Improved Inventory Management in Healthcare

Abstract

In the US, inventory accounts for approximately 30% of steadily growing hospital expenditures. However, investment in cost-saving initiatives within hospital supply chains has traditionally been viewed as low-value. Furthermore, the processes and technology used to manage inventory within hospitals are often out-dated, improperly used, or nonexistent. As a result, items may be ordered too frequently, not often enough, or in suboptimal quantities; thus increasing the probability of stocking-out and the overall cost of the supply chain. In a study aimed at improving inventory processes, several divisions of the VA Boston Healthcare System (VABHS) supply chain were studied in detail to explore the potential for applying both inventory science and lean tools to improve inventory management. Based on observations, VABHS inventory process maps were created and the traditional economic order quantity and safety stock models were modified to best reflect inventory policies within the VABHS. The cost benefits and potential for application of both the inventory models and various lean techniques were then examined. Based on the results of literature review, data analysis, and model application, a variety of recommendations were made which have significant potential to immediately improve the flow of products within the VABHS and considerably reduce costs. This initial study has led to research in more advanced inventory science methods, including: quantifying and reducing the effect of inaccurate inventory records on costs and patient care; and determining the applicability of decreasing costs and product unavailability through the integration of operating room scheduling with inventory ordering.