Hospital Materials Management Empowers Healthcare Organizations

What is Materials Management for Hospitals?

Materials management in hospitals includes the strategic planning, procurement, storage, distribution, and utilization of materials and supplies essential for providing healthcare services. These materials encompass a wide range of items such as medical equipment, pharmaceuticals, surgical instruments, consumables, office supplies, and more. Efficient materials management is crucial for maintaining a seamless workflow, optimizing costs, reducing waste, and ensuring that healthcare providers have the necessary resources at the right time and place.

Six Best Practices in Hospital Materials Management

Best practices in hospital materials management can generate the same significant cost reduction and service level improvements seen across the manufacturing and retail industries. Hospitals have evolved and now look to better manage materials, expenses and their workforce. Following are six key best practices

1. Integrated Inventory Management: Implementing an integrated inventory system enables hospitals to track all materials from a single location, avoiding stock duplication and ensuring timely restocking when necessary.

2. Analytics: Leveraging data analytics and usage patterns, hospitals can make informed decisions about inventory levels, demand forecasting, and identifying cost-saving opportunities.

3. Vendor Cooperation: Building strong relationships with suppliers and vendors allows hospitals to negotiate favorable terms, streamline the procurement process, and secure reliable supply chains.

4. Standardizing Supplies: By better controlling materials and using research-based criteria for product selection, hospitals can reduce variation, enhance efficiency, and improve patient safety.

5. Auditing and Quality Control: Regularly auditing inventory levels, checking for expired items, and conducting quality checks ensures that hospitals maintain a high standard of care, drive performance improvement initiatives, and avoid potential risks.

6. Cross-Departmental Collaboration: Effective communication and collaboration between departments, such as clinical, finance, and procurement groups, can lead to better planning and allocation.

Understanding the Difference Between Materials Management and Procurement

Materials management and procurement are often used interchangeably, but they encompass distinct aspects of the supply chain within a hospital. Materials management refers to the holistic process of planning, organizing, sourcing, storing, distributing, and controlling the materials needed for hospital operations. It involves managing inventory levels, optimizing storage, and ensuring timely availability of supplies throughout the hospital. Procurement, on the other hand, focuses specifically on the purchasing of goods and services required by the hospital. It involves activities such as identifying suppliers, negotiating contracts, placing orders, and managing supplier relationships.

Benefits of Efficient Hospital Materials Management

Efficient management for hospitals can help achieve a variety of key benefits, which include the following:

Cost Savings: Optimizing inventory levels, negotiating better contracts, and reducing waste can result in substantial cost savings for hospitals.

Improved Patient Care: When materials and supplies are readily available, healthcare providers can focus on patient care without interruptions, leading to better treatment outcomes.

Enhanced Patient Safety: The likelihood of stockouts or expired products is reduced, minimizing potential harm to patients.

Streamlined Workflows: Proper materials management leads to smoother workflows and less time spent searching for or waiting on supplies.

Regulatory Compliance: Maintaining accurate records and adhering to regulatory standards ensures hospitals remain compliant with healthcare regulations.

Key Activities of Hospital Materials Management

One of the prime tasks of a robust program is inventory control. This includes tracking and managing inventory levels, ensuring stock availability, and preventing overstocking or stockouts. Procurement is another key responsibility. It comprises sourcing from reliable vendors, negotiating contracts, and managing supplier relationships. Other important activities include:

Storage and Distribution: Properly storing materials in controlled environments and efficiently distributing them to the appropriate departments.

Asset Management: Overseeing the lifecycle of medical equipment, ensuring maintenance, and tracking depreciation.

Risk Management: Identifying and mitigating risks associated with materials and supplies, such as expired items or product recalls.

Four Key Steps in the Materials Management Process

The process comprises four essential steps that work in tandem to ensure a seamless supply of resources:

Demand Forecasting: Accurate demand forecasting is the foundation of efficient materials management. Hospitals need to anticipate the quantity and types of supplies needed based on patient volume, procedures, and historical data.

Inventory Management: Maintaining the right balance of inventory is crucial. Excess stock ties up capital and storage space, while insufficient stock can disrupt operations. Advanced inventory management systems leverage technology to track usage, predict reorder points, and minimize waste.

