Managing fleet a balancing act

Friday, October 31, 2003

HME providers have become more sophisticated in managing their inventories for hospital beds, concentrators, wheelchairs and other fleet rental items in recent years, but they still find optimum levels elusive, manufacturers say.

Attaining critical mass for inventory – placing a majority of products in the field while ensuring sufficient “safety stock” in case of spontaneous orders – is an ongoing challenge for HME providers. Having too much product on hand drains cash while being caught empty-handed can mean lost business. It’s a precarious balance for which there is no set formula, vendors say.

“Providers are absolutely doing a better job focusing on managing their rental fleets,” said Tom Tucker, vice president of sales for DME and respiratory at Mundelein, Ill.-based Medline Industries. “It’s still tough though – with discharges it can be hard to get them back in, especially wheelchairs and beds. So these inventories float more drastically than others.”

The unpredictability of product retrievals makes precise ordering difficult, Tucker said.

“There could be 10 pickups one day or none,” he said. “If you could predict that, you’d know how much to buy at a time. As it stands, it can get out of control if you’re not careful.”

Consequently, Joe Priest, president of Buffalo, NY-based AirSep says he’s seen providers change their purchasing methods.

“At Medtrade, show attendees used to buy a six-month supply at one time,” he said. “They’re not buying those huge volumes anymore. They can buy smaller quantities and be more efficient.”

Product versatility should help keep providers from stratifying their product lines too widely, allowing them to assign the same product to multiple applications.

“What we’ve done is make our products more interchangeable and compatible,” said Lou Slangen, director of sales and marketing for Elyria, Ohio-based Invacare. “It’s one way providers should look at product life cycle costs instead of just acquisition costs.”

When it comes to managing fleet categories, Priest discourages providers from taking a boilerplate approach toward all of them.

“Be careful that you don’t have an edict of one certain pattern of business for each product line,” he said. “Each one is different.”

Duwayne Kramer, president of Kansas City, Kan.-based Burke Tri-Flex, says his benchmark model for hospital bed fleet equilibrium is having 50% in reserve.

“Any less than that and you’re stressing your fleet,” he said.

Burke marketing director Steve Allee added: “I know one company with 70% utility and they’re in panic mode all the time. They’re correcting the problem by buying more product.”

Tucker offered some basic rules of thumb for determining proper fleet balance.

“If you have 100 concentrators out, you probably need 10 backups,” he said. “That most likely won’t work for other products, though. For beds, it’s probably five backups for every 100 out there. For ventilators, you need one backup for every one out there. Those patients absolutely can’t be without one.”

Instead of offering ratios for inventory counts, Slangen says providers should look at the role product performance plays.

“The size of the fleet related to customers is determined by the reliability of the fleet,” he said. “It’s no different than an airline that can maintain and turn around a plane in a half hour rather than two hours. Minimal service means faster turnaround times.”

Manufacturers concur that the key variable in the fleet management equation is product maintenance – specifically the decision of whether or not to perform it in-house. Either way can work, Priest said.

“Deciding whether to invest in their own repair capabilities is the first criteria providers need to examine,” he said. “On one hand is the expense of hiring service personnel, while on the other it provides the opportunity to minimize your fleet. You don’t need as many products on hand if you can service them onsite.”

Those who handle onsite maintenance should find it advantageous to standardize on brands for each product line, manufacturers advise. Ideally, they say, providers should settle on a single brand for each category.

“It is much easier and effective to manage one concentrator brand than six different ones,” Slangen said. “Focusing on one line gives technicians the ability to concentrate on one product and know it inside out.”

Conversely, standardization isn’t a necessity for providers who opt to refrain from doing onsite repairs. Although outsourcing maintenance saves the company in labor costs, it requires the provider to carry more inventory because sending machines out for repair means they are out of circulation longer.

The upshot about product maintenance is that the provider’s decision can be right either way, Priest said.

“I’ve seen people who don’t touch the product and others who do their own servicing and both are extremely successful,” he said. “There isn’t a clear-cut template that says ‘this is the way to manage your fleet.’”

Manufacturer warranties are also a factor in fleet maintenance. Although three to five years is now the norm for most products, they probably won’t go any longer, vendors say.

“They’ve hit a plateau,” Tucker said. “The ante on rentals is a long warranty, but that has stagnated. It’s been stretched out as far as it can go.”

Besides, the five-year warranty limit is a logical life cycle for products, he added.

“At that point you look at whether you want the product longer than that anyway,” he said. “Even if it’s in good running order, you may want to a new model with better technology.”

Parts replacement can be a costly endeavor if providers aren’t vigilant about availability. Repeated trips to a patient’s home are a real money waster, manufacturers say.

“Certain items, like bed cables, should be on hand at all times,” Kramer said.
Category: Fleet management
Key product lines:

Concentrators, hospital beds, wheelchairs, liquid oxygen systems, ventilators.

Top fleet management strategies:

- Look for versatile products that can be assigned to multiple circumstances.

- Don’t issue an edict that all product purchasing patterns be handled the same way; address each category individually.

- Decide whether it is most cost-effective to service products onsite or to let the manufacturer handle it.

- Determine which replacement parts are necessary to keep on hand at all times.