The Most Dreaded Part of Inventory… and How to Change It!

Think about it, what is the part you dread the most about managing inventory? Nothing usually compares to the end-of-the-year inventory count. An all day (or even multiple day!) event where hopefully everyone helps count thousands and thousands of pills, syringes, and hundreds of mLs of injectable medications. Then on top of that, spending countless hours entering the data into a practice management system. Not my idea of a good time!

So how can we make that unpleasant time of the year better? Set up a cycle counting schedule!

Let’s talk about what a cycle counting is. The basic definition is it is a system where a small amount of inventory is counted on a daily, weekly, monthly, or quarterly basis. This can be set up in several different ways; counting the most frequently used items more often, counted by specific categories, or locations in the hospital.

Let’s look at the challenges of only counting once a year (if that…) then we will look at the benefits of cycle counting.

Challenges of Once-a-Year (or less frequent) Inventory Counting:

• End of the year inventory counting is a HUGE time expenditure for the hospital, and often can be logistically difficult

  [Tweet “End of the year inventory counting is a HUGE time expenditure for the hospital, and often can be logistically difficult “]

• It does not leave time for investigating discrepancies. Also on this note, because there has been a huge time lapse, it may be difficult to discover and usually will require a multi-modal approach
• When only counting once per year, it does not accurately keep track of expiration dates or over-ordering. These two major sources of product (and income!) loss are not discoverable if inventory is counted infrequently.
• After performing a year-end inventory count, the numbers are correct and everything else left as-is, creating a huge financial loss for the hospital

So what can we do about this? How can we make it easier on ourselves, and on the hospital’s bottom line?

Introducing cycle counting!!

When a cycle counting schedule is implemented, a small amount of inventory will be counted daily or weekly so that counts are monitored on a continual basis. Virtually all of the problems that once-a-year counting presents are solved! BONUS: you don’t have to spend ridiculous amounts of times at the end of the year trying to cram in a huge count.

Benefits of Cycle Counting:

• It closely monitors the accuracy of incoming and outgoing inventory. For example, if you had an inventory code set up incorrectly in the computer, and you were receiving 100x the amount of product you should (ie, like 5,000 Bordetella vaccines) you would immediately spot that error because your counts would be WAY off. On the flip side, if a client wasn’t be charged for something or there was theft taking place, you would know right away so the problem could be fixed.
• Depending on the size of your inventory, counting for 15 minutes or an hour every week is a lot less disruptive and inconvenient than counting for 12 hours straight and then fixing your entire inventory for another 10 hours.
• My favorite part (and the biggest benefit I think) is the ability to continually monitor trends.

  [Tweet “My favorite part of cycle counting (and the biggest benefit I think) is the ability to continually monitor trends.”]

  You can easily measure and quantify items that aren’t selling, or that are flying off the shelf like hot cakes. You can see if you have a problem with shrinkage (whether that’s theft or expirations) or if inventory or treatment codes need to be adjusted.

There may be many more benefits that are specific to your hospital, but you can see how implementing a cycle count schedule can make your life easier!

So now that you know you need a cycle count schedule, how do you start one? My preference is to count my most frequently used items on a monthly basis (weekly for controlled drugs), fairly often used items quarterly, and infrequently used or special order items counted twice yearly. It can also be counted by location. But, it’s important to figure out a system that works the best for you and your hospital.

On a related note; a cycle count schedule can be set up during an ABC analysis. For more information on an ABC analysis, check it out HERE. Interested in seeing how an ABC analysis can benefit your hospital? Email me, and let’s get started!