Supply Chain Best Practices

Presented toSociety for Arkansas Healthcare

Purchasing and Materials ManagementFall Conference

October 18th, 2013

DEFINITIONDEFINITION

What is aBest Practice?

Current Practice:•Manage Materials

Best Practice:

•Manage the Supply Chain continuum•Materials, expenses and resources

Rationale:•Establish strategic direction •Build effective overall controls

SUPPLY CHAIN MENTALITYSUPPLY CHAIN MENTALITY

SUPPLY CHAIN INCLUDESSUPPLY CHAIN INCLUDES

Internal process from need to disposal

External process from manufacture to payment

Includes product selection and use

Includes services as well as products

Includes labor to effect the whole process

n Manage Expenses (Dollars and People)

n Work with Supply Chain Partners

n Make Total Cost Decisions

n Create Internal Alliances

n Integrate Policies and Procedures

n Focus on Interdepartmental Teams & Process Flow

n Start with the basics and develop a plan

SUPPLY CHAIN PERSPECTIVESUPPLY CHAIN PERSPECTIVE

BECOMING MORE STRATEGICBECOMING MORE STRATEGIC

Current Practice:•Allowing routine operations to be on

cruise control and run themselves

Best Practice:

•Making sure that the nuts and bolts are being checked on a regular basis

Rationale:•Little problems can become big

issues•Customers have long memories

DON’T FORGET THE BASICSDON’T FORGET THE BASICS

View your operations through the customer:

•Visit others in their own departments

•Review par locations quarterly•Tour your own warehouse•Walk in your employees shoes•Monitor key indicators such as:

stock outs & pickup requests

View your operations through the customer:

•Visit others in their own departments

•Review par locations quarterly•Tour your own warehouse•Walk in your employees shoes•Monitor key indicators such as:

stock outs & pickup requests

DON’T FORGET THE BASICSDON’T FORGET THE BASICS

Current Practice:•Materials supports hospital

Best Practice:

•Supply Chain supports all entities like LTC, ASC, Satellite locations, Home Care etc.

Rationale:•Adds value to all•Process & product standardization

SUPPORTING ALL ENTITIESSUPPORTING ALL ENTITIES

Current Practice:•Inconsistent supply cost tracking

Best Practice:

•Supply Chain tracks and reports organization-wide

Rationale:•Supply Chain takes the lead•Will show trends that can be

addressed

TRACKING HOSPITAL INDICATORSTRACKING HOSPITAL INDICATORS

n Supply Cost/Net Rev

n Supply Cost/Total Cost

n Supply Cost per Adj Adm

n Supply Cost per APD

n Supply cost per case

n Inventory turnover

n Inventory accuracy

n Invoice discrepancies

n Fill rates

n Case cart accuracy

SOME COMMON MEASURESSOME COMMON MEASURES

Current Practice:•Materials purchases supplies but

services purchased directly by depts

Best Practice:

•All services go through supply chainRationale:

•Provides missing scrutiny•Establish competition•Significant savings possibilities

SERVICES THROUGH Supply ChainSERVICES THROUGH Supply Chain

SOME OFTEN NEGLECTED SERVICES

SOME OFTEN NEGLECTED SERVICES

n Transcriptionn Banking servicesn Insurancen Landscapingn Cleaning services (outside buildings)n Dialysisn Mobile imaging servicesn Parking

Current Practice:•Company submits contract with their

terms and conditions

Best Practice:

•Establish Hospital specific Ts & Cs•Becomes basis for all bids and RFPs

Rationale:•Hospital takes control of the process•Results in more favorable framework

ESTABLISH HOSP CONTRACTUAL TERMSESTABLISH HOSP CONTRACTUAL TERMS

n Gain leverage by presenting your terms first

n Establish control from the start

n Eliminate undesirable clauses

n Create consistency in all contracts

n Reduce the overall contract time process

n Avoid potential legal involvement and fees

ESTABLISH HOSP CONTRACTUAL TERMSESTABLISH HOSP CONTRACTUAL TERMS

Current Practice:•Equipment dispatched to floors or

units maintain own equipment•Limited or No tracking controls

Best Practice:

