As inventory demands fluctuate, healthcare facility leaders may wonder if low or Logical Unit of Measure (LUM) distribution models are the best choice to meet their facility’s evolving needs. However, using data to improve supply chain efficiency is crucial during unexpected demand circumstances.
An optimized supply chain drives down operational costs, increases fill rate and efficiency, and can help improve the quality of care delivered.
We asked Paul Farnin, a supply chain expert and director of Distribution Services at Cardinal Health, some of the most pressing questions about LUM distribution models. He shared insight into how LUM models can provide benefits to users during times of fluctuating supply demand.
Q: To start, what’s the difference between a “Just In Time” (JIT) and a Logical Unit of Measure (LUM) distribution model?
A: JIT is a method of inventory control that brings material into the production process, warehouse or to the customer just in time to be used, which reduces the need to store excessive levels of material in the warehouse.1
The LUM distribution model is similar to JIT. The key distinction is that LUM is a differentiating component of a JIT supply chain – it’s about having a supply chain that is lean, but is also data-driven, simplified, and harnesses all the benefits that entails. Cardinal Health ValueLink® refers to LUM as a “logical unit of measure” vs the “lowest unit of measure” because it represents a more appropriate way of thinking and provides a greater benefit for our customers. This “logical unit of measure” is focused on the right unit of measure, based on actual usage. 2
Q: How can LUM distribution models help hospitals redirect their focus back to patient care when they’re unsure if they will be able to acquire the products they need?
A: First, it is important to remember that the recent challenge around acquiring products is not a supply chain issue, but rather a supply issue. Product availability is critical to the success of any supply chain or distribution model. Throughout the COVID-19 pandemic, Cardinal Health has worked with customers to find creative solutions, like spot buys, while expanding our own manufacturing and sourcing capabilities and expediting movement of product across our supply chain, to help fill in the gaps as much as possible from the unprecedented increase in product demand.
Additionally, a LUM distribution model like ValueLink® helps hospitals redirect their focus back to patient care by delivering supplies to their points of use, meaning clinicians spend less time managing supplies and more time with patients. This model is still very beneficial once the underlying supply constraints have been addressed.
Q: Why is it important for healthcare facilities and networks to have inventory visibility? What are distributors like Cardinal Health doing to provide more visibility?
A: Given the recent supply chain disruptions, visibility—or knowing where inventory is and how much is available—has become a new standard for doing business. Inventory visibility is a top priority for most health systems right now, and the healthcare industry has an opportunity to increase visibility across all points of the supply chain.
To help deliver as much end-to-end supply visibility as possible to our customers, Cardinal Health is delivering a suite of visibility tools as part of our pandemic response that includes three reporting and dashboard solutions spanning across key product categories.
Q: How can healthcare facility or network leaders best assess their Days of Inventory on Hand (DIOH)?
There are many Periodic Automatic Replenishment (PAR) levels that healthcare facilities or networks should factor in when determining their DIOH. Cardinal Health has some valuable analytics to help customers establish and maintain PAR levels. Those levels include at the nursing unit or department, within the nursing supply room or hospital storeroom, within the health system’s warehouse, within your distributor’s warehouse, and within your own pandemic stockpile.
Q: Why is remaining lean still important when stockpiling seems to make the most sense for healthcare facilities and networks during a pandemic or other large-scale scenario that increases inventory demand?
A: I think it’s important to note that you can remain lean while also addressing potential pandemic needs. A healthcare organization could have a lean “just in time” program and augment it with some selective increased inventory of critical items that are “just in case.” A lean supply chain gives more opportunity for optimization and standardization of inventory, as well as frees up storage space, labor and utilization of strategic inventory tools. For example, Cardinal Health has a new Pandemic Storage Solution that can help healthcare networks and facilities keep the “just in case” inventory they need on hand and can acts as a great extension to ValueLink®.
For more supply chain insights, visit the Cardinal Health Supply Chain Center.
Sources:
1 https://www.thebalancesmb.com/just-in-time-jit-2221262
2 https://www.cardinalhealth.com/en/services/acute/medical-services/medical-supply-distribution/valuelink-services.html