1. The document discusses Kaiser Permanente's supply chain management practices, including its use of regional and national warehouses, group purchasing organizations, and inventory management processes. 2. Kaiser Permanente tested RFID and barcoding for inventory management but both failed due to privacy, cost, and usability issues. 3. Kaiser Permanente's supply chain practices have kept administrative costs low at 6% compared to 20-30% for other hospital chains, while still ensuring adequate inventory levels and quality patient care.

1. A Case Study
On
Supply Chain Management in Hospital
Submitted by-
Mithisar Basumatary
Tridip Sarma
3rd Sem MBA

2. 
 Health care supply chain consists of 3 major players :
producers, purchasers and healthcare providers.
 Highly fragmented
 85-90% of total cost is comprised of fixed costs.
 Problems faced by hospitals:
I. Outdated IT systems and infrastructure
II. Poor inventory and distribution management
III. Adhoc procurement systems
IV. Lack of executive involvement
V. No process improvement culture
Health Care Industry and
SCM

3. 
 Integrated managed health care consortium
 Founded in 1945 by Henry J. Kaiser and Sidney Garfield
 Headquartered in Oakland, California
 Current CEO : Bernard Tyson
 Total 18,652 employees
 Made up of 3 entities: The Kaiser Foundation Health
Plan, The Kaiser Foundation Hospitals, and the
Permanente Medical Group
Kaiser Permanente

4.  Clinicians are given autonomy to
 On an average, the Physician Preference Items accounts
for 40% of total medical supply spending.
 Hospitals going through financial burden
 One of the opportunities in supply chain savings is in the
area of physician buy-in.
 KP Sourcing and Standards team evaluates and
determines the best and cost effective products to
implement.
Product Management

5. 
 KP adopted the use of Group Purchasing
Organization (GPO).
 Broadlane, a GPO, conducts all the negotiations with
the suppliers
 KP and Broadlane work collaboratively with their
suppliers.
 Use of GPOs has helped KP streamline the
purchasing process and provide cost savings.
Sourcing and Services

6. 
 Utilizes Integrated delivery networks(IDNs).
 Provides services to in- and out-patients.
 Outsourcing program with Apria, an IDNs to provide
outpatients supplies.
 KP Monitors the service levels by Apria.
 Resulted in good quality of service nationally.
Sourcing and Services

7. I. Purchasing system remains an area to be improved.
II. Integrated in 1985
III. Used outdated Data Management System
IV. Outsourcing of supply data management
V. Global Data Synchronization Network
VI. Personnel required for understanding the old
technology used by the existing IT systems to move to a
newer platform.
Purchasing System and
Technology

8. 
 KP maintains a system of centralized and regional
warehouses
 Central warehouse serves as a national warehouse
and works with nearby facility to conduct product
testing and standardization before deployment to KP
hospitals.
 Regional warehouse holds inventory of products
that are more applicable to regional demand.
Inventory and distribution
management

9. 
KAISER
PERMANENTE
REGIONAL NATIONAL
In
Livermore,
California
• Supplies Regional specific inventories
only strictly based on regional
demand.
• Lesser variety of products in One
Warehouse and quicker deliveries to
the regional hospitals
• Supplies Common inventories to
wider range.
• Conducts products testing and
standardization to all KP Hospitals
Nationwide.

10. 
Q(quantity
ordered)
T (time)
Reserved stock
Reorder Level
1. KP do not follow Just-in-Time Logistics process.
2. Fresh Inventory orders are placed at the point when
available stocks reach Reserved Limit.
Lead timeOrder is placed
R
AvailableStock
Demand Rate

11. 
 KP tested incorporating RFID and SKUs with bar-coding into
its inventory management systems. But BOTH failed !
 Initially
1. RFID promised in medical device and asset tracking
2. Promised Improved visibility of inventory and supply
chain management, and
3. In Preventing drug counterfeiting (Scalise 2005)
 Why it Failed?
1. RFID potentially exposed KP’s confidential reports to hackers.
2. Was costlier than its previous item tracking process of 1960.
3. SKUs are vulnerable to casual usage by physicians and make
it hard to track smaller items flowing within the Hospital
premises.
Making the decision…

12. 
1. In comparison to costly logistics and vigilance systems
by other Hospital chains (at costs 20-30%), the old
fashion (1960 model) of KP has kept the administrative
cost at 6% level.
2. Clinicians are more apt to provide necessary supplies to
patients in order to improve their conditions at home.
3. Benefits have also resulted in lesser complications in
future.
4. Thus cheaper bills to customers as well.
5. Never a record (as per case) of inventory deficiency.
BENEFITS

13. 
conclusion