable, stocks get lost or obsolete, and missing up-to-date price lists prevent facilities from maximizing buying potential.
Automating the supply chain not only streamlines the flow of materials, it favorably impacts the bottom line, making it an essential step in wiring the enterprise.
Holy Name Medical Center, Teaneck, N.J., uses a perpetual inventory materials management system interfaced to its chargemaster. When a supply item is used, the system automatically bills the patient and deducts the item from inventory. When the supply reaches its minimum level, the system automatically reorders the product.
Beverly Sanborn, Holy Name's assistant vice president of materials management, believes perpetual inventory systems are superior to par-level systems. "Perpetual systems require each item purchased to be accounted for in the chargemaster and in inventory," she says.
Sanborn says implementing a perpetual inventory system requires a clean master file that is interfaced with your chargemaster. "This ensures that each item purchased is connected to the correct chargemaster codes and that there are less loss charges," she says.
Methodist Health System in Dallas has a materials management system that automates all steps of the supply chain from online Web-based requisitioning through invoice matching. "We place the majority of our orders using e-commerce," says Jan Lea, vice president of materials management.
In addition, most of the five hospitals in the Methodist system use standard point-of-care, bar-code scanning to automatically decrement inventory and charge the patient for the supply item. "This system automatically generates a reorder when par levels reach the minimum stocking level," Lea says.
Lea says Methodist's system optimizes par levels by establishing minimum and maximum stock levels for each supply item. "We no longer need to count items daily, plus we have significantly reduced inventory levels," she says.
The ability to manage inventory automatically improves workflow efficiencies and provides higher service levels, since hospitals no longer need to allocate staff to place pricing stickers on supply items, count stock daily, or manually produce a restocking order. All of this im-proves the bottom line. Inventory was not the only thing reduced at Methodist; materials management staff has been cut roughly in half.
Lea estimates that automated materials management has saved Methodist in excess of $1 million, plus another $4.5 million in lower pricing that they've been able to negotiate as a result of having better aggregated purchasing data. The Web-based materials management system allows Methodist to capture and aggregate its supply spend on an enterprise level. "We use this data to negotiate deeper discounts with suppliers," Lea says.
St. Joseph's Hospital Health Center, Syracuse, N.Y., automated its supply chain on a just-in-time basis through an independent distributor. Approximately 85 percent of products used daily are provided just-in-time, reducing inventory size, storage space and associated costs. Neil Davis, manager of materials management, says the overall effect of supply chain automation has been to improve material service to the organization while reducing inventory and staff. "Now the majority of internal distribution is accomplished on the day shift, letting us reduce staff by 25 percent," he says.
Since implementation, Davis says the system has been upgraded so that now order transmission can be achieved wirelessly from handheld devices, eliminating the need for staff to return periodically during par counting to cradle the hand-held so orders could be downloaded.
Automated supply chains also enhance quality of care. "Supply automation gives caregivers more time at the bedside," says Lea. "Before, clinical staff spent a lot of time on supply replenishment." Plus, Lea says the cost savings generated by standardizing supplies across all their hospitals contributes to the enterprise's ability to invest in new clinical equipment.
Lea recommends getting clinical buy-in early. "Include clinician representatives in product demonstrations and site visits and listen to their concerns," she says.
Douglas Page is a freelance writer in Pine Mountain, Calif.
This article first appeared in the May 2011 issue of H&HN magazine.