Hospital Supply Chain Automation Case Study
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Waste in hospitals - everywhere - is massive. Up to 50% of consumables and devices purchased are never used on a patient. Support activities are highly manual, repetitive and done by professional clinical staff... This presentation sets out the strategic environment and discusses the development and successful implementation of a leading-edge process and supply chain solution for hospitals.
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Hospital Supply Chain Automation Case Study
- 1. Hospital Supply Chains CASE STUDY: Goulburn Valley Health Presented by Genevieve (Gen) Ford MBA Founder & Managing Director – Ithaca Business (C) Ithaca Business Limited 2001-2010. All rights reserved.
- 2. Strategic Environment – Government & Health Providers Seeking to satisfy voters & shareholders Improvement focus is on procurement & e-commerce Cost cutting targets support functions Improving use of market power - fragmented Poor access to accurate information Lack of resources – skilled people, capital, systems Maintain “Just-in-case” inventory levels Inwardly focused, “supply” is not strategic Conservative, risk averse © Ithaca Business Limited 2001-2010. All rights reserved.
- 3. Strategic Environment – Suppliers & Manufacturers Increasing commoditisation, many substitutes & generics Increased bundling of service & product offerings Reducing product life-cycles Scarcity of point-of-use information from end users Cost pressure resulting from unit cost focus of customers Primary use of technology in product R&D Globalised organisations implementing systems approach to supply chain management Fragmented High inventory levels in place of accurate information © Ithaca Business Limited 2001-2010. All rights reserved.
- 4. Strategic Environment – Distributors & Prime Vendors Perceived to use information as a source of power Medium to sophisticated systems approach to supply chain management Prime Vendors also manufacture generic products Pure “logistics” service companies – 3PL & 4PL moving into this space Typically charge a % premium based on product value Under threat as non-value adding © Ithaca Business Limited 2001-2010. All rights reserved.
- 5. Impediments to Change in Health Change Emphasis on eCommerce, not Process Lack of Experience & Understanding Amongst ‘Supply’ Staff & Executive Commitment to Outdated & Inappropriate Supporting Tools Lack of Supply Chain Leadership Over-Regulation & Over-Reporting Requirements Zero Visibility = Zero Accountability Vested Interest in Status Quo © Ithaca Business Limited 2001-2010. All rights reserved.
- 6. “More than half of i2 (NASDAQ: ITWO) customers listed as references on the company's Web site have not achieved a positive return on investment (ROI) from their i2 deployment.” Business Wire, Jan 13, 2003 08:46 “It’s not pretty out there. Companies have spent fortunes on ERP software and implementation only to find that business performance has not improved at all... nine out of 10 companies don’t get it right the first time around” R. Michael Donovan & Co. Framingham Massachusetts, Successful ERP Implementation – The First Time We Have theTECHNOLOGY We Have the FADS, BUZZ & JARGON… © Ithaca Business Limited 2001-2010. All rights reserved.
- 7. BUT © Ithaca Business Limited 2001-2010. All rights reserved.
- 8. We build & maintain internal silos, measures and focii... Our Natural Focus isInward… © Ithaca Business Limited 2001-2010. All rights reserved.
- 9. Geographical Constraints Competitors Inbound Logistics Inventory Management Warehousing & Packaging Suppliers Government Regulation Technological Innovations Customer Service Sourcing & Procurement Order Management Outbound & Reverse Logistics Planning Partnerships & Alliances Customers Market Characteristics Demand Management Economic Trends Social Trends CORE: Identity, Values Principles, Beliefs, Strategies, Competencies, Systems, Processes, Measures Adapted from Ibex Management (UK) Concept Supply Chains OperateOUTWARDLY © Ithaca Business Limited 2001-2010. All rights reserved.
- 11. PICK, PACK, DELIVER
- 12. SOURCE & PROCURE
- 13. IMPORT
- 14. MAKE
- 15. STORE
- 17. PICK, PACK, DELIVER
- 18. SOURCE & PROCURE
- 19. IMPORT
- 20. MAKE
- 21. STORE
- 23. PICK, PACK, DELIVER
- 24. SOURCE & PROCURE
- 25. IMPORT
- 26. MAKE
- 27. STORE
- 29. PUTS AWAY
- 31. PUTS AWAY
- 33. PUTS AWAY
- 35. STORE
- 36. USE
- 38. STORE
- 39. USE
- 41. STORE
- 42. USE
- 43. WASTE© Ithaca Business Limited 2001-2010. All rights reserved.
