The first step to incorporating Inventory Turnover as a metric is to begin measuring and tracking it. Because Inventory Turnover looks at both your usage and your on-hand inventory level, it is a great resource for measuring inventory efficiency. And if your procedure volume increases, your Inventory Turnover will start to rise, which may signal it’s time to start keeping more stock of certain items. And as you measure trends in your data, you’ll start to see that as your procedure volume drops, your Inventory Turnover will start to decrease, meaning it’s time to adjust your inventory levels downward to correspond with the drop in procedures.
If you have too little inventory, your Inventory Turnover ratio will be too high. If you have way too much inventory on hand, your Inventory Turnover ratio will be low. The reason that Inventory Turnover is the single best metric to track is that by definition it measures your efficiency.
Inventory Turnover = Cost of Goods Sold / Average InventoriesĪs an example, a hospital department that has $10 million of supplies on hand and $20 million of supplies used annually would have an Inventory Turnover of 2.0x ($20 million cost of goods / $10 million inventory). Inventory Turnover is an efficiency ratio that looks at how often you are going through your inventory in a certain time period. There are many established metrics that help you determine if your inventory levels are appropriate, but one metric can help you manage your efficiency better than any other: Inventory Turnover. There are several metrics to consider but one stands above the rest in terms of its ability to measure inventory management efficiency. All of these poor outcomes are costing hospitals real money, and the time for this mismanagement is coming to an end.Īs hospitals look for ways to become more efficient with their inventory levels, they need to rely on data and track their performance against metrics to start to turn the tide. Some of the results are bloated inventories, expiring items and vendor managed stock that hospitals have no visibility in to. While this is done to make sure that physicians have what they need to treat their patients, inventory managers in the procedural areas have often taken a hands-off approach to making sure that these items are managed efficiently. A lot of this has to do with the top-down method that hospitals have traditionally used for ordering implants and supplies, with physicians dictating which implants and supplies should be kept in stock. For too long, hospital supply chains – more specifically the procedures for managing surgical implants and supplies that make up a large share of supply costs for hospitals – have been managed inefficiently. AugSri Mandava Cath Lab Cost Reduction Hospital Finance Hospital Management Operating Rooms Operational Efficiency Radiology Supply Chain The Business of Surgery Tissue ManagementĪs hospital executives look for new opportunities to reduce costs in an era when value is taking over for volume, the supply chain is increasingly coming in to focus.