Tag Archives: inventory management

Ensuring the Resilience of Your Supply Chain – Team, Strategy and Tools – Part 1

Ensure the Resiliency of Your Supply Chain

Excerpts from a Conversation with Intalere Senior Advisory Specialist, Tracey Chadwell

Supply chain resiliency is a term and phrase that has really gained traction over the past several months as we deal with the fallout of the pandemic and seek to apply some lessons and best practices so we can avoid making the same mistakes in the future.

While the pandemic showed the importance of the supply chain, it also served in some ways to spotlight its weak links. In order to make the healthcare supply chain more resilient, we need to identify several components that are vital to its success.

In building a resilient supply chain, we need to focus on building a cross-functional team, implementing the correct strategies and utilizing the tools that can make the supply chain more efficient and effective.

First, let’s look at some of the key team members and what their roles are.

When you look at the supply chain and its function, it’s a vital part of the entire team at the hospital to achieve the quadruple aim of improving the patient care experience, the health of a population, the clinical experience and reducing per capita healthcare costs. For that reason, we need to make sure that we in supply chain develop a winning team with some good strategies and some good tools to help do that.

When we look at the team itself, we need to make sure that we’ve got all the stakeholders involved including leadership, clinicians, finance, suppliers, distributors and group purchasing organizations (GPOs). Once the team is identified, you need to develop a game plan. What are some of those most critical winning strategies to enhancing your supply chain once the team is in place?

The most important part is identifying your areas of vulnerability. COVID gave us an opportunity to actually see some of those areas and identify them pretty quickly. But we really need to do a deeper dive and explore the areas that might put us in a vulnerable situation, and then develop strategies as far as preserving supplies, and preventing over ordering and hoarding of limited resources.

You want to look at your current inventory practices. Many facilities went to just-in-time (JIT) inventories to avoid having bulk storage. And yet this could have caused them a problem with the allocations during the pandemic. That may be something that needs to be re-evaluated.

Another strategy is to review a list of must-have supplies and develop a hierarchy of clinically approved substitutions. That’s why having clinicians on your team is so incredibly important. You may find products that you think would be viable substitutions, but they really need to be clinically approved to ensure they meet the requirements of the end users.

You also want to build in redundancies. Source like items from several sources and build relationships with vendors that are manufacturing in different countries or non-traditional local suppliers. Many of us have had an opportunity to develop some relationships with local suppliers, and those need to be continued because they may be able to provide you with an allocation in an emergency so that you would have priority in obtaining needed supplies.

Another area that people have been investigating is the use of disposable versus reusable versus reprocessing. There may be an opportunity for you to lower the inventory that you carry by utilizing reusable products or by reprocessing. Additional investigation may be required as you’re going to need to have laundry services or some way to reprocess or reuse the product.

Demand signaling is another strategy in which you have visibility to the availability, consumption and utilization of critical supplies. What this all boils down to is having access to, and knowing how to use data to predict potential waves of cases. Demand signaling involves understanding your current supply levels or inventory, the burn rate of how it’s being used and the sourcing challenges.

Predictive forecasting models that are based on clinical surveillance through the EHR and supply chain data can be useful in helping to do this, especially if we go beyond COVID. There are opportunities to identify swings, upticks of certain illnesses, diseases or even surgery cases at certain times of the year, and use that data to do some predictive forecasting about what supplies will be needed to ensure that you have inventory to care for your patients.

In our next post, we’ll review some important tools to implement to help you get ahead of the curve.

We Can Help

For further information on any of our resources to help you deal with your supply chain challenges, visit our website at intalere.com. You can review our recent Supply Chain Resiliency podcast and infographic, as well as success stories and recent blog posts on a wide variety of supply chain topics.

9 Reasons for Inefficiencies in Supply Management

by Tracey Chadwell, Senior Director, Advisory Solutions, Intalere

In recent blog posts, we discussed the idea of supply utilization management and building a sustainable process to identify gaps in supply chain strategies and create new behaviors that bring savings to your healthcare facility’s bottom line.

One area of particular scrutiny is waste in the supply chain. Waste and inefficiencies in the consumption of products is where 79% of all new supply chain savings are hidden. That includes things like inferior products, value mismatches and misused, misapplied, or misappropriated products, which must be identified and eliminated.

In some cases, supply chain can evaluate, select and contract for a product/service/technology, but hospital staff use too many, use wrong products, choose feature-rich products, waste products, or vendors upsell new, higher cost products inside the new contract. That is why a cross-functional team with representation from supply chain, finance, operations and clinical segments, along with a process that includes checks and balances, is so important.

