Periodic automatic replenishment (PAR) is at the forefront of hospital inventory management best practices in the effort to keep inventory costs down.
It is no secret that healthcare supply chain costs continue to rise while hospital profits fall. Materials costs are poised to eclipse labor next year. Supply Chain and Materials Management departments must find a way to reduce costs while still maintaining PAR levels for exceptional patient care. Let’s examine a few PAR inventory management best practices for hospitals and other healthcare providers.
In the current climate, hospital executives are striving to stretch every penny in an era where generating more revenue is proving more challenging than ever. The strategy some have been taking is decreasing the bottom line to expand margins. Over the last decades of improvements in medical technologies, healthcare supply chain has often been neglected. By taking advantage of recent development in the healthcare supply chain industry, hospitals can ensure they hit the trifecta of right product, right patient, at the right time with a lean SCM support team saving the facility money by ensuring efficient usage of personnel, contract compliance, and more effectively stocked inventory.
One area that offers great returns on optimization for a healthcare facility is Periodic Automatic Replenishment (PAR). Let’s review some of the options you have in setting up PAR locations and levels in a hospital and how to make the best use of the space and dollars you have available.
The first step in getting a handle on material costs is knowing how much inventory you have on hand and where it is located. Disorganization of PAR locations, PAR items and PAR Storage in general can lead to lost revenue and productivity. A few strategies to approach this:
Traditional PAR Management
With traditional PAR management, organizations will establish an ideal amount of product, often referred to as the “PAR level” of product to store in a supply location. Supply chain staff will periodically count the remaining supplies at the supply location, or “PAR closet” and use that count to determine how much needs to be picked to replenish item quantities back up to the PAR level. Then, supply chain staff will execute the picks and deliver the supplies to the PAR closet. An optimal PAR level will have enough supplies to support patient care for the period from when the closet is stocked until the next time it is counted and supplies are delivered. It should also support a buffer of safety stock to accommodate any variances in supply usage or delays in replenishment.
Two-Bin/Kanban PAR Management
Kanban (also known as Two-Bin) optimizes traditional PAR management by leaps and bounds for organizations with the space and bandwidth to implement. Using Kanban, the stock of an item is split into two bins, one in front and one in back. When the front bin is empty, the care provider stacks it with other empty bins in a designated area of the PAR closet and pulls the rear bin forward. Each bin will be labelled with the item it carries, so when a supply tech enters the PAR closet to count, they can scan the labels on the stacked bins. Each scan will generate a pick for the full quantity stored in that bin. Using this method, dozens of bins can be scanned in seconds, decreasing manual counting and increasing labor productivity.
Stockless / LUM PAR Management
Stockless PAR management removes a significant amount of the burden in storing bulk quantities of commonly used goods. Stockless PAR works best if most supplies are being purchased through a prime distributor that has a strong relationship with your organization. If that vendor also has a regional warehouse, stockless PAR management becomes an option. With stockless PAR management, when a PAR count occurs and replenishment is required, it will source through a streamlined & often automated procurement path straight from the distributor instead of from a warehouse. Goods will often be delivered early the next day - broken out from the standard orders and divided into individual totes bound for particular supply closets.
Trust, reliable fill-rates, and speed are critical to a successful implementation of stockless PAR management. A streamlined procurement pipeline for the stockless orders is imperative to maintain day-to-day operations.
Once you’ve defined where and how your inventory is stored, the next step is determining if you are keeping enough inventory on-hand. A common fear is that staff won’t have what they need, when they need it. This can lead to a culture of excess safety stock levels. Are you paying extra on rush fees or throwing away expired inventory? There are a few strategies to understand your usage:
Demand Planning
As previously mentioned, determining the ideal PAR level can be a challenge, but the PAR Management system has historical records of PAR replenishments, so you should put that data to work! With demand planning, a PAR management system can review how often and how much an item is replenished, as well as if any stockout occurred. Then, based on historical usage, the system can make recommendations on whether to increase or decrease the PAR level for individual items within specific locations. This ensures that the most is being made of the space and stock available.
Utilize GPOs
Work with clinical staff to determine how to best consolidate supplies. Is there a clinical need for three brands of gloves at a particular location? Is there a tangible difference between items available from preferred vendors that are purchased from other sources? If not, identify the best fit and work with the vendor on contract pricing for the consolidated items with a Group Purchasing Organization (GPO). This will save space in supply locations, enabling healthy quantities of the various supplies used to provide patient care, and room to implement more effective methods of PAR management as mentioned above.
You can’t take control of your supply chain if you don’t have visibility into it. Here are a few ways technology can improve your PAR Management processes:
Use Barcodes
It is becoming standard for hospitals to use barcodes on their materials. You'll also want to barcode the bins where you'll be stocking materials. Better than a description, your picker is now looking for the barcode number that matches his pick slip. Scanning barcoded inventory as it is received and replenished gives you complete visibility and improved data accuracy.
Reduce Manual Processes
Integrating barcodes with technology like RF-SMART's PAR inventory system can increase productivity of your Materials Workers and further improve the data accuracy of storeroom and PAR Locations. If a nurse alerts Supply Chain that a PAR location is low, an Inventory Inquiry can quickly show the quantity available in the storeroom and they can request the materials for that department right then, improving the speed of storeroom replenishment.
Create a Cloud Supply Chain Strategy
"The cloud" is slowly infiltrating the healthcare industry. One study noted 88% of healthcare CFOs were looking to replace their ERP system preferred a cloud-based solution.
RF-SMART customer CentraCare chose an inventory management solution to manage PAR locations across their eight hospitals, 30 clinics, 11 senior housing facilities, and eight long-term care facilities. As CentraCare began their Cloud transformation, it was critical to partner with a mobile supply chain provider that allowed them to take control of their supplies – ensuring product availability and giving their supply chain professionals real-time inventory visibility.
Read more about healthcare supply chain management or mobile healthcare PAR management for Oracle Healthcare.
