Category: Professional Posters
Purpose: Martin Luther King, Jr. Community Hospital (MLKCH), a safety-net community hospital, developed a digital inventory reporting system in 2018 to optimize inventory turns. While this process improved house wide inventory turns, a systematic method to establish inventory levels within the pharmacy remained undefined, leading to inventory bloat on slow moving and lower cost medications. The original inventory control analysis was expanded to include automated dispensing cabinet (ADC) utilization and package size data to create a days-supply-on-hand (DSOH) metric. This DSOH metric defined par levels for all pharmacy items, informed purchasing decisions, and further reduced inventory carrying costs.
Methods: An inventory reporting system was developed by integrating data from automated dispensing systems (BD Pyxis ES), pharmacy inventory application (BD Pharmogistics), and hospital electronic health record (Cerner Millennium) to evaluate inventory on hand. The reporting system tabulated monthly inventory value to produce an inventory turns evaluation within end of month business processes, but additional analysis was needed to further improve inventory performance. As an extension of this methodology, annual and high-usage monthly utilization data from the inventory management system and ADC cabinets, package size, and ADC load level data were integrated to develop an algorithm establishing a days-supply-on-hand (DSOH) metric for every formulary item. This algorithm was designed to be automated and easily applied to 100% of inventory lines. As compared to using only historical purchasing data, this DSOH-based par level system was applied to reduce inventory carrying costs while being cognizant of the risk of inventory depletions and service failures.
Results: Previous efforts to improve inventory turns were effective but plateaued at the 8 turns mark. The integration of the DSOH-based algorithm identified additional candidates for par level optimization. Algorithm development and initiation resulted in alignment of par levels with DSOH-adjusted utilization patterns and reduced pharmacy inventory by 14%. Incorporation of utilization metrics into the DSOH metric also improved staff confidence to return inventory and comfortably reduce par levels without concern for stock outs and service failures. The full effect of establishing DSOH-based par levels will not be observed until sufficient time has elapsed to utilize current non-returnable inventory. Once the pharmacy staff establish a timeframe for the adjustments to take effect, DSOH-based par levels will be re-evaluated on a quarterly basis.
Conclusion: MLKCH developed a DSOH-based par level system to establish pharmacy inventory levels, adjust current stock on hand, and reduce carrying cost by right-sizing par levels in the Pharmacy. The initial adjustment allowed the department to achieve significant and measurable reductions in pharmacy inventory cost with the full effect to be quantified on a quarterly basis. Coupled with the electronic end-of-month inventory turns valuation, this new DSOH-based par level process adds a quarterly double check to the digital inventory management suite to further improve inventory management and reduce carrying costs through integrated pharmacy automation and informatics.