Furthermore, redundancies in supplies and unnecessary deviations in inventory processes lead to variations in practice, many times sacrificing clinical and operational excellence for personal preference or comfort.

What are some of the main reasons for waste in the supply chain that we need to guard against?

  1. Tradition – Products, services and technology need to be reviewed regularly to ensure relevancy beyond the old adage of, “this is what we’ve always used and it’s been fine.”
  2. Poor or inaccurate performance specifications – Most items are purchased from manufacturer-supplied data, not based on required performance expectations, and, therefore, are either over- or under-performing, resulting in waste and inefficiency.
  3. Wasteful and inefficient practices – Excess inventory, discards, redundant motion, unnecessary practice variation, irrational consumption.
  4. Old technologies – Some products may be inefficient or need maintenance to keep operational. It’s important to evaluate “useful” life to ensure these products are still meeting needs.
  5. New technologies – Conversely, new products and tech purported to be faster, better, cheaper may be less reliable, more supply intense and, thus, more costly.
  6. Lack of accountability – No one “owns” the value chain to oversee the life and cost of an item used by numerous departments.
  7. Lack of input from key stakeholders – Customers aren’t consulted prior to product or service decisions, so inappropriate use or changes occur. Comprehensive stakeholder involvement helps identify flawed thinking or assumptions so better decisions can be made.
  8. Feature-Rich Products – Value mismatches provide more than what is functionally required. For example, pacemakers with over 100 features that cost 50% more, when only 10-15% of its features are medically indicated.
  9. Standardization vs. Customization – It’s rare that one product is able to meet all requirements of all users without incurring waste, inefficiency and a higher cost than necessary. Customization, or building products according to individual specs, will meet the requirements of approximately 80% of the users. The other 20% require higher or lower specs to fit their needs, which may mean buying different products for them. Doing so may actually reduce waste and inefficiency by 10-15%, thus lowering overall costs.

Identifying and understanding these possible hurdles and how best to make critical adaptations, create new behaviors, and revise policies and procedures to mitigate them, is an important part of bringing sustainable savings and a strategic supply chain to your organization.

We Can Help. Intalere helps you better understand the strategic nature of supply chain and provides resources that can assist in bringing efficiency and savings to every area of your supply chain. Reach out to see how we can help. Contact Customer Service at 877-711-5600 or customerservice@intalere.com  or your Intalere representative.

Supply Utilization Management (SUM) – Part One: The Untapped Well

Peter Cayan and Tracey Chadwell, Intalere leaders

By Peter Cayan, Vice President and Tracey Chadwell, Senior Director, Advisory Solutions

While controlling cost and reducing variation will always be mission-critical functions to any and all supply chain managers, these tip-of-the-iceberg savings represent only about 37% of the total lifecycle cost of supply purchases. The preponderance of your product, service and technology life cycle costs, or 63%, is in your deployment and utilization, or how your commodities are employed by staff in your healthcare organization. 

Total lifecycle management has a beginning, middle and end. At the beginning, there is your value analysis process (i.e. deciding on best value); the middle is your utilization management system (i.e. controlling when and how the product is used) and at the end of the lifecycle you need to economically and ecologically dispose of the product.

While most hospitals, IDNs and other healthcare providers have focused on the beginning and end of this total lifecycle management process, only a few healthcare organizations have a system in place to rein in the middle of this process, or utilization, where most of their lifecycle costs are incurred. This fact could be costing your healthcare organization a significant amount of money each year.

Defining Utilization Management

By definition, utilization management is control of the wasteful and inefficient consumption, misuse, misapplication or value mismatches in the products, services or technologies you are buying. It’s all those things that happen after you deliver products to your customers. 

Waste and inefficiencies in the consumption of products is where 79% of all new supply chain savings are hidden – inferior products, value mismatches, and misused, misapplied, or misappropriated products must be identified and eliminated. What happens?

  • We evaluate, select and contract for a product/service/technology, then staff will often use too many, misuse or waste products, or choose feature-rich products that are more expensive. In addition, vendors may upsell new, higher cost products outside the new contract.
  • Redundancies in supplies and unnecessary deviations in inventory processes lead to variations in practice, many times sacrificing operational excellence for personal preference or comfort.

