Staying ahead of the game:
Best practices for your supply chain
Steve Thompson
VP, Supply Chain Innovation
Lean Six Sigma Master Black Belt
© Copyright 2014, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and
ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Ever changing environment
Must be agile and
adaptable to
control costs
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Impact of time
“If you don't have time to do it right,
when will you have time to do it over?”
- John Wooden
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Sources of variation
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Fluctuating patient census
• Ramp up clinical staff
• Seasonal staff
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Clinical practice
• Lack of standardization
• Diseases treated differently
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Demographics
Geography
Age
Gender
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Seasonal impact
Summer
Winter
Flu
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Multiple variables effect
Demographics
Census
Interactions
magnify
variation
Seasonality
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Clinical
Practice
Disease
States
Adapting to change
• Grocery stores adapted to a lean model
• Point of use data collection/analytics
• Just-in-time inventory (logical unit-of-measure)
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Ensuring financial success
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Freight management
• Freight has become a profit center for manufacturers
– Hidden in price of product
• Operating Room should be focal point
– Next-day delivery
– Transportation budget managed elsewhere
• Unit cost vs total delivered cost
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Number of suppliers
•
•
•
•
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
More invoices
More time spent ordering
More time unloading trucks
More cost
Manual cycle counting
• No value add in counting
– 50% materials management time?
• Too many mistakes
– UOM issues
– Fat finger
• Correct cycle count frequency?
– Weekly, monthly, quarterly
– NEVER?
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Reviewing consignment
•
•
•
•
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Hidden costs
Expired/obsolete products – charged?
Inefficient delivery method
Ineffective controls and tracking
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
How do you replenish?
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Traditional forecast-based purchasing
• A retail model of purchasing
• Established based on some criteria
• A “stocking strategy”
Positives
Negative
Low effort
Inaccurate
Creates storage solution mentality
Lack of visibility
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Traditional demand-based purchasing
• An industry model (automotive, aerospace, etc.)
• Based on utilization
Positives
Based on actual demand
Replenish only what you need
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Negative
Inability to re-act quickly to
unexpected demand variation
Requires supply chain visibility
© Copyright 2014, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and
ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
The art of finding the right
balance
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Three-legged stool
Patient outcome
Capital
Technology
is the enabler
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Best practice for clinical preference items
Key points when choosing an inventory
management solution for PPI
Best Practice
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Reason
RFID-enabled system
• Unique Device Identification
• Tracking
Point of “use” charge/data capture
• Compliance and accuracy
Eliminate manual counting
• Unreliable, many errors
Open vs closed access
• Time management
• Inventory control
© Copyright 2014, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and
ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Best practice for commodity products
Two options for inventory management of
commodity products
PAR system
2-Bin Kanban
Ordering back up to a set amount
Order when it is empty
• More frequent triggers
• Less predictable ordering patterns
• More labor
Picking/stocking is random
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• Less frequent triggers
• More predictable ordering patterns
• Less labor
Supports FIFO (first in first out)
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Gap between bill and reimbursement
HCAHPS
Charge
Capture
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• Cost of charge capture is often
greater than reimbursement
• $50 threshold?
• Balance sheet vs income
statement
TCAB
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Metrics for success in supply
chain
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Before you begin
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Ranking common metrics
Rank
Tracking Methods
Reason
Good
Total Supply Expense as a % of
Net Patient Revenue
• Variability in Net Patient Revenue
distorts month over month trends
• Does not effectively illustrate true
supply spend performance
Better
Total Supply Expense Per
Adjusted Discharge or CMI
Adjusted Discharge
• Better aligns supply spend with patient
volumes and level of acuity
• Does not capture supply spend
performance at the patient level
Best
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Supply Intensity Score
• Measures supply costs by patient and
procedure type
• Provides more precise and actionable
data
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ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Are you measuring the right metrics?
• Every hospital measures similar benchmarks
– But your waste is hiding in what you’re not measuring
New metrics to track
Expired Supplies
Improvement Opportunity
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•
•
Lost Products (Leakage)
Clinical time spent on
supply chain (HCAHPS)
•
•
How much product is missing each month?
Leakage can be mitigated with enhanced tracking and inventory
controls.
•
How much clinical time is spent on finding stocked out supplies,
logging in/out of POU systems, or recording takes/returns?
This represents time could have been spent with the patient.
•
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How much are you expiring out each month?
These are products that could have been returned, redeployed,
or even resold.
2% - 5% annually lost
© Copyright 2014, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and
ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Q&A
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Steve Thompson
VP, Supply Chain Innovation
Lean Six Sigma Master Black Belt
614.553.4572
[email protected]
© Copyright 2014 Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and
ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.