A new report from the IBM Center for The Business of Government examining the inefficiencies of inventory management plaguing the federal government needed a poster child to illustrate the context of the problem.

It found one in the Veterans Health Administration.

The report—authored by Northeastern University professors Gilbert N. Nyaga, Gary J. Young and George (Russ) Moran—examined eight medical centers and over 35 community health centers in the Veteran Health Administration's New England region, finding an inventory process that was fragmented, duplicative and often lacking in the proper training and oversight needed to effectively track inventory.

Related: Read the report

"Ineffective management of inventory has major implications on both cost and service delivery," the report said. "In particular, inventory shortages undermine service delivery while excess inventory leads to increased costs. Thus, a key objective of inventory management is to ensure that an appropriate amount of inventory is available to meet set service levels while keeping costs at a minimum."

The report studied how each of the VHA facilities handled their inventory processes and found that despite some guidelines being handed down by VA, the medical facilities varied in their approaches to management.

In one case, a logistics staff member told the study's authors that due to the difficulty of using the VHA's 1990s-era inventory IT system, the Generic Inventory Package, they kept inventory on paper and entered it into the GIP system later.

The authors also found that few facilities mapped data trends or used analytics to inform future purchases. Nevertheless, the study identified two hospitals that had implemented better technologies and practices to ensure more accurate data.

To streamline the system's approaches to inventory management, the report laid out 10 recommendations that include better policy standardization, management practices and information technology updates. The other recommendations included:

  • Adopting better software to use on legacy IT systems

With agencies continually weighing the benefits of maintaining their old legacy systems versus a complete overhaul to new systems, the report recommended the middle ground of finding cheaper, and newer, software to work with the older systems.

"In particular, Graphical User Interface applications provide an interface that users may find more visually appealing and less cumbersome while processing data in the legacy system," the report said.

"Because the GUI is embedded into the legacy system and merely provides a better user experience, it will not require major legacy system modifications, but it will extend the system's life and use."

The new software will require more routine training, but in doing so, could standardize practices and mitigate costs, the report said.

  • Use predictive analytics to manage supply

Inventories could be better managed and replenished with the broader use of the analytics, combined with performance metrics to track usage and promote data sharing.

  • Improve collaboration with suppliers

By sharing more information with private sector suppliers, VHA hospitals could improve inventory performance. The report recommends utilizing practices like collaborative, planning, forecasting and replenishments, or CPFR, and vendor-managed inventory to streamline management.

  • Start using process mapping to route inventory

The report found that many of the inventory processes are often not delineated.  By laying out the steps of the inventory process, facilities could better identify breakdowns and opportunities, especially if they are mapped out by logistical personnel familiar with the supply chain's weaknesses.

  • Classify inventory by ‘A-B-C’

The report cites the practice of classifying supply into three categories. Category A is composed of the most valuable items and is given the top priority for restocking, Category B items have a lower value and less priority but account for higher inventory and Category C items, which have the lowest value and are ordered last. By categorizing these items and keeping regular inventory cycles, product counts could be made more accurately.

  • Set benchmarks for performance

The report noted that some of the VHA medical centers studied applied better inventory practices than others. By standardizing those approaches and applying them systemwide, inventory management could be improved. The study's authors recommended the Supply Chain Operations Reference model, which is used by the Department of Defense and relies on performance metrics and communication to improve the process.

  • Make continuous improvement a mantra

By establishing incentives like cash awards or recognition that entice front-line employees to identify breakdowns and fixes, inventory managers can make process improvement a standard function.

  • Add more teamwork and training

To make sure the process doesn't lag, mix up the training by adding more certifications for employees to learn.

The report said this could be accomplished with practices like partnering with local universities or rotating employees through other agency components to observe and adopt better practices. Adding opportunities for promotion and career development could also be implemented.

  • Make senior leadership more accountable

The report noted that the source of some of the breakdowns studied came from a lack of engagement by senior leadership. By developing policies to make leaders more accountable, including the use of performance metrics, management responsibility becomes more clear and shared.

  • Communicate, communicate, communicate

The report found that open communication channels to senior leadership allowed for the quick identification of supply chain problems as well as implementing solutions.

"As we noted from our study of the VA, frequent communication between senior leadership and logistics staff, and between logistics staff and clinical staff, appears to be a major contributor to better inventory management at two medical centers," it said.

But while the study's authors stressed strategies like standardized best practices, they also noted that there was no silver bullet to solving supply chain problems.

"Each agency or department needs to understand the dynamics at play and to tailor inventory management practices to realize highest performance," the report said.

"Our study demonstrates that while government agencies face substantial challenges in inventory management, opportunities exist to mitigate these challenges and enhance inventory performance. Our recommendations point to practical ways to address some of the challenges in spite of institutional limitations."