Pros and Cons of Kanban Inventory Management Systems in Hospitals

Why hospital stock control is important

Hospitals carry a huge amount of stock and ensuring that the full range of items is on hand for nurses supports optimum patient care. Healthcare organizations have high volume usage of their low cost medical supplies, so storing, tracking and controlling inventory is no easy task.

In an effort to maintain constant supplies many organizations end up with some very bad habits:

• materials management staff ‘playing safe’ by over-ordering medical inventory
• nurses hoarding products that often run out, distorting the real stock situation
• overstocked hospital supplies sitting unused on the shelves
• unnoticed expired hospital medical inventory in stock cupboards

Problems caused by overstocking hospital medical inventory

Over-ordering stock is a logistical, storage and patient safety issue, plus it ties up precious hospital money on products that may not be needed.

Most hospitals operate with limited storeroom capacity so over-ordering inventory puts pressure on the materials management team and creates crowded storage spaces that are difficult to use and maintain.

Overstocking also results in expiry management issues, as excessive amounts of stock are left sitting on the shelves, moving ever closer to their expiration date.  The more stock ‘on the shelves’, the harder it is to control – carrying surplus stock increases the risk of expired products being accidentally used. This may compromise the hospital’s compliance and nurse’s registration, have a detrimental effect on the patient (with the risk of a never event) and could also result in expensive litigation.

Simply put, ordering too many items is a disaster on all fronts.

Avoiding Stock Outs by Optimizing the Hospital Supply Chain

Stock outs are every hospital’s nightmare. Having adequate hospital supplies ensures the comfort and safety of patients. The right product needs to be available in the right place at the right time.

Stock visibility is probably the biggest issue in the hospital supply chain. Hospital materials management staff need to have a clear picture of what is sitting on storeroom shelves and in what quantities. They need to have real-time awareness of ‘the numbers’, ie. what is running out, so that they can re-order and prevent stock-outs. Because hospitals are so vast and there are so many products in so many store rooms, maintaining full stock visibility is a crucial step towards effective management of hospital medical supplies.

Selecting an inventory management system that meets the needs of different areas of the hospital is key to regaining control of hospital supplies.

In hospitals there are high value supplies such as implants and medical devices as well as bulk stock such as swabs, creams and bandages. It is the low cost, bulk supplies that are often managed using Kanban and PAR inventory management solutions in the healthcare setting.

Manual PAR System for Hospital Medical Supplies

The first step to improving medical inventory control of low value bulk items is to get a grip on usage and then set the minimum stock levels that you require. Setting Periodic Automatic Replacement, or ‘PAR’ levels ensures that you always have the required stock on hand. All items are stored in labelled plastic bins. Following regular stock monitoring by hospital supplies technicians, who need to go to each stock room and do a manual count, individual items are re-ordered when the minimum stock levels are reached.

Disadvantage of the manual PAR System in Hospitals

Using a manual PAR System to manage hospital inventory is labor-intensive and time consuming. In order to determine current inventory levels, supplies need to be regularly manually counted. In many cases guesses are made instead of accurate counts, so an accurate picture of stock levels is not achieved. Because of this, overstocks and stock outs are still a risk.

Kanban Inventory Management System for Hospital Medical Supplies

The Kanban inventory management system is used as a stock control method in many industries. In hospitals this visual stock management tool, also known as ‘just in time’ replenishment, is often used to store and manage medical supplies. The two bin Kanban method for hospital supplies management is a ‘pull’ system meaning that it is demand lead – with levels of usage driving the procurement process.

Hospital Kanban inventory control involves two bins stored side by side or one in front of the other. There is a main bin and a refill bin. Items in the main bin are used first then the empty bin is placed in an agreed position, usually the top shelf of the storage unit, which is reserved for this purpose.

Maintenance management staff then log data from all the empty bins and place a reorder. The bin that was originally the refill bin now becomes the main bin, so the two bins basically rotate to ensure that stocks remain available.

The two bin Kanban systems does not require counting as it is based on empty bins being replenished – so the same quantity – enough to fill a bin – is reordered, negating the need for any counting.

Kanban systems provide greater protection for nurses as they involve two bins with stock being reordered once the first is depleted. This prevents surplus stocks and stock outs as there is a proper system in place based on actual usage.

Disadvantages of the Kanban bin system in hospitals

The traditional 2 bin Kanban system relies upon staff following the rules. Empty bins need to be placed on the top shelf and full bins need to be placed at the front. Stock should only be taken from the main bin and not the refill bin. Busy nurses are human and can sometimes forget to follow the rules.

