Written by SmartSense | Supply Chain, Patient Safety, Healthcare, Pharmacy
Key takeaways
Especially since the onset of the global COVID-19 pandemic in 2020, inventory management has become a complicated, high-stakes priority for the healthcare industry. A primary lesson learned over the last several years is that, as supply chains become more globalized, their sensitivity to disruption increases. Consequently, healthcare enterprises often struggle to collect real-time data on asset location and condition, which compromises their ability to make timely decisions about inventory levels and to execute appropriate action to correct them. Inevitably, errors in inventory availability create disabling out-of-stock or wasteful overstock situations.
In this post, we provide an overview of IoT-enabled best practices that help overcome challenges to healthcare inventory management. The convergence of artificial intelligence, machine learning, digital sensors, and analytics software has significantly improved operational efficiency, reduced waste, lowered costs, and enhanced patient safety and wellness.
What is healthcare inventory management?
Healthcare inventory management is the systematic process of tracking, controlling, and optimizing the stock levels, locations, and condition of medical supplies, pharmaceuticals, and vaccines. Its primary goal is to ensure the right products are available — the right quantity at the right time in the right place — to support patient care and operational efficiency while minimizing waste and reducing cost.
The main challenges in healthcare inventory management arise from the need to deliver immediate patient care within a strict financial and regulatory environment. Key hurdles include:
- Inventory invisibility: Many healthcare facilities continue to rely on manual and fragmented tracking systems, resulting in "blind spots" preventing visibility of real-time stock levels across different departments or locations.
- Unpredictable demand: Healthcare needs are prone to volatile fluctuations due to emergencies, seasonal illnesses (e.g., the flu), and global events such as the COVID-19 pandemic, thus making it difficult to maintain optimal stock levels.
- Supply chain disruptions: Geopolitical tensions, natural disasters, and labor shortages frequently cause delays in receiving critical medical supplies, forcing healthcare organizations to ration care or find expensive alternatives.
- Stringent regulatory compliance: Strict rules govern the storage, handling, and tracking of controlled substances, vaccines, and hazardous medical supplies. Failure to comply can lead to heavy fines and legal liabilities.
- Financial pressures: Rising supply costs and stagnant reimbursement rates create a "lean budget" environment in which managers must balance the high cost of holding extra stock against the risk of life-threatening shortages.
Converging IoT technology with healthcare inventory management
Healthcare inventory management in the 21st century has evolved from manual, paper-based tracking to automated systems integrating artificial intelligence, machine learning, digital sensors, bar codes, and RFID tags. The COVID-19 pandemic accelerated the adoption of IoT-enabled technology and Sensing-as-a-Service solutions to safeguard healthcare supply chains and improve asset and inventory management at scale. Key benefits of IoT-enabled healthcare inventory management include:
- Monitoring inventory levels In real time: providing an accurate view of available medications is crucial for managing high-turnover items and preventing stockouts.
- Reducing errors: automation of formerly manual inventory tasks minimizes dependency on human labor to significantly reduce the risk of dispensing errors related to stock mismanagement.
- Streamlining compliance: maintaining cloud-based, tamper-proof logs of asset conditions ensures temperature-sensitive medications were stored in their optimal settings, thereby simplifying and guaranteeing compliance with regulatory requirements.
- Enhancing patient care: IoT-enabled inventory management facilitates rapid transfers to meet patient needs while monitoring inventory conditions. If a particular medication is unavailable, IoT systems can quickly identify alternative locations.
IoT-enabled best practices for healthcare inventory management
The convergence of IoT-enabled technologies has generated a variety of tools for simplifying the complexity of inventory management. Enterprises that implement and deploy the following IoT-enabled best practices improve operational efficiency, reduce costs, enhance patient care, and allow staff to focus on their core competencies rather than contending with stock-related issues.
ABC analysis
ABC analysis is an inventory technique that ranks healthcare products into three groups based on their cost, volume, and importance: A (high), B (medium), and C (low). Class A products (such as high-cost pharmaceuticals) generally account for 20% of a typical healthcare inventory’s volume but 80% of its value, thus requiring strict and frequent monitoring and tight control. The benefits of ABC analysis include better availability of stock and optimized labor focusing on high-value products.