- 44. Traditional Health Distribution Channels Order Placement Order Delivery Order Distribution Hospital Receiving Wards, Theatres, Labs etc. Prime Vendors/ Wholesalers Suppliers © Ithaca Business Limited 2001-2010. All rights reserved.
- 45. © Ithaca Business Limited 2001-2010. All rights reserved. Where is Inventory Held? Gen Ford - Mayne Logistics, Evaluation Report, Health Logistics Pilot Operation
- 46. EXPIRED DAMAGED OBSOLETE OBSOLETE PILFERED OBSOLETE OBSOLETE 18% - 22% of current stock on hand of medical consumables & devices is waste Efficient Health Care Response, CSC 1996, DASH Report, PfriceWaterhouseCoopers 2000, Ithaca Supply Chain Management Studies at The Alfred, Goulburn Valley Health, Westmead Hospital, Northern Hospital, Western Hospital, Hurstville Community Private Hospital, The Bays Private Hospital © Ithaca Business Limited 2001-2010. All rights reserved.
- 47. EXCESS EXPIRED EXCESS EXCESS DAMAGED EXCESS OBSOLETE EXCESS OBSOLETE EXCESS EXCESS PILFERED EXCESS OBSOLETE OBSOLETE Of what remains, another 25%-30% of all items are excess to requirement at any given time. Efficient Health Care Response, CSC 1996, DASH Report, PfriceWaterhouseCoopers 2000, Ithaca Supply Chain Management Studies at The Alfred, Goulburn Valley Health, Westmead Hospital, Northern Hospital, Western Hospital, Hurstville Community Private Hospital, The Bays Private Hospital © Ithaca Business Limited 2001-2010. All rights reserved.
- 48. Silo-Driven Supply © Ithaca Business Limited 2001-2010. All rights reserved.
- 49. Supply Chain Waste Inventory Waste Excess Stock (stock held over lead-time & usage requirements) Obsolete Stock (has been superseded by another product); Dead Stock (not been used for 6-months or more but not superseded); Expired Stock (the use-by-date has passed); Damaged Stock (broken, crushed, no longer sterile etc.); Pilfered Stock (taken by staff for home or other use); Borrowed Stock (taken by other parts of the hospital but never replaced); Stock Thrown Away (stock thrown away for IC or other purposes – althoughit is not deficient in any other way) Process Waste Duplication of effort or lack of streamlined processes in the services that maintain and provide replenishment services. Transaction Waste Flowing from Inventory and Process Waste – transactions for order placement, delivery, invoicing and payment that can be done away with. © Ithaca Business Limited 2001-2010. All rights reserved.
- 50. Goulburn valley health Our Case Study: © Ithaca Business Limited 2001-2010. All rights reserved.
- 52. Replenishment process had known problems
- 53. Critical Patient Safety incident occurred – out-of-date item was used
- 55. Clinical Risk Management demanded that issues be addressed© Ithaca Business Limited 2001-2010. All rights reserved.
- 56. Incident Review Conducted Storage methodology in GVH Theatres shown to be major risk factor of incident Replenishment process methodology (no First-In-First-Out, Zero Stock Visibility) also major contributor to incident © Ithaca Business Limited 2001-2010. All rights reserved.
- 57. Ad Hoc ‘Solution’ Proposed Theatre examined the Incident Report Key Recommendation to Senior Management: New Theatre Storage System Proposal Senior Management Review of Proposal believed root causes had not been addressed Investment in solution needed to be grounded in more solid review of entire situation © Ithaca Business Limited 2001-2010. All rights reserved.
- 59. Source & Implement Appropriate IT Solutions
- 60. Ensure Organisational Structure Suits Business Need
- 61. Resource Competency Matrix & Training / Recruiting Needs
- 62. Robust, Meaningful MeasurementRevisit & Review © Ithaca Business Limited 2001-2010. All rights reserved.
- 63. Ithaca’s Initial Review Findings Current GVH-Wide Replenishment Processes © Ithaca Business Limited 2001-2010. All rights reserved.
- 64. Ithaca’s Initial Review Findings Hospital Inventory Management ‘System’ No database of historical purchases Data integrity extremely poor – item numbers constantly re-used & re-allocated No visibility of transactional activity Existing functionality not used Legacy System © Ithaca Business Limited 2001-2010. All rights reserved.
