July 14

Hospital Inventory Management: Is One Indicator Enough?


Having an effective hospital inventory management system in place is crucial for supply chain success. We always look for more than one performance indicator in our value analysis analytics practice to ensure that we are seeing all sides of the equation. This is because if we employ three indicators, we can triangulate this information into a more reliable decision-making model. We find this technique particularly important when we are analyzing a hospital’s inventory values.

3 Indicators Critical to Hospital Inventory Management Success

This is because healthcare organizations “face a balancing act as they try to carry enough inventory to meet their customers’ demand while minimizing the inventory and storage cost,” as commented on in Supply Chain Brain Magazine. Specifically, we find three inventory indicators critical to our analysis: (i) inventory value as a percentage of net revenues, (ii) inventory turns, and (iii) cost per activity.

Using this formula, a typical 150-bed hospital’s operating room inventory would have three indicators: 1.3% inventory value to net revenues; seven inventory turns annually; and inventory value per procedure of $292.05. Based on our benchmarks, this hospital theoretically could reduce its operating room inventory by $39,899 annually.

Now, why do we go through all this work to decide on an appropriate inventory value for a hospital? Well, it comes down to this; the more information we have to base our decision on, the more consistent and dependable our decisions become.

Since deciding on how much inventory can be saved for a hospital is the first step in any well-designed inventory reduction strategy, we think it makes sense for supply chain managers to go through these extra steps to triangulate their inventory indicators to get it right the first time. Otherwise, you could expend a lot of time and energy only to discover that your inventories are in balance after all! 

Articles you may like:

Driving Your Hospital’s Supply Chain from a Dashboard

Triangulate Your Healthcare Supply Chain Analytics for Superior Irrefutable Results

Request Demo of SVAH’s Value Analysis and Utilization Tools


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