Time To Get The (Wrong) Data Out Of Your Annual Inventory Valuation
Fall coming probably means that you have a giant physical inventory project coming, too. Just between friends, though, you're probably doing it wrong.
That's not your fault! Let's get that straight straight away: the way that healthcare providers count their surgical supplies, medical devices, and pharmacies has always gone a certain way, and meeting the minimum standard of reporting a final valuation isn't bad. It's good!
But - as you might have gathered from the word "minimum" - it could be better.
Perhaps you're saying to yourself - perhaps you'll be saying to yourself throughout this blog - "We get it done. So what's the problem?"
Allow us to answer that question with another question: "Do you feel good about it?"
When all is said and done and you've reported your valuation, you probably feel a sense of relief that it's over, but do you feel good about how it went? Do you feel like the process was relatively easy, relatively quick, and relatively disruption-free? Do you feel like your accuracy was high? Do you feel like you can turn the data you gathered into more than a dollar value at the bottom of a report?
If you feel like you have any room for improvement (you do -- we all do), read on.
What you've always done:
Stop us if you've heard this one already.
The end of your fiscal year is coming up, and you need to book a value for all the medical and surgical supplies in all the facilities that you oversee, so you arrange for an all-hands-on-deck approach that requires lots of employees spending lots of time counting lots of shelves, carts, and every other random place that inventory might be found. This requires a lot of time, effort, and personnel, but after an intense few weeks, you have your final valuation.
Great. Except it wasn't great, was it? It was a pain for everyone involved.
Labor isn't a sunk cost, as we explain in more detail in our most recent white paper. Even if you're not paying to hire outside staff or paying your existing staff overtime, counting your physical inventory costs you. The healthcare, supply chain, and finance professionals who are involved in the process have better things to do.
There, we said it.
Tallying sutures is a necessary evil, but it is an evil. A nurse should be predicting what their patients need. An accountant or controller should be predicting financial risks. And a supply chain staffer - the person everybody else thinks should be doing this sort of thing - should be predicting the next major disruption that could prevent supplies from reaching your shelves.
Time spent counting supplies on a shelf is time wasted. Someone is going to have to do it, though. We'd suggest that you use Z5 Inventory to staff your next count, but we realize that's not always an option. So how do you meet your requirements with the minimum disruption and waste?
What you could be doing better:
If any part of your physical inventory count process is conducted on paper, you're in trouble.
At minimum, you should be prepping, counting, and rolling up your results digitally. Every time that you have to transfer between media - paper-to-spreadsheet, spreadsheet-to-ERP, vice versa and et cetera - you've prolonged the process. Working completely digitally - recording supply values on a mobile app that uploads the data wirelessly and automatically to a central database, for example - eliminates the bulk of that waste.
Again, though, that's a "minimum."
We're assuming in the above example that everyone has done all the work necessary to prep your count before anyone approaches a shelf. Keeping in mind that labor is not a sunk cost, how much of the time that could be spent on a task that requires actual supply chain management expertise is currently being spent instead on building count sheets?
Paper or digital count sheets -- it doesn't matter. They're not only a waste of time - because they slow down counting as someone tries to find the items that they're supposed to be counting instead of the items that are actually present - but also a source of inaccuracy - because product that's not on the sheet has to be added in, which might or might not end up being attached to the correct product data in the final valuation, and that's assuming that it isn't missed entirely.
When you're looking at how the count itself is scheduled, doesn't it seem a little hectic?
Consider spreading it out throughout the year (or quarter or month). Relieve your fiscal year end of some of its intensity by conducting cycle counts in each of your supply storage areas at a more manageable pace. Your final valuation will still be accurate, but you and your staff will feel less overwhelmed and inconvenienced.
That's part of how our partners at Baylor Scott & White Health reach a valuation for all their facilities spread across the state of Texas in one day. And it's something you can do, too. But that, too, is just the start.
What you could be doing even more betterer:
You've got the data. No matter what method you used to get it, the hard part is done. What's the only thing you want to do now? Rest.
Sorry to have to be the one to tell you: there ain't no rest for the wickedly talented healthcare professional.
Meeting your regulatory requirements is another "minimum." What you can do to exceed that low bar is to turn the data that you fought and scrabbled for into something usable.
Take, for example, all the weird one-off products that you found on your shelves. Knowing where it all is now - because you did note the locations along with each and every surgical supply, med device, and pharmacy product you counted, didn't you? - you have an opportunity to optimize their storage. Move them from their current, random homes to a location where they're more likely to be used. Improving how much of your inventory you actually use is key to supply chain resiliency.
If you know a product is not going to be used at all - whoops, you converted away from that brand a year ago or the physician who used them just left - sell or donate the supplies to recoup some of what you spent on them.
Travel back in time by combining the data from this most recent inventory exercise with your ordering history. Once you can connect the dots between when you're buying and when you're using product, you can improve your predictions on how much will be used and when. That means better buying decisions and better inventory optimization overall.
Does your valuation track expired inventory at all? It should. Use your annual physical inventory as an expiration sweep to collect data on how much was thrown away and attach expiration dates to what you toss and what you kept. This is especially valuable in a pharmacy, where you have the opportunity to return expired inventory to the manufacturer for a partial refund.
We've built all of that into our industry-leading Z5 Reallocate solution, which identifies all your excess for you, then does all the work of identifying where those supplies ought to go to maximize your cost-avoidance savings opportunity. It even comes with the experienced brains and hands of Z5 Inventory pros who do all the difficult reverse-logistics for you -- not to mention the heavy lifting.
In fact, we built automatic analysis into every possible inventory management task executed on the Z5 Inventory Platform.
If you don't use all the capabilities available to you - if you don't wring every last drop of value out of your valuation - you're wasting your time gathering that inventory data in the first place. Reaching a final value is a difficult task in itself, but it's also the only "minimum" that you should be aiming for.
Ready to exceed the minimum? Request a free demo of any and all software, services, and staffing that Z5 Inventory offers.