PAR leveling
Periodic Automatic Replenishment (PAR) leveling is a control system that maintains the ideal quantity of medical supplies and medications in stock. PAR establishes the minimum quantity of an item that must be in stock at a specific location to ensure it is always available for patient care. PAR also sets specific thresholds for every product in a supply location, such as a pharmacy or operating room. When stock falls to or below the minimal threshold in that location, a reorder is triggered. The benefits of PAR leveling include prevention of stockouts of life-saving supplies, reduction of expired medications, and automation of the reordering process, thus allowing staff to focus on patient care rather than manual supply counting.
Just-in-Time
Just-in-Time (JIT) is a “pull-based” lean strategy to optimize on-site inventories. Medications are ordered and received as needed, rather than stockpiled in large quantities. Facilities keep just enough supplies to meet immediate patient needs, typically restocking when a predetermined minimum threshold is reached. Replenishment, therefore, is demand-driven: instead of ordering based on long-term forecasts, supplies are triggered by actual usage or confirmed patient requirements. Benefits of JIT include space optimization and reduced waste due to expiration.
Perpetual inventory system
A perpetual inventory system (PIS) continuously and automatically updates inventory records in real-time. PIS uses barcode scanning and radio-frequency identification (RFID) tags to log item movements instantly. PIS tracks every addition (delivery), subtraction (dispensing), and adjustment (returns or waste) the moment they occur. The benefits of a PIS are precise visibility into medication availability and expiration dates, automated replenishment, and integration with electronic health records (EHR) for accurate patient billing and electronic data interchange (EDI) for seamless ordering.
Digital data integration
Digital data integration connects disparate data sources, such as EHR and EDI systems, with real-time, automated tracking tools into a single, unified, and actionable platform. The shift from reactive, paper-based tracking to proactive, data-driven, and patient-centered inventory management enables centralized inventory control and synchronized usage, billing, and patient records.
Data-driven forecasting
Data-driven forecasting employs historical data, machine learning and predictive analytics to accurately calculate future demand for medical supplies and pharmaceuticals. Forecasting anticipates future needs, especially seasonal trends (e.g. flu season) and the possibility of supply chain disruptions. Enhancing patient care, data-driven forecasting ensures the right supplies are available for both scheduled and emergency procedures, thus reducing surgical delays or cancellations caused by missing equipment or medications. Other benefits include automated insights and improved decision-making.
Prescriptive analytics
Prescriptive analytics is an sophisticated telemetry strategy that employs optimization algorithms to recommend specific actions, such as reordering, restocking, and allocating supplies, to achieve the best possible operational outcomes. Beyond predictive analytics, which only forecasts when a shortage may occur, prescriptive analytics synthesize data on historical usage, real-time demand, and clinical constraints to provide a roadmap for execution.
Deploying digital sensors at every critical asset in the supply chain, healthcare organizations are able to remotely monitor its location, status, and condition, such as temperature, humidity, air flow, impact, and light. This valuable telemetry data combined with historical sales statistics, evolving market trends, consumer demand, weather patterns, economic indicators, and geo-political activity can be processed by a prescriptive analytics software program to uncover key insights across the supply chain that help prevent excess stock or stockouts.
Benefits of prescriptive analytics include suggestions for precise restock quantities for surgical supplies based on predicted hospital admission trends, recommendations for redistributing stock among different locations or departments to prevent expiration and avoid local stockouts, and management of real-world constraints such as storage capacity, budget caps, shelf-life, and regulatory compliance.
Implementing IoT-enabled healthcare inventory management with SmartSense
Many healthcare enterprises lack the technical proficiencies or resources to implement an IoT-enabled Sensing-as-a-Service solution. For that reason, healthcare leaders should seek assistance from a proven partner that can both leverage the power of AI and ML and integrate an IoT infrastructure within existing inventory management systems at scale.
In this video, Chandler Peoples, Executive Director of Strategic Operations for ObjectiveHealth, explains how the SmartSense unified platform helps his enterprise maintain regulatory compliance, protect high-value medications, and provide peace of mind through real-time visibility and support.
