Friends Don’t Let Friends Use Par Replenishment
By John Freund
Which of the following statements are true?
a) Par replenishment relies on the personal expertise of the supply tech
b) Par replenishment is in use in nearly every hospital in America
c) Stock-outs and overstocking occur where par replenishment is used
d) Inaccurate counts can snowball as a result of par replenishment
e) Par replenishment isn’t actually inventory management
Yep – all of them. Most hospital supply chain leaders are using par replenishment somewhere in their organization. It’s often used because the approach was in place when a new supply chain leader arrived or because it’s the approach their technology supports. But what’s the result? Hospitals see higher costs because of ongoing issues with stock-outs, overstocking, hoarding, waste and maverick spending.
What do I mean by par replenishment? Once par levels are set for items stocked in the hospital, a supply technician goes at scheduled intervals to each store room or supply area and does a visual review of the supplies. An experienced technician doesn’t actually count all the supplies on the shelf, which would be enormously time-consuming given how many products are on-hand. Instead, they do a visual assessment, based on their experience with the items and estimate of current levels, and create a requisition for supplies needing replenishment. If an item has par set at 10 and is at 11, but the technician thinks the supply looks low, he or she may report it at nine to trigger a reorder to avoid a stock-out.
What was originally great about par replenishment was removing the burden of managing supplies from clinicians. But it’s not actually managing the inventory. The problem is that when repeated – again and again, across a wide range of supplies – inaccurate reporting and replenishment occurs, driving overstocking, stock-outs, hoarding, waste and maverick spending.
The problems with par replenishment keep piling up:
1) A hospital won’t know true inventory levels (and won’t have accurate velocity data)
2) Hospitals often set par but don’t go back to reanalyze the levels based on updated data
3) Using par replenishment places inventory decisions in the hands of supply techs, with varying degrees of expertise (and a brand new tech can wreak havoc on the system).
4) Current systems often only support par, limiting opportunities to leverage other approaches
There are better ways to replenish inventory and eliminate the potential for stock-outs and overstocking. One example is 2Bin, which uses par levels but gets rid of the counting, keeps the burdensome work of supply management off your clinicians, and by the way, doesn’t double your inventory or space. (Let’s tackle that in the next blog!)
Don’t let legacy processes drag you down – this doesn't have to be your grandfather’s inventory management system!