As the saying goes, “An ounce of prevention is worth a pound of cure.” For hospitals and other healthcare providers, that ounce of prevention includes making sure the right medical supplies are on hand when clinicians and their patients need them. After all, running out of supplies can have fatal consequences. In addition, demand—and the inventory needed to meet that demand—is also notoriously unpredictable in healthcare. Look no further than the COVID-19 pandemic to understand just how vulnerable healthcare organizations can be to unexpected supply chain disruptions.

This article examines the challenges of managing inventory in healthcare and provides best practices for staying ahead of them.

What Is Inventory Management?

Inventory management is the process of ensuring that the right products and supplies are available at the right time in the right quantities to meet shifting customer demand—without ordering too much or too little of any particular items. It can be tricky for businesses to maintain this delicate balance between supply and demand to avoid both inflated costs and lost sales opportunities.

Successful inventory management is rooted in several key technologies. Barcodes and radio frequency identification (RFID) tags attached to goods in inventory store detailed information about them that can be scanned to track their movement, letting companies know exactly what’s in stock at any given time. Inventory management software automates inventory processes, providing real-time insights that help businesses make informed supply ordering decisions.

What Is Healthcare Inventory Management?

Healthcare inventory management involves tracking and optimizing the flow of medical and other supplies, including drugs, surgical instruments, medical equipment, masks, and patient care items. Given patients’ medical needs, healthcare inventory managers can’t afford to focus on cost efficiency alone. Instead, they must prioritize keeping patients safe, providing high-quality care, and meeting regulatory requirements.

The healthcare industry also must grapple with the unpredictable nature of demand. A sudden infectious disease outbreak, for example, can quickly deplete supplies, causing inventory shortages of essential items that may delay treatments and surgeries. A 2022 Deloitte study of 400 nurses found that 57% could recall an instance when a physician didn’t have the product required for a patient’s procedure. Adding to the challenge is the fact that many medical items have strict storage requirements and expiration dates, leading to financial losses when products aren’t managed correctly.

Automated inventory systems can save lives. For example, a hospital could use an RFID-based system to automatically update inventory levels as medical supplies are used, notifying staff when a certain medication is running low so they can reorder the drug before the hospital runs out. The system can also help prevent over-ordering supplies to reduce holding costs and avoid wasting medications due to expiration.

Key Takeaways

  • Managing healthcare inventory involves optimizing the supply of critical items such as lifesaving drugs, surgical instruments, and medical equipment.
  • Healthcare inventory managers face many challenges, including unpredictable demand for medical supplies, diverse and often perishable inventory, strict regulations, lean budgets, and technology integration issues.
  • Developing precise inventory management strategies has many benefits, including reduced costs, improved patient care, regulatory compliance, and better decision-making.
  • Best practices for healthcare inventory management include conducting regular audits, standardizing processes, forecasting demand, carefully collaborating with suppliers, and using a centralized inventory management software system.

Healthcare Inventory Management Explained

Healthcare inventory management is the process of controlling the supply of medications, equipment, and other medical necessities. It’s a high-stakes responsibility requiring precision, given the potential for life-or-death situations if doctors can’t access supplies. In fact, a Premier survey found that nearly half of the US healthcare supply chain, operations, and clinical leaders consulted said they had had to cancel or reschedule patient cases or procedures at least quarterly in 2022 due to product shortages.

Because demand for particular drugs, surgical equipment, and other items is often unpredictable, it’s important for the healthcare industry to rely on sophisticated demand forecasting tools that can accurately estimate the need for critical medical inventory by analyzing historical usage data, seasonal trends, and emerging health threats. This forecasting helps ensure that supplies are always available when they’re needed, especially for emergencies, without having to pad orders and tie up capital in excess inventory.

Consignment inventory models, in which suppliers retain ownership of inventory until items are used, can also play an important role, reducing the financial burden on healthcare facilities by providing a steady supply of essential materials while reducing the risk of over-purchasing. Health organizations can also benefit from cloud-based inventory management systems that offer real-time access to data and integrate with other hospital systems to coordinate care across departments, improve response times, and get supplies in the hands of healthcare professionals before an emergency occurs.

Why Is Healthcare Inventory Management Important?

Careful inventory management is essential to the financial health of healthcare providers, given that inventory accounts for a large portion of costs. A 2022 study showed that inventory-related activities, such as handling, storage, transport, and restocking, represented more than one-third of hospital budgets—and US hospitals waste about $25 billion each year on unnecessary supply chain spending.