Another issue is storage. Some hospitals have very small supply rooms and the double bin option may not be suitable in every storage area. Some storage spaces have shelving systems which don’t accommodate bins, so again, in this circumstance, the 2-bin hospital inventory Kanban system is not suitable.

Kanban inventory control reduces medical supply stock outs

Stock outs are when an item runs out or becomes out of stock. When any product is not available it effects patient care, causing delays to treatment and making nurses stressed. Because nurses hate stock outs so much, they have a tendency to hoard stock items. This distorts the materials management team’s visibility of true stock levels, as many items of stock are hidden in nurses’ secret places!

With Kanban, staff are trained to only take stock from the main bin and to place it in an assigned place when it is empty. The materials management team will monitor all returned bins and place repeat orders for the same quantity of the depleted stock.

In this way the Kanban ordering system for medical supplies provides a visual prompt that stock is required (the empty bin) and materials management staff can therefore reorder based on actual demand. The system therefore protects against stock outs.

Kanban tackles surplus stock to help medical inventory expiry management

As we have explained, the Kanban system for inventory management is demand-lead, with orders only being made where there are empty bins. This focuses the procurement process just on used stock and minimizes overstocking. When supplies are overstocked, they not only waste valuable hospital funds but stock rotation becomes harder – when stock is not carefully monitored and rotated expiry management is compromised. If expired products remain in stock there is the high risk that they will be used which can be extremely dangerous for the patient. The natural rotation of stock by using existing stock from the refill bin prior to any newly ordered stock, puts protection in place for the hospital.

The Kanban medical supplies system therefore reduces the risk of using expired products by controlling stock rotation and only ordering more stock upon demand.

Hospital inventory Kanban bins with barcode systems

Manual Kanban systems are run with labels and bin cards, which hold product information. However, electronic Kanban systems are now available which use barcode technology.

Barcodes are labels with lined coding on them which are readable with a scanner. To incorporate barcodes into a Kanban stock control system, barcode labels are added to each bin, each is individually coded with the specific product stock keeping unit (SKU).

Supplies tech staff now just need to use the barcode readers to scan all empty boxes. The barcode data is automatically checked against a database to establish the product, description, quantity and price which is then used for reorders.

Radio Frequency Identification (RFID) Kanban system for medical supplies

As with all systems, healthcare Kanban inventory management is always being upgraded. Often new technology can be used to make the system more effective. In recent years RFID has been used to add automation to Kanban in healthcare.  Each bin is tagged with a unique RFID label which is coded with the product details. RFID sensors are able to sense when the bin is empty and a report is created to show the materials manager details of the product that needs to be re-ordered and the quantities required. RFID digital restocking has added additional accuracy and automation into the hospital Kanban inventory management system. RFID is commonly used to control high value supplies stored in smart cabinets.  In recent years, however, there have been new RFID options coming on the market that are suitable for low value medical supplies.

How Kanban inventory control can optimize hospital supply chain management

As we have mentioned in this article, hospitals struggle with their supply chain management when they lose visibility of their inventory. When the materials management team don’t have accurate stock level data then ordering is basically guesswork. By putting systems in place to control stock and flag up usage, purchasing become more accurate and stock outs and surpluses can be avoided.

Some Kanban systems use digital Restock Tags to manage the tracking of medical supplies. Modern Kanban systems use RFID technology to store product SKU and other information. Many of these systems have a push button on the restock tab to signal a reorder request.

Benefits of Kanban system to manage medical inventory in hospitals

Introducing a Kanban inventory management system in hospitals results in improved supply chain management.

There are several benefits for hospitals in commencing a Kanban ordering system:

• Stock outs and stock surpluses are rare because the hospital now has better visibility of their medical supplies and replenishment of hospital supplies is based upon known usage.
• Better inventory tracking and stock control and reduced surpluses means that storage shelves are not cluttered and stock is easier to manage. In addition, the Kanban inventory system’s natural bin swapping results in ‘first in-first out’ stock rotation taking place naturally, with the older products being used before the new order. These factors result in better expiry management.
• Nursing and clinical staff can rely on adequate stocks and therefore don’t need to resort to hoarding.
• Materials management staff receive more accurate data so that they can effectively manage hospital medical supply stocks. Automated reports inform reordering and patterns of usage can be tracked and this data can be used to inform more effective inventory management.
• Reduced costs due to accurate procurement and less time spent on counting/checking inventory.
• Improved patient care due to nurses having access to the right products at the right time.
• Improved compliance and patient safety as well as reduced litigation, due to more effective expiry management and fewer ‘zero-events’.

The Kanban system can support a data-centered supply chain by adding accuracy to the healthcare inventory management process.

