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Orthopedic inventory management is inherently challenging, thanks to unpredictable surgical demand, SKU variations and field inventory that’s shipped from warehouses, sits in reps’ trunks and is stored on hospital shelves.
Surgeons want to know that everything they need for a procedure is on hand, so surgical facilities often want implants in every available size, with extra screws and instruments just in case, to ensure that surgeries aren’t delayed due to missing supplies.
Layer in the high-dollar value of orthopedic implants, where one canceled or added procedure can swing thousands of dollars in utilization, and inventory management quickly becomes an operational nightmare, according to Eric Anderson, CEO of WebOps, a medical inventory management system built for device manufacturers and distributors.
“The industry operates on a concept of infinite supply,” Anderson said. “Companies overstock to guarantee case coverage, which creates excess that sits idle, expires or becomes obsolete.”
These challenges present a costly catch-22: Unused supplies tie up capital, while undersupply can lead to missed surgeries and revenue loss. Limiting inventory exposure while meeting demand fluctuations requires a delicate balancing act — not just slashing supply, but strategically right-sizing inventory to lower carrying costs, reduce risks and strengthen cash flow.
Aligning Inventory Strategies
The challenges inherent in orthopedic inventory management make forecasting notoriously difficult. Even with sophisticated enterprise resource planning (ERP) systems, companies struggle to connect the dots between supply and demand.
That’s because ERP systems weren’t designed to handle field inventory at the point-of-use. “The big issue with orthopedic implant inventory is the last-mile logistics. ERPs excel at factory and warehouse planning, but go blind once products hit the field,” said Anderson, who spent the first 15 years of his career implementing ERP software from SAP. “They don’t natively track real-time consignment movement, rep-level trunk stock or last-minute case changes. When inventory leaves the warehouse, all that visibility and control is lost.”
To compensate for these blind spots, companies rely on a patchwork of proprietary tools, manual spreadsheets, phone calls and emails to coordinate supply beyond the ERP. Inevitably, this fragmented approach leaves visibility gaps across the supply chain.
“The technologies that help manage field inventory rely on the inputs of your distributor base and sales reps, so if the inputs are wrong, the system is kicking out the wrong numbers,” said Matt Stekier, Principal, Management Consulting at Plante Moran, who focuses on medical device supply chain operations. “The demand is based on historical usage instead of forecasts.”
But the true inventory problem lies deeper than the tools used to manage it, according to Stekier. It starts with poor sales and operations planning (S&OP).
“Planning is more about the process than it is about the system,” Stekier said. “You use technology to automate tactical items, like when you need to place a purchase order based on lead times and minimum order quantities. But planning is a strategic exercise that considers where instrument sets need to be positioned and how you’re going to utilize them to maintain or grow sales.”
Planning among multi-disciplinary teams can be tricky because each stakeholder has a different motive when it comes to inventory management, according to Stekier.
Sales will say they always need more because they never want to cancel a surgery, and CFOs will tell them that they could make do with less. Operations and supply chain teams are stuck in the middle, trying to keep the manufacturing process running smoothly so they can keep replenishing instrumentation kits.
“If everyone’s working toward their own plan, your inventory will be completely out of whack,” Anderson said. “You don’t have what you need, and you have too much of what you don’t need. ”The key to more proactive planning is establishing accountability for shared goals.”
“There’s a real opportunity to get sales, operations and supply chain teams on the same page by having a robust supply chain plan in place and having someone own it,” Stekier said. “It has to be a team effort, but someone needs to be accountable.”
Rationalizing Inventory Levels
Even with the right systems and strategic planning in place, managing inventory bloat isn’t as simple as just reducing stock. “The biggest myth is that cutting inventory automatically equals cost savings,” Anderson said. “In reality, indiscriminate cuts create stockouts that kill case coverage, damage surgeon relationships and hurt revenue.”
The issue is not necessarily too much inventory, but too much of the wrong products and not enough of the right ones.
“Inventory volume is often a symptom, and SKU bloat is the disease,” Anderson said. “The root cause is almost always too many SKUs driven by surgeon preference and historical product proliferation. Excess SKUs explode the complexity of field management.”
This challenge is exacerbated by the fact that many orthopedic manufacturers offer several versions of similar implants and instruments, in multiple sizes and configurations. Plus, many surgeons have personal preferences for specific products, forcing hospitals to stock variations of like devices instead of a standardized, streamlined supply.
Although there’s good rationale behind overstocking, because surgeons should have access to anything they need to complete a successful surgery, it also comes at a cost.
“Outside of just having too much capital tied up in inventory, you risk it becoming obsolete because new products are always coming out,” Stekier said. “Then there’s the risk of it expiring, so as the shelf-life runs out, you’re risking potential quality issues.”
While obsolescence and expiration are the obvious direct costs of oversupply, there are also the indirect costs associated with handling unused implants as they move from one location to another. That’s a massive administrative burden for reps and logistics teams, who spend hours chasing inventory instead of supporting cases.