- 65. Ithaca’s Initial Review Findings Stock Profile 63 days stock-on-hand for 691 items (not including sutures & prostheses) 95% of goods have standard delivery well within 96 hours Approximately 30% of stock-on-hand value was identified as obsolete, expired or special needs © Ithaca Business Limited 2001-2010. All rights reserved.
- 66. Ithaca’s Initial Review Findings Physical Storage Assessment No FIFO / Stock Rotation ‘0’ Stock Visibility Poor Space Utilisation (‘Air’ Storage) Non-TGA/GWP/ACHS Compliant OH&S Issues No Management System © Ithaca Business Limited 2001-2010. All rights reserved.
- 67. CLHR System Concept © Ithaca Business Limited 2001-2010. All rights reserved.
- 68. Solution Overview: How Would It Work? Point-of-Care Walk Through © Ithaca Business Limited 2001-2010. All rights reserved.
- 71. Etc…hTrak Data Capture / Catalogue Management © Ithaca Business Limited 2001-2010. All rights reserved.
- 72. ITOL “ITOL is an Australian Government funding program administered by the Department of Communications, Information Technology and the Arts (DCITA) designed to accelerate the national adoption of e-business solutions, especially by small to medium enterprises (SMEs).” http://www2.dcita.gov.au/ie/ebusiness/developing/about © Ithaca Business Limited 2001-2010. All rights reserved.
- 73. The Central Line Consortia Project Leader (in receipt of funding): Ithaca Customer: Goulburn Valley Health Consortia Members: Georg Larsson A/S (Denmark) Healthspace hTrak Exel Warp Systems Medical Industry Association of Australia (MIAA) Supplier Collaboration: J&J, 3M, Tyco, Smith & Nephew © Ithaca Business Limited 2001-2010. All rights reserved.
- 74. Process-Oriented Implementation Re-Structure Supply Service Replenishment Process – Theatre AppGen Functionality Uptake Physical Storage Issues New Stock Profile © Ithaca Business Limited 2001-2010. All rights reserved.
- 75. Working Capital Reduction © Ithaca Business Limited 2001-2010. All rights reserved.
- 76. CLHR Productivity Gains © Ithaca Business Limited 2001-2010. All rights reserved.
- 77. Impact of Network Rationalisation on Transactional Costs © Ithaca Business Limited 2001-2010. All rights reserved.
- 78. Pure Logistics Distribution Channel Order Placement Order Delivery Order Distribution Wards, Theatres, Labs etc. – Aggregated Merchandiser Order Placement Suppliers Distribution Centre © Ithaca Business Limited 2001-2010. All rights reserved.
- 81. Real-Time Advice on Recalled and Expired Products
- 82. Data can be Captured for many, beyond supply-chain, uses
- 83. Year-on-year product purchase costs down by 7%© Ithaca Business Limited 2001-2010. All rights reserved.
- 84. End-Pilot Process Position © Ithaca Business Limited 2001-2010. All rights reserved.
- 85. Process Position in 2008 © Ithaca Business Limited 2001-2010. All rights reserved.
- 86. Questions? © Ithaca Business Limited 2001-2010. All rights reserved.
- 87. Ithaca Opportunities Summer Internship – July to September 2010 Part-Time Analyst Position Sponsoring Student Dissertation: mentoring, introductions to primary sources etc. © Ithaca Business Limited 2001-2010. All rights reserved.
- 88. A Selection of Ithaca Clients © Ithaca Business Ltd (2001 – 2010) All rights reserved.