A well-managed healthcare inventory process can lower operational costs by avoiding expensive rush orders caused by unexpected stockouts and reducing the amount of supplies that expire before they can be used. After all, controlling costs is critical for healthcare organizations, which routinely operate on lean budgets. In fact, a recent study projected that hospitals and health systems would continue to struggle financially in 2024, putting increasing pressure on organizations to manage their inventory wisely to avoid waste.

Most important, an effective inventory management strategy improves patient safety by making sure a company’s medications and supplies are current and are stored under the right conditions to avoid serious health consequences while improving compliance with stringent regulations.

Types of Healthcare Inventory Management

Accurate tracking and robust forecasting are particularly critical in healthcare to ensure that inventory is available when it’s needed—a process known as inventory control. Different approaches to inventory management can significantly affect a healthcare organization’s ability to control costs and respond to patient needs. Understanding the following two key inventory types can help determine the right method for keeping operations running smoothly.

Benefits of Healthcare Inventory Management

A growing number of hospitals and other healthcare organizations are adopting sophisticated asset tracking and inventory management systems to keep close tabs on their medical supplies. In fact, the inventory management market grew from $25 billion in 2022 to $27 billion in 2023 and is expected to grow to $35 billion by 2027.

The market has grown so much because healthcare companies recognize that closely managing healthcare inventory is key to reducing waste, improving financial performance, and providing the best care possible for patients. Here’s a closer look at the key benefits precise inventory management brings to healthcare organizations.

Cost Reduction

Maintaining ideal stock levels lowers expenses for healthcare companies in two main ways.

Enhanced Patient Care

Successful inventory management allows healthcare companies to provide timely and accurate treatments and improve patient outcomes with:

  • Better availability of supplies: Successful inventory management in healthcare means essential items such as medications, surgical instruments, and medical devices are always in stock so that providers can deliver prompt and uninterrupted care.
  • Improved accuracy: When inventory is accurately managed, healthcare staff don’t have to worry about having the wrong drugs or instruments in stock or running out of them so that they can focus instead on patient care.

Improved Efficiency

By closely tracking medical supplies and optimizing their use, healthcare providers can focus on improving the efficiency of facility operations while delivering quality care to patients. This boost in efficiency is achieved in two key ways.

  • Streamlined operations: A smooth flow of supplies helps reduce patient wait times and boosts job satisfaction for healthcare workers.
  • Quick inventory audits: With efficient inventory management systems, inventory audits can be completed in a fraction of the time it would take to do so manually. Such systems also improve the accuracy of inventory counts, saving time and helping to quickly identify and resolve any discrepancies.

Regulatory Compliance

Healthcare providers must comply with rigorous standards for patient safety and operational efficiency. Inventory management can help with:

  • Accurate recordkeeping: Healthcare companies need to maintain detailed records of their inventories, including purchase and expiration dates, as well as usage data. Advanced inventory management systems automate this process to keep information up to date and easily accessible, helping organizations pass state and federal inspections and avoid penalties while maintaining the highest safety and care standards.
  • Traceability: Tracking the history and location of each inventory item from the point of purchase to its use is particularly important in healthcare to manage product recalls, investigate issues, and maintain the integrity of supplies, helping organizations comply with strict governmental regulations while maintaining patient safety.

Data-Driven Decisions

When healthcare companies make decisions based on accurate data, they can boost operational efficiency, reduce costs, and improve patient care. Advanced inventory management system can help healthcare organizations make data-driven decisions by providing:

  • Inventory analytics: Analyzing patterns and trends in inventory usage allows healthcare companies to identify inefficiencies and areas for improvement. For example, hospital data might reveal that certain supplies are consistently over-ordered, leading to waste. Addressing these costly missteps helps ensure that resources are used more effectively.
  • Forecasting: Healthcare companies that have better visibility into their inventory levels and usage patterns can more accurately forecast demand for medications and equipment based on past usage patterns and upcoming events. Forecasting techniques can also help organization deal with potential shortages or supply chain issues before they become critical.

Enhanced Security

The best inventory management systems and processes help healthcare organizations implement stringent security measures to protect valuable supplies and make sure that they’re used appropriately. For example, advanced systems can allow for:

  • Controlled access: It’s important for health organizations to restrict access to certain medical supplies and drugs so they aren’t stolen and used irresponsibly. To reduce the risk of theft, misuse, or accidental loss, healthcare companies often use secure storage areas and automated dispensing systems to limit access to authorized personnel only.
  • Inventory tracking: By knowing exactly where each item is located and how much is readily available at any given time, healthcare providers can maintain tighter control over their supplies and prevent potential security breaches.

