10 Myths Holding Back Your Hospital’s

Inventory Management

www.jumptech.com

Myth 1: Supply Chain is One of the Biggest Problems in Hospitals

• Reality: The problem isn’t supply chain; it’s inventory management

• The majority of hospitals outsource supply chain functions to distributors*

• Hospitals receive the supplies they need within 24 hours or less

• Because hospitals receive supplies to virtually any location, the real problem isn’t supply chain

• Poor technology and processes causes hospitals to struggle with overstocking, stock-outs, high supply costs, high labor costs and dissatisfied clinical staff

Tip: Hospitals that have overcome problems with current inventory management systems have reduced the cost of supplies and labor, while increasing nursing satisfaction

*HIDA, the Health Industry Distributors Association estimates that 100 percent of U.S. hospitals use distributors in some capacity

Myth 2: My ERP System Does Everything I Need

• Reality: ERP systems excel at meeting the needs of manufacturing organizations; hospital CFOs purchase ERP systems for financial and human resource functionality

• Supply chain managers are expected to adopt the supply chain module offered with the ERP

• ERP modules can be difficult to use, create workflows that are labor-intensive & expensive, can drive up supply chain costs

• Price tags are often hundreds of thousands of dollars

• Systems take six- to twelve-months or longer to implement

Tip: Cloud-based solutions designed specifically for inventory management deliver greater efficiency more quickly. Today’s inventory management solutions are:

• Implemented in as little as a week

• Require no extensive hardware investments

• Reduce impact on IT resources

• Deliver immediate savings through both supply costs and labor

Myth 3: There’s No Way to “See” Inventory That’s Stored All Over My Hospital

• Reality: This may seem true in hospitals, yet examples of being able to see inventory anywhere in a system exist throughout retail

• Legacy hospital ERP systems haven’t invested in mobile- and cloud-based technology to provide users with total visibility into their on-hand inventory

Tip: Labor savings could quickly be achieved by giving clinicians the ability to find inventory in the hospital by using an iPod Touch, just like the customer representatives in a Lowes or Apple store.

Myth 4: My Reporting Tools Give Me Everything I Need to Know About Our Inventory

• Reality: While data exists, it can be difficult to access and then, even more difficult to use for decision-making

• Many current hospital systems provide reports, without providing recommendations for what action to take

• To improve smart and accurate decision making, hospitals should identify an inventory management solution offering a rules-based recommendation engine, allowing a user to input variables into a report and receive recommendations for actions based on the data

Tip: Look for reporting functionality with recommendation capabilities. Example: enter a time period for velocity, an inventory ordering method, and the desired days of supply and safety stock into an item velocity report. A smart system will recommend new PAR level settings, and allow a user to reset PAR level for one or more products quickly and easily.

Myth 5: I Need to Manage Every Item Used in My Hospital the Same Way

• Reality: Lean processes recommend elimination of “touches” and waste

• 60 years ago, Toyota implemented a process called Kanban to manage high-frequency consumable items used in manufacturing

• Kanban (also known as two-bin) has been proven by lean manufacturers to manage lower-cost, high-velocity supplies

• Today, it’s estimated that while 75-80% of items used by a hospital cost less than $20 each, thousands of dollars are spent capturing consumption of those items, either for patient billing purposes (with little reimbursement) or with the belief that a single process is most cost effective

Tip: Let your approach fit the product and patient care required: using PAR, barcode scanning, cabinets and RFID-tracking systems make sense for the 20-25% of the inventory that is either regulated or high value. For low cost items, a two-bin approach provides visibility for supply management while reducing the labor costs of both clinicians and supply technicians.

Myth 6: We’re Not Overstocked!

• Reality: Hospitals carry more inventory than needed toward the goal of preventing stock-outs

• Overstocking often takes place because there isn’t good visibility to supplies on hand

• Nurses report spending as much as 20-30 percent of their time on supply-related tasks, with much of this spent locating products

Tip: Overstocking can happen as an attempt to help nurses have supplies they need, but there is an unintended consequence: overstocking costs more in both supply spend and labor to manage more items

Myth 7: Stock-outs are a Fact of Life

• Reality: Stock-outs are recurring events with today’s

inventory systems, but they can be easily eliminated

• Stock-outs occur because an organization lacks

accurate velocity information; they’re also caused

when nurses remove supplies from inventory, in an

attempt to eliminate stock-outs on their own

• The inventory problem is exacerbated when supply

hoarding leads to waste, as items are overstocked

and expire

• Stock-outs drive maverick spending when staff

places orders directly, without going through supply

chain

Tip: Real-time visibility to products, how many items are on

hand, where they’re located, and at what rate they’re

consumed can eliminate stock-outs and avoid associated

problems.

Myth 8: An Inventory Management System Must be Expensive to Work!

• Reality: Historically, hospitals have been limited to expensive bolt-on modules from their ERP system vendors or cabinet-based systems

• These approaches require significant investments, including both financial and IT resources

Tip: Emerging solutions leverage cloud- and mobile-based technology to implement inventory management solutions quickly – in as little as a week in some cases – without making large investments in hardware, while reducing the impact on internal IT resources

Cabinet

system used

in the ED of

a busy PA

medical

center had

significant

ongoing

costs and

resulted in

10% nursing

satisfaction

Myth 9: We Don’t Really Need Mobile Devices in our Organization

• Reality: Mobile device adoption is growing

quickly, with both business and clinical

applications

Tip: Users are finding convenience in using a single

device for multiple applications. So today’s nurses might

be updating a patient record, checking for a drug

interaction, while removing an item from inventory, using a

single device loaded with multiple applications, all in a

very simple, automated manner.

Myth 10: Cloud-Solutions Won’t Work for What I Need

• Reality: Hospital ERP managers often find their system one or more release levels behind because the cost to upgrade is prohibitive

• Implementing cloud-based solutions puts the cost of maintaining servers and system upgrades on the solution provider

Tip: Using a cloud-based provider ensures hospitals can take advantage of new cost saving features in their inventory management solutions, as soon as they become available. Supply data is well-suited for cloud solutions as it contains minimal if any HIPAA sensitive data.

Message from John Freund, CEO, JumpTech

“Hospitals have made significant investments in inventory management and still haven’t gotten the results they need. Why? Because these systems aren’t focused on solving the inventory problem.

“An ERP system can deliver exactly what finance needs, but leaves supply chain leaders still in need of visibility to the products used within their hospital organization.

“As we strive to ‘see’ all the way to end of the supply chain, we need inventory solutions that are easy to implement, low cost with strong ROI, and easy for staff members to use. At JumpTech, we’re building cloud-based solutions and using mobile devices to deliver simpler ways to solve hospital’s inventory management problems.”

John Freund, CEO, Jump Technologies, Inc.

Thanks for Reviewing

“10 Myths Holding Back Your

Hospital’s Inventory Management”

Visit us at www.jumptech.com or call 888.373.7226

Follow us on Twitter @JumpTechNews and LinkedIn