By Jeffrey F. Solarek, CMRP, FAHRMM, CPIM. CPSM
Consulting Director, Vizient Spend Management Operations
Inventory shrinkage occurs when a hospital’s physical inventory levels are lower than what’s noted on their inventory system or when a stock out occurs, but the inventory balances in the system show on hand quantities. Hospitals typically discover inventory shrinkage during cycle counts or year-end inventory counts when they realize that accounting’s inventory records do not match reports from the physical audit. This could cause a patient safety issue if the system shows on hand inventory, but it is discovered the hospital has no inventory on hand.
What can hospitals do to reduce inventory shrinkage? Here are a few quick-win approaches:
Implement strict inventory management procedures. Strict inventory management procedures can prevent inventory losses as they help to monitor inventory levels, identify discrepancies, and reconcile inventory on a regular basis. An example of this is to implement a daily cycle count program.
Conduct regular stocktaking and audit. Regular stocktaking and auditing can help to identify discrepancies between inventory records and actual stock levels. It will also help to detect and prevent possible theft or pilferage.
Use technology to manage inventory. Hospitals can use inventory management software to monitor inventory levels, track usage, set minimum and maximum levels, and generate notifications for reordering. This will help to reduce manual errors and improve accuracy.
Train staff on inventory management. Staff should be trained on inventory management procedures, including how to handle and store inventory, how to document usage and how to report any discrepancies.
Control access to inventory. Access to inventory should be restricted to authorized personnel only. Additionally, procedures for signing out and returning inventory should be established to monitor inventory usage.
Conduct background checks on personnel. Hospitals should conduct background checks on personnel with access to inventory to detect any prior criminal records that could lead to possible theft.
Establish a culture of ownership. Remind staff of the importance of inventories, and how reductions in shrinkage will benefit the hospital operations, improve margins and enhance patient safety.
By implementing the above steps, hospitals can significantly reduce inventory shrinkage and improve operational efficiency.
About the author
In his role as consulting director, Jeffrey F. Solarek provides guidance, mentoring and leadership to member organizations to help transform their supply chain operations to leading-practice performance levels. With more than 35 years of supply chain experience in technology, steel, electronics and healthcare, Solarek has garnered eight supply chain certifications: CPSM, APP and CPM from the Institute of Supply Chain Management; CPCM from the National Contract Management Association; CPIM and CIRM from the American Production and Inventory Control Society; and CMRP, along with a Lifetime Fellowship (FAHRMM) from the Association for Healthcare Resource & Materials Management.