Understand the resources available to get your warehouse in great shape
by Ryan McDevitt

Discussing inventory is a challenge with today’s market. Between M&A, revenue reductions, new entries and long-standing companies, we see many different models for inventory management and asset utilization. The focus you place on your collective businesses varies as much as the SKUs in the warehouses across the country. Revenue models have changed significantly in the past 24 months. Those that thrive today have abandoned many of the age-old DME/HME practices we used for years and now pursue a new hybrid of traditional and new opportunity focuses. The redesign of a model can rarely succeed without the complete dedication of leadership within the company. This isn’t to say that we cater any less to our valued referral sources or the opportunities that have fueled us in the past—it notes that we should be diligent on tracking the issues with equipment and driving our operational expenses. I am selfish. I want efficiencies in all categories for your company. I think you should be selfish in this way, too. When turning your focus toward your warehouse and inventory solution, there is a simple model that holds two main components.

  1. Read your inventory. Focus your team on revenue by managing expenses intelligently. Automation and inventory design are paramount in customizing your plan to your organization. No single decision should be made without rational thought in each of these areas.
  2. Deliver three routinely expected standards to your team. Attaining the results most post-acute care companies are seeking requires critical analysis and review. Employ rigid requirements in these three areas: standardized company reports, Microsoft Excel use and strict standard operating procedures (SOP).

When speaking in front of a class at a conference, I often ask for a show of hands for various polls. Recently, I asked, “Who in the room has made large-scale warehouse changes in the past 12 months?” I was astounded by how many companies attempt to control their warehouse without understanding the complete picture of how dedication to one process, vendor or asset affects financial well-being. Do you today know how many returns were made on your most common brand? How does that compare to your secondary choice? What does this mean to your bottom line? We all have favorite vendors and representatives. Understanding revenue and expense has to be more critical than the age-old concept of reimbursement - cost = profit. I will not be as bold as to inform you the exact specifics to running your business, but it’s important to compute other metrics within your profit model. Some basic report suggestions: active inventory and rental values, trending items, new product and recurring revenue reporting are also vital. I like to look at near-term convert to purchase revenue as well so that I can project revenue falling off of the books.

Work Smarter with Technology

Technical skills in our industry are more important than ever. The new breed of inventory analysis requires much more than summaries and totals on spending in categories. It requires advanced knowledge of a spreadsheet program such as Microsoft Excel. When I left my provider a few years back, I was—at best—an amateur at formulas, pivot tables and v-lookup functions. This isn’t optional anymore and my current colleagues quickly convinced me of the power in data. I hope this article does the same for you. There are many way to improve skills if you’re responsible for inventory and, as a warehouse manager, you should be accountable for succinctly reporting on victories and challenges within your warehouse. There are several ways to grow your talents in Microsoft Office—whether you take an evening class at a local college or subscribe to the various online/app-based excel education—this is a must for analysis and the ability to run a lean organization. Many even resort to YouTube videos for help for help with complex formulas or the sought after v-lookup expertise. Focus your efforts on your gut feelings—evaluate the data. In your current software program, there are many ways to gain the information you need, but the consistency of data and reporting is vital. Before you spend a moment evaluating data, it must meet four standards: quality of composition, consistent review, advanced computation and competent review. We call these the four Cs of data.

Work Through Reports and Analysis

What do the four Cs really mean? For the net of this equation, let’s use a cost of goods sold (COGS) report, one that we should all be reviewing on a monthly basis. The report should be compiled in a concise but clear way that can be interpreted by all that receive it. Furthermore, when we review this on a consistent basis, the person presenting the report should be prepared to compute sub-categories of the report. For example, if a particular mobility device is your most profitable and highest cost good, you would immediately want to know how many of those items were returned last month and at what average cost. This should include both the cost of returning the device and its replacement, as well as the personnel cost to provide a replacement to the customer. You will also want to look at this detailed section of the report in the monthly one-on-one that you have with your inventory manager. If you’re an owner or executive reading this, I do not mean these specific critiques as a license to harass your inventory manager to solve CPA-style algorithms on the fly. Seek an employee who has this skill set, or use an existing resource to help your current team. If you don’t have financial analysis capability in your company today, you’ll likely need to either create it organically through education or temporarily outsource this component. I advise a temporary outsourcing because it’s my belief that this type of evaluation should occur daily.

Count the Steps

Comparing manual efforts to automation technologies is a rigorous but necessary exercise today. From counting clicks on a mouse to covering a room in Post-it notes for every step along a process, the concept of lean management is not new—but investment in the evaluation of technological advancements and opportunities should never stop. Automate the most time-consuming events in your warehouse. Perhaps you are picking too many orders by hand, or placing recurring reorder purchase orders week after week because your trending reports require the labor. Evaluation of pick and pack procedure, and the integration of software, UPS shipping and automatic max/min should likely be in your future. I like to look at the latest and greatest efficiency tools aimed at post-acute models. The trend is that we should use as much brainpower as possible to offset the labor and intensive effort. Sometimes this is as specific as counting the steps that your staff takes from the computer to the label printer. I also encourage your evaluation of automation to go deeper than just discovering tasks a computer can do that people cannot—and more focused on the bottlenecks of your revenue. Using the above example, we could likely use a more advanced IT system, API links into UPS World Ship or even a handheld printer. All of these could be effective solutions—but a simpler solution might be to move the printer and computer closer together. Using your existing software package to roll out automation is typically the strongest or best step. In order to take full advantage, the executive leadership of your company has to understand the available resources via system update, user conference or social networking board. Because our software is so frequently updated, I will often speak with providers who have an out-of-box solution to their problem in their existing software system. Expect your warehouse leadership team to digest and test new technological options available to them, and suggest new iterations. You should also speak with your vendor to fully understand some of the connectivity opportunities that companies are bringing to the table. The simple, two-step process I have outlined is intended to approach technology and analysis with a similar fine-toothed comb. After all, a neatly kept warehouse is just like that of a freshly cut head of hair—it is easier to fix when things go awry.