Tag Archives: supply chain management

Ensuring the Resilience of Your Supply Chain – Team, Strategy and Tools – Part 2

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

In our previous post, we introduced the concept of supply chain resiliency, and shared insight on building your team and several strategies you can undertake as you move through the process.

Now that we’ve got the team and we’ve got some of the strategy in place, what are some of the tools that are most important to implement to help you get ahead of the curve? What are some of the things that you can do in utilizing opportunities through the various partners on your stakeholder team?

It’s very important to build relationships with local, national and non-traditional suppliers. Obviously, suppliers can provide you access to products, but as we learned during COVID, having a variety of resources is important.

We were going places like Home Depot, which is not traditionally thought of as a supplier for medical supplies, but they were able to provide things like N95 masks and other types of protective equipment. To keep those relationships very, very vital, you need some pre-planning to develop needs-based allocation strategies to ensure access to your supplies.

This can be done through the suppliers directly, especially the local suppliers, but it also needs to be done through your distributors who can also assist with identifying alternative products, strategic sourcing and risk share models, as well as storage of products and inventory management. Some of them offer an opportunity to serve as your warehouse or your storage area and will bring the supplies to you on a regular basis so that you don’t have to allocate that extra space normally required for inventory. Speak with them about possible opportunities to see how they can assist.

Suppliers/Distributors will sometimes initiate allocations to prevent excessive ordering and to promote the availability of needed products to other healthcare providers. We saw some of this happening during the pandemic, where it may benefit specific facilities, but it also hurt others down the line with not having product availability. That’s something we need to work with our distributors on proactively, so that we have our products, but our neighboring facilities have their products as well.

Your GPO can be an incredible resource in that they can help determine reliable sourcing methods, purchasing partnerships, etc. Many GPOs are now looking at onshore/nearshore sourcing, diversifying sourcing and product substitutions, so that we’re not in a position again where we are not able to get products because of where they were made. They are looking at non-traditional suppliers and vetting them to ensure providers are not taken advantage of.

Another area that’s incredibly important is that transparency is the name of the game along the entire supply chain. We need tools that are going to help put data together and provide actionable information and provide transparency.

Some larger organizations are implementing ERP or enterprise resource planning, a cloud-based solution that basically allows you to find the product from when it hits your door to when it’s actually being used on the patient. With that, you have the visibility to utilization and inventory levels, and can see where it’s being used, how it contributes to cost of care and how it actually flows through your financial software.

We’re seeing a lot of system integration and interfaces come up. That allows for data flow between different systems so that you can put the big picture together and see what’s going on with your inventory systems, your staffing models, your patient information and more.

Item master cleanup is incredibly important because if you’re not using accurate data, the decisions you make based on that data are often flawed. There are services that provide item master cleanup and maintenance that are worthwhile in resolving this issue.

For smaller facilities, we’re seeing a lot of solutions coming out that are procure-to-pay. From ordering all the way through finance, it’s a chance to integrate what’s going on. Many of these solutions can be scaled down to fit smaller institutions. It basically makes it almost like an Amazon-type setting. You can put your ordering in and it helps with your three-way reconciliation, you can do inventory management and you can do charging from it with barcodes. And again, this would all feed into the financial software.

Finally, there are stand-alone inventory management systems so that you can see what’s there, how much you’ve got on stack and what they have on the units. Again, all of these systems help you in knowing what’s there, knowing what the availability and usage is, and can really help you do some predictive analytics and determine what needs to be ordered when, how much to keep in stock, develop your par levels, etc.

To go one step further in looking at workflow efficiencies, we also have robotic process automation (RPA). Basically, any repetitive process can be set up so that it is done by a software “robot,” freeing you up to spend more time for example with enhancing your revenue by addressing accounts payable, versus making repeated calls to insurance companies for refiling or for pre-authorizations.

That’s another area we’re seeing more and more because in going virtual, a lot of things fell by the wayside due to the fact we didn’t have processes in place for them. Having these types of solutions in place now makes us much more viable and sustainable. If something like that should happen again, and you can continue these processes, continue generating revenue, continue communicating with patients and insurers, you don’t have to fall behind or play catch up when you get back to the office.

These are just some of the best practices that can be helpful to anyone depending on where they are in their level of supply chain maturity.  

Something that really came out during the pandemic is just making sure that you’re prepared and you’re proactive in working with those other sourcing alternatives. Whether it be reuse or other alternative systems, they all work together to make sure that you don’t have a drop in service or you’re still able to ensure that you’re taking care of patients and customers at the high levels they have become accustomed to from your organization.

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.

How to Find Opportunities to Advance Your Supply Chain Organization

Brent-Johnson-Amerinet-President-and-CEOBy Brent Johnson, President and CEO, Intalere

A recent supply chain survey conducted by UPS found that only 18 percent of companies could produce a current supply chain strategy document with a detailed project roadmap. Why? Much of it has to do with the fact that supply chain, especially in the case of healthcare, is extremely complex and challenging in terms of scope and development. Just that initial fact is enough to keep organizations from getting started. But it is extremely important for healthcare executives to understand, that with the coming pressures of healthcare reform, supply chain management will need to become a competitive differentiator for many organizations. Externally purchased materials and services represent 40-45 percent of a company’s total cost structure, making supply chain best practices adoption the most powerful cost-reduction and quality lever available.

So what are some of the steps that an organization can undertake, whether through their own initiative, or by partnering with a consultant or facilitator, that can more easily get the ball rolling? Let’s take a look at some solid steps to follow, starting with data analysis and pre-assessment:

  • Conduct a qualitative assessment across the people, processes and technology of the organization.
    • People – Understand gaps or hand-offs between internal customers and materials. What, if any, staffing limitations exist? What are the currently defined roles and responsibilities of current staff and what might cross training needs be? What’s the scope of influence of your supply chain across the non-labor spend of your company? What’s the talent level of your supply chain resources, and can they lead strategic improvements in categories beyond med-surg?
    • Processes – In this area, you need to gain a full understanding of the current state of supply chain skill sets, resources and communication dynamics, with an eye toward coordinating the organization in all service areas related to procurement processes and possibly formulating a plan for standardization of products. Understand how/why clinical staff outside of supply chain order product, what the current policies and procedures are, how space is being utilized in terms of inventory, and what is being done to mitigate product waste or to reduce the touches of products from “dock to doc.”
    • Technology – Identify metrics needed for each area – med surg, pharmacy, etc. – to help those managing understand what they should be measuring to gauge performance. Identify tools that can assist in integration and help to operationalize tracking of spend, and other related details.
  • Quantitative assessment of supply chain data. Depending on what size and type of facility you have, it is important to understand where you are currently in terms of relevant supply chain benchmarks. Some areas to consider in setting benchmarks that can help you establish next steps:
    • Procedure volumes, including encounters by specialty and encounters by physician.
    • Spend – Spend analytics is the foundation of supply chain management. It’s important to know the volume, by category, of all the non-labor spend within your organization. Other data needed would include inventory volumes by areas, supplier/vendor spend and spend volumes by unit cost and month.
    • Inventory – par levels, inventory velocity, waste management and reduction.

With these basics