You are on page 1of 4


SATGURU PARTAP SINGH Apollo Hospital is one of the leading hospital in Ludhiana. It was opened in year 2005 and within 2 years of operation, it was awarded with accreditation by Joint Commission International, USA in January 2007. It is multi-specialty hospital with state of the art technologies. It has over 350,000 square foot area with 350 beds capacity and 7 operation theaters. SPS Apollo Supply Chain management is Hospital organization and mostly follow service industry standards for Supply Chain Management. One of the major component of Apollo Supply chain is Inventory Management. In this report we are going to discuss the challenges faces by SPS Apollo in Inventory Management.

Inventory Management:
Patient Safety is the No. 1 challenge faced by the hospitals and all the executives agrees that the challenge No.2 was the overall operating costs possible. To achieve this twin objective, a balance should be hit with At-par levels, inventory turns ratio, re-order point and restocking playing the decisive role. SPS Apollo has internal pharmacy and dedicated vendors for proving supplies. Besides SPS Apollo keeps significant amount of critical supplies in house inventories. But problem is that most of the times, orders are placed to the suppliers on an As and When required basis. The problem of this approach is twofold: I. There is a higher chance of stock-outs from the suppliers end.

II. The transport and ordering cost incurred is also more, considering the fragmented nature of the orders placed. This approach also prevents the hospitals from entering into any long term contracts with drug distributors. Hence, they are denied of optimal bulk order discounts from the drug distributor/ manufacturers. From a criticality point of view, this has an even larger dimension attached: the hospitals lose out the preferential/ priority supplies commitments in case there is a shortage of some lifesaving drugs. So in all, there is incurring of greater

cost and still running a chance of lower customer service being offered. The challenge lies in efficiently integrating suppliers, logistics, different hospital departments (outpatient, emergency ward, radiology, pathology, supplies, stores and purchase) to ensure optimum utilization of resources. The ultimate aim is to transform a sick patient to a healthy person at a reasonable cost, in the shortest possible time and with superior patient satisfaction. Continuing the above point further, that majority of the cost is borne by specialized departments like Oncology, Cardiology etc. It is unlikely that these specialized departments will have a high degree of variation in their prescribing practice. In contrast, routine drugs like Claforan/ Cefotaxime are used by a large number of hospitals internal departments and practitioners including specialists, surgeons, gynecologists and surgeons for different clinical conditions. In such a case where the use spans different departments and wards, subject to individual practice and policy, the usage experiences greater variation of demand. The volume of usage and variability in demand are mutually exclusive. Some medicines like ampicillin, tetracycline etc, are not only prescribed by many departments but also their volume of usage is much higher. One of the biggest problems with medicines and supplies faced by hospitals is the risk of expiration. Centralized procurement also yields significant power on the hands of the hospitals and they can enter into contracts with manufacturers/ distributors whereby they can return the unused medicines when they near their usable life. This translates into direct waste reduction and reflects hugely in the profit margin.

Consolidation of demands from all the departments and proper flow of information between the departments and suppliers can remove a lot of bottlenecks and result in reduced cost of all the parties involved. SPS Apollo has already Supply Chain process but it needs more integration and capability for demand forecasting.


1. Build relationships: Supply chain executives in hospital must coordinate from all areas of the hospital to truly impact supply chain spending. Executives need to specially engage physicians proactively in supply chain management. Placing physicians in leadership positions on value-analysis committees can help achieve significant buy-in from the medical staff. Physicians also can be involved in contract negotiations, formulary development and technology assessment. 2. Practice evidence-based medicine: Eliminating variations in care through the adoption of evidence-based medicine not only improves outcomes, but also reduces expenses. 3. Focus on clinical integration: The supply chain should be integrated with the care delivery process. A high-performing supply chain delivers the right product, at the right time, in the right quantity, at the right cost, resulting in improved outcomes and greater efficiency. 4. Automate the supply chain: The need for automation in the supply chain is clear. Lack of automation can lead to overstock and overspending on supplies. Materials management information systems provide real-time information on pricing, product availability, contract compliance and usage. Automation also enhances supply chain accuracy and expedites the billing process. 7. Enhance value analysis: The value analysis process helps hospitals determine whether they are getting the right product at the right prices. Value analysis teams provide nurses, physicians and others a say in product utilization and performance. 8. Think Lean: Process improvement methodologies, such as Lean and Six Sigma, can identify inefficiencies within the supply chain and streamline processes. 9. Enhanced IT Enterprise Resource Planning (ERP) system: Advanced ERP system can not only automating supply Chain but also help in demand forecast.

References: I. II. III. IV.