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Hospital Inventory Management

Lead Time & Buffer Stock in Inventory Control in Hospitals

If your hospital is losing money as a business enterprise, stop looking at the patient statistics but turn to its inventory management instead. Hospital inventory management is one area which has a direct bearing on your hospital’s expenditure and profits and yet is often overlooked. Poor inventory control may lead to excessive stock wastage, or buffer stock shortage which in turn reflect on the hospital’s quality of service to the patients. Hospital inventory management cannot be trifled with, as it indirectly affects the lives of patients in the hospital. So, the healthcare quality management  team of the hospital must monitor its inventory and take steps to control its supply chain. Enlisting the services of a competent healthcare consulting firm would be the right thing to do to accomplish this.

Main factors to consider for efficient hospital inventory management – lead time and buffer stock

For efficient hospital inventory management, 2 factors must mainly be monitored and held in check – lead time and buffer stock. Let us discuss this in detail.


Lead Time

Lead time is ideally defined as ” the sum of supply delay and reordering delay”. Supply delay is the time taken by a supplier to deliver the products once they are ordered. Reordering delay is the delay time that occurs until the ordering occurs again.


A hospital should always maintain some safety stock or buffer stock as a contingency to meet its ongoing requirements. Storing surplus stock will only increase the inventory costs and overheads of the hospital. It may also lead to unnecessary wastage and loss as medical supplies like drugs have a quick expiry period. On the other hand, stock deficit or “stock-out” situations cannot be entertained at a hospital where patient’s lives are involved. So, a perfect balance has to be reached between the two and this is done by computing the lead time.


Lead time comprises of 2 elements – internal and external. The internal lead time is the time taken between the decision making and the actual ordering and this occurs within the hospital management. The external lead time is the  taken by the supplier to process and deliver the order and this is from the supplier’s end.  Lead time can be controlled with proper planning and used to regulate the supply chain and inventory of the hospital.


The lead time tells us –

  • how long the hospital can run on existing stock till a stock-out occurs
  • when the stock should be reordered and in what quantity.
  • how much safety stock is required to manage emergencies

In a hospital, stocking of medical supplies and ordering them all depends on the correct lead time computation. Lead time is a factor which affects the safety stock analysis and decides how much buffer stock should be stored in the hospital.


Reducing the lead time is the right method of efficient hospital inventory management and this can be achieved only by strategic planning done with the help of an expert healthcare consulting firm.


Buffer stock

Buffer stock or safety stock is the amount of stock or medical supplies set aside to meet the requirement of the hospital in the time of an emergency like unforeseen demand or depleting stock. This must not be confused with the regular stock or working stock held on hand for the routine operation of the hospital. Buffer stock or reserve stock is the contingency stock held to tide over unexpected situations like delay from the supplier’s end, unexpected epidemic situation or increased patient influx.


Hospitals must always carry an optimum safety stock to prevent stock-outs, maintain the quality of clinical care and patient satisfaction  and avoid emergency ordering of medical supplies at a high cost.


The quantity of buffer stock needed by a hospital depends much on the lead time. Higher the lead time, more the buffer stock to be maintained and higher the inventory costs. So, it is always critical to maintain the lead time low and the buffer stock on an average. An experienced healthcare consulting firm can suggest ways to maintain the right buffer stock without adding on to the costs.


Hospital inventory management can be done based on various theoretical models like ABC, VED, XYZ, SDE, FSN, etc and the order processing can be cyclical or fixed. But more than theory, only an expert and experienced healthcare consulting firm can tailor the inventory control system to suit your hospital’s specific needs.


Initiate the streamlining of your Hospital inventory management immediately using the services of a competent healthcare consulting firm to maximize profit and minimize overheads.