The way that medical supply inventory is managed in hospitals is changing. In the past, it was normal for healthcare organizations to have a surplus of inventory. Physicians had to be served, nurses had to be able to find what they needed quickly—and it was the supply chain’s responsibility to make sure there was inventory everywhere for everyone.

That does not work today, as competition is fierce, and costs are being scrutinized by the Affordable Care Act and other insurance reimbursements. Poor inventory management can tie up precious resources, end up costing more than expected, and can affect an organization’s ability to remain profitable.

What does all this lead to? In addition to a surplus of inventory, it’s also a catalyst for inventory inaccuracies such as current inventory data not being precise, which impacts decision-making. In other words, higher healthcare costs for everyone.

In its simplest form, managing and tracking inventory is a manual task that requires entering data into a computer by barcode or typing the information into an inventory management system. Manual entries can create inaccuracies and can be very inconvenient if these tasks need to be performed during a procedure or an emergency.

For high-valued medications, medical devices, implants, and critical tools or surgical kits, Radio Frequency Identification (RFID) technology is usually justified since the tracking of these items are highly regulated and require that level of tracking. However, for low-cost items like bandages, syringes, toothbrushes and other more consumable items, RFID is not typically seen as a solution due to the added cost of an RFID tag being placed on individual items. This would also be a very labor-intensive process and would end up costing the hospital more money than it saves. This creates a problem for hospitals and hospital management. How does a hospital reduce costs for items they use on a daily basis?

There are various types of inventory tracking being used for lower cost inventory items in hospitals and ambulatory surgery centers. One of the most common is Kanban. Kanban is loosely translated as “visual board” or “sign board” and was first used by supermarkets for inventory management in the 1940s, and later adapted by Taiichi Ohno, an industrial engineer at Toyota in the 1950s, for increasing efficiencies of the automobile manufacturing operations by having critical items always available (Agileramus, n.d., Digite, n.d.Kanbanize, n.d.). Kanban is simply a method to maintain inventory levels while avoiding “stock outs,” so that when an item is needed, it is available while at the same time eliminating inefficiencies in manual inventory tracking.

In the late 1980s the use of a two-bin system for inventory management started showing up in healthcare supply rooms for managing lower cost inventory items that are required in every station where these medical supplies are needed. In some cases, this is an inventory location on every floor, or even multiple locations on a floor. The goal is to consolidate supply inventory while managing workflow and reducing staff workload, letting them do what they are meant to do – take care of patients.

Kanban has become a customary practice in thousands of healthcare facilities around the world today. Some of the benefits that made this method attractive to hospital administrators is that the Kanban system is passive, which means it requires no additional work by medical staff and very little time for supply chain or central stores staff to count inventory in every location in a hospital. There are many ways to implement a Kanban system for managing medical supply inventory. Some of the most common are 2-bin, 3-bin, or card-based. I will focus on one of the most common types of inventory Kanban: two-bin Kanban.

"By having an RFID Surface Read Point in each medical supply inventory storage location, any supply chain staff would know which room has empty bins, and which ones do not, eliminating the need to stop and inspect every location- saving valuable time and creating efficiencies, and thereby reducing overall costs."

Here’s how it works:

Two bins of the exact same inventory item and quantity are placed front to back on a shelf or in a medical cabinet. Each bin has half of the supply’s on-hand quantity. Inventory is used from only the front bin first. When the last item is used in the front bit, and the bin is empty, it is removed and placed in a dedicated spot to signal the need for refill. The second bin is pulled forward and inventory from that bin is used. The empty bin is refilled by a supply staff member, returned to the shelf, and placed behind the current bin in use. This ensures that the nurses, or other medical staff will not run out of inventory and allows older inventory to be used first.

This is a wonderful system, but it can be improved upon and made even easier for medical supply chain staff. This is where RFID technology can be beneficial.

Typically, when people think of RFID, they think of placing an RFID tag on every item, which in some cases can be cost prohibitive. The solution that Terso has established is to tag the Kanban bin, not the individual item. The benefit of this can simplify the supply chain staff workload and help reduce costs.

I have already mentioned that once a bin is empty, it is placed in a location by the medical staff. However, how does the supply chain staff know a bin is empty? Usually by having to send a person to every inventory location to manually check if there is an empty bin. It is quite common that the bin is labeled with not only the name of the item, but also a barcode that indicates the specific detail of the items placed inside the bin.

When the bin is retrieved by the supply chain staff, they then must manually scan that barcode and create a pick list for gathering that specific inventory to be placed in that bin.  Once created, the inventory is pulled from stock, placed in the bin, and taken back to the original inventory location.

These steps can be labor intensive, time consuming, and are usually performed on a routine basis to improve efficiency of the supply chain.

RFID can help improve this process even more by reducing labor and other overheads through automation.

RFID is being used increasingly for inventory tracking purposes. Although RFID has been around since the 1950s, its current cost now makes it a feasible solution. RFID readers can automatically track and trace items from receipt to utilization with almost no human intervention. Plus, the reliability is as high as 100 percent and minimal intervention is required from medical staff.

Some of the benefits of using an RFID-enabled Kanban solution are as follows:

  • Minimize the amount of time that non-medical staff are on the patient floors where they are required to look at every inventory storage location, even if there are no empty bins
  • Minimize manual bar code scanning of bins into an inventory system
  • Eliminate human error by reducing the number of manual tasks
  • Reduce the workload for both the medical and supply chain staff.

This is accomplished by enabling RFID in a storage location. Instead of tagging the individual item, the bin is tagged with a RAIN RFID tag that contains a digital serial number. That digital serial number is assigned to that specific bin and is used in the inventory tracking RFID healthcare software for referencing the bin number, the product and quantity of what is contained in that bin, and other information required by the supply chain staff.

When the bin is placed in a location for collection, that area is set up with Terso’s RFID Surface Read Point. When the bin is placed on the RFID Surface Read Point, it automatically triggers the replenishment system, creates a pick list, and in some cases generates the fulfillment order even before the bin arrives in the central stores for replenishment. By having an RFID Surface Read Point in each medical supply inventory storage location, any supply chain staff would know which room has empty bins, and which ones do not, eliminating the need to stop and inspect every location- saving valuable time and creating efficiencies, and thereby reducing overall costs.

Another concern around PPE and other lower cost, critical items that are currently being tracked by a Kanban system is storing those products that are critical and require additional security within a hospital setting. In situations where simple room access does not supply enough security, Terso has developed a secure access cabinet that is Kanban ready.

The Kanban Security Cabinet is used in place of open shelving. The device allows for viewing the contents inside the medical cabinet while at the same time, requiring specific user access in order to remove product. Like a 2-bin Kanban shelf, this medical cabinet is configured with shelves and bins. However, only authorized personnel can access the contents.

Once the bin is empty, the standard Kanban process can be used whether there is an RFID read point or a manual bin collection system in place. This cabinet ensures that the right inventory is in the right hands, at the right time.

Although there are many types of Kanban systems already in place, the process can be enhanced and simplified using RFID, eliminating some of the manual processes already in place. By cutting down on these manual processes costs can be reduced, allowing the hospital to know now as to what inventory levels are at in real-time, and how to better manage inventory turns and reorders.