Intelligent Inventory

Even for smaller companies, hand-counting inventory is a miserable necessity. For large multi-site operations, tracking stock inefficiently can have a detrimental effect on the company’s financial health. The solution, for large and small companies alike, is to adopt one of the many automated inventory control systems that are currently available to HME/DME providers. Those who imagine a hefty price tag will be pleasantly surprised, and others who are wary of a steep learning curve will be relieved as well, according to Spencer Kay, president of Fastrack Healthcare Systems.

“Automated inventory systems shouldn’t be considered a cost, but an investment that will pay for itself very quickly,” he says. “And with everyone being so familiar with smart phones, tablets and PDAs these days, there’s nothing to be worried about in terms of learning how to use the technology. These are very simple devices to operate.”

Implementing Automation

Anyone who has rummaged through a dusty warehouse, clipboard in hand, manually counting individual product units can appreciate the concept of automating such a time-consuming process. David Schaer, president of Computers Unlimited—developer of the TIMS suite of medical software, which includes an inventory management component—is one of those people. “One of my first jobs was working as the purchasing agent for one of our current customers,” he says. “Even though we were a small company then, we stocked thousands of items, so I understand the value of automated inventory management.”

Schaer points out that his company’s inventory software was first developed for industrial distribution applications some three decades ago, so many years of both research and development and real-world experience support the current technology. Describing the process of installing the system for a first-time user, he says it begins with a “pre-implementation” process during which the customer’s business process is examined in order to set certain parameters within the TIMS software.

“This system isn’t just about keeping count,” he says. “It can be programmed to handle everything from automatically generating vendor purchase orders to tracking transfers between an HME provider’s various locations.”

Oftentimes, new users will begin with a six-month period of “manual purchasing,” during which purchase orders and inventory levels are entered into the system manually. This gives the system time to begin “learning” about your operation, at which time you can switch over to “automatic purchasing,” in which the software applies algorithms to the information it’s gathered to synchronize purchasing with necessary inventory levels, etc. “It will determine the ‘economic order quantity,’ or EOQ, so that your stock is replenished before it runs out, but without leaving too much sitting around on the shelves costing you money,” Schaer says. “But you can set individual item levels manually, so the system is very flexible, and you can also establish ‘thresholds’ so that the software can predict when something will need to be ordered in advance of running out based on usage.”

Streamlined Systems

Another way these systems help save money for companies with multiple locations is by providing warehouse managers at individual locations with information about inventory levels at other sites. This allows for products to be shifted from one stockroom to another, saving the cost of placing new orders unnecessarily.

“We call this capability ‘warehouse transfers,’ and it’s a terrific way of managing your assets internally,” Schaer says. “It’s also built into the automated purchasing system so that you’ll be notified of surplus items at a particular location before you place a new order.”

The TIMS system also benefits those who are assigned to handle “cycle counts,” in which employees take a physical count of inventory to compare against the levels logged into the computer. “One of the best parts of automated systems are that they allow your warehouse to go wireless,” Schaer says. “You can scan barcodes with handheld wireless devices, which means you can count less frequently and each count doesn’t take as long. The efficiencies that automated inventory systems bring to your operation just go on and on.”

It can also provide opportunities to enter new markets, he says, pointing to the company’s newly developed rental inventory management module. “Providers are becoming more entrepreneurial in terms of the services they offer,” he says, “so we’re trying to look down the road so we’ll have systems in place to support their plans for growth.”

Smart Stocking

Just as Computers Unlimited conducts its pre-implementation survey, Fastrack also works directly with its customers when a new system is being installed. Kay has seen users take a number of approaches.

“They have an advantage if they’re already using our business software, because then they can just download the existing product catalogs and vendor listings into the inventory system,” he says. “If not, the first step will be building that product table within the system and deciding on the type of labeling you’d like to use.”

Some HME/DME providers choose to assign their own inventory numbers on self-generated barcodes—which can be linked to the manufacturer’s product number in the software system—while others simply rely on the product number and barcode most vendors now print on their packaging. Kay says they also must determine the scale of the program’s startup: Should you begin one product section at a time, or should you automate the whole warehouse at once? While he doesn’t endorse one approach over the other, he does say that it’s always best for new companies to implement automated tracking from the beginning if they can. “That way it’s ingrained into the way you do things from the very start.”

Kay says that small businesses benefit from automated inventory systems as much as larger operations, “and perhaps even more so. First of all, most of your capital is usually tied up in your inventory, so you need to monitor levels carefully so that you don’t have too much stock sitting there idle,” he says. “You want to know if one product isn’t moving, or if you keep running out of another.”

Other concerns mitigated by automatic systems include theft—“it occurs in companies of all sizes,” Kay says, “and good barcode systems tend to deter it”—over and/or undershipments from vendors and wasting time placing recurring orders by setting automatic purchase order submissions on fast-moving items.

With competitive bidding forcing HMEs to streamline operations, Kay says that the Fastrack system helps lower operating costs, fine-tune inventory levels and move products more quickly through the “purchase to sell” cycle. “Automated systems allow you to make smart decisions throughout the process. You know where you stand at all times.”

Recognizing Reality

Even though he allows that the majority of HME/DME providers in this country are still using antiquated inventory management systems, spending endless hours penciling in checklists, Schaer has seen growing interest in automation over the past few years due to the pressures of competitive bidding and the realization that upgrading and increasing efficiency can no longer be shelved for later. It is now time to act in order to survive.

“When it comes to business systems, the emphasis has always been on the claims processing side instead of inventory,” he says, “but they are equally important. The providers who plan to remain in this market are finally realizing that your inventory is one of your most important assets, and you’ve got to manage it well if you want to succeed.”

Sidebar: Searching for Software

Brightree
www.brightree.com

CPR+
www.cprplus.com

Computers Unlimited
www.cu.net

Fastrack Healthcare Systems
www.onlyfastrack.com

Noble House
www.nobledirect.com

TeamDME
www.teamdme.com