Understanding product availability is crucial to running any successful supply chain model. Recent circumstances have triggered an increase in stockpiling efforts, which has revealed several misconceptions regarding lean supply chains–specifically low or logical unit-of-measure (LUM) ordering and distribution.
Here, we debunk four common misconceptions regarding LUM distribution:
Misconception #1: LUM distribution models are not long-term solutions.
Fact: Although LUM is often correctly associated with Just in Time (JIT) delivery, they are not completely synonymous. While both ordering models generally keep less inventory on hand, LUM distribution models provide a long-term solution in contrast to JIT.
Many of the benefits from LUM ordering occur over a period of use. For example, benefits include labor savings, inventory reduction, and space reallocation for revenue-generating activities. The savings increase over time, while repurposing space for meaningful use can bring in more revenue as well. Additionally, the longer a facility or hospital network utilizes LUM data and analytics involving product data and utilization rates, more strategic inventory decisions can be made.
Lastly, the longer a facility is committed to this lean distribution model, the more established the process will be, resulting in more meaningful data and efficient ordering processes.
Misconception #2: Having a large amount of days of inventory on hand (DIOH) is more beneficial for our facility.
Fact: While an excess of DIOH can offer some benefits under certain circumstances, such as for pandemic storage planning, often LUM is more beneficial for a facility overall. LUM drives efficiencies throughout the hospital supply chain – “streamlining staff, processes, and technology.” 1
A sophisticated distribution model involves much more than inventory on hand. While a large amount of DIOH might allow for peace of mind, it can actually decrease efficiencies in numerous ways. First, more inventory means more on-site logistics, which can take time away from patient care activities. Second, greater DIOH leaves less opportunity to accurately monitor usage and then implement that data for more precise ordering processes. Excessive DIOH can also lead to product expiry and shrinkage over time. Lastly, extreme DIOH levels can handicap a supply chain’s ability to quickly adapt to changes in treatments or treatment protocols, meaning high levels of stock could be rendered useless.
Misconception #3: LUM distribution models are not much different than bulk distribution models.
Fact: Supply chain experts from the Association for Healthcare Resource Materials Management (AHRMM) state that LUM distribution “enables hospitals to reduce personnel and bulk inventory while creating available space in previously utilized storage areas.” 1 The key differentiators are that LUM distribution requires less labor and less space than bulk distribution, while also offering benefits tied to consolidation and standardization throughout the hospital.1
However, when using multiple distribution models at a facility, it is important to capitalize on the benefits of a LUM model to find value in the additional fees. Using multiple solutions together can provide even more benefits for a facility.
Misconception #4: LUM customers have no storeroom or back-up inventory (i.e., they are stockless).
Fact: Many LUM distribution models, like ValueLink® Supply Management Services, support a small hospital storeroom to supplement their inventory on the nursing floors and in the departments depending on the number of days they receive a delivery. Additional benefits, such as inventory optimization programs, ensure replenishing and delivering the right amount of product to the right place on time.
Using LUM throughout the hospital enables products to be stocked throughout the hospital, providing back-up inventory near the point-of-use instead of in a large central storeroom. Inventory supplementation supports the Joint Commission rule to hold enough inventory for 48-72 hours.
If you hold any of these common misconceptions about LUM distribution, it might be time to reconsider. Learn more about how a LUM distribution model like ValueLink® can support your organization here.
Sources
1 https://www.supplychainstrategiessolutions-digital.com/ahrs/0119_january_february_2019/MobilePagedArticle.action?articleId=1453717#articleId1453717