Lab services are highly dependent on every item stocked in your inventory. Therefore, planning and maintaining this business entity not just helps to offer better service delivery but also to manage cost-effectively for your center.
Focus on Cost-saving Areas
Most labs don't give importance to their inventory systems. This is where they are making a big mistake. From a lab’s point of view as a pathologist, there are two areas where I concentrate to save cost - the first biggest component is consumption.
Larger laboratory players focus a lot on inventory control looking at consumption trends. We monitor consumption regularly. If on average the range of consumption is 2.5- 3.5L and suddenly it goes to 4.5L, we have an in-depth analysis. Monitoring trends in average consumption plays a big role in a lab.
The second important component is monitoring tests with short expiry - that is what larger players do. They put a check on their inventory every month and export the list of ledgers that are going to expire in the next 25-30 days. This is notified to their technical heir with the recovered data of expiry for the next 25-30 days. Then action is taken to prevent wastage.
If I have 130-150 items in my lab’s inventory. Each item will have 2-7 boxes in the fridges. Since there is no control over inventory placement in a lab, they would be expiring every month without being noticed. Some of these boxes are highly valued, like 16,000Rs/box. Imagine if you have 2-3 boxes expiring every month, what will be the wastage? If you compare this scenario to a big hospital, the wastage comes around 80,000/year.
How to manage Stock Expiry at Inventory?
In corporate labs, we run a check on our entire inventory and export data. We check this against expiry data and get information about items expiring within 30 days. This information in the form of a list is shared with the technician guy to take necessary action to reduce wastage.
Although, what actions can be taken - we have 2 options -
- Either we call the supplier and ask them to take back what we won’t be able to utilise. We suggest they give it to another testing centre that would need it urgently. (We cannot return a box to the supplier after the expiry date has passed).
- The second option we can consider is supposed we have 30 days for an opened box, we can arrange a camp to utilise it. For example, a free vitamin D test. We can call our customers and notify them about it. In that case, we not just save our wastage, but also save marketing expenses; rather we control our inventory better.
Looking for Inventory Software?
Dealing with a Stockout Situation
Other labs observe at least one item stocked out. What bigger corporate labs do is evaluate their centre when they reach a minimal re-order level. At this level, the technician keeps filling the items before the inventory reaches the panic level.
The pathologist on the other hand gets a message that a certain item is almost stock out so that he can take necessary action for the item to get stock on. When you stock out an item from your lab, this is a very big problem for your lab since out of stock means out of service.
However, if a day prior if we get notified by an inventory management system about stock-out items; especially for a critical test, it is much easier to message the supplier and purchase them. Thus, anticipating the problem and then preventing the problem.
What I would suggest is -
- Maintain minimum reorder level
- Track stock exceeding 45 days inventory requirement
- Track whether staff are ordering reliable kits with good CPT
Tracking Consumption Regularly is a Necessity
To explain the further points, having an inventory solution that keeps track of consumptions regularly is necessitated. It will help you know your last three months precisely for every item and have control at ordering.
For example, if for the last 3 months you have used 1 bottle of blood group, then while placing an order for the next month, the inventory will allow you to place an order request for only one bottle. The logic behind that, if you use 1 bottle for 3 months, you’ll not require a bottle for the next 1 month.
Although, lab technicians do not analyse this and place orders of any number which leads to wastage. This is why big corporate labs have control over ordering; preventing you from ordering more than what you consumed for the last 3 months.
At wearing up of consumption the need for action increases like special approvals from higher levels, and more visibility to consumption data.
How Inventory management software helps
There are a lot of features that an inventory system can provide to help labs control inventory and reduce cost in a big way. I do not think we as labs have realised the impact of inventory management on the lab's success. It makes a huge difference. I don't think they have reached a stage wherein you know it would give the substantial benefit that may be someday, one year from now, it will be there.
The way we approach our patient & collection, I think inventory control tech is a very huge area for a lab.
An inventory module can prevent wastage, prevent getting the stock-out situations in a lab, prevent over-ordering, and help you track any irregularities in financial situations.
There are 100 areas where inventory plays a huge huge role in saving costs. I came across a lab in 2016, where the lab was not doing well, the profit margin was not good. They were having a monthly consumption of around 6L. After implementation of the inventory control module, tracking of the expiry item, limiting the accept orders, routing all the orders through the software, defining prices from their software, their consumption decreased from 6L to 3.5L
Even though their test volume doubled, the consumption increased to 4-4.5L. It has not gone back to those levels again. The problem with the lab was incorrect inventory management that required a properly set inventory control module. If done properly using automated software can save you lots of wastage with huge potential.
A basic inventory control module in the diagnostics industry is still lacking a lot. All you can do is actually have huge selling points in the market, you know. I think only a few labs have the level right towards it. The other labs don’t have these kinds of features at all. They would want these kinds of things but look at implementing it the right way to build better services and control wastage. This is the only way to control expenses at wastage, at ordering, and at consumption overall.
If you have any questions, suggestions, or requests, drop them in the comment box.