Strategies for improving supply chain management in perioperative services

Healthcare Purchasing News, August, 2005 by Tom Montanaro, Janet Pelczynski, Chris Strasser

Managing inventory and product replenishment to better understand consumption

While benchmarking provides the strategic impetus to engage physicians in the discussion of supply expense reduction, the process for managing inventory and product replenishment must ultimately provide the business intelligence to understand product cost, supply cost per case, and supply cost per surgeon.

The process begins with the operating room schedule. Inventory management and distribution efficiency depends upon having enough lead time to effectively manage the flow of supplies. A suitable lead time for proactive supply management in perioperative services is three business days (72 hours). To accomplish this, perioperative services personnel must monitor the ratios of scheduled, add-on, and emergency cases to determine the organization's supply lead time requirements. This will help provide a baseline understanding of the organization's perioperative business flow. A typical teaching organization might expect a higher percentage of add on and/or emergency cases. The goal of monitoring is not necessarily to eliminate add-on cases, but rather, to understand the magnitude of these cases and account for those instances that result in insufficient product acquisition and equipment lead time. In this case, augmenting stock of relevant products to compensate for reduced lead time is more cost effective than incurring product outages and/or express shipping charges.

A second consideration concerns the development and ongoing maintenance of preference cards. Preference cards must be complete, accurate, and up to date to accomplish strategic cost reduction objectives. Supply and equipment requirements continually vary to accommodate the rapid pace of change in the standards of medical practice. A proactive and uniform process must be established to ensure the accurate capture and transfer of preference card data into the technology source files. This requires assignment of dedicated accountability within perioperative services to continuously maintain the internal processes that define item and equipment requirements, assign accurate item cost, and ensure the availability of appropriate charge codes for billing purposes.

The final component addresses the management and replenishment of the physical inventory itself. The urgent and reactive nature of a typical perioperative business operation is not generally conducive to the rigid operational controls required to support and maintain an accurate online inventory. This consideration is further complicated by the existence of multiple stocking locations for a single product within perioperative services. Even in a "best practice" environment, it may be appropriate to have a specific product in a case cart inventory, a center core star inventory, and a surgical suite.

The most significant challenge is that many organizations don't have an accurate baseline inventory of what they own or usage data to understand what they consume. Often, these organizations have a strong knowledge of what they've purchased, but it is difficult to equate purchase volume with on-hand quantity and product consumption. The first priority in these instances is to establish baseline inventory counts and dollar values. This must be followed by establishing processes to manage inventory from purchase to point of use. This includes delineating, on a product by product basis, where the product will be stored, how it will be assembled for case, and who will be responsible for the effort. Frequently, mathematical calculations of par levels must be adjusted to compensate for specific product usage patterns. For example, review of historical usage of a particular orthopedic screw may indicate a par level requirement of two as being sufficient. However, if the screw is always used with a plate that requires four screws, a par level of two is not adequate. This review process must ultimately result in the update of quantities maintained, increasing what is assembled prior to the case, and reducing supplemental picking of additional supplies during the case. Finally, an audit of current processes must be conducted on a recurrent basis to ensure that appropriate charging and credit mechanisms are in place to capture accurate consumption at the case level.

Engaging physicians and clinicians in support of the process

The key to engaging physicians is understanding that they are scientists by nature. Physicians, and clinicians, for that matter, are data and outcome driven. They are often approached with anecdotal or financial analyses that fail to address all of the elements required to support a proposed opportunity. Perioperative and supply chain professionals must better articulate and quantify a broader range of elements; including, clinical effectiveness; patient safety, quality; cost; availability; operation; compatibility with related products, equipment, or systems; service and repair; and education and training requirements. This is best accomplished through a multi-disciplinary team that establishes specific parameters and processes for evaluating these elements in the review, selection, and use of products.