Finding Hospital Supply Chain Savings with Operation Optimization

With financial pressures mounting across many health systems, organizations are looking for new ways to create value across their operations. Supply chain contract pricing negotiation has long been a dependable source of savings, but that well is now challenged by tariffs and a shifting supplier and manufacturing landscape. While operational savings may not match the scale of major contracting wins, the impact of operational optimization is significant; reducing labor costs, improving workflow, and supporting higher nursing satisfaction. When done well, these improvements can generate measurable savings opportunities and increased value for the health system.

Operations improvement and savings begin with understanding how you deploy your operational resources. Most supply chain teams know their PO lines, pick volumes, receipts, and inventory issues. Some even track fill rates and identify supply risks. But very few truly understand their labor. You need to capture and understand the real capacity of each operational team and how its capacity fluctuates throughout the day as tasks and demands shift.

Do you have a dashboard that displays your labor availability vs demand to complete your work? Without a clear measurement capability, it’s nearly impossible to know whether you can take on more work, adjust schedules, or understand the impact of a process change. At its core, operational optimization comes down to applying disciplined supply and demand thinking to labor, something many organizations overlook. 

Effective labor management begins with establishing target productivity metrics.

• How many put-aways should a staff member complete within an hour?
• What is the average transit time for a delivery?
• How many receipt lines can be processed in a shift?

By defining these targets and applying them across your workforce in a structured way, you can begin to project overall operational capacity.

Once labor targets are established, scheduling becomes the other half of the equation. Understanding the demand for pick, put-away, and receipts on an hourly basis helps determine exactly when tasks must be completed and what workload is expected. Plotting these requirements and overlaying your labor model will reveal where you may be overstaffed or understaffed. You may find that some staff cannot be fully productive due to their shift structure, while others are consistently overloaded. The ability to accommodate unexpected staff absences must also be incorporated into your labor balancing approach.

Completing this exercise establishes the foundation for operational improvements that can significantly enhance your ability to manage the hospital.

Optimizing PAR locations with labor considerations in mind can yield significant savings. In many cases, a well-executed PAR optimization effort can reduce the labor required to support operations by 20 percent. Appropriately sized PAR levels reduce the number of daily replenishment lines and can even eliminate entire delivery runs.

Example: An ICU clean supply room with 400 products may generate 80 replenishment lines per day using standard PAR counting. Closer review may reveal that 20 percent of the products are stagnant and have not been delivered in six months. Supporting this PAR location requires approximately 4.2 labor hours per day, while stagnant items consume valuable space and drive product expiration. With proper PAR management, labor could be reduced by an hour per day while improving overall service.

Effective clinical unit support also requires careful monitoring of work completed outside of routine replenishment. Ad-hoc supply deliveries, both emergency and routine, cannot be eliminated but should be minimized. A single on-demand delivery often takes 12 to 15 minutes. Deliveries made at the wrong time or overlapping with other transactions increase labor burden. Returned products carry an opportunity cost of 400 to 600 percent of the original pick because they must be picked, delivered, returned, identified, keyed, and put away. Organizations that avoid processing returns may inadvertently allow supplies to be discarded or shift the burden of managing the overstock to nursing staff.

For supply chain teams that complete this analysis effectively, hidden capacity is often unlocked even in operations that already run lean. Work can be completed at the optimal time, schedules become clearer, and progress toward daily goals is easier to quantify. Teams may also identify opportunities to restructure schedules, such as eliminating a night shift and extending daytime operations with fewer staff members. 

Larger healthcare systems may find additional opportunities to reduce staffing or reallocate team members to higher-value work. Supply operations teams are uniquely positioned to take on project work or expand support in areas that benefit from their expertise, such as bedside carts, oxygen tanks, and durable medical equipment distribution.

For organizations that struggle to build a consistently high-performing supply chain, partnering with an experienced operations service provider may be the most effective path forward. Canon Business Process Services offers deep expertise in labor optimization, workflow design, and logistics execution. Canon can assess operational maturity, identify mismatched labor and poorly aligned demand, and help correct inefficiencies that hinder performance. With the right experts and technology in place, Canon can provide the visibility and structure required to deliver meaningful value to the health system.