Improved Supplier Management

Healthcare companies need to collaborate with their suppliers to create more transparent interactions, gain favorable terms, and develop supply chains that can withstand disruptions. A 2022 Deloitte survey of supply chain leaders said strong relationships across their supply networks lessened the impact of the pandemic on their organizations. Advanced inventory management practices can help build:

  • Better relationships: Developing clear communication plans and reliable ordering patterns is a surefire way to build strong supplier relationships. Well-managed inventory leads to more consistent and accurate ordering, allowing healthcare companies to bring in a steadier flow of the necessary supplies that are crucial for maintaining high-quality patient care.
  • Negotiation leverage: When healthcare facilities clearly understand their inventory needs and purchasing patterns, they often feel more confident when they engage in supplier negotiations. This leverage can lead to cost savings and more favorable contract terms, boosting a company’s bottom line and its ability to maintain essential items. Besides, by implementing digital inventory management systems, healthcare organizations can share real-time data with suppliers, enabling them to plan production and delivery schedules more effectively.

Environmental Benefits

Effective healthcare inventory management can contribute to environmental sustainability by reducing waste, the number of required deliveries, and the resources required to store stock—all reducing an organization’s carbon footprint. Healthcare organizations can also shift away from single-use disposable materials and expand their inventories of reusable items, as well as prioritize suppliers that abide by environmentally sustainable practices.

Challenges of Healthcare Inventory Management

Keeping track of thousands of supplies, dealing with strict regulations, and handling unexpected patient demand can be challenging for healthcare provider inventory managers. Overcoming the following challenges can help organizations avoid supply shortages, wasted resources, and disruptions in patient care.

Demand Forecasting

The more accurately organizations can forecast demand, the more likely they are to avoid carrying either too much or too little inventory. Of course, predicting demand is never foolproof, especially in the healthcare industry, for the following reasons.

  • Unpredictable demand: Demand can spike unexpectedly due to unforeseen health emergencies, such as pandemics, severe weather conditions, and accidents that cause a massive number of injuries. These fluctuations make it difficult to predict the exact quantities of medical supplies needed at any given time, which can lead to shortages or overstocking.
  • Changing patient needs: Patient needs in healthcare are constantly evolving, influenced by factors such as new treatment protocols, advancing medical technologies, and demographic shifts in patient outcomes. Healthcare organizations may find it challenging to maintain inventory that meets current demand.

Inventory Accuracy

Inventory accuracy challenges manifest themselves in two main areas.

  • Tracking issues: Keeping track of every item in a busy healthcare operation can be tough. Supplies can get misplaced, miscounted, or used without proper logging, leading to discrepancies between what’s actually in stock and what’s recorded in a system. These issues can cause shortages and delays in providing care.
  • Expired products: If inventory isn’t accurately tracked, medications might not be circulated efficiently, leading to waste with expired products or—even worse—the risk that outdated products will be used to treat patients. Nearly one in four hospital staff members said they have seen or heard about a recalled or expired product being used on a patient, according to a 2022 Deloitte report.

Regulatory Compliance

In healthcare, staying compliant with regulations is essential to protecting patient safety and ensuring high standards of care. Compliance challenges stem from:

  • Strict Regulations: on how supplies and medications are stored, tracked, and handled. For example, the US Food and Drug Administration’s Good Manufacturing Practices mandates that products such as medications, medical devices, and other healthcare supplies be consistently produced and controlled according to quality standards. Failing to comply with these guidelines can lead to hefty fines, legal disputes, and risks to patient safety.
  • Quality Control: Many medications have a limited shelf life and require storage under precise temperatures and lighting conditions to maintain their efficacy and safety. Any lapse in quality control can directly impact patient safety and care.

Cost Management

Budget constraints can lead to tough choices for healthcare organizations, like having to decide between purchasing expensive medical equipment or opting for cheaper alternatives that might not last as long. Overspending can strain budgets, while underspending can lead to supply shortages that affect patient care.