•Establish and centralize control•Involve Clinicians in process

Rationale:•Decrease losses / Decrease rentals•Replacement cost avoidance

Reduce/Eliminate Pat Care Equip LossesReduce/Eliminate Pat Care Equip Losses

Reduce/Eliminate Pat Care Equip LossesReduce/Eliminate Pat Care Equip Losses

n Establish formal policy & procedures

n Control and account for all equipment

n Utilize RFID / Bar Code Tracking

n Include regular BioMed check-ups

n Evaluate 3rd Party Providers

L

Current Practice:•Fragmented and error prone

Best Practice:

•Integrate with MM•Utilize available technology

Rationale:•Inventory & Labor savings•“Right” people performing tasks•Reduction in errors

INTEGRATED CASE CARTSINTEGRATED CASE CARTS

Outcomes:•Preference cards more accurate•Minimal errors in case items•Minimal RN time•Consistent stock replenishment•Automated patient billing•Accurate patient billing•Data for standardization/update

INTEGRATED CASE CARTSINTEGRATED CASE CARTS

Savings:• RN time (pulling, ordering, maintaining

preference cards)

• Materials time (restocking)

• Supply cost (less waste)

• Inventory cost

• Case cost (standardization)

• Revenue

INTEGRATED CASE CARTSINTEGRATED CASE CARTS

Current Practice:•Nurses spend too much time on

supply activities

Best Practice:

•Re-establish clear supply chain control over floor stock supply areas

Rationale:•Increase nursing patient care time

and materials management credibility

LIMIT CLINICIAN INVOLVEMENTLIMIT CLINICIAN INVOLVEMENT

n Establish regular communication with clinicians

n Match expectations with realities

n Publish formal schedule for restocking areas

n Arrange products in treatment groups

n Locate high use products closer to user

n Increase visibility of staff and self

n Communicate some more

Limit Clinician Involvement in Supplies

Limit Clinician Involvement in Supplies

M

Current Practice:•Products pulled when expired

Best Practice:

•Manage proactively by schedule •Rotate and shift near date to higher

use department

Rationale:•Improves patient safety •Build effective overall controls•Creates formal tracking process

ESTABLISH EXPIRATION REVIEWESTABLISH EXPIRATION REVIEW

Current Practice:•Pars set and rarely reviewed•Increases additions by user dept.

Best Practice:

•Frequent reviews and adjustments based on usage data

Rationale:•Clinicians have what they really

need•Pars easier to maintain

OPTIMIZE PAR INVENTORIESOPTIMIZE PAR INVENTORIES

L

Current Practice:•No Formal Linen Controls

Best Practice:

•Establish controls that monitor and educate the use of linens and textiles

Rationale:•Improves outcomes •Build effective overall controls

Establish Linen/Textile GuidelinesEstablish Linen/Textile Guidelines

Establish Textile GuidelinesEstablish Textile Guidelines

n Establish formal policy

n Set quality standards

n Create data driven PAR levels

n Develop linen change policy

n Control / educate linen usage

n Control use and dispensing of scrubs

M

Current Practice:•Most price change notifications are

accepted

Best Practice:

•Challenge virtually all •Require rationale/reasons

Rationale:•Many price increases can be

eliminated or reduced if you just question

CHALLENGING PRICE CHANGESCHALLENGING PRICE CHANGES

Current Practice:•Stuff Piles Up

Best Practice:

•Implement a program to properly manage excess equipment & supplies

•Involve all key departmentsRationale:

