Manage Your Inventory and Save

March 12, 2009

Too little attention is given to inventory management in many practices.

Too little attention is given to inventory management in many practices. That’s a big mistake: The costs for drug, medical, and office supplies in the typical medical office run a whopping $51,200 to $113,495 per FTE physician, according to annual cost surveys from the National Society of Certified Healthcare Business Consultants (NSCHBC) and the Medical Group Management Association (MGMA). How’s that for a motivator to get serious about plugging holes in wasted supplies?

Smart inventory control means identifying your needs and balancing product availability, procurement, and costs. You must get the fundamentals right so you have what you need when you need it, without pricing gouges or waste. The following strategies are key to keeping tight control on costs:

  • Take personal ownership of your practice’s inventory control. Don’t delegate this to your suppliers. Evaluate inventory costs, examine opportunities to reduce costs, and identify ways to manage them better. Of course, you should collaborate with vendors and value these relationships - they are golden. Certain suppliers offer just-in-time, stockless supply programs worth exploring.

  • Let suppliers know when material costs are a concern and that you’ll take steps to reduce supply expenses through price comparisons, negotiations with preferred vendors, and, perhaps, seeking group purchase discounts.

  • Start developing points of accountability within your practice, determining which individuals will be responsible for identifying needs, approving expenditures, ordering, and tracking costs. Without accountability at each of these points, it will be difficult to control costs.

  • Bring the internal players in the inventory supply chain together. Develop a system that assigns both responsibilities and accountability, including determining budgets (by department) and reviewing expense controls each quarter. When you insist people accept responsibility for maintaining a budget for supplies, they perk up and pay attention to costs and possible waste.

  • Prepare your budget by scrutinizing high-cost and high-volume items to bring supply expenses down. Validate which supplies are essential and whether there are ways to reduce some of those costs. Failing to perform the necessary due diligence here can cause big supply-management problems.

  • If you’re a specialist, you probably have special supply needs, too. Factor that into the equation. Clue into rising costs of materials, where shifting to another supplier might bring significant financial benefit without compromising outcomes. Also, do some cost comparisons with online suppliers.

  • At an operations level, examine supply maintenance to be sure you are not over-ordering, and keeping more supplies on hand then is necessary. In particular, watch out for those drugs and antigens that have a short shelf life and end up wasted. Automated inventory control systems can help organize supplies and manage costs in a way that dictates typical utilization and triggers when supplies need to be reordered. But even a simple spreadsheet can help control and manage supply costs.

Make sure your team takes inventory management seriously. Creating a system that monitors usage and holds people accountable will be worth the effort and bring long lasting results.

Judy Capko is a healthcare consultant, speaker, and author of the popular books; “Secrets of the Best Run Practice, 2006” and “Take Back Time: Bringing Time Management to Medicine, 2008.” She is also a popular speaker at national and regional conferences. Judy is the owner of Capko & Company (www.capko.com) and is based in Thousand Oaks, Calif. She can be reached via physicianspractice@cmpmedica.com.