Technology Integration

While technology can help tremendously with managing inventory, if integrations aren’t handled correctly, a company’s systems could struggle to keep the flow of supplies running smoothly. Two main challenges in technology integration include:

  • System Compatibility: Healthcare companies often use multiple software systems to manage different aspects of their operations, such as enterprise resource planning (ERP) applications for financial management and electronic health record systems for clinical care, as well as warehouse management systems and supply chain management systems. If an inventory management system doesn’t integrate well with other applications, communication gaps and data silos can occur, making it harder for a business to get a clear picture of its inventory needs and costs.
  • Data Management: Accurate inventory management relies on real-time data, but managing and processing large amounts of data can be overwhelming, especially if systems are outdated or not user-friendly. Poor data management can lead to errors, such as incorrect stock levels and misplaced orders, which can disrupt the entire inventory process.

Supplier Management

Managing suppliers is a critical aspect of monitoring healthcare inventory, since interruptions to the steady flow of supplies can significantly impact operations. The main challenges in supplier management are:

  • Supply Chain Disruptions: Supply chains are vulnerable to multiple types of disruptions, including natural disasters, transportation delays, labor shortages and strikes, geopolitical tensions, severe weather conditions, and pandemics. For example, in 2017 Hurricane Maria devastated Puerto Rico, a major producer of intravenous fluid bags, leading to a shortage that persisted for months. Also, 2022 lockdowns in China due to the COVID-19 pandemic led to a shortage of contrast dye used in imaging procedures, causing delayed diagnoses and procedures in hospitals across the US. Healthcare facilities must be prepared to adapt quickly and mitigate damages from disruptions, often by securing alternative sources to keep operations running smoothly.
  • Vendor Reliability: Suppliers that don’t consistently deliver on time or provide the high-quality materials a company requires can cause delays, subpar products, and stockouts. Maintaining strong relationships with dependable vendors and making sure backup options are in place are crucial for minimizing risks.

Operational Efficiency

Two major challenges for healthcare organizations in achieving operational efficiency revolve around:

  • Workflow Optimization: In healthcare, it can be tricky to make sure every step of the inventory management workflow runs smoothly, because many different departments need to coordinate, such as procurement, pharmacy, nursing and logistics. Poor coordination in the inventory workflow can lead to bottlenecks, delays and shortages of critical supplies.
  • Resource Allocation: In a busy healthcare environment, resources might be stretched thin or misallocated because of high demand, urgent and unpredictable needs, or the complexity of managing multiple departments with varying priorities. If resources aren’t allocated effectively, healthcare organizations may see wasted supplies, increased operational costs and inadequate patient care.

Security and Theft

Healthcare companies carry inventory that can be susceptible to theft because of its high value and the large number of people accessing these items. Two areas of particular concern are:

  • Theft Prevention: The theft of controlled substances, for example, can be especially damaging, leading to supply shortages, increased costs, and potential harm to the public. Preventing theft requires strong security measures, such as tightly controlled access to storage areas, regular audits, and vigilant surveillance.
  • Data Security: To prevent cyberthreats, healthcare facilities must protect sensitive inventory data, such as important information about medications, equipment, and patients. If data security is compromised, companies can experience breaches that lead to large financial losses and damage to the facility’s reputation. Securing this data involves employing encryption software, access controls, and regular security updates.

Staff Training

All team members need to take a consistent approach to handling healthcare inventory, requiring extensive staff training in:

  • Skills Development: In a healthcare setting, staff need to understand the specific skills required to manage inventory effectively, such as the optimal approaches to using inventory management software, tracking supplies, and handling and storing medications safely. Without these skills, mistakes can happen, such as errors in inventory counts and misplaced items.
  • Adherence To Protocols: Healthcare staff must consistently follow established protocols for inventory management to make sure supplies are ordered, stored, and used correctly, reducing waste and promoting patient safety. However, getting everyone to stick to these practices can be difficult, especially in a busy environment. When protocols aren’t followed, inconsistencies, errors, and compliance issues can arise.

Sustainability

Sustainability is becoming increasingly important to consumers and businesses alike, challenging healthcare organizations to implement a range of environmentally friendly practices. When it comes to inventory management, those practices include sourcing supplies from environmentally responsible vendors, reducing reliance on single-use items, and adopting more efficient supply chain and other processes that minimize waste and consumption of fossil fuels. Sustainability initiatives aren’t easy to implement due to costs, the limited availability of eco-friendly options and the need for widespread staff buy-in.

