Warehouse Protocols

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Your company is running fine then one day someone gets hurt or makes a complaint and it all goes downhill,  fast.  Allegations  are fired at you stating that you did not provide adequate training, that there were no systems in place, etc, etc.   But you were doing what you thought was right, you did not do anything wrong – in today’s world that will not cut it. What you think (or don’t think) can get you in trouble.

This particular flash is about warehousing although it can apply to every area of your business. You need to draft some protocols, some instructions, an explanation of who does what and when they should do it.

I call them guidelines, but they can be called anything for example work instructions or procedures,  as long as you make sure they are used and understood by everyone.  In this scenario I am referring to the warehouse, but it can apply to any part of your business.

So you are storing and distributing products from your own warehouse – have you documented what happens and who does it and more importantly who does what when it goes wrong?  Your document should include sections such as Responsibilities, Hazard Identification, Risk assessment, Risk Control, etc. These, along with a number of other item are important in running a safe and efficient business.  Yes it is not just about safety, it also includes efficiency and effectiveness.  In simplistic terms efficiency = dollars and effectiveness = goals.

When you have a document that covers such things then you can start moving forward, defining where you are and what needs to change, plus it is a way of ensuring that everyone knows what should happen, when it should happen and who to turn to when it doesn’t. Then build in review cycles, these should include those ‘on the line’ as they will know far more than you what is and is not happening. Use this knowledge, it is free and possibly (probably?) have positive repercussions for your company.

And as always, if you need help, I am only a call (or email) away.

Healthcare Inventory

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Hospitals are being pushed to reduce their costs, from this need a fantastic opportunity can be found – reduce inventory in their stores to Zero (excluding drugs). Massive savings can be made by not purchasing and ‘storing’ inventory in any quantity. The amazing part of this, is that it will cost nothing to implement, although it will require a little more work with the vendors and drafting new supply agreements up front.

The savings can be achieved by having Vendor Managed Stock (VMS).  The scenario is: the VENDOR places a quantity of stock that they own in the Hospital’s imprest cupboards, with initial quantities being agreed to. As hospital staff consume the products, they are in reality “purchasing” the stock at that time. The appropriate invoices will be based on usage at time of replenishment. In effect you have just removed ALL your inventory costs.

The next trick is to ensure you never go into an ‘out of stock’ situation. For VMS to work effectively there needs to be a financial penalty for stock-outs, saying sorry by the vendor does not help the patient and there is no incentive, apart from losing your custom (albeit a strong incentive), to ensure stock is ALWAYS available.

A penalty clause included in the supply agreement eg: “stock-outs will attract a $1,000/day penalty fee, payable by the vendor”, will give the vendor the appropriate incentive to ensure adequate stocks are on site at all times.  Airlines use a similar clause based around ‘AOG’s  (Aircraft on Ground).  Remember, overstocking can be managed, out of stocks are critical, if not life threatening, and are never ‘managed’.

This method also takes an extra link out of the chain so there is even less chance of running out of stock. There are a few other provisos that need to be included to ensure the process is fair, robust and is appropriately measured. And, if followed correctly by all parties , everyone is a winner from the hospital, the vendors, the staff and ultimately the patient.