The vast majority of hospitals in the United States manage hospital supplies using what is called the “Par Level” method. It is claimed that one of the strengths of this method is that it performs well against variable usage. The actual use of a hospital supply item is different from that of a manufactured part, as the rate of use depends on the need of the patient at the time, which is difficult to control or forecast. A factory can accurately predict how many widgets it will need, based on a production plan and a bill of materials. A hospital can certainly analyze historical usage data, but it can’t control that pesky variable, the patient, very well. Therefore, advocates of the Par Level method argue that it is the only replenishment method for the variable usage environment. In this article, I will describe how the Par Level method works, how the Par Level method could be replaced using a method called Kanban, and how a Kanban system could be successfully used to address the admitted challenge of high usage variability.

At first glance, the Par Level method makes a lot of sense. The basic idea is to set a target quantity of a given item that you want to store where it is used. A general rule of thumb of, say, a two-day supply based on average usage, would be a reasonable goal when setting these target or “per” amounts. As supplies are consumed, based on actual need for the day, the amount available will decrease. The heart of the Par Level method is to have a supply handler review the quantity on hand and replenish the items that are needed to bring the total quantity back to “par.” If the item is consumed faster than usual, having a supply handler check inventory daily will help ensure that the item is not completely depleted. The key to the success of the Par Level method in the face of uncertain usage is to check stock levels frequently, usually once a day.

The Kanban system, mentioned above as an alternative, is the material replenishment method used by major manufacturing companies around the world, including Toyota Motor Company. It is similar to the Par Level method in that a target level of material is calculated, based on average usage and a certain number of usage days. In this sense the methods are virtually identical. The difference is in the method to fill in the items that have been used. Instead of physically looking and counting every day, the Kanban method establishes a signal (the literal meaning of the word Kanban) for replenishment that completely eliminates the need to count or assess inventory quantities. This is done in a number of ways, the most common being to split the quantity of the item in two and signal replenishment when the first quantity is depleted. The details of how a Kanban system works are available elsewhere, and the method is well known, so I don’t need to repeat it here. The benefits compared to the Par Level method are substantial, including a reduction in the number of resupply trips, the elimination of counting, a possible reduction in overall inventory levels, and a reduction in supply shortages.

However, the focus of this article is on a critical issue: what happens when the actual usage of an item exceeds the planned usage? How do Par and Kanban systems respond to unplanned consumption? After all, if the usage was known for certain ahead of time, there would be no excuse for running out of an item. Is daily control and counting the only alternative available to hospitals? Let’s compare the two methods.

The even level method. A supply handler will visit a supply storage area daily, with a clipboard or handheld device, and assess the current stock level of each item. Items that need to be “brought up to par” will be noted, and these items will be refilled on a subsequent trip, usually later the same day. If during the day an item is consumed at a higher rate than planned, such that the entire supply is consumed in one day, the item’s balance will go to zero or someone will have to notify the materials department and expedited delivery will be required. to finish. The intention is for this to happen infrequently and for a daily review to be sufficient to cover variability in usage.

The Kanban Method. Under a Kanban system, the supply handler does not count or evaluate item quantities at all. As the amount of the initial supply is consumed and depleted (the “primary amount”), the nurse or technician will create a signal by placing an order card in a collection box, raising a flag indicator, placing the empty container at a collection location or post some other type of simple sign. The Supply Handler simply responds to the signal and refills a standard amount at a time. While the supply is refilling, nurses and technicians will consume the second quantity of the item. No time is wasted looking at or counting supplies, and once a regular replenishment cycle is established, there is no need for a separate trip to the storage area to assess what is needed. Kanban cards or containers can be collected as part of the routine replenishment trip, or what is called a “milk run.”

If supplies are used faster than planned, due to a temporary emergency or for some other reason, they will need to be replenished faster than planned, as with the Par Level method. The difference is this: Under a Kanban system, you’ll set up a routine replenishment cycle (the milk run) that will be more frequent than the Par level cycle. While the Par Level frequency is typically one cycle per shift or one cycle per day, the Kanban system plans to deliver twice per shift, or even more frequently. This is possible without increasing the number of employees of the supply handler because there is no need to count. The milk production cycle involves collecting Kanban cards (or not even that if the Kanban system is automated), collecting standard quantities from a “supermarket” or central stores, and delivering these full Kanban quantities to the correct storage locations. This process is many times more efficient than the typical Par Level process and will allow a supply handler to double or triple the number of resupply trips they can complete.

How does this help respond to variable demand? Let’s explain. If the milking cycle is four hours and you do three milkings a day, and the kanban quantity represents a two-day supply based on average usage, actual usage should exceed average by 600% before we need to worry. to be completely exhausted. While the method of running milk does not guarantee that you will never run out of supply, the chances of doing so are remote. The manpower to support this system could be less than you have today, since you don’t count trips, count, or collect variable amounts.

Let’s go through this again, so you’re 100% clear about the example above. If you consume a given supply at a two-day average rate, you will receive a signal to replenish a Kanban quantity every two days or twenty-four business hours. If you consume the supply at double the expected rate, you will receive the signal after only one day, or twelve business hours. If you consume the supply four times the average usage, you will receive a replenishment signal in six hours. Finally, if you consume the supply at six times the normal rate, you will receive the replenishment signal in four hours, equal to your replenishment cycle. The supply handler and milk run cycle should be able to handle that without rushing or running out. Of course, in this example, if you consume the supply faster than 600% of your average consumption rate, you risk running out. Kanban is not magic.

The winner in this Par Level vs. Kanban comparison on the topic of responsiveness to variable usage is: Kanban. As we have seen, the key to responsiveness to change is a short replenishment cycle, and the Par Level system is too labor intensive to allow for a large number of replenishment cycles without sending your materials management budget through the roof. Kanban, on the other hand, does not require counting, standardizes replenishment quantities, eliminates the highly undesirable practice of “eyeing” supply quantities, and allows for a greater number of replenishment cycles without increasing material handling costs.