Reviewing hospital medical supplies storage when implementing a 2-Bin Kanban system

Hospitals review their storage spaces when looking to introduce a new system. This is a useful exercise as the most commonly used items can be identified and then located within easiest reach.

Stock generally sits on individual carts which each have shelves on them. The bins are then numbered for ease of identification. An inventory guide is pinned in the supply room to show staff where items can be found with a reference to the cart, shelf and bin.

It is beneficial when introducing any new product to take the time to review the bigger picture. When considering a new Kanban system it is beneficial to talk to all ward staff and listen to their feedback. Which items tend to go out of stock? Which items are always in surplus? Are regularly used items on top shelves or hard to reach? Is it easy to locate stock?

Getting grass roots feedback is vital to implementing a successful system and involving the users in any change also helps them to feel valued and heard. This makes it more likely that you will gain their support for the planning and implementation of the new Kanban hospital supplies system.

The next generation of Kanban and PAR for hospital medical supplies

We have seen that the healthcare Kanban system started off as a manual system using physical cards but over time many systems have been modernized and now use barcode and RFID technology. Each upgrade improved the product but now there is an even newer style 2 bin Kanban system for medical supplies that offers even greater benefits to hospitals.

At IDENTI Medical we have used patented RFID technologies to create smart Kanban and PAR systems that take full control of the hospital medical inventory process. The system is powered by AI management software, resulting in automated inventory management for the re-ordering of medical supplies.

IDENTI views standard products with fresh eyes to produce innovative upgrades, such as the weight based inventory management system. This upgraded PAR bin combines an old, established idea and incorporates new technology to optimize the automation and usefulness of the product. Weight based inventory management systems for hospitals do already exist but these are on large plugged in storage solutions that don’t offer much flexibility. The IDENTI weight based inventory management system is an individual unit, completely portable. It’s operated by Wi-Fi and can be incorporated into any hybrid system of storage.

We recognize that all hospitals have different requirements – and even each individual hospital will often have different needs depending on the department, storage space and shelving units used. Therefore, we prefer to offer a range of Kanban and PAR solutions for hospitals as we know that every medical supplies store room requires a different approach.

We work in partnership with healthcare organizations to understand their specific needs and to make recommendations for their different medical supplies storage spaces. Our solutions are based on the ‘best fit’ products and are designed around the available space, storage systems in use or planned, type of items being stored and more. Because it is necessary to tailor the solution to optimize the results, many hospitals use hybrid Kanban and PAR systems, often side by side in the same storage area.

Our Kanban and PAR products for hospitals include:

• A Smart Weighing bin for medical supplies – this is a brand new wireless and portable Weight Based Inventory Management System that works autonomously. The Smart Weighing Bin uses RFID technology and senses when it is empty. It communicates to the IDENTI AI Management Platform which links in to the hospital and supplier ERM systems. No staff action is necessary at all, the smart bin is in full control! It’s our very own portable and self-replenishing PAR system. The Weight Based Inventory Management System is an innovative new automated solution that takes the PAR system up to another level.

• ReStock Tag for medical supplies – this is a digital tag that is used on the two bin automated Kanban solution – it can be placed on any storage container of shelf in hospital supply rooms. Each tag can be programmed with electronic data to store details of the product. This product has a Push-Button Restock Tag which logs usage and automates replenishment. Using Restock tags in a hospital inventory management system ensures accurate usage tracking for medical supplies and when minimum levels are reached, reordering is requested by simply pressing the ‘restock button’ on the tag. Then our cloud-based software ensures that the hospital and supplier ERP is updated with the request. One press on the tag and you know that a restock order will be on the way soon.

• Scan and Restock Mobile App for medical supplies – this has enabled inventory management to go mobile. It can manage stock checking and stock ordering from within medical inventory supply rooms across the hospital. Take the system with you as you check on stock levels and push through reorders.

All IDENTI products integrate with the hospital and supplier ERP systems via our AI powered management platform. This gives all parties full visibility of stock statuses.

Smart Kanban systems with in-built automation

IDENTI’s smart Kanban and PAR level solutions for  offer the first fully automated stock tracking and replenishment system. Hospitals will be able to find a smart solution to their medical inventory management whatever the size or style of the supplies room.

We’ve come a long way since manual PAR counting and now have sophisticated yet easy-to-use smart Kanban inventory management solutions for hospitals – these add greater efficiency and cost savings to hospital supplies management.

Contact us to find out more about our Kanban and PAR level solutions for the healthcare setting or to discuss how IDENTI Medical can help your organization improve its inventory management.