Buying in bulk, just in time purchasing, consignment: Which supply-ordering pattern is right for your ASC?

Healthcare delivery in the ambulatory surgery center setting is often fast-paced and prone to sudden changes. While medical providers and staff learn to adapt quickly to this environment and modify processes accordingly, finding a supply-ordering pattern that works well for ASCs can be a challenge.

"Most surgery centers do a good job of managing their facilities," says Lori Pilla, vice president of the clinical advantage program and supply chain optimization at Amerinet. "But because the industry is changing, and more procedures are moving to the outpatient Pillaarena, they have to stay on top of service line expectations and manage those well. Thus, it is important that ASCs have someone in the role of purchasing who understands the products they are ordering and how much they need as the schedules change."

Some popular supply-ordering patterns include buying in bulk, ordering on consignment and just-in-time purchasing. However, there are pros and cons to each.  
Buying in bulk

•    Pros: According to Ms. Pilla, the fundamental benefit of buying in bulk is the larger the volume ordered, the higher the discount. "Especially since ASCs have service lines with specific focuses, buying in bulk makes sense because there are a large number of specific items that they are using on a consistent basis," she says. "Managing their utilization allows them to use bulk items more efficiently."
HED Peter Saviola•    Cons: Typically, challenges with bulk purchases for ASCs are driven by two constraints — space and inventory management systems, says Peter Saviola, vice president, operations, corporate sales for Medline. "Often the ASC does not have the storage space for bulk quantities of items, and on the inventory management side, without good discipline to support product usage, specifically product rotation and replenishment, ASCs often become victims of product overstock, over ordering and obsolescence."

Ordering on consignment

•    Pros: Consignment options allow ASCs to tailor their supply needs, making it an effective strategy for them since the volume of supplies needed at a surgery center are lower than in the hospital and their schedules can be in flux, says Ms. Pilla. Using consignment options also helps ASCs save money, as they typically don't have to pay for the product until it is used, thus reducing the expenses up front.  
•    Cons: Challenges arise when the facility does not implement processes around inventory utilization or accountability, according to Mr. Saviola. "The effectiveness of consignment programs is dependent upon the involvement and support provided by the vendor partner and the processes around storage and utilization," he says.

Just-in-time purchasing

•    Pros: According to Mr. Saviola, if the intention behind using a just-in-time purchasing strategy is to reduce or minimize safety stock on items, then those programs make sense. Just-in-time purchasing is effective for items used consistently but are not mission-critical.  
•    Cons: While just in time purchasing makes sense as part of an ASC's overall supply ordering strategy, surgery centers should note these patterns do not necessarily help offset emergency situations. "For true emergencies, you really need a separately defined emergency preparedness plan," says Mr. Saviola. "The difference is that while just in time items have a more routine and predictable usage, there is no way to predict an emergency."

Developing a supply-ordering pattern
ASCs can use these patterns separately or in combination to find a supply-ordering strategy that works for them. There are several steps ASCs can take that will help them develop and implement a cohesive pattern:

1. Monitor supplies routinely. This includes daily, weekly and monthly inventory management to define an ordering pattern, says Ms. Pilla. Having one staff member responsible for managing this is important. The staff member can keep track of supplies used and order the appropriate amount of new supplies. Having one person dedicated to supply ordering creates transparency and accountability around the process.

Ideally, the staff member in charge of ordering supplies will be aware of scheduling as well as the current inventory. "That way they know how much is needed and they can avoid over- or under-ordering supplies or ordering products that aren't needed," says Ms. Pilla.

2. Consider an inventory management system. "In the ASC setting, the simpler the better for supply management programs," says Mr. Saviola. "There are no magic bullets and one solution typically won't solve all challenges. Since there are many LEAN inventory/order management processes offered today, the key to having something both comprehensive and successful is in the simplification."

Systems like Kanban, an inventory scheduling system, is especially effective in the surgery center environment because they rely on simplified visual cues in a highly repeatable process, he adds. Keeping track of inventory will help ASCs develop an ordering pattern tailored to their needs.

"Don't let great get in the way of good, meaning keep it simple," Mr. Saviola says.

3. Test and establish a delivery frequency schedule. The frequency with which supplies are being delivered has a direct impact on inventory management. ASCs can test out different patterns; for example, they could buy supplies in bulk but set up contracts with vendors such that the supplies are delivered in a just-in-time manner, says Ms. Pilla.

Since schedules can change quickly and unexpectedly at an ASC, this combination might be an effective strategy for them. Combining order strategies would help solve the issues of buying in bulk — namely lack of storage space for bulk items and supply waste — while taking advantage of the pros.

"For ASCs considering this option, joining a group purchasing organization is a good idea," says Ms. Pilla. "Typically GPOs have a specific distribution system set up with vendors and many are aware of the unique challenges ASCs face. GPOs can help set up contracts where the distribution of bulk items is done in a just-in-time manner."

Once a surgery center has settled on a pattern that works for them, it should be communicated to all members of the staff.

4. Keep track of invoices. According to Ms. Pilla, surgery centers need to reconcile accounts receivable and accounts payable regularly so they know they are being invoiced correctly. This can help ASCs keep track of which patterns are most cost-effective.

5. Communicate frequently with staff and create buy-in. It is important for surgery center administrators to establish purchasing goals and share them with the staff, says Ms. Pilla. They need to not only communicate the 'what' but also the 'whys' behind supply ordering decisions — this helps create buy-in.

"Also, ASCs can create incentives around supply usage, which will encourage them to think about how they are currently using supplies and how they could change processes to use supplies more efficiently and cost-effectively," says Ms. Pilla. "This will help ensure they are not opening supplies unnecessarily and wasting them."

When formulating and implementing supply chain management strategies, the entire ASC staff and administration must be engaged and on the same page, she says.

More articles on supply chain:

The road to ASC financial success: 10 supply chain cost-cutting strategies
5 ASCs with effective purchasing strategies
Surgical Care Affiliates, Medline Pen 5-Year Deal

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