High-tech help can hover, cover key performance indicators

Arguably, the pre-eminent parameter for any storeroom or warehouse design plan is to ensure easy accessibility to any product inside.

If you can find it fast, stockpiling won’t last.

Despite the best of intentions, however, the mammoth scope of a storeroom or warehouse redesign effort may be enough to inspire procrastination in doing anything about it.

Sure, hospitals may not be in the warehousing business and supply chain not their "core competency" as some in the industry have posited at conferences and trade shows, but either excuse rings hollow and shallow if the core competency of caring for patients somehow is affected by a storeroom or warehouse design that enables stockouts or simply makes things hard to locate.

Donna Van Vlerah

In fact, Donna Van Vlerah, Vice President of Supply Chain, Parkview Health, Fort Wayne, IN, respectfully rejected the diminishing notion that supply chain or warehousing is not a core competency of a healthcare organization.

"At the core, a hospital is a business that specializes in healthcare, but it does not preclude us from the many disciplines of running a business [that include] Human Resources, Finance, Facility Maintenance ... and the list goes on to include Supply Chain/Materials Management," Van Vlerah told Healthcare Purchasing News. "In order for a hospital to provide excellent care, they must have all disciplines within their core competencies.  I believe the messaging that storerooms are not important advances the notion we are not critical to the healthcare mission."

If anything, a well-oiled supply chain and an efficiently organized storeroom or warehouse both demonstrate competence for its core service, which is supporting clinicians to care for patients.

From the lights on the ceiling to the cleanliness and temperature of the air to the breadth and width of aisles to the arrangement of shelving to the order of products on shelves, design can make a difference in how a hospital delivers service.

How do Supply Chain teams determine whether their storehouse footprints need a redesign to improve throughput and workflow? What kinds of techniques and tools will enable the necessary improvements?

HPN reached out to a small group of provider and supplier supply chain experts for high-tech and low-tech practices and tools necessary for redesigning or reorganizing storeroom and warehouse space, as well as the danger/warning signs that a storeroom or warehouse needs an update, upgrade or complete overhaul.

In this edition, HPN spotlights high-tech strategies and tactics; an upcoming edition will feature low-tech strategies and tactics.

For Van Vlerah, success can be found in a virtual world where storerooms and warehouses can be managed with sophisticated software tools. "These software tools enable the Supply Chain leader to have visibility of stocking levels in hundreds or thousands of locations," she said. "With this aggregated virtual view, one can optimally manage obsolescence, expiration and right-size inventory through demand planning/forecasting. Today’s robust software packages enable the Supply Chain leader to manage items in the right unit of measure, too. Point-of-use systems tied to sophisticated software tools becomes a significant force multiplier. In order for a supply chain to operate in a Lean Six Sigma environment, management of ‘big data’ via an automated system is a critical element for today’s inventory management."

Van Vlerah pointed to three options as "nirvana:" A warehouse management system (WMS), a demand forecasting system and a point-of -use system.

Mike Switzer

Mike Switzer, Vice President of Supply Chain & Support Services, North Mississippi Health Services Inc., Tupelo, MS, delineated the differences he sees between storerooms and warehouses, which he considers to be two separate types of operations. Switzer spearheaded the design of a consolidated service center for his integrated delivery network that he currently manages.

"A storeroom is typically set up so that any nurse can find goods in the off hours," Switzer noted. "In a storeroom like items are usually placed together. Things like needles will generally all be located together to make it easier for a nurse to find the goods. A warehouse is — or should be — totally different. In a warehouse you should never place any two like items beside, above or below each other [because] this is a miss-pick waiting to happen."

Like Van Vlerah, Switzer favors the use of a warehouse management system, which would track item location, proper stock rotation, lot numbers, expiration dates, receiving, shipping, routing personnel and even which size totes to take for an order, he indicated. This system also will enable managing inventory in multiple locations within the warehouse — both dynamic and fixed — as well as handle cycle counts for a consistent, accurate inventory and allow you to measure the various [key performance indicators] to verify how well your systems and your people are doing, he added.

Jim Dickow

Warehouse management systems can help even the newest employees and intermittent personnel identify picking locations for fulfilling order selections and putting away stock, according to Jim Dickow, President, Dickow Consulting Group LLC, Milwaukee.

"Most warehouse management systems have some sort of system to rearrange the ‘picking ticket’ in the order most efficient for picking and/or packing," he continued. "This would increase the pace and accuracy of the fulfillment process."