Notas do Editor
- Now we would like to walk you through a high-level view of how our solution might ultimately work in a typical Theatre procedure in an Epsom & St Helier hospital.As you know the supply chain begins with demand – in a hospital, this is demand created by the admittance of a patient for a specific purpose. After gaining an accurate picture of demand from as close to the point of care as possible, our solution will enable stocking parameters to be created for all consumable, device, pharmaceutical and fluid items, eliminating the 35-55% of over-stocking that is currently typical in most hospitals. In any Theatre procedure it is normal to find that four types of items are needed:Low-value, high volume items such as syringes and bandagesHigh-value, low volume items such as prostheses and their associated screws etc. – these could be on consignment or actually owned by the hospitalPharmaceuticalsFluids Because of the different nature of these items and the different values they have our solution sees that, at the point-of-care, their use should be recorded in different ways.Low value, high volume items typically constitute between 15and 20% of a hospital’s consumable and device spend – they don’t need to be individually tracked as their value does not warrant such sophisticated treatment…in our solution these items would be stored in a Scan Modul open no-count system with bar-code labels identifying the contents of each bin. As the front bin is emptied, the person removing the final item removes one of the bar-code or RFID labels and places it in a central point for scanning by supply staff using Scan Modul Data System. Supply continues through picking from the back-bin.If acceptable, non-controlled drugs and fluids can be managed in exactly the same way.High-value, low volume consumables and devices– whether on consignment or owned – account for the remaining 80 to 85% of hospital expenditure on consumables and devices. Additionally, it is these items that most frequently become obsolete or expire – between 18 and 22% of all these items in any storeroom will be obsolete and 2 to 3% will be expired or damaged. Crucially, many of these items are going to be placed inside a patient, meaning the surgical team want to have the best possible information about expired – or recalled – items BEFORE they proceed. Clearly therefore, these items need a different sort of management.This is where hTrak comes in – items are picked in the same way as described above – from a double-bin storage location but this time usage will be recorded by the scout nurse scanning the manufacturer bar-code as the item is unpacked – and before it is handed to the operating team – in the most sophisticated implementations hospitals have chosen to capture patient ID, staff IDs, location, procedure codes plus device ID. hTrak’s real-time links with manufacturer databases means that recalled items can be notified immediately – but this real-time, point-of-care system also means full traceability to patient is possible, along with fully automated replenishment should that be required. This unique and innovative streamlining step is made possible by hTrak’s unique use of the mandatory GS1 or HIBCC bar-codes meaning that – just like in the supermarket – all critical information can be captured simply without additional process complexity at the point-of-care.Controlled drugs and fluids can be tracked to patients by hTrak, however, using SMDS to manage the replenishment of pharmaceuticals and fluids allows even greater levels of control to be achieved – with up to nine authorisation levels possible for any given item.
- Behind the scenes of course, the receipt of data from either SMDS or hTrak triggers whole sets of activities in line with the previously agreed business processes which the software has been configured to support.Replenishment of low-value, high-volume items would typically be managed by supply staff conducting their regularly scheduled location check and scan of bar-code or RFID labels removed from empty front bins – with orders being placed, potentially automatically, to return stock up to the agreed levels. Replenishment would usually occur 24 hours after scanning, with staff rotating older stock from the back bin to the front and replenishing to the back bin.Replenishment of items captured by hTrak would also return the location to agreed, set stock levels, this activity would also be managed by supply staff but possibly on a more frequent basis. It is possible to automate the replenishment activity to a degree where, as is the case in one Australian implementation, used items are being replenished even as the theatre list is still underway! Alternately, there is the option of configuring the process and the software for slightly slower, more traditional order management processes through the hospital’s procurement system. Again, replenishment would typically occur within 24 hours of order generation and stock would be rotated.Controlled pharmaceutical and fluid items would be replenished in the same way as described above but additional levels of authorisation can be added to the process in line with client requirements.SMDS will also record receipt of orders from suppliers, dealing with this by confirmation of advance shipping notices if possible.Above and beyond these simple supply chain transactions reports can be generated in virtual real time tracking items to patients, providing procedure costing, facilities usage information and benchmarking in-procedure processes.
- The consortia solution goes beyond the standard set of benefits to deliver significant further benefits that are unique in the health sector:Usage of devices, pharmaceuticals and fluids is captured at the point of care using the global standard GS1 or HIBCC bar codes – which can easily be mapped to item catalogue masters if required – this technology is well-proven, having been successfully applied in other sectors for many, many years – the opportunity exists to cut out entire non-value added processes as a result of this innovation.A centrally managed real-time database of all items captured using manufacturer bar-codes is available to all clients – enabling them to clean up their own data integrity and catalogue issues with ease while offering the potential to fully automate the entire purchasing process as delivered by the consortia in their leading edge implementation at Goulburn Valley Health in AustraliaItem-type driven capture of individual lot or batch number information – captured in-procedure before an item is handed off for use enables real time knowledge of whether an item has passed its use-by date or, more importantly, has been recalled by the manufacturer – placing patient safety at the forefront of our processesFacilities who choose to capture full point-of-care data will also find – as other clients have done – that they can link this data directly into procedure costing reports, facilities management decision sets, forecasting and benchmarking requirements to name a few.