Objective:
To optimize stock levels at point-of-use storage locations across the healthcare organization to safeguard patient safety and improve customer service
Calculation:
| Number of lines ordered where there is a stock-out at point-of-use location | ||
| x 100% | ||
| Total number of lines ordered at point-of-use locations |
Target:.
≤ 1% stock-out rate
Background Details
Rationale
Stock-outs represent the highest level of service delivery failure. If supplies are not available when they are needed, patient care and safety can be jeopardized. Stock-outs occur for a variety of reasons, including: Supplier backorders and delivery issues;
- Supply usage spikes;
- Uneven demand from customer departments; and
- Inaccurate reorder parameters.
The following steps will help maintain an uninterrupted supply of inventory:
- Regularly review par levels and replenishment schedules;
- Monitor the number of incidents of stock-outs at the customer level;
- Conduct root-cause analyses to determine reasons for service deliveries failures; and
- Implement recommended improvements.
Consistent tracking of the number of, and reasons for, stock-outs rather than relying on anecdotes
enables the supply chain department to demonstrate its service-level performance to customers.
Benefits
Patient Care
Meeting the stock-out rate target ensures that the right products are available at the right places at the time they are required for providing the best possible patient care.
Process EfficiencyThrough better management of cart quotas, improved planning processes and product standardization initiatives, the number of purchase order (PO) transactions will be reduced, as well as the number of rush POs.
Customer Service
Monitoring stock-out rates at the customer level supports continuous improvement efforts in areas such as enhanced communication with customers on changing requirements and demand planning as well as periodic reviews to determine optimal cart quotas. If monitoring reveals increasing rates of stock-outs, a root-cause analysis should be conducted immediately and reporting frequency should be increased until the problem is solved.
Underlying Leading Practices
Demand Management
A comprehensive understanding of the organization’s demand requirements will result in improved service at the cart level and increased customer satisfaction.
Identification of Product Standardization Opportunities
Reducing the variety of supplies frees up space to store optimum levels of standardized supplies at the cart level as well as freeing up shelving space that that can be reassigned for other purposes.
Supplier Relationship Management
Developing strong relationships with strategic suppliers supports more reliable performance and fewer backorders, enabling the supply chain department to meet their customers’ supply needs more effectively.
Bar Coding/Scanning Technology
The use of an electronic data collection system enables the supply chain department to more efficiently and accurately monitor product usage at the cart level.
Target Considerations
Establishment
This metric is difficult to monitor. The members of the Working Group that do measure it use a number of different methods. Consequently, the group recommends that a review be conducted in six to twelve months to further refine the target levels and confirm the definition and method of data collection.
Reporting Frequency
Reporting frequency could be scheduled based on the level of customer satisfaction. If customer complaints are high or monitoring reveals increased rates of stock-outs, the organization should consider reporting on a weekly basis (or more frequently) until the root cause has been identified and resolved.
Related Metrics and Standards
| Related Metrics: | Related Standards: |
|---|---|
| 1.2 Purchasing Response Time 2.2 Inventory Turnover in One Month 3.2 Percentage of Rush Purchase Orders 4.2 Fill Rates to Customers 5.2 Supplier Performance |
2.2 Inventory Policy 4.1 Customer Survey Tools and Processes 5.1 Supplier Performance Management Process |
Implementation
Calculation Parameters
Calculation:
| Number of lines ordered where there is a stock-out at point-of-use location | ||
| x 100% | ||
| Total number of lines ordered at point-of-use locations |
| Variable | Include | Exclude |
|---|---|---|
| Number of lines ordered where there is a stock-out at point-ofuse location | Include the number of lines ordered that meet all of the following criteria:
|
Do not include orders for product where there is one or more of the items remaining at the point-of-use location or for the types of orders or categories below |
| Number of lines ordered at point-ofuse location | Include all lines ordered at point-ofuse or cart orders initiated via a quota management system for stock items | Do not include orders that are either for the following types of order:
|
Data Accessibility Rating
DIFFICULT – Data do not exist and are difficult to obtain
Possible Data Sources
Electronic
Inventory and/or Cart Management Modules:
Many hospital information systems track Number of lines ordered at point-of-use location, but do not monitor stock-out incidents to determine the Number of lines ordered where there is a stock-out at point-of-use location. This is because the supply chain department usually expenses out items as they are issued to the point-of-use locations and does not monitor use. To determine the Number of lines ordered where there is a stock-out at point-of-use location, the information system would need to compare order quantities to the par level for that item. When the order quantity equals the par level, a stock-out has occurred.
For hospitals with closed-cabinet point-of-use systems, in which users indicate withdrawals of inventory, stock-outs are communicated automatically to the supply chain department for follow-up. This would allow the organization to determine the Number of lines ordered where there is a stock-out at point-of-use location.
Manual
If electronic tracking of stock-out incidents is unavailable, the hospital will have to collect the data manually. However, this metric would be very difficult to track at many organizations due to the large number of point-of-use POs and lines per PO. Organization could select a representative time period (one day, one week, etc.) to collect a subset of data, particularly to measure fill-rate performance to critical departments.
Implementation Challenges
Challenges:
- Par levels may be increased excessively to avoid stock-outs to meet this target, leading to overcrowded wards and suboptimal inventory levels. Organizations should conduct periodic reviews of item usage, and adjust par levels and replenishment schedules as necessary to ensure optimal par levels.
- It is important to give customers an opportunity to contribute to development of the reporting method to ensure they perceive it to be accurate, credible and representative.
- To calculate this metric accurately, organizations need to include in the stock-out count the number of incidences where stock is immediately transferred from one area to another to fill a stock-out.
- Although the data may be difficult to collect, this is a very important measure to see whether the supply chain department is meeting basic customer needs. Organizations should consider periodical manual measurement of performance in critical departments.
