Inventory Management
Business related Benchmarks
According to Arya et al. (2015), hospital supplies are usually considered the main source of excess cost and inefficiency; this has placed hospital material managers under pressure in an effort to address the issues. For instance, the Ramsey Group website points out that most of the time the staff spends additional time trying to manually check tracking usage and par levels in different supply locations which made it difficult to optimize and organize inventory levels (www.ramsayhealth.com). Cheung et al. (2014) agrees with this notion by claiming that inventory management and supply chain activities are portrayed as elements that may guarantee competitive advantage for organizations. Furthermore, a study that the researchers carried out showed that improper management of inventory management practices may happen due to incurred costs, management commitment levels and the workers skills (Cheung et al., 2014).
Throughout the supply chain process, inventory management is considered a great challenge when it comes to enhancing coordination within a value chain (Qrunfleh & Tarafdar, 2014). Furthermore, the researchers claim that controlling inventory is necessary because it formulates the business future concerning failure or success in the growing competitive environment. Blome et al. (2014) agree by stating that inventory requires appropriate control because it is the main asset of any business. They add that a balance needs to be found between inventory management and supply chain strategies because they influence an organization’s performance operations.
Iannone et al. (2015) points out that the current cost of offering higher quality patient care has led to more scrutiny from insurance companies, government regulators as well as patient-advocacy groups; this means that hospitals have to limit medical supply expenditures as well as other inventory costs that do not compromise health services. Rahimi et al. (2016) conform to this by suggesting that accurate data should be provided on how medical supplies are utilized because this will help hospitals to manage inventory with less expense and greater precision. This is a necessary benchmark when it comes to inventory management and controlling costs because hospitals will be able to manage their operations in a manner that is more accurate.
Govindan et al. (2015) implies that there are two main factors that increase hospital costs which include the time that is spent by clinical staff looking for the misplaced medical supplies and extra costs that come from finding the items which may lead to placing new orders for replacement supplies that are not needed. However, Abdulsalam et al. (2015) suggests that this issue can be dealt with if replenishment processes are automated and limiting the amount of time needed for clinical and supply chain staff to find medical supplies; this will increase efficiency throughout the health system.
If the medical supplies fail to be closely monitored or properly recorded after use, they may trigger incorrect billing and lead to continuous financial losses for a company (Yu et al., 2014). An automated inventory management will enable hospitals to automatically record accurate charge information, retain most of their expenses and ensure the cost of the medical supplies is allocated appropriately (Chitrakalarani et al., 2016). For instance, Cleveland clinic uses smart supply cabinets to assist them in operating in a manner that is more efficient; this has helped the facility to ensure that it reduces its medical costs and guarantee proper inventory management.
The Mayo clinic website suggests that a computerized system should be used to enhance inventory performance. While the clinic was implementing a computerized inventory system, it modified its purchasing strategy from a predominantly direct account to a prime-vendor wholesaler that was progressive; this reduced their inventory levels to 46.5 percent. This means that the process leads to reduced inventory operation costs. Ghiami & Williams (2015) believe that once an appropriate inventory management technique is adopted, it will include three main components: change management, buyer experience and technology.
Inman & Blumenfeld (2014) argue that when it comes to inventory management it is important to maintain accurate records of goods that are finished and ready for shipment. This may mean posting production of the newly finished goods to inventory totals and subtracting recent shipment of the finished goods to the buyers. Navasiri et al (2016) posit that an organization has to develop and design an inventory management technique that can balance supply and demand. This may reduce inventory costs, limit the cycle time and enhance information sharing. Fortis Group has managed to effectively manage inventory as well as coordinate the supply chain system which has led to improved performance.
Volland et al. (2017) explains that inventory management benchmarks as well as functions utilized by businesses help to manage stocks of the finished products, raw materials and semi-finished products. Therefore, accurate implementation of the activities ensures that a business or firm can limit waste and extra costs while increasing revenue. Benchmarks are meant to improve inventory management practices within hospitals and they improve operation costs in an efficient manner (Blome et al., 2015).