Supplier Relationship Management: Collaborating closely with suppliers is necessary to ensure a steady supply of high-quality materials. Building strong relationships fosters communication, efficient issue resolution, and the ability to negotiate favorable terms.

Distribution and Logistics: Efficient distribution ensures that supplies reach the right departments at the right time. Streamlined logistics processes optimize transportation, reduce lead times, and minimize the risk of stockouts.

Challenges Associated with Efficient Hospital Materials Management

Hospitals are never aware of the number and type of patients they’re going to deal with. Therefore it is essential to effectively manage the flow of materials and maintain accurate inventory levels in order to meet diverse patient needs. These are daunting tasks, particularly in hospitals where healthcare professionals need to focus their attention on patients. Here are some of the typical challenges:

Constantly Changing Demands: Fluctuations in patient volume and medical advancements can make demand forecasting challenging.

Vendor Reliability: Dependence on external suppliers can lead to disruptions in the supply chain if vendors fail to deliver as expected.

Cost Pressures: Healthcare facilities often face financial constraints, making it essential to strike a balance between quality and cost-efficiency.

Inventory Complexity: Hospitals deal with a wide range of materials, each with its unique storage requirements and expiration dates, increasing the complexity of inventory management.

Technological Integration: Implementing new technologies and ensuring interoperability with existing systems can be a daunting task.

Addressing Challenges with Materials Management

If your hospital or facility struggles with maintaining the right supplies at the right place and time, consider implementing these strategies:

Technology Integration: Invest in inventory management software that tracks usage patterns, generates reorder alerts, and provides real-time visibility into stock levels.

Centralized System: Establish a centralized system that coordinates supply distribution across different departments. This minimizes duplication and waste.

Demand Forecasting Improvements: Utilize historical data and trends to refine demand forecasts. Regularly review and adjust forecasts to accommodate changes in patient volume and treatment modalities.

Cross-Functional Collaboration: Encourage collaboration between medical staff, administrators, and procurement teams. This facilitates better communication and understanding of supply needs.

Unique Requirements for Hospitals

There are at least four key requirements for hospitals. These include:

Availability of Supplies: In hospitals, some supplies, like life-saving medications or emergency equipment, are of utmost importance, necessitating robust inventory management.

Infection Control: Maintaining strict infection control protocols is crucial for preventing the spread of diseases through materials handling.

Supply Chain Vulnerabilities: Hospitals must be prepared to address supply chain disruptions during emergencies or unforeseen events.

Medical Waste Management: Proper disposal of medical waste requires adherence to regulations and ethical guidelines.

Assessing the Efficiency of Your Hospital Materials Management Function

Whether implemented internally or with the help of a services provider, assessing your efficiencies can help identify any opportunities that will ensure increased efficiency and accuracy. Following are four critical areas to consider for your assessment:

Key Performance Indicators (KPIs): Hospitals can monitor KPIs such as inventory turnover rate, stockouts, carrying costs, and order fulfillment time to assess efficiency.

Benchmarking: Comparing practices and processes with industry benchmarks can highlight areas for improvement.

Stakeholder Feedback: Gathering feedback from healthcare providers and staff about materials availability and effectiveness can provide valuable insights.

Data Analysis: Utilizing data analytics to track trends, identify patterns, and forecast demand can aid in streamlining the function.

Why hospitals should consider outsourcing materials management processes

Outsourcing is a strategic decision that many healthcare facilities have adopted to streamline their operational efficiency. It involves acquiring, storing, distributing and utilizing medical supplies, equipment, and pharmaceuticals. By entrusting this critical function to managed services experts like Canon, hospitals can focus additional time and resources on their core mission of providing high-quality patient care. The following are 10 significant advantages to outsourcing:

Cost Containment. One of the primary reasons choose business process outsourcing is cost savings. External providers like Canon Business Process Services have experience implementing best practices in inventory management, data tracking and workforce management, all of which can help build a more cost-efficient operation.

Here is an example. A major hospital concluded that while its Receiving and Central Supply operation was essential to the business, the operation’s recruiting, training, and corporate support systems were more tailored to healthcare professionals than logistics specialists. To better ensure that the right materials are available in the right places, at the right time, the hospital engaged Canon to manage its receiving, central supply, and inventory replenishment processes.

