May/June 2014 | Streamlining Healthcare 15

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Streamlining Healthcare: As an origina-tor of the just-in-time ( JIT) distribution model, what have you learned through the model’s growth and evo-lution to date?

Almon: We never invented stockless models, we merely applied a proven process to a new applica-tion: hospitals. In the beginning, our JIT programs were usually based around exchange carts. Some customers even physically sent depleted carts back to us to be refilled.

In recent years, there has been more emphasis on the last 200 yards of the supply chain, mean-ing ways to automate the replenishment process within the hospital. A variety of automated storage technologies has emerged while substantial work between vendors and hospitals to seamlessly splice these systems together has taken place.

We believe that today most hospitals and sup-ply chain consultants recognize some form of JIT as a best practice and are working on their models or toward them. Warehouse management systems have continued to improve, specialized materials handling equipment has evolved, and technologies like voice-directed picking and radio-frequency identification, or RFID, still show promise for the future. We believe this has increased the value of distribution by enhancing the distributor’s role in the supply chain between manufacturers and hos-pitals.

Streamlining Healthcare: What unique benefits can healthcare providers achieve by adopting these inventory models?

Almon: We believe the single most influen-tial variable driving conversion to JIT programs is space savings. Space is at a real premium in many or most of today’s hospitals, and there is a clear strategic intent to use it for the most ap-propriate purposes, which is very seldom stor-

age of supplies. We believe this is why such pro-grams are so popular in major urban areas where space is so dear and room for expansion is often non-existent.

Additionally, there is the well-recognized fi-nancial principle that inventory has a cost associ-ated with it and should always be minimized to improve efficiency of operation and cash flow. Next would be labor savings, as most hospitals ex-perience about a one-third reduction in man hours when they eliminate their own warehousing/store-room operation. The icing on the JIT cake is in enhanced reporting and accountability that some vendors can provide JIT accounts with the added data on real-time consumption and using locations that the program yields.

Streamlining Healthcare: Where do you see the JIT, stockless, and LUM markets heading in terms of future opportunities for providers and suppli-ers?

Almon: The hot topic in our industry in recent years has been self-distribution by major hospital groups and integrated delivery networks, or IDNs. Ironically, in areas like the northeast, where stock-less/JIT models prevail in most hospitals, there has been very little activity toward self-distribution. We don’t think this is coincidental. The entire healthcare industry is entering an era of unprec-edented change, with cost pressures being the most prominent characteristic.

As revenue pressure is applied to the top line, efficiencies of operation will receive amplified at-tention, and even nominal waste that could be tol-erated in the old model will give way. There are a variety of ways that distributors and their custom-ers can continue to improve on supply chain costs, but certainly the principles of JIT are consistent with Lean techniques and the quest to continu-ously improve.

Ted Almon, President & CEO, The Claflin Company

Efficient inventory management leads to cost reductions

The Claflin Company is a medical supplies distributor and pioneer in the adaptation of the just-in-time (JIT) distribution model.

“Inventory has a cost associated with it and should always be minimized to improve efficiency of operation and cash flow.”