The Key Constructs of Inventory Management
Inventory management is the main element when it comes to logistics and supply chain management (Qrunfleh & Tarafdar, 2014). This section will provide an overview of the major constructs which will be explored. Inventory management is mainly done in order to reduce the costs of controlling the system delivery and manufacturing, supply and time saving. Therefore, inventories assist in simplifying operations because it increases the need to develop products that fulfill individual demands. Some of the constructs that will be discussed in this section include leadership management, inventory integration, inventory complexity, inventory risk management, stakeholder impact, and inventory agility, resilience, and adaptability.
Leadership Management
Issues with the supply chain have to be considered if a healthcare facility wants to make decisions concerning new product introductions, customer service and pricing (Oballah et al., 2015). It is believed that 56 percent of leaders in the supply chain are either senior or executive; this correlates with the performance in the supply chain (Arya et al., 2015). Effective leadership translates to making continuous decisions towards a bigger goal despite the risks or obstacles. Therefore, dedication and discipline are required in order to enhance inventory management and make sure that the leader targets outcomes that are more favorable (Navasiri et al., 2016).
A positive performance on inventory management will be realized if the leaders implement integration and differentiation because it is important for the supply chain process (Böhme et al., 2014). Leadership is an integral part of inventory management because it implements the use of strategic planning, innovation and supply management. Once a health care facility realizes the benefit of proper leadership, it will be able to reduce medical costs and manage the medical supplies in a more efficient manner (Tseng, 2014).
Inventory Complexity
Management of inventory may become complex if the products do not get purchase (Cannella et al., 2017). Even though many of the inventories depend on automated machines, healthcare facilities have to hire competent leaders that will manage the inventory in an effective manner. However, Inman & Blumenfeld (2014) posit that wasteful inventory may become accumulated within a system because of unwise decisions which are made by personnel that are not accurately qualified and this includes the warehouse managers who may not be accurately trained to deal with inventor in a professional manner.
Iannone et al. (2015) believe that inventory systems are complicated or complex because of the existence of different kinds of uncertainty. Furthermore, they suggest that there may be a need to select a forecasting method and inventory management policy in order to guarantee the success of inventor management. Böhme et al. (2015) agree and state that such choices may have an effect on the inventory management performance levels because there may be a connection between policies of inventory management as well as the forecasting method. Complexity of the inventory systems may be developed for the unique kind of irregular demand that uses the simulation model (Iannone et al., 2015). It is for this reason that there is a probability to predict properties of a complete system rather than breaking it down to analyze the different segments.
Ghiami & Williams (2015) imply that inventory systems could reveal specific uncertainties when it comes to lead times, demand, transportation times, quality and availability of resources. Tackling uncertainty is considered a significant issue in the management of inventory. Some of this uncertainty originates from the suppliers while some can be attributed to factors like economic conditions and customers (Tseng, 2014). The inventory management decisions need to consider such uncertainties. Despite the different kinds of uncertainty, performance and behavior of the inventory management system can be affected by the choice of demand forecasting method and inventory management policy; this is because the two factors connect with one another (Yu et al., 2014).
Chitrakalarani et al. (2016) posit that the decisions and uncertainties on inventory management systems performance as well as the connection between the decisions and uncertainties contribute to the complexity of inventory systems. Hence, it is recommended that predicting properties of the complete inventory system is necessary rather than separating the components and analyzing them on an individual basis.
Inventory Integration
When it comes to inventory management, the supply chain integration is considered the most essential aspect (Rahimi et al., 2016). This is because integration synchronizes the aspects of the supply chain in terms of all parties involved in the process. Most of the health care facilities have managed to attain an increased level of integration through applying the lean manufacturing principles in order to optimized the supply chain as a whole (Arya et al., 2015). Inventory control methods like Collaborative Planning, Forecasting and Replenishment (CPFR), Vendor Managed Inventory (VMI), and the Collaborative Transportation Management (CTM) are based on the ideology of lean thinking (Blome et al., 2014).