Healthcare Inventory Management and Automation

Automation is a game-changer in healthcare inventory management, simplifying the process of tracking supplies and helping businesses avoid the mistakes that can happen when tasks are completed manually, like entering the wrong quantity of supplies or forgetting to update inventory records.

One popular example of inventory automation is automated replenishment, which uses analytics tools to set inventory thresholds based on historical data and the latest forecasts. When inventory falls below a certain threshold, the system automatically orders more supplies. In addition, technologies such as barcodes and RFID tags can help organizations track inventory in real time, eliminating the need for manual inventory checks. Automation also helps save money and reduce waste by ensuring that supplies are ordered only when they’re needed, so companies can avoid paying for duplicate items as a result of manual tracking errors.

14 Healthcare Inventory Management Best Practices

The key to healthcare inventory management is building a foundational set of strategies to keep supplies organized and costs in check, avoiding waste and making sure every lifesaving medication and surgical instrument is available when it’s needed. Consider the following 14 best practices.

1. Implement automated inventory management systems: In an industry where timely access to supplies is critical, relying on manual processes poses significant risks. With automated systems in place, healthcare companies can monitor inventory levels in real time, trigger automatic reorders when stock runs low, and maintain accurate records with minimal human intervention. This not only saves companies time and money but also reduces errors and streamlines operations. When choosing a system, look for one that integrates smoothly with existing software, and train staff thoroughly on the organization’s updated inventory management protocols to ease the transition and realize the full benefits of the new system.

2. Conduct regular inventory audits and cycle counts: Without closely monitoring stock, inventory discrepancies can be overlooked, which can be costly and disruptive. For example, emergency room physicians might think they have enough critical supplies on hand, only to discover that they’ve run out due to unrecorded usage.

Regular audits help catch these problems early, while cycle counts—a method of checking portions of inventory on a rotating basis—keep stock levels consistently accurate and up to date. In addition to training staff to spot discrepancies, healthcare companies should also leverage inventory management software to streamline audits and cycle counts, making it easier to catch errors and keep inventory records current.

3. Optimize stock levels: During the COVID-19 pandemic, many healthcare facilities overstocked personal protective equipment, such as masks and gloves, in response to initial shortages. Storing the excess products for extended periods was costly, however, and large batches of items ended up going to waste because they either degraded or became obsolete before they could be used.

To avoid costly miscalculations and successfully optimize stock levels, it’s important to regularly review inventory data and analyze usage patterns, adjusting orders based on seasonal demands and patient volume while actively monitoring upcoming medical supply needs and supplier lead times. Inventory management software can help track equipment usage trends, forecast patient demand, and automate reordering processes, allowing organizations to maintain the right balance of stock levels to help ensure that products aren’t wasted and patient care is never compromised.

4. Standardize inventory management processes: Effective standardization involves developing clear protocols for every step in the inventory management process. from ordering and receiving supplies to tracking and auditing them. Training staff consistently across all departments is important to guarantee that everyone is following the same protocols. Inventory managers should regularly review and update these processes to adapt to any organizational or supply chain changes to keep the system efficient and responsive.

5. Employ effective demand forecasting: Patient needs can change rapidly due to emergencies, seasonal illnesses, or the advent of new treatments, requiring healthcare organizations to consider a variety of factors to predict demand accurately. For example, prior to cold and flu season, a hospital that accurately forecasts an increased need for flu and pneumonia vaccines and antiviral medications can stock up to prepare for a sudden influx of patients.

When healthcare providers employ demand forecasting, they can regularly analyze historical data, consider upcoming illness trends, and collaborate across departments to get a comprehensive view of supply needs. Advanced inventory management software often incorporates predictive analytics tools to enhance the accuracy of that information, helping providers adjust forecasts as new data becomes available and allowing them to remain responsive to constantly changing conditions.

6. Manage and collaborate with suppliers: Strong, reliable supplier relationships lead to better communication, faster problem resolution, and more consistent deliveries of high-quality materials. For example, a hospital that works closely with its suppliers can negotiate priority shipments in response to a sudden spike in demand during a natural disaster or other public health emergency.

Healthcare organizations should diversify their supplier base to reduce the risk of disruptions and prioritize building long-term relationships with key suppliers while setting clear expectations for outcomes. Using technology to conduct periodic audits, track supplier performance, and monitor inventory levels can also give healthcare providers the data they need to effectively collaborate with vendors, further strengthening these partnerships.