A WMS also enables employee accountability and responsibility, Dickow insisted, "keeping track of who is filling a particular order, how much time it takes and how the performance compares to standards of operational practice," he added.

"Inventory management begins with accurate tracking of original incoming inventory for use in manufacturing processes from raw materials, staging [and] kitting, through work-in-process to shipment of finished goods," said Amy Flynn, OR/CS Market Manager, Hanel Storage Systems, Pittsburgh, PA. In fact, [materials resource planning or enterprise resource planning] systems provide management visibility for all in-bound, in-storage and out-bound inventory, she added. "These systems assist in the planning of the manufacturing process to ensure that all needed components are on hand at the time of assembly or manufacturing," she said. "The [stock-keeping unit] level tracking continues throughout the process to keep accurate stocking levels, create audit trails of employee interaction with inventory, identify obsolete inventory as well as identify shipping requirements."

Flynn insisted that a comprehensive integrated system is vital for accurate inventory management in this age of accountable care, tighter budgets, leaner staffing and Six Sigma methodology, but lamented that "far too many hospitals are still utilizing a pen-and-paper system or a standalone software platform for inventory management."

Switzer favors "wire guidance" in the floors to guide powered equipment, such as forklifts or pickers. "This keeps your staff from running into the shelves and potentially damaging the shelving, the products, or even their coworkers," he said.

Believe it or not, Supply Chain should design the building’s air conditioning system, too, Switzer insisted. "We use a type of system that uses no ductwork and allows you to store goods clear up top without having to worry about temperature differences," he said. "A typical warehouse with standard air conditioning would have about 100 roof penetrations — which can lead to leaks — and will have air stratification that can lead to a 15 to 20-degree difference from the floor to the ceiling in a warehouse. This is very important for temperature-sensitive items. It also has the ability to filter all of the air and remove all of the dust from the entire building. The only time we have to dust our goods is when we receive them."

Nancy Pakieser

"Our partners often work through the ‘people, process, technology’ methodology," Pakieser said. "Once they have the right staff in place and have identified the workflows and processes needed to support patient care, then we can determine the right technology to put in place. As an example, in some clinical areas, bar-code readers work well, in other clinical areas an RFID-enabled Kanban system is the best solution. In the perioperative setting there may be many technologies in place to support various aspects of the workflow, such as handheld devices to help build the case carts, 2-bin Kanban in the core, an RFID reader to capture data use in the operating room and then a bar-code reader to restock unused items." 

Technology merely gives supply chain the inventory visibility across the health system it serves, Pakieser noted. "Knowing what you have and where you have it enables an organization to be nimble and responsive to fluctuations in care delivery needs and to shift items to areas of greater demand," she said. "You can then leverage this data to right-size your inventory investment and implement demand-planning practices. By leveraging the data from any mix of technology capture, you can improve your supply chain’s overall performance with definite business payback and better support of care delivery."

Access to real-time data is critical for decision-making, according to Robert Jones, Director of Logistics, Medline Industries, Mundelein, IL. "At worst, most healthcare supply chains rely on gut feel, and at best, many cumbersome spreadsheets to merge data," he said. "Forward-thinking institutions should utilize modern database strategies and business intelligence software to ensure optimal performance. Having real-time visibility of inventory performance, equipment locations and KPIs will have a significant positive impact on service to clinical partners."

Supply Chain must be able to visualize its workflow through a system of record for bin locations so that they can maintain a slotting strategy, Jones continued. "This slotting strategy should be evaluated with modern warehouse visualization software, which allows for the ability to test what-if scenarios for warehouse layouts and slotting strategies," he added.

Scott Nelson

Scott Nelson, Senior Vice President of Supply Chain, Cardinal Health Inc., Dublin, OH, indicated that simulation tools would contribute here as they would allow Supply Chain "to see the impact of design changes and mitigate any unforeseen bottlenecks or obstacles before moving any furniture."

Nelson further recommended velocity/profiling tools as another essential element "to determine the optimal storage location for each product based on parameters such as velocity, size, and proximity to the outbound area."

Gaining access to inventory velocity data can facilitate planning and forecasting, according to John Freund, CEO, Jump Technologies Inc., Eagan, MN, but hospitals tend to struggle with it.