“Forget the strict financial cost of inventory,” Anderson said. “The much bigger cost is the people going through Herculean efforts to satisfy surgical demand because inventory is inefficiently allocated throughout the supply chain.”
On the other end of the spectrum, companies also need to consider the risks of stocking out of high-velocity implants. “Are you at risk of missing surgeries because a device is fast-moving and you haven’t replenished it?” Stekier asked. “Is your distributor base going to lose confidence in your product and push another company’s product over yours? Both of those scenarios result in lost revenue.”
The sweet spot lies between overstocking to give surgeons a comfortable surplus and making broad inventory reductions across the board.
“Every product has different demand cycles and usage rates,” Stekier said. “Look at each product family to determine the current usage and how much you need to meet demand. The real opportunity is strategic right-sizing — using data and automation to keep the right product in the right place at the right time, while also improving service levels.”
Medical sales reps and the surgeons they work with must be confident that needed supplies will be on hand and surgical schedules will stay on track.
Gaining Visibility
Strategically reducing inventory levels without impacting case coverage requires comprehensive visibility into inventory location and utilization rates, paired with the ability to accurately forecast future demand from that data. This is where AI-driven tools can supercharge traditional sales plans by combining real-time data and predictive analytics to build better forecasts, down to SKU-level specifics.
It starts with mapping every piece of inventory in the field, in hospital consignment and in transit. Instead of periodic manual cycle counts, Anderson recommends continuous, mobile inventory tracking with automated alerts for low stock and expiring lots. Then, layer in advanced analytics to identify demand patterns.
“Leading companies are moving to AI-powered demand-sensing tools that factor in historical case data, surgeon patterns, hospital schedules and even daily utilization,” Anderson said. “Automation handles replenishment triggers and kit optimization, while analytics deliver actionable dashboards on inventory turns, utilization and slow movers. AI can be used to anticipate surgical demand, optimize kit routing, and recommend inventory adjustments in real time.”
For example, WebOps provides visibility into the location of every instrument kit and implant in the field, revealing exactly which SKUs are dragging downturns versus driving revenue, so distributors and manufacturers can strategically reallocate inventory across the network. Anderson said his clients routinely cut field losses by 30% to 50% by using the software’s automated alerts, mobile scanning capabilities and intelligent redistribution.
Instead of sales reps calling in or typing up orders for scheduled cases, WebOps’ AI assistant can suggest inventory levels based on historical usage combined with predictive demand forecasts.
“While there is a lot of complexity, there are patterns in the data, and large language models can interpret that data much faster than a human,” Anderson said. “That results in less scrambling and less express shipping of inventory. Reps are spending more time focusing on their surgeon customers and the products, and less time patching potholes in the supply process.”
Advanced analytics and predictive AI can help companies unlock significant value by aligning inventory levels with revenue potential.
“Part of the business case for having capital tied up in inventory is that each surgical set is supposed to generate a certain amount of revenue. What do you have, where do you have it, what should it be generating in revenue and how can you position it to reach those targets?” Stekier said. “Analytics and AI are giving companies more and clearer information at a faster rate so they can make better decisions.”
Unlocking Value
Access to granular, real-time data enables companies to thoroughly evaluate where to position inventory and how to set minimum and maximum reorder points based on historical trends and forward-looking projections. “Looking ahead and setting your reorder points correctly is what helps free up capital,” Stekier said.
Now, instead of par-level management, companies have more advanced tools to manage supply and demand fluctuations across the network. These technologies are transforming orthopedic inventory management from a build-and-push-to-the-field model to a pull-based, demand-driven and connected ecosystem.
“You get to a point where you’re producing to meet demand instead of making to match par levels,” Anderson said. “That’s game-changing. Imagine a world in which clear visibility of supply needs along the frontline means you’re not going to ship anything from a finished goods warehouse unless you know that it’s needed.”
Although orthopedic inventory management is a complex endeavor, AI-driven tools can drastically simplify and streamline the supply chain.
“We’re in the technology’s early stages, but there will soon be a vast reduction in the total inventory in the supply chain for every OEM,” Anderson said. “AI will analyze the historical data, and predictive analysis will determine future demand. Companies will use that robust information to rationalize SKUs and ensure that, not only have they set the right inventory levels, but that it’s also in the right place at the right time.”
Rationalizing SKUs and right-sizing inventory not only frees up capital — often millions of dollars’ worth — but also lowers costs associated with storage, freight, obsolescence and expiration losses, as well as the administrative burden of managing it all.
“But what’s more important is tightening up the supply chain and getting rid of the waste,” Anderson said. “If we can make supply chains more efficient, OEMs will have more resources dedicated to innovating and making better solutions that improve patient outcomes. Companies that right-size supply levels don’t just cut costs. They become more agile and competitive.”