The Canon team implemented best practices in inventory management, data tracking, recruiting, and employee development. This helped contain costs while improving processing times, providing vital business insights, and giving the hospital greater scheduling flexibility. Canon helped to build Kanban workflow management systems, improve the replenishment process, and develop point-of-use storage systems for high-use items. With an improved flow of material throughout the hospital, our client can concentrate on other priorities including its core mission of providing the finest quality healthcare for its patients.
Enhanced Focus on Core Activities: As the example above illustrates, by outsourcing the function, hospitals can focus more on patient care, medical research, and improving healthcare outcomes. Instead of dedicating resources to managing supplies, hospital staff can concentrate on critical tasks, thus improving overall operational efficiency and patient satisfaction.
Access to Specialized Expertise: Service providers like Canon are equipped with specialized knowledge and experience in handling medical supplies and equipment. They employ skilled professionals who understand the intricacies of managing medical inventory, compliance requirements, and the latest technological advancements. This expertise contributes to better decision-making and streamlined processes within the hospital.
Improved Supply Chain Management: Outsourcing materials management often involves implementing robust supply chain management systems. These systems can help hospitals accurately track and forecast supply needs, ensuring that essential items are always available when needed. An efficient supply chain reduces delays and stockouts, minimizing disruptions in patient care.
Technology Optimization: Outsourcing service providers typically employ advanced software solutions to manage inventory, track usage patterns, and automate replenishment processes. Such technology integration enhances overall efficiency, reduces manual errors, and provides real-time insights into inventory levels and expenses.
Flexibility and Scalability: Outsourcing allows hospitals to adapt to fluctuations in demand and growth. As patient numbers increase, the outsourcing partner can scale its services, which helps ensure that the hospital remains equipped to meet its requirements without incurring substantial fixed costs.
Regulatory Compliance: Compliance with various regulations and standards, such as FDA guidelines and Joint Commission accreditation, is crucial for hospitals. Professional providers are well-versed in these requirements and ensure that the hospital's supply chain adheres to all necessary rules and protocols.
Risk Mitigation: Outsourcing materials management can also help hospitals reduce operational risks. By entrusting the management of supplies to experts, the hospital can mitigate the risks associated with stockouts, expired products, and inventory mismanagement.
Time Savings: Outsourcing allows hospital staff to save time and effort spent on vendor management and inventory tracking. This additional time can be utilized for staff training, quality improvement initiatives, and other core activities.
Continuous Improvement: Outsourcing service providers often bring best practices and innovative approaches from their experience in managing supplies for various healthcare facilities. This constant exposure to diverse environments encourages continuous improvement and fosters a culture of innovation within the hospital.

Learn how Canon improved a hospital's materials management

Cost Cutting Strategies

Internal logistics systems and inventory management have not advanced nearly as rapidly in healthcare as it has in several other industries. The entire supply chain is playing a critical role in the transformation that the healthcare industry is making in order to provide quality care in a sustainable and affordable manner. Here are two key strategies that can help contain costs while boosting the efficiency of your current materials management/supply chain operation.

Improve Inventory Management. As spotlighted in the previous section, improving inventory management is one of the key cost reduction strategies for hospitals. This is why an increasing number of care providers are outsourcing some, many or all of their inventory management functions to service providers.

Enhance Data Visibility. A better inventory management system might not totally resolve the out-of-stock and excess inventory issues that have plagued a hospital in the past, and continues to plague it today. Some hospitals find that product costs and complexity problems aren’t all externally driven or supply chain driven. Product costs are also being driven by problems associated with their own internal data, systems, processes, procedures and controls. As a consequence, providers are continuing to struggle with overstocks, out-of-stocks, high supply costs, high labor costs and dissatisfied clinical staff.

To address these issues, healthcare providers are looking to achieve greater visibility into product purchasing, delivery, utilization and inventory across all of their systems and facilities, and an integrated solutions approach. The lack of data standardization, visibility and an integrated approach is a common challenge to achieving materials management/supply chain excellence. With better visibility into data, greater integration with clinical operations, and improved business systems, processes, procedures and controls, providers can address many of the inventory management challenges facing them today.