Fusion Newsletter Article: Managing Floor Stocks

Managing Floor Stocks

It is still amazing to me to find facilities that are not tracking and monitoring their different floor stock locations. It is almost as if it is just an afterthought, but in reality this can have a significant impact on a site’s budget, not only from a food cost perspective, but also on the labor side. In order to find ways to reduce our food cost and labor cost as associated with floor stocks, first we need to define what it is. Searching the Internet (http://www.ask.com/health/floor-stock-system-hospital-b456821e901d5895), I found the following:

A floor stock system in a hospital involves the storage of food and drugs (prescription and over-the-counter) where they are needed, usually in a nurse's station, rather than in food & nutrition services or the pharmacy. The point of a floor stock system is to avoid the time required to get necessary food and/or medications from the Food & Nutrition department or the pharmacy to the nurses who provide/administer them.

Floor Stocks as it Relates to Food & Nutrition Departments

Managing Floor StocksNow that we have the definition, let's focus primarily on the food portion and break it down. First, let’s explore the food cost aspect. In days past, these floor stock costs were absorbed by the Food & Nutrition department as part of their normal operating budget, you know, cost of doing business. When times were good and healthcare reimbursements were steadily flowing, it was never really an issue. But now, with reimbursements being monitored and being more strictly controlled and Food & Nutrition departments being asked to cut unnecessary costs, they have been pushed to the forefront. Floor stocks, by definition, are meant to support patients during their stay and should be treated no differently than how medication is treated and tracked. Also, they are meant for the patient; they are not meant for employees to enjoy at their leisure if they are hungry or thirsty. Tracking what is being sent to a particular nursing floor and knowing the cost is critical even if your facility is not charging that back to the particular cost centers. At the least, it will provide you with the information you will need to know when budgets come due. However, if you truly need to reduce your food cost, charge it back to the cost centers as then they are responsible and may determine that they need to reduce how much is stocked in their locations. If the cost centers are now financially responsible for this inventory, they are more likely to control it in a more responsible manner.

Example of a Customer Success with Tracking Floor Stocks

I read an article by a customer that did exactly what was described earlier. They tracked floor stocks for three months before implementing the new policy, then implemented the new policy of billing the cost centers for the floor stocks and tracked the difference after. What they found was impressive. They noticed a 4% savings in food cost, a 10% reimbursement to their food budget, fewer extra deliveries and reduced labor cost. Not bad for such a small change in how they did business.

The Burden of Labor

Let’s look at the labor side of floor stocks. If your staff is making multiple trips a day to cost centers to stock areas, then that is a lot of extra labor going around. Take some time to look at when, how often, and how they are currently handling the stocking of these areas. Then analyze if any of those specific things can be modified. If you are a room service or spoken menu facility and have a host/ambassador program for taking and delivering trays to the patients, could they also handle calculating how much a particular cost center might need for replenishment? Then the inventory clerks can gather all the requirements at one time and either deliver them or the host/ambassador can take care of it on the way up. Make use of your healthcare foodservice software to make this much more efficient in pulling the products required as well as ordering the cost center’s needs. Labor is a very costly necessity and controlling it can make or break you as an organization. By making better use of what labor you have, you may be able to reallocate it to another area that requires it more.

The best advice someone ever gave me was to manage my operation, not let the operation manage me. Simply put, know what is going on and control it. Part of any successful operation is utilizing this same philosophy, by knowing what is happening within your operation at any given time, you are then prepared to make better decisions that will ultimately make you and your facility more successful.

Michael Andersen, Account Relationship Management SpecialistArticle by: Michael Andersen, Account Relationship Management Specialist; Fusion, 3rd Quarter, 2016