Distributors and suppliers build this data by using technology such as carousel systems that organize, store and provide access to huge amounts of inventory, Freund indicated. "Because these systems are extremely sophisticated, they not only learn the best way to organize the inventory, they also track every item requisitioned and over time, build accurate velocity data that supports the replenishment and ongoing fulfillment processes," he said. "As the system assimilates more data, it can reorganize the location of supplies for efficiency, set new reordering information based on actual velocity over time, and make recommendations to assist with planning."

John Freund

Historically, hospitals have found managing inventory velocity, or item-level usage data, difficult to achieve and maintain for three reasons, Freund observed.

"First, there may not be a way to centralize consumption data for every item in each area of the hospital or health system," he noted. "Second, hospitals must overcome the challenge of unit of measure, with some areas or systems storing item data as ‘eaches’ and others reporting ‘boxes’ and ‘cases.’ Finally, reporting tools accessible to the hospital may not be able to aggregate item usage data across multiple systems."

As a result, hospitals rely on PAR replenishment, which involves "a technician visually assessing items in a storage location to determine what needs to be replenished, using existing PAR levels to trigger a reorder rather than true velocity data," Freund continued. "This method can become highly inaccurate over time, as a tech reports a number to trigger a reorder simply because some items look low and they don’t want to stockout."

A lack of systems in place can hinder progress, according to Kevin Hartler, Senior Director, Services & Solutions Development, W.W. Grainger Inc., Lake Forest, IL, which specializes in industrial supplies, MRO (maintenance, repair and operations) equipment, tools and materials used in environmental services and facilities management.

Kevin Hartler

"The increase of slow-moving and inactive inventory is a universal problem often caused by a desire to improve service levels," Hartler said. "Items are added to inventory based on an assumption that if a part is needed today, odds are it will be needed again in the future, and therefore should be stocked for future needs. However, Grainger Consulting Services research has shown the majority of MRO items purchased by an organization meet infrequent needs that are unlikely to repeat. Many organizations accumulate substantial inactive inventory as a result of mistaking infrequent, unplanned needs as the start of a repetitive need."

Hartler noted that Grainger’s baseline analysis of more than 100 organizations across various industries — including healthcare, food and beverage, manufacturing and aerospace — found the following:

• On average, an organization’s MRO inventory turns one time annually

• 50 percent or more of a typical organization’s MRO inventory is "inactive," having no issuances during the previous 12 months

• Average turns on MRO items only increases to 2.5 times annually after excluding "inactive" inventory

These findings suggest MRO inventory provides a considerable opportunity for process improvement, cost reduction, waste elimination and increased value, Hartler added.

RFID should play a key role as it can "signal when inventory levels are low or depleted, product hasn’t been ordered, and to help optimize replenishment cycles to right-size bin locations," Cardinal’s Nelson noted.

Although RFID technology may not be economical for every item in a hospital supply chain, Medline’s Jones acknowledged, a smart implementation can reduce replenishment activity and improve performance by providing visibility to inventory and equipment locations, which is critical in a hospital setting.

Flynn recognized that healthcare organizations, by and large, have been slow to use automated inventory systems. "While robotic surgical devices have gained widespread use, hospitals have not embraced opportunities to utilize automation to assist in daily inventory handling environments," she said. "Early adopters, however, are realizing the significant cost-reduction opportunities available to them."

Flynn cited sterile processing departments at "several dozen" U.S. hospitals are using high-density storage in automated vertical carousels to manage sterile instruments, implants, soft goods and a variety of other stored inventory in the SPD and the OR, reducing the departmental footprint by 60 percent to 80 percent, and avoiding the need for costly renovations or construction projects to accommodate additional demand and volume.

"These systems utilize on-board inventory management control systems to track all inventory and then quickly bring the item to the SPD technician, rather than the technician traveling all over the SPD or OR to locate a tray of sterile instruments, while also delivering the items to the end user at an ergonomically correct height," she noted.

Jean-Claude Saghbini

Automated inventory management solutions that include an analytics platform and efficient tracking mechanisms can reduce costs and increase efficiencies by tracking location and usage, according to Jean-Claude Saghbini, General Manager of Inventory Management Solutions, Cardinal Health Inc. "The solution ‘learns’ optimum inventory levels to eliminate over/under-stocking," he added. "It also can provide an early alert to expiring products, offer an ability to easily scan and marry to patient records for appropriate charge capture, eliminate tedious and error-prone manual cycle counting and reduce clinician time spent on supply chain tasks so they can focus on patient care."

Even as the industry migrates toward centralized inventory management within organizations, however, Flynn sees value in the opposite remaining attractive, too.