How to Create an Effective Inventory Management Program

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By Patricia Frendak

Inventory management, also referred to as supply chain management, is crucial to the profitability of an ambulatory surgery center (ASC). Accurate and timely inventory management results in increased productivity and profitability. However, when inventory is not managed effectively, the impact can be financially and operationally devastating.

When supplies are not properly tracked, it is impossible to know if a case makes financial sense. Poorly managed inventory can also cause needless cancellations and delays when necessary supplies aren’t readily available when needed. Despite these well-known financial and operational implications, inventory management is often overlooked because of its onerous nature.

When there is no inventory oversight, things can get out of control very quickly. This is especially true for a busy center, like New Britain. Upon my arrival, the sheer volume of supplies that sat unused, and untracked, was so large that it was impossible to measure its monetary value.

Regaining control over inventory

New Britain opened its doors in 2011 without any inventory controls in place. No one was responsible or accountable for inventory oversight, nor was there an effective line of communication between the administrator and materials management personnel. Over time, this lack of oversight took a toll on the center as costs associated with unused inventory mounted. In an effort to regain control, in 2015 the center’s board hired me as Administrative Director to oversee the implementation of an inventory management system.

The team at New Britain, led by an outside expert advisor (Ann Geier) hired from SourceMed ASC Advisory Services, worked diligently to implement technology and processes to regain control. In a matter of months we saw considerable positive changes in how our inventory was managed and the improvements continue. While it is too soon to quantify the cost savings achieved by regaining control over our inventory management, we expect the amount to be significant. 

New Britain has learned some important lessons along the path to overcoming inventory management issues. These lessons can be easily applied to other organizations facing similar challenges. Below are some of the lessons we learned.

  1. Start inventory management at the beginning, before your center opens its doors. As we learned first-hand, it is exponentially more challenging to put a system in place once a center is already functioning. For centers that are already up and running, while installing an inventory management system at this stage is far from ideal, it is not impossible. The financial rewards are well worth the effort.
  2. Enlist the help of an ASC expert.  A seasoned ASC inventory expert will ensure proper technology and processes are in place to optimize the cost of acquiring and holding inventory, while satisfying a center’s requirements for keeping supplies on hand. Look for an expert that will do more than simply point out problems; you want someone who will deliver actual solutions.
  3. Automate inventory management processes. Significant time and cost savings can be achieved when utilizing technology to automate the inventory management process. The clinical software New Britain uses has an inventory management module that was not being used. Rather than investing in new technology, we were able to utilize the technology already in place.
  4. Understand your vendor relationships. Don’t assume vendor consignment is not an option. Significant cost savings can be achieved for centers that successfully pursue consignment with their biggest vendors. Additionally, reach out to all your vendors and request the last six months of inventory usage. This information should be entered into your center’s inventory management system. You may be surprised at what you discover.
  5. Plan ahead to avoid future supply issues. Identify frequently used supplies and ensure back-up items are always available in the event of a shortage, price hike, etc. For example, surgeons at New Britain use a particular glove. If these gloves are not available or become too costly, simply substituting them with any glove will not work. Therefore, we conducted a trial with surgeons in advance. Surgeons were asked to test a backup glove and sign off on them before a substitute was necessary.

With the right inventory management technology and processes in place, significant cost- and time-savings can be achieved. What steps has your center taken to ensure inventory management runs smoothly?

Patricia Frendak is Administrative Director of the New Britain Surgery Center located in Chalfont, PA.