Let’s say, for example, that your I.V. pump set cost is $4.65 each and you use 100,000 sets per year. Then this $465,000 represents your annual utilization cost for this I.V. set. If your clinical staff is misusing or misapplying, or the I.V. set is a value mismatch (i.e. lower cost alternative available, but not being employed or purchased) of 10%, you are losing $46,500 annually in what we call a utilization misalignment.

Now, multiply this factor by the 7,000 to 15,000 products, services and technologies that you buy annually to help you to understand the impact of how not having a system in place to effectively, efficiently and easily manage and control your supply utilization is compromising your overall cost efficacy.

That’s why price is just the tip of the iceberg to be considered in your spend. This is because you could actually pay more for a product but have a lower utilization cost (e.g. electrode, bath system or lab test, etc.) and still be way ahead of the game. This fact is important to remember as we move to value-based purchasing.

In our follow-up post, we’ll take a look at what it takes to achieve real improvement.

We Can Help. Intalere helps you better understand the strategic nature of supply chain and provides resources that can assist in bringing efficiency and savings to every area of your supply chain. Reach out to see how we can help. Contact Customer Service at 877-711-5600 or customerservice@intalere.com or your Intalere representative.

Intalere Member Best Practice Spotlight-Summit Pacific Medical Center-Supply Chain Transformation

Issue

The Summit Pacific Medical Center (SPMC) materials management department needed to shift from a manual procurement-focused ticket system to an inventory-based, data-driven, end-to-end supply chain model to provide enhanced support and value to SPMC clinical areas.

Solution

By the end of 2017, the SPMC materials management team had succeeded in expanding and improving inventory throughout the hospital and was pushing the boundaries of integrating new areas into the materials management system. Through 5S, Standard Work and Continuous Improvement methods, the materials management team created a highly efficient, data-driven replenishment system that enabled Par Optimization Analysis and slotting logic to proactively size and adjust locations based on consumption to deliver a high reliability of inventory at a low cost of effort. Through point-of-use integration, clinical staff was spending less time managing supplies and had more of what was needed to treat patients. By reducing and sizing inventory locations to demand, supply chain staff was able to reduce their workload and convert former areas that were needed for inventory to patient care areas. To add visibility and transparency to the process, they developed a robust set of dashboards that accurately reported their progress toward goals and areas for improvement and provided important information and feedback to end users on their supply expenses.

Outcome

The improved process resulted in an increase in materials management controls and supply maintenance tracking from 2,727 physical inventory tracked locations to more than 4,364 locations. There was also a net 30% reduction in inventory levels and total hospital inventory turn rate of 4.6. Data visibility was added to department purchases, as well as enhanced controls. Clinical staff time spent on materials management was significantly reduced.

About Summit Pacific Medical Center

Summit Pacific Medical Center (SPMC) is a critical access hospital with a Level IV Trauma designation. SPMC offers 24-hour emergency services including a full-service laboratory and diagnostic imaging department. The Emergency Department is staffed 24 hours, 7 days a week by an ED physician. SPMC also operates three rural healthcare clinics and an urgent care clinic that is open seven days a week. The hospital is unique due to its size and accessibility. SPMC is proud of its low emergency department wait times and its ability to give patients access to a doctor quickly.

Check out the project video and view the Summit Pacific Medical Center page in the 2018 Intalere Best Practices Compendium.

Intalere Member Best Practice Spotlight – Parkview Health – Optimizing Point of Use (POU) Technology

Issue

Implementing a Point of Use (POU) inventory management system in the Parkview Health medical surgical areas resulted in scanning compliance of approximately 70%. According to POU vendors, 70% is considered a benchmark, however, with $25 million of chargeable supplies passing through the POU system on an annual basis, settling for the industry standard of 70% compliance would mean leaving $7.5 million in potential charges on the table.

Solution

With support of senior leadership, Parkview Health developed a project team whose goal was to enhance the POU system to ultimately reach 90% compliance. The team collaborated with subject matter experts from supply chain, information services, revenue integrity and finance. The team identified multiple changes that could be implemented including building a custom database table, creating daily scanning reports detailing missed scans and charges, and building a dashboard so senior leadership could monitor performance monthly.

Outcome

Parkview Health reached its compliance goal of 90% and exceeded $22 million in overall patient charges; $5.5 million of which would not have been possible without the efforts of this project. Process improvements included the development of a custom field in the software’s movement table to track recovered charges, as well as the creation of two daily automated reports to provide to nurse leaders (one to capture supplies that left the room without being scanned and the second to capture chargeable supplies that were scanned as general supplies instead of being attributed to a patient). In addition, a dashboard was built that would indicate compliance and charge capture by hospital for senior leaders to monitor and report on during their monthly organizational huddle meetings. 