•Become a proactive environmental steward

ASSET RECOVERY PROGRAMASSET RECOVERY PROGRAM

ASSET RECOVERY PROGRAMASSET RECOVERY PROGRAM

•Policy needs to be in place and supported by all•Assets must be taken off books •Reuse, sell, recycle, dispose•Supplies are often needed by charitable

ventures•One hospital’s junk is someone else’s treasure

Supply Chain is in the best position to be the custodian:

Current Practice:•Issue a RFP or rely on GPO pricing

Best Practice:

•Key products and services are sourced directly with suppliers

Rationale:•Negotiate from a position of strength

•Market knowledge•Physician support

•Commitment brings best pricing

ESTABLISH STRATEGIC SOURCINGESTABLISH STRATEGIC SOURCING

STRATEGIC SOURCING PROGRAMSTRATEGIC SOURCING PROGRAM

AnalyzeSpend

Analyze Category

AnalyzeMarket

ImplementStrategy

ManageNegotiations

Award & Contract

DevelopStrategy

Traditional Contracting

Strategic Sourcing

n Physicians are able to use their preferred items thus they are more likely to be on your side

n Many supplier tactics are neutralized

n Negotiations are driven by facts and data

n Establish target pricing based on information and commitment

n Contracts eliminate middlemen and rebates

P

STRATEGIC SOURCING PROGRAMSTRATEGIC SOURCING PROGRAM

Current Practice:•Little review of new purchases•No review or existing products

Best Practice:•Establish Formal Value Analysis

Rationale:•Reduces product variation•Identifies hidden savings•Establishes a savings culture

Current Practice:•Little review of new purchases•No review or existing products

Best Practice:•Establish Formal Value Analysis

Rationale:•Reduces product variation•Identifies hidden savings•Establishes a savings culture

ESTABLISH VALUE ANALYSISESTABLISH VALUE ANALYSIS

Step 1

Define Need

Step 2

Assess Practices

Step 3

Identify Alternatives

Step 4

Select Best Option

Step 5

Implementation

VALUE ANALYSIS THE STEPS

Education

POLICIES

Policies and ProceduresFacilitation

FIVE STEPS OF VALUE ANALYSIS

Step 1Define Need

Step 2Assess Current Practices

Step 3Identify & Assess Alternatives

Step 4Choose Best Alternative

Step 5Implement Choice

VALUE ANALYSIS TOOLS & TECHNIQUES• Asking Probing & Open Ended Questions

Step 1

Define Need

• Name the product, service, or procedure• Identify the functional elements • Determine specifications & requirements• Assess the necessity of what is being

considered• What is the real reason for the request

Needs versus Wants

Step 1

Step 2

Assess Current Practices

VALUE ANALYSIS TOOLS & TECHNIQUES

• Determine benefits of current use• What are disadvantages• Estimate cost impact of current use• Differentiate necessary and unnecessary

features• Assess the cost effectiveness of current

practice

Identify what is currently in use

Step 1

Step 2

Step 3

Identify & Assess Alternatives

VALUE ANALYSIS TOOLS & TECHNIQUES

Identify and Assess Alternatives

• Alternative ways to meet the need

• Employ creative thinking

• How do others meet the need

• Conduct trials of products or services

• Track the impact of alternatives versus current practice

Step 1

Step 2

Step 3

Step 4

Choose BestAlternative

VALUE ANALYSIS TOOLS & TECHNIQUES

Identify and Assess Alternatives

• Evaluate the benefits, cost and disadvantages of alternatives

• Which alternative meets the need and yields the most financial benefit

• No negative impact on quality

Implementation and Monitoring

• Value Analysis Worksheet & Action Plan• Communication to all affected areas• Utilize Clinical Champion• Involvement and commitment of Team• Documentation to track Savings• Quantification and monitoring of results

KNOW WHAT CAN GO WRONG

BARRIERS AND PITFALLS

h Lack of understanding and acceptance

h Lack of support

h The process is static

h Resistance to change surfaces

h Process perceived as not concerned with quality

h Physicians not involved

Supply Chain Best Practices

QUESTIONS???