Integration of inventory management offers a platform that assists in making right decisions when it comes to what to purchase, when to purchase it, what should be eliminated, and what should be kept in stock (Sonntag & Kiesmüller, 2016). This offers a disciplined procedure that efficiently controls the storeroom investment and the associated inventory costs while aiming to attain the acceptable service levels (Qrunfleh & Tarafdar, 2014). Furthermore, integration of inventory refers to proper understanding of the basic inventory management procedures along with a disciplined and effective application of the associated best practices (Sonntag & Kiesmüller, 2016). Possessing proper knowledge of underlying principles offers a more understood approach towards the implementation as well as appropriate practice in which any individual would have the ability to make effective decisions on the proper manner to manage the inventory (Qrunfleh & Tarafdar, 2014).
Inventory integration is a platform that is based on the basic data integrity (Cannella et al., 2017). This then concentrates on the practical application of the work process which depends on the data in order to establish the baseline for improvement; afterwards, realistic goals are developed and the action plans which will assist in controlling inventory and attain those goals (Cannella et al., 2017). Navasiri et al. (2016) claims that integrated inventory management has a possibility of becoming self-sustaining if regular progress monitoring as well as constant re-evaluation of the action plans and objectives are done.
According to Inman & Blumenfeld (2014), inventory management involves having knowledge of how and where an item is within a warehouse. Therefore, it is sensible to make sure that the inventory asset value of the financial reports coincides with what is available in stock so that one can integrate the inventory package with the account package (Inman & Blumenfeld, 2014). Inventory integration can only become effective if it is flexible, real-time, easily reconcilable, transparent to uses, and scalable based on growth (Oballah et al., 2015). If the accounting system and inventory system are integrated, issues may arise concerning its effectiveness. As a result, application database tables (vendors, customers, inventory items, duplicate multiple sites, accounts and so on) may be massively overloaded (Oballah et al., 2015). This database overload may lead to a dysfunction in accounting and reporting, opportunity tracking and sales quoting, operations, purchasing and inventory management.
Integration of inventory assists in maintaining inventory instead of learning new systems continuously; this helps the medical supply staff to continue leveraging investment while benefiting from enhanced efficiency of the inventory management process (Sonntag & Kiesmüller, 2016). Therefore, inventory integration abolishes the need to learn the new interfaces, reporting or data structures. Learning a new system or reconciling the disparate systems wastes time which is required when carrying out integrated inventory management and warehouse system which incorporates with relevant software (Ramanathan & Gunasekaran, 2014).
Inventory Risk Management
Volland et al. (2017) suggest that in a risk management process, a firm has to take inventory of the current risk management procedures in order to determine the sectors of strength and to build upon the weak areas. This inventory will provide valuable information for the management which will help in improving processes of risk management. Inventory risk can be managed through accurate purchase and equal sale (Sonntag & Kiesmüller, 2016). Furthermore, it is not possible to abolish inventory risk while still remaining in business due to the fact that inventory management risks influence all firms irrespective of how much the company inventory comprises of (Volland et al., 2017).
Inventory faces the risk of theft specifically if it is high value; businesses invest millions of dollars annually in order to create inventory management policies and this safeguards prevention of theft even though it still takes place regularly (Ramanathan & Gunasekaran, 2014). In addition, inventory can get lost which means that there have to be tight inventory policies along with personnel that are efficiently trained to prevent losses (Tseng, 2014). If inventory gets lost, a company strikes it off its records which are equal to liabilities for the business and limited equity.
The traditional inventory approaches concentrate on characterizing the replenishment policies in order to maximize the forecast profit or minimize expected cost over the planning horizon (Govindan et al., 2015). Optimization of the expected profit shows that the risk-neutral leaders find it appropriate; this means that the inventory planners are not sensitive to the profit variations (Oballah et al., 2015). However, not all inventory planners neutralize risks because they are willing to downside the need for protection against losses (Govindan et al., 2015).
Ghiami & Williams (2015) focused on the influence of risk aversion and risk within the newsvendor model especially because the risk was measured through expected utility functions. Specifically, they determine the comparative static effects of the changes within different cost and price parameters within the setting of risk aversion. On the other hand, Cheung et al. (2014) analyzed the mean variance trade-offs within the newsvendor models and standard infinite models. They focused on the tradeoff of the mean variance concerning the customer waiting time and the tradeoffs of the mean variance of the inventory levels.
