Hospital Supply Chain Management: Automated Replenishment Strategy

As a healthcare provider, are you struggling with how to deliver quality patient care, while also managing operational efficiency? You are not alone. Across the industry, there is a high cost associated to stocking items. When medical supplies can’t be located, are expired, or out of stock, you end up with frustrated medical staff, disrupted material workers tracking down missing items, and delayed patient care. Many hospitals are under pressure to tighten operating margins and are looking to reduce supply chain expenses. Establishing an automated replenishment strategy is a good place to start.

healthcare 2-bin replenishment

Stockouts of medical supplies in a healthcare setting can result in life or death situations. And a history of stock outs can create a culture of hoarding essential materials on carts by individual nurses or specific units. Without proper visibility into materials, overstock can also happen, wasting money on extra products and valuable shelf space. In fact, it’s common to see up to 20 percent of inventory value expire on the stock room or PAR location shelves, with up to 25 percent of inventory sitting unused for 12 months or longer. Using mobile materials software along with a best practice replenishment process can help you clean up these stats and solve one of your biggest headaches. 

Why Cloud is the First Step

One way to solve the challenge of reducing expenses while delivering the best patient care is to implement a cloud-based materials management solution. Benefits include improved productivity, accurate picture of materials on-hand, and increased visibility of items across departments. This is the first step.

Oracle has a long-standing and ever-growing presence in the healthcare space. Oracle Cloud SCM is a powerful cloud-based solution suite that can help healthcare providers transform and innovate in a digital world. Apps like Oracle Supply Chain Planning help healthcare providers understand demand by leveraging consumption history to create a forecast, automate procurement, and calculate safety stocks. Hospitals that enable Oracle Healthcare solutions to track, trace, and manage clinical inventory by improving clinical inventory visibility to locations, quantities, and history as well as lot and unique device identifiers.

Oracle Cloud partners with RF-SMART for Mobile PAR Management. With real-time integration to Oracle Cloud SCM, you get mobile materials management, offline PAR counting and seamless replenishment processes that automatically update Oracle Inventory Management Cloud.

Additional Resource:  Building your Healthcare Supply Chain Strategy in the Cloud

Common Automated Replenishment Strategies in Healthcare

The next step is to properly define how you plan to manage on-hand quantities and automate your replenishment process. The goal is to make sure you are holding the optimal amount of materials at any given time.

Periodic Automated Replenishment (PAR) level counting lets you perform counting and replenishment in locations/ sub-inventories that don’t track on-hand quantities of items. If you are doing this manually, workers typically do not count each individual item. Instead, a quick visual scan is done to see which PAR locations are low. This process may be easy for an established worker, but with hundreds of PAR locations in stockrooms, it could be a challenge for new workers lacking the tacit knowledge.

Once this process is automated, you can designate how you want to replenish each location – basic count, quantity request or a two-bin method – and the software is able to tell the worker exactly what to do on the mobile device.

PAR Replenishment – Basic Count & Quantity Request

Outfitted with a mobile device, replenishment can happen with a simple scan using RF-SMART:

  • The supply Item is scanned, and then the count quantity is entered.
  • RF-SMART creates the replenishment requests (requisitions for a supplier or a transfer order for stock room items) based on the PAR location configuration.  
  • Then the materials worker will replenish the location back to established PAR level. RF-SMART provides an offline mode to prevent users from losing work when going in and out of WiFi coverage. Locations can have minimum and maximum quantity tolerances set to ensure your locations have optimal stock and prevent over/under ordering.

PAR Replenishment - Two-Bin Replenishment

Two-Bin Replenishment is a replenishment process our team highly recommends. It is a type of just-in-time replenishment that is based on Lean Management techniques:

  • PAR locations are set up with two “bins” for supplies.
  • Clinicians pull the items they need from first bin.
  • When that bin is empty, the clinician moves the empty bin to a designated collection area (on top rack, or counter space) and they pull the second bin forward.
  • Empty bins signal to material/supply chain personnel that more supplies are needed. They scan the empty bin, and just like in the Basic replenishment process, RF-SMART creates the replenishment requests based on the item's configuration.

Watch how St. Clair Hospital Set up two-bin replenishment processes

Pros: By using Two-Bin replenishment, accurate counts only take a few seconds per empty bin before the worker can move on to the next location. This process also delivers the exact amount to replenish each empty bin instead of relying on eye-ball counts. Using the principle of First Expired, First Out (FEFO), the materials department can ensure that aging product and upcoming expiration dates are used first. Plus, being able to monitor usage also gives increased visibility into your fast and slow moving inventory.  As far as your clinicians, Two-Bin Replenishment helps with the flow of care because it ensures your important items are never out of stock, which helps avoid hoarding and keep supply budgets in check. 

Cons: Implementing a Two-Bin replenishment system isn’t always feasible for a healthcare provider. It often requires an overhaul of the current storage systems in PAR locations, and closed cabinetry and small spaces are challenges to utilizing this system. It also takes buy-in from multiple departments and stakeholders.  

Read more about setting up your PAR system:

Download the PAR Best Practices Guide