7. Centralize inventory management: In hospitals and other healthcare providers, supplies are handled by multiple departments: pharmacies, operating rooms, nursing units, and labs. If that inventory is managed in silos, the organizations risk losing tight control, leading to fragmented data, duplicate orders, and stockouts.

Centralizing inventory management is essential, bringing all data and processes under one system to maintain consistency, reduce errors, and provide a clear, real-time view of stock levels across the organization. Comprehensive inventory management systems integrated with financial, HR, and other systems help streamline ordering, promote better resource allocation, and avoid costly overstocking or understocking. For example, a hospital with a centralized inventory system can quickly see if one department has a surplus of a particular item while another is running low, allowing for more efficient redistribution of supplies.

8. Monitor expiration dates: In an industry where precision and safety are paramount, expired products can lead to ineffective treatments, poor patient outcomes, and legal liabilities. Healthcare organizations can closely monitor expiration dates using an inventory management practice known as first-in, first-out (FIFO), where items that have been on the shelf the longest are used before newer stock. This reduces waste and helps ensure that supplies are fresh and effective.

Inventory management software can help healthcare organizations track expiration dates, conduct regular inventory audits, and set up automated reminders when items are nearing expiration.

9. Adopt lean inventory practices: Lean inventory practices focus on keeping only necessary healthcare inventory in stock, eliminating excess materials to reduce waste, lower costs, and improve efficiency—all while making sure critical supplies are available when needed.

To successfully adopt lean inventory practices, healthcare orgs should regularly analyze usage patterns, adjust inventory levels based on real-time demand, and work closely with suppliers to establish reliable, just-in-time delivery schedules.

10. Enhance security measures: Medical supplies and medications, particularly controlled substances, are often targets for theft or misuse. Without strong security measures, healthcare companies run the risk of losing valuable inventory, facing legal actions, and compromising public safety.

Enhanced security measures—such as restricted access to storage areas, real-time inventory tracking, and regular audits—help prevent theft and misuse. Protecting sensitive inventory data from cyberthreats is also important.

A key step in building these security measures is implementing access control systems that limit who can enter storage areas, handle sensitive items, and access patient and other data. Inventory management software can track every transaction and flag unusual activity, further strengthening security.

11. Embrace sustainability and reduce waste: Failure to reduce waste can result in rising disposal costs, regulatory penalties, and a negative public image. By reducing single-use plastics and opting for reusable medical supplies, for example, healthcare organization can cut down on waste and reduce their carbon footprint.

Implementing programs to recycle materials and properly manage hazardous waste disposal also contributes to a safer environment. Partnering with suppliers that prioritize eco-friendly products and conducting regular audits to evaluate sustainability efforts can also further reduce waste.

12. Leverage inventory analytics: Analyzing usage patterns and identifying slow-moving items that take up valuable storage space can help healthcare providers manage a wide array of supplies, medications, and equipment.

Advanced inventory management software typically features analytics tools that track real-time data and provide insights to help healthcare personnel make better decisions about ordering products, stocking inventory, and allocating resources. Integrating inventory analytics with other systems, such as EHR and procurement platforms, can also create a holistic view of inventory needs and simplify supply-related decision-making across the organization.

13. Provide training and development: The complexity of healthcare inventory, from everyday pain relievers to lifesaving medications, demands a high level of accuracy and efficiency. Effective training programs equip staff with the skills they need to handle inventory efficiently. For example, training on the use of barcode scanning systems helps make sure supplies are tracked accurately and in real time. Development programs also keep staff updated on current best practices and the latest technologies gaining ground in this constantly evolving industry.

Companies should focus on both initial onboarding and ongoing education, including hands-on training sessions, regular refreshers, and access to resources that help staff stay informed about software updates and process changes.

14. Prepare for emergencies: Whether it’s a natural disaster, an infectious disease outbreak, or a mass casualty event, an unforeseen medical crisis can occur at any moment. Healthcare organizations must be ready to respond quickly and efficiently.

To prepare for sudden spikes in demand, they should create contingency plans with their suppliers to secure fast replenishment, as well as maintain a buffer stock of essential items that can be accessed quickly during a crisis. In addition, it’s important to conduct regular emergency drills that include inventory checks, as this will result in a more coordinated and effective staff response when emergencies erupt.

7 Healthcare Inventory Management Use Cases

The following examples illustrate the importance of solid inventory management in healthcare settings.

