An Appetite for Inventory Innovation in Healthcare

We may know what supplies hospitals are buying, but do we know what supplies are actually being used?  We are pleased to publish our first guest post from Nicola Hall, managing director at Ingenica Solutions (provider of procurement, supply chain, inventory and data management solutions to the healthcare sector), explaining the increasing appetite for inventory management in the NHS.

Nicola Hall 2013 colourApproximately 40 percent of hospital budgets are spent on non-pay goods. This equates to between £10 million and £15 million per trust on goods, ranging from a box of tissues to high-value medical implants. So this is cost of supplies but not an indication on the true usage levels.  With pressure mounting to reduce costs, and in light of the Government’s target NHS efficiency savings of £20 billion by 2015, inventory management is swiftly emerging as a powerful mode to help the NHS achieve significant savings.

Actions certainly need to be taken to revolutionise the way the NHS spends its money.  One of the most important factors to enable the NHS to act smarter with budgets, and become truly world class, is innovative technologies. The NHS has a clear appetite for transformation through embracing tried-and-tested methods established in the commercial sector, so we must grasp such enthusiasm and provide the necessary tools to help shape the future of supply chain management.

Trusts are at different levels of supply chain maturity, and it’s an area under close scrutiny.  The majority of trusts are able to identify the number of products purchased, but few understand where those products are used, when they are used or on which patient. Even when money has been spent well, and good prices are obtained, consumption is not managed and waste is often the result of poor inventory controls. They simply don’t have the systems to record these activities which means there will most definitely be an element of wastage, be it from expired goods, excess stock levels, or even fraudulent activity.

In many organisations there is often no centralised function to where product shortages and delivery delays can be reported or for the information to be communicated to clinical teams. This means that clinical staff have become progress chasers, chasing orders and deliveries and searching for suitable alternatives with other suppliers. Ultimately, this means that the clinicians have a closer relationship day to day with the supplier than procurement do. The right technology allows the tracking of products due to expire, thus eliminating wastage. It also facilitates consolidated purchasing taking benefit of volume breaks, reduced deliveries and invoice processing; creating efficiencies both upstream and downstream of the clinical point of use.

Best practice

There are trusts within the NHS today that have already implemented process change and improved inventory management using appropriate technology. They have delivered outstanding audited results, and are showcase examples of how efficient and effective solutions improve outcomes.  As well as being able to track purchases, they are able to build a picture of usage -- something which few have successfully accomplished, but in reality it is achievable for any hospital.

Trusts that are leading the way have recognised that the most important element to improvement of the overall supply chain is inventory management.  The data generated by their inventory management systems empowers their healthcare professionals, at all levels, by providing visibility, control and simplicity in a complex, fast-moving clinical environment.

Technology is being used by these trusts to give visibility of the product across the organisation, so product purchasing can be shared, driving down the investment of product on the shelf. They are able to understand usage history which means they can ensure the right product is purchased at the right time. There are clear benefits of having a comprehensive understanding of real usage rates, who the individual users are, or taking it a step further, the ability to tie the costs to each patient. The goal of Patient Level Costing is not far out of reach of the NHS today, but some key activities need to take place at an operational level for this to become a reality; the most crucial of which is the implementation of inventory management solutions.

Inventory management means data intelligence is now at our fingertips, and is core to the supply chain; it’s at the heart of transformation, and in today’s healthcare environment is increasingly popular.

Voices (4)

  1. David Ford:

    To clarify, I don’t disagree with any of the comments here.
    We are implementing solutions where paper systems in silos are the norm…
    Leeds were indeed ahead of the game and so the “wheel” invention obviously takes time to get adopted in the NHS!
    These are fundamentals – not rediscovered or rebranded, but made practical to implement in an environment that for to long has been made overly complex. Here indeed a pull/replenishment model and dynamic management of strategic stock buffers are exactly what is being implemented within the Ingenica solution. Wholly demand led, and driven by consumption of items at the point of use, it makes collecting valuable data easier and reduces staff workload significantly.
    Pick to procedure is indeed a reality now if Trusts want it. It is the data though, that linked with a decent ERP system can give the flexibility and quality of management a busy clinical area needs. Add outcome analysis – and then things get really interesting..
    So not rocket science – but a good solid implementation of tried and tested industry practice, all wrapped up in a no-nonsense easy to use system. I would say that – but so do our clients!

  2. Ian Heptinstall:

    SS – I often have that feeling with “new” initiatives. Fundamentals rediscovered, and rebranded?

    Technology is often needed though to apply good practice on a large scale. But just what is being automated? The max/min approach built into ERP systems, and buyers who buy to forecasts or extrapolations from the past is a discredited approach. Today’s best supply chains respond to actual demand, and operate with fast replenishment from central warehouses. Is today’s NHS structure that encourages hospitals to believe they are independent corner shops compatible with achieving an efficient supply chain – high service levels with lower inventories?

    Anyone automating logistics other than with a pull/replenishment model and dynamic management of strategic stock buffers will be missing a great opportunity. Buyers may also need to consider suppliers’ capability to deliver with speed and in smaller batches as part of the selection process.

    1. David Lawson:

      Fully agree with comment. When we implemented our auto-replenishment system a key decision was to place the systems as close to the point of consumption as possible to match true demand. The challenge was ensuring the supply chain behind it could cope with a change from large quantity/ bulk deliveries once a week to low unit orders across multiple points same day/ next day. The next step is to design out the need for anything but emergency inventory within Theatres for areas such as orthopaedics with the inventory arriving same day as the patient.

  3. Secret Squirrel:

    Blimey……

    I’m not saying this is wrong but to me, it’s like Back to the Future……I was doing this kind of things with Keith Lilley and Graham Medwell at Leeds Teaching Hospitals over ten years ago…….

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