About Parkview Health

Parkview Health is northeast Indiana’s largest healthcare provider, consisting of eight hospitals and a physicians group with more than 500 providers. With more than 10,000 employees serving a population of 820,000, the not-for-profit health system’s mission is to improve the health and well-being of the communities it serves.

Check out the project video and view the Parkview Health page in the 2018 Intalere Best Practices Compendium.

Intalere Member Best Practice Spotlight – Supply Cost Efficiencies: How Increasing the Use of Custom Packs Helped WASC

ISSUE

Wooster Ambulatory Surgery Center (WASC) was facing many inventory issues: inventory costs out of proportion, inefficient management of the supplies needed and how they are purchased and/or stored and too many miscellaneous items on stock shelves.

SOLUTION

WASC became a sole-source member of Intalere and began utilizing Intalere supplier contracts to receive the best possible pricing on all supplies needed. The facility also determined that increasing the number of custom packs used daily would allow the distributor of the packs to buy them in bulk, providing a better price per item.

In addition, WASC implemented a “two bin” stocking and storage system which helps the purchase agent keep a better eye on stock and know when items need to be ordered. Using the two bin system eliminated the storage of items in multiple locations and improved the efficiency of inventory management. Since WASC is a small facility and space is limited, using carts for each service allowed staff to stock specific items in one place and helps the purchase agent and staff know what is available at any given time.

OUTCOME

By using Intalere contracts for purchasing supplies, WASC’s supply costs have been significantly reduced. Implementing the two bin system has allowed for more efficient inventory management and restocking, and allows nursing staff the ability to focus on patient care. The system has helped WASC decrease inventory by roughly 1/3 of their previous inventory. The new system has lowered overhead costs, eliminating the need of increasing their charge master and keeping costs of services low and quality high.

ABOUT WOOSTER AMBULATORY SURGERY CENTER

Wooster Ambulatory Surgery Center (WASC) was built in 2008 when a group of area physicians recognized the need for a high quality and lower cost medical facility option for the local community. Built as a multi-specialty ambulatory surgery center, WASC has increased the number of cases performed on a yearly basis and in 2016 performed more than 4,000 surgeries/procedures. WASC serves five counties in rural northeastern Ohio and has a high number of self-pay patients as it serves the Amish communities in its area. WASC is highly committed to providing high quality care at an affordable price in an environment that staff would be proud to bring their own families.

View the WASC page in the 2017 Intalere Best Practices Compendium.

 

Intalere Member Best Practice Spotlight-Leveraging RFID Technology and Value Analysis to Manage Expiring Inventory-University of Chicago Medicine

ISSUE

Expiring medical devices represent significant financial costs to healthcare institutions, but also represent a risk to patient safety. An issue that is many times dismissed as a ‘cost of doing business,’ expiring inventory is a problem that required University of Chicago Medicine (UCM) Supply Chain to effectively engage clinicians and suppliers in order to create a systemic solution.

SOLUTION

UCM implemented a process designed to prevent expiration of inventory with a collaborative effort from inventory management and sourcing teams, as well as suppliers. This data feeds into a dashboard, which is utilized by leadership to track which suppliers, stockrooms and value analysis teams have the highest value of expiring inventory in the next 90 days, as well as total risk of expiration over the next 10, 30, 60 and 90 days. The dashboard also shows the dollar value and number of items expired in the last week in addition to what was avoided through supplier swaps.

OUTCOME

Since implementation of the new process in August 2016, UCM’s expired product rate has decreased by 40%. UCM shares the data with physicians to determine if the inventory may be used in upcoming procedures, thus avoiding expiration. Additionally, they are able to initiate discussions with the physicians to determine whether items expiring should be reordered at all. Expiring product is now incorporated into UCM’s Supplier Scorecard in order to push suppliers to swap expiring product or put items on consignment.

ABOUT THE UNIVERSITY OF CHICAGO MEDICINE

The University of Chicago Medicine has been at the forefront of medical care since 1927. It is an academic medical center and not-for-profit corporation based in Hyde Park. Its physician-scientists cover the full array of medical and surgical specialties and are University of Chicago faculty members.

Check out the University of Chicago Medicine page in the 2017 Intalere Best Practices Compendium.