1. Medication management during a national drug shortage: During a nationwide shortage of a critical heart medication, a large healthcare network has to allocate its limited supply across multiple facilities to meet patient needs. Its inventory management system analyzes real-time data from each location to identify facilities with excess stock and those with imminent shortages. The system then manages the transfer of the medication among hospitals to prevent any one location from running out.

2. Automated replenishment for high-demand personal protective equipment during a pandemic: When a pandemic hits, a regional hospital sets up an automated system to track its inventory of masks, gloves, and other essential protective gear. The system uses analytics to monitor how quickly supplies are being used and automatically adjusts reorder levels based on real-time data. When stock reaches these critical levels, the system places orders with suppliers to keep necessary items in stock, even during surges in demand.

3. Surgical supplies management in a multispecialty hospital: A multispecialty hospital must stock a wide variety of surgical supplies. For example, the neurosurgery department needs highly specialized surgical microscopes and delicate brain retractors, while the orthopedic department require implants. A centralized inventory system helps the hospital monitor what’s being used and what’s available. When the neurosurgery team schedules a complex surgery, the system checks to make sure all necessary, specific tools are ready to go and properly sterilized. If anything is missing, the system flags it right away so it can be addressed before a procedure begins.

4. Managing expiration dates for time-sensitive medications: A children’s hospital uses inventory management software to keep a close eye on the expiration dates of important medications, such as vaccines that need to be used within a certain timeframe. The system alerts the pharmacy team when its vaccines are getting close to their expiration dates, helping the team decide whether to use those vaccines in upcoming clinical settings or send them to another location where they can be used more quickly.

5. Emergency preparedness for a natural disaster: A coastal hospital may face hurricanes from time to time, leading to periodic surges in patients and delays in getting new supplies. To prepare, it uses its inventory management system to keep extra stock of crucial items, such as intravenous fluids, emergency medications and nonperishable supplies. When a hurricane is on the way, the system sends alerts so staff can acquire more resources, allowing the hospital to continue caring for patients without experiencing interruptions of essential supplies during and after the storm.

6. Centralized inventory for a healthcare network with diverse service lines: For large healthcare networks that span multiple locations, managing supplies can be particularly challenging. A healthcare network with different clinics, such as pediatrics, oncology, and orthopedics, can benefit from a centralized inventory system. When the pediatric clinic needs specialized infant formula and the orthopedics department needs more surgical screws, an inventory management system can help distribute these supplies based on what’s already in stock and what’s required. The result: more efficient supply management and reduced waste.

7. Compliance and reporting for controlled substances: A large hospital with many departments has to handle controlled substances such as opioids, which the government closely regulates. To follow the rules, the hospital uses an inventory management system to keep track of every dose from the date it arrives in the pharmacy to the moment it’s given to a patient. The system also creates reports for inspections by regulatory agencies, helping the hospital avoid fines and reduce the risk that stolen medications might go undetected.

Healthcare Inventory Management Trends

Healthcare inventory management is evolving quickly, thanks to new technology. A 2023 survey of more than 100 healthcare leaders by Global Healthcare Exchange found that cloud-based technology is quickly becoming the new standard, with 70% of respondents saying they’re likely to have adopted a cloud-based approach to supply management by 2026 to improve efficiency, reduce costs, and enhance operational resilience.

Another important and still-emerging tech category is the Internet of Things, including smart shelves, whose sensors alert staff when supplies are running low, and RFID tags that automatically keep track of inventory levels.

In addition, 46% of companies in the healthcare sector have already started using AI to identify and address potential disruptions in their supply chains, according to 2024 research by Economist Impact. AI-powered tools can help determine optimal inventory levels based on demand variability, lead times, and cost constraints, and AI-driven predictive analytics can examine past data and monitor how supplies are currently being used, helping healthcare facilities better predict what they’ll need in the future.

How to Choose a Healthcare Inventory Management System

Healthcare organizations can take the following steps to identify the ideal inventory management system for them:

1. Assess needs: The first step is to evaluate the current inventory management process and pinpoint problem areas. This includes assessing the kinds of supplies being managed, the amount of inventory on hand, and any special requirements, such as temperature-controlled storage or the need to meet specific regulatory standards.

2. Set clear objectives: Next, it’s important to define what the new system must accomplish. Whether the goal is to improve accuracy, cut down on waste, or increase automation, having clear objectives helps guide the system selection process.

3. Research and compare options: Once objectives are set, it’s time to explore the different inventory management systems on the market, prioritizing applications designed specifically for healthcare settings and comparing their features, costs, and user reviews. It’s also crucial to understand how well each system integrates with your organization’s existing software.

4. Consider compliance and security: The system must help your organization comply with healthcare regulations such as the Health Insurance Portability and Accountability Act. It should also have strong security features to protect sensitive data and prevent unauthorized access, such as data encryption, multifactor authentication, role-based access control, and audit trails.

5. Evaluate usability: The news system should be easy for staff to use. An intuitive interface and minimal training requirements will encourage staff to adopt the system, leading to a smoother transition.

6. Check for scalability: The new inventory management system should be able to grow with your organization, with feature, security, performance, and other updates delivered regularly and seamlessly.

7. Request a demo or trial: Before making a final decision, ask for a demo or trial of the system to see how it works in a real-world setting and whether it meets your organization’s needs.

8. Review support and training options: It’s important to determine what kind of support and training each vendor offers. Adequate resources, such as online tutorials, on-site training, and readily available customer support can boost adoption rates and help staff get up to speed quickly.

9. Consider total cost of ownership: Beyond the initial purchase, remember to account for implementation, maintenance, and upgrade expenses and any hidden fees, such as those for systems integration cost.

10. Gather feedback from key stakeholders: Get input from department heads, IT staff, and front-line workers—the people who will use and help maintain the system.

Modernize Healthcare Inventory Management with NetSuite

NetSuite offers comprehensive solutions tailored to the needs of healthcare organizations. With features such as real-time inventory tracking, automated replenishment, and robust reporting tools, NetSuite Enterprise Resource Planning (ERP) helps healthcare providers maintain optimal stock levels, reduce waste, and avoid costly supply shortages. For example, NetSuite’s real-time tracking allows for instant visibility into stock levels across multiple locations, ensuring that critical supplies are always on hand where they’re needed most.

NetSuite’s integrated approach to ERP means that its inventory management module connects seamlessly with other critical functions, such as finance, procurement, and supply chain. These tight integrations eliminate data silos and create smoother workflows that afford better insights for decision-making. NetSuite’s 100% cloud-based solutions provide the flexibility and scalability healthcare organizations require to adapt to changing needs without significant downtime or disruption. NetSuite also provides deep industry expertise and ongoing support founded upon its long history of understanding the complex healthcare regulatory environment.

Effective healthcare inventory management is critical for ensuring patient safety, controlling costs, reducing waste, and maintaining efficient operations at medical facilities. To succeed, healthcare organizations should optimize stock levels, conduct regular inventory audits, closely monitor expiration dates, and leverage advanced technology solutions, such as automated inventory tracking systems and real-time data analytics, allowing for improved visibility, accurate demand forecasting, and streamlined inventory processes.

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Healthcare Inventory Management FAQs

How is inventory managed in a hospital?

Hospital inventories are managed through a centralized system that tracks medications and equipment in real time. Automated inventory management systems monitor stock levels, trigger reorders when supplies run low, and ensure that critical items are always available. These systems also help manage items with expiration dates and compliance with regulations.

Why is inventory important in nursing?

Inventory is particularly crucial in nursing because it includes supplies, medications. and equipment that are crucial to patients’ well-being and safety.

What are the four types of inventory management systems?

The four main types of inventory management systems are warehouse management systems (software that helps optimize inventory tracking, storage, and order fulfillment in warehouses; enterprise resource planning systems (comprehensive software packages that integrate inventory management with other key business processes such as finance, procurement, sales, and HR); inventory management software (specialized software that tracks and manages inventory levels, orders, sales, and deliveries in real time); and automated storage and retrieval systems (systems that use machinery and computer controls to efficiently store and retrieve inventory with minimal human intervention).

What is an inventory management system in a hospital?

A hospital’s inventory management system helps with tracking and managing medical supplies and equipment. An efficient system monitors stock levels in real time, automatically reordering items when they run low and ensuring that critical supplies are available where and when they’re needed. This kind of system also helps cut down on waste by tracking expiration dates and prevents shortages that could impact patient care by keeping the hospital’s supplies organized and operations running smoothly.

What are the three major inventory management techniques?

The three major inventory management techniques are push, which involves forecasting demand and pushing inventory to stores or warehouses based on predictions; pull, whereby inventory is replenished based on actual demand; and just-in-time, which is a pull-based technique whereby inventory is ordered and received just in time for use, minimizing storage costs and reducing potential waste.