Ask any hospital inventory manager what their least favorite part of the job is, and a majority will say inventory reconciliation. After all, reconciling inventory is a tedious, time-consuming and labor-intensive process that, despite all its drawbacks, needs to be completed to ensure the success of your department’s operations. We’ve all been on the receiving end of a poor reconciliation process in our daily lives. Who hasn’t been to their local department store, shoe store or clothing store and asked an employee for help locating an item, only to be told that despite their system saying it’s in stock they are actually out of stock? That’s a sign that the store is in desperate need of inventory reconciliation so that their systems better reflect reality.
While stores run the risk of disappointed customers when they don’t reconcile their inventory, hospitals are risking lives when they experience unexpected stock outs. Whether using barcode technology or manual systems, periodic inventory reconciliations are necessary to combat shrinkage and poor adherence to protocols. You can train every employee perfectly to record their removed items and offer constant re-training, but it only takes one missed transaction to throw off inventory numbers permanently. Without reconciliations, organizations end up with constant stock out problems, or wasted money on over-buying of inventory to cover up their poor inventory accuracy.
We know that having barcode systems makes the periodic reconciliation of inventory a reality. So, what can time- and resource-constrained inventory managers do to make reconciliations happen without herculean efforts from hospital staff? Below we examine 3 inventory reconciliation methodologies, 2 of which can save time and effort but still deliver superior results.
3 methods for reconciling hospital inventory
- Seasonal or quarterly reconciliations. These are far and away the most common reconciliation methods. They are done infrequently during the year, usually lining up with the hospital’s fiscal quarters. Because they are done rarely and on the whole inventory, they require a lot of resources to complete in a small amount of time. They are often completed using overtime labor during nights or weekends. Due to the excessive cost and efforts, they are often done too infrequently or with poor results.
- ABC analysis. In an ABC analysis, you rank inventory according to total dollar volume. You then separate the inventory into 3 categories:
- A items are those that make up roughly 80% of the dollar value but only 20% of the volume.
- B items would be the next 15% of dollar value and roughly 30% of the volume.
- C items would be the remaining 5% of dollar value and roughly 50% of the volume.
Though the exact split will vary depending on your inventory, the idea is that you should frequently reconcile the A items (maybe bi-weekly or monthly), reconcile B items less frequently (maybe quarterly) and C items rarely (one to two times per year). A items are the ones that carry the most risk if understocked, so they should be reconciled most often. B and C items are less critical, so stock outs or overstocking are not as detrimental as with A items. By breaking down inventory and doing frequent, quick reconciliations of critical items and rare, more lengthy reconciliations of less important items, you can reduce the total amount of time spent reconciling inventory while getting better results.
- Frequent micro-reconciliations. With micro-reconciliations, inventory managers separate the large task of inventory reconciliations into smaller tasks. You can even enlist the help of co-workers to break down the seemingly gargantuan task of inventory reconciliation into bite-size tasks. It could involve just a few minutes a week reconciling 10-20 items for each person. Spread these tasks over several employees and consistently over a quarter and you could complete reconciliation on all items 4 times per year without breaking a sweat.
While inventory reconciliations continue to be a thorn in the side of inventory techs and managers, a little planning can go a long way and break up the mundane task of reconciliation into smaller, more manageable tasks. Creativity can even come into play, for example by combining ideas from ABC analysis and micro-reconciliations to ensure high confidence in inventory levels on A items and minimizing the risk of stock-outs of critical inventory.
If you are still facing challenges in reconciling your inventory and are suffering from repeated stock-outs of critical items, one solution to consider is RFID technology such as such as iRISupply. The advantages of RFID technology over barcode solutions is that RFID eliminates the need to do reconciling completely by providing highly accurate, real-time inventory counts. With RFID technology in place, reconciliations are no longer required, returning dozens of valuable hours to your team every quarter. Stock outs are also a thing of the past because you always have a clear picture of inventory and exactly what needs to be ordered to meet forecasted demand.