Dive Brief:

• A 700-bed public hospital in Greece implemented an inventory management system within its pharmacy that led to improvements of up to 25% across inventory cost key performance indicators (KPIs), according to a case study report published this year by University of Macedonia and Papageorgiou General Hospital researchers.
• The researchers created replenishment plans that considered the usage value of a product, its importance in a clinical setting and its demand fluctuations. The plan's success was tracked using five KPIs: average stock value, average inventory turnover, stock range of coverage, excess stock and service level.
• The replenishment plan was built in a way that allowed the hospital to continue using its existing enterprise resource planning. The people working in hospital pharmacies "are sometimes less proficient with SCM concepts​," which meant it was important to create easy-to-use tools, the report notes. The final framework was "built around data and tools that are readily available within common ERP systems​."

Dive Insight:

The researchers partially relied on what's known as ABC analysis to place items into three categories based on usage value. When looking for an inventory management system, the researchers pointed out that it would be important to consider more than just consumption and cost.

"Especially in hospital pharmacies where drug administration is complex and drug shortages can have an impact on human lives, ABC classification alone cannot adequately support inventory management functions because it imposes the risk of assigning a low priority to an item because of its low consumption values, despite its critical importance for human lives," the report reads.

The inventory management framework accounts for this by further listing each item as either vital, essential or desirable. A final step was to preform an XYZ analysis to see how demand changed over time for each item. Once the items were clustered based on the criteria, they fell into one of the following reorder strategies:

1. Automatic reorder point planning with a fixed lot size.
2. Forecast-based planning with an economic order quantity.

Items that fell into the group relying on forecast-based planning tended to have more seasonal demand, whereas those in the automatic reorder group experienced more constant demand.

After creating the framework, researchers let it run its course for a year. Then, they compared the five KIPs year over year. The result was improvement across KPIs, including decreased average stock value and dead stock, along with increases to average inventory turnover.

The researchers in Greece focused on creating a framework that can work with and improve the use of existing ERP systems and tools. But another paper published last year suggests inventory management systems within a hospital pharmacy could also benefit from a robotic original pack dispensing system by helping to reduce dispensing errors that occur when the process is performed manually.

However, the Greek researchers make it clear that more complex methods that rely on tools a hospital doesn't already have could face implementation barriers, which is why they say its important to focus on a framework that can be used within existing systems.