Exploring unique approaches to inventory management, procurement optimization, and supply chain resilience 

By: Armond Green, Head of New Business Development, Triose and Gerald Offei-Nkansah, PharmD, MBA, MS, Senior Director of Pharmacy Practice Solutions, Cencora

Across the country health systems are dealing with financial strains caused by issues such as rising labor costs, decreasing Medicare and Medicaid reimbursements, and operational challenges. The numbers are sobering hospitals absorbed $130 billion in underpayments from Medicare and Medicaid in 2023 alone¹ and in 2024 total hospital expenses grew 5.1%, significantly outpacing the overall inflation rate of 2.9%². 

Among operational challenges, hidden supply chain inefficiencies are a hidden danger to health system budgets. They often go undetected due to fragmented processes and lack of real-time inventory delivery and tracking visibility, proof of delivery, and integrated logistics solutions across the healthcare supply chain, creating cascading effects like emergency purchases at premium prices, over- and under-stocking, expired inventory, and missed savings. This includes challenges like overstocking surgical kits, misallocated durable medical equipment, and emergency procurement of critical medical supplies. 

By implementing systematic prevention strategies, health system leaders can move away from managing procurement through disconnected systems and treating inventory as a necessary overhead cost and toward capturing strategic optimization opportunities across their supply chain ecosystem. 

Tracking and managing inventory through supply chain management software is more robust thanks in part to the widespread use of enterprise resource planning systems and electronic health records. Artificial intelligence and automation have helped increase the level and sophistication of digital data capture, enabling insights into both consumable supplies (e.g., PPE) and critical assets (e.g., surgical devices or equipment). 

Analyzing this data to identify trends and enable proactive decision making helps healthcare systems: 

• Predict demand 
• Optimize inventory 
• Coordinate transportation, delivery, and distribution 
• Mitigate risks

This type of data capture and analysis can be achieved through integrated technology solutions which, in turn, drive efficiency, resiliency, and insights into an organization’s supply chain.  In the healthcare industry, this can include shipping platforms integrated with health system pharmacy inventory management software; real-time tracking to enhance visibility for medical-surgical supplies into the health system; and proof of delivery to meet operational and compliance requirements. 

For example, when UPS implemented its rural deferral program in May 2024 – an initiative experimenting with making less frequent deliveries in designated rural areas to increase delivery efficiency – it created significant delivery challenges for a specialized healthcare organization managing critical supplies to more than 400 correctional facilities across 20+ states with approximately 70,000 annual shipments. Cencora Triose helped the dispensing pharmacy enroll in the UPS Premier Gold program, providing advanced tracking capabilities through RFID-enabled sensors which enabled the company to:

• predict delivery timing for critical medications with greater accuracy
• pinpoint the exact location of packages in warehouses or on trucks 
• dispatch emergency courier services when delays occurred. 

These capabilities can benefit health systems managing critical supplies—whether medications, medical devices, or consumable supplies—by proactively addressing disruptions and timely delivery.

In addition to supporting delivery logistics, integrated supply chain data is pivotal for healthcare organizations developing consolidated service centers (CSCs) or retail central fill operations. By leveraging purchase, dispensing, waste, and inventory data, health systems can gain a comprehensive understanding of their current processes and operations. This data-driven approach can then be used to:

• Forecast future demand: Data can be leveraged to estimate patient encounter growth, new facilities (sites of care), or investments in new providers that will support new or expanded service lines.
• Build scalable operations: The goal is to design an operation that the health system can grow into without requiring additional capital investment until year ten. 

Reducing waste through enterprise-wide inventory visibility 

Without enterprise inventory transparency, health systems are prone to "emotional buying." This is procurement driven by the amount of confidence the pharmacy has in its ability to manage a shortage on a particular drug, should it be impacted. This same issue can occur with surgical supplies, where emotional buying leads to overstocking implants or surgical trays, resulting in wasted inventory and unnecessary costs. 

As an example, when data does not guide this process and it replicates itself across 10 acute care hospitals and 50 drugs, the cost of managing an inflated inventory, and the waste associated with not turning it appropriately, can outweigh the theoretical impact of a shortage. 

When inventory transparency is provided at the enterprise level, a data-driven approach can be made to right-size the inventory levels for the benefit of the entire system.  

Specific to pharmacy, inventory optimization and NDC standardization are consistently the highest value programs for health systems pursuing new CSCs (>5M annual benefit). These cannot be accomplished effectively without the needed data and inventory insights. 

While these initiatives are pharmacy-specific, the underlying principles of inventory optimization and standardization apply broadly across the healthcare supply chain.  

For example, medical-surgical supply chains can achieve similar efficiencies by standardizing surgical kits and consumables or optimizing inventory levels at an enterprise scale. CSCs serve as a platform to centralize and streamline operations for all supply categories, enabling health systems to drive cost savings and operational efficiency enterprise-wide.

Strategic partnerships and resource consolidation for risk mitigation  

• Leveraging economies of scale by bringing together multiple service lines into a single distribution network
• Supporting effective distribution to all sites of care 
• Requiring less health system cash investment in excessive inventory 
• Creating enhanced operational efficiencies and reducing labor

Value creation through automation helps create core efficiencies within an existing large operation. A health system with a CSC leverages automation while also streamlining processes, connecting manufacturers and wholesalers to a hospital pharmacy, retail pharmacy, physician office, and outpatient clinics. A CSC enables health systems to centralize services such as pharmacy purchasing, surgical supply distribution, replenishment of medical equipment, revenue integrity support, and shortage management across all product categories. 

Once these foundational operations are optimized, health systems can expand their capabilities by leveraging strategic partnerships to address specific challenges like shipping visibility and inventory shortages. "For example, a health system with a CSC can streamline the distribution of PPE and surgical supplies to all sites of care, ensuring the right products are available where they are needed while reducing redundant inventory. 

Beyond consolidated service centers, health systems can develop the following resources and partnerships to address drug shortages and mitigate risks: 

• Strategic carrier partnerships: Collaborating with a partner like Triose unlocks access to logistics providers like UPS Premier Gold to achieve reliable delivery of critical equipment, even in rural areas or during disruptions.
• Technology vendors: Partnering with technology providers for advanced tracking and predictive analytics can help health systems anticipate shortages and manage inventory more effectively. 
• Group purchasing organizations (GPOs): Leveraging GPOs allows health systems to negotiate better pricing and access to scarce medications.
• Cold-chain storage providers for medications or temperature-sensitive medical-surgical products (e.g., biologics or tissue implants), partnerships with cold-chain logistics companies can ensure proper storage and transport conditions.
• Consultative support from Cencora’s supply chain experts: Automation and workflow optimization to maximize efficiency in pharmacy spaces as well as medical-surgical inventory rooms, sterile processing departments, and operating room supply chains 

Health systems can also benefit from procurement optimization tools to guide buyer decision-making processes, reducing the risk of overstocking or stockouts. Another piece of the puzzle is building and implementing a shortage mitigation program offered through wholesalers (e.g., Sure Supply, consignment, dedicated virtual warehouses) to provide additional safeguards against disruptions. 

As the healthcare supply chain continues to evolve with new technology and processes to keep up with regulatory changes and shifts in healthcare practices, it is essential for health systems to proactively strategize to deal with financial, operational, and regulatory pressures.