Stakeholder Impact
Based on the financial factors of the healthcare industry, inventory management is important to the society or patients because it entails many stakeholders (Yu et al., 2014). Yu et al. (2014) investigated the health care industry especially its value chain so that they could uncover essential industry trends as well as identify the main stakeholders entailed in providing inventory and supply chain health care services. Sufficient evidence revealed that both the horizontal and vertical integration were present within the health care in which vertical integration involved hospitals joining the insurance agencies in order to co-work on different areas of the delivery network (Yu et al., 2014).
A good example of how stakeholders are involved in inventory management is that doctors usually request batteries so that tests can be performed on their patients even though their symptoms as well as other indicators show the course of treatment (Rahimi et al., 2016). The stakeholder influence inventory management because it depends on the items that they need in stock, the more frequent an item is used the more it needs to be restocked accurately; this increases the significance of inventory management (Abdulsalam et al., 2015).
Inventory Agility, Resilience and Adaptability
Inventory management can only become effective if it is adaptable, real-time, easily reconcilable, transparent to uses, and scalable based on growth (Oballah et al., 2015). Inman & Blumenfeld (2014) state that inventory management involves having knowledge of how and where an item is within a warehouse. Therefore, it is sensible to make sure that the inventory asset value of the financial reports coincides with what is available in stock so that one can integrate the inventory package with the account package (Inman & Blumenfeld, 2014). If the accounting system and inventory system are integrated, issues may arise concerning its effectiveness. As a result, application database tables (vendors, customers, inventory items, duplicate multiple sites, accounts and so on) may be massively overloaded (Oballah et al., 2015). This database overload may lead to a dysfunction in accounting and reporting, opportunity tracking and sales quoting, operations, purchasing and inventory management.
Technological and economic globalization make it necessary to divide labor in a more pronounced manner and in a medical setting it may involve more suppliers within the supply chain network and this may make the process of inventory management complex (Arya et al., 2015). Therefore, inventory management procedures are mostly resilient so that they can deal with issues pertaining to the ability of the system to be prepared for the unforeseen interruptions as well as withstand and be able to recover from the issues effectively (Volland et al., 2017).
Agility in the inventory management process is important in order to guarantee the efficient operations of medical care (Cannella et al., 2015). The inventory management decisions need to consider such uncertainties. Despite the different kinds of uncertainty, performance and behavior of the inventory management system can be affected by the choice of demand forecasting method and inventory management policy; this is because the two factors connect with one another (Yu et al., 2014). This shows how agility applies to inventory and how it assists in making the process more effective.
Resilience is an important element in inventory management because it tackles the increasing interdependency and complexity of the supply chain network (Iannone et al., 2015). Building a resilient supply chain network and inventory management process helps quantify the influence of the unexpected events within their operations (Sonntag & Kiesmüller, 2016). Therefore, it is recommended that risk reduction strategies be implemented within inventory management procedures (Iannone et al., 2015). Management of inventory may become complex if the products do not get purchased (Cannella et al., 2017). Even though many of the inventories depend on automated machines, healthcare facilities have implement resilient inventory management processes that will manage the inventory in an effective manner. However, Inman & Blumenfeld (2014) posit that wasteful inventory may become accumulated within a system because of unwise decisions and thus resilience will appropriately recommend solutions to such issues.
It is important to note that disruption is the driving force of resilience; in a supply chain, disruptions may be classified into external or internal (Blome et al., 2014). Possessing proper knowledge of underlying principles of resilience offers a more understood approach towards the implementation as well as appropriate practice in which any individual would have the ability to make effective decisions on the proper manner to manage the inventory (Qrunfleh & Tarafdar, 2014). Resilience of the inventory systems may be developed for the unique kind of irregular demand that uses the inventory simulation model (Iannone et al., 2015). It is for this reason that there is a probability to predict properties of a complete system rather than breaking it down to analyze the different segments within the supply chain and inventory. Therefore, it is important for inventory to be agile, adaptable and resilient so that any issues that arise in the supply chain can be dealt with promptly.

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