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Manipal Journal of Medical Sciences

Abstract

Inventory costs in hospitals vary from 30 to 40 percent of the hospital operating costs per year. Inventories are materials and supplies that a hospital carries for patient care. Often, they are a substantial part of the total assets of a hospital. Quick liquidation is imperative in real-time scenarios like value recovery, getting rid of excess material or bringing down logistics cost. Due to poor handling of finances by purchase managers without prior retail management education – the ordering systems, vendor payments management of the hospitals will not be ideal, which will affect vendor relations. In this scenario, this study was undertaken to reduce the high inventory costs of this hospital. Aim: To reduce the inventory purchase costs of hospital stores. Method: An observational study was conducted in general stores of a private hospital for six months period. A retrospective analysis of drug consumption pattern, a cyclical trend was analyzed by exporting the data from Hospital Information System (HIS) into an excel sheet (CSV) format. Economic Order Quantity (EOQ) was the formula applied for each item. Results: A stock of goods worth INR 1.10 crore was identified which was having INR 17 lakhs worth non-moving items and INR 12 lakhs worth slow-moving and near-expiry items. By applying the EOQ formula, reorder levels were identified, safety stocks were applied and the inventory was reduced to INR 59 lakhs, a reduction of INR 51 lakhs. This money parked on inventory got released for the hospital to improve its operational efficiency. Conclusion: The store managers and purchase managers in smaller hospitals prefer to order stock for two to three months at a stretch, to reduce their workload. The Chief Operating Officer (COO) of the hospital should do a walk-in of stores and conduct audits for at least 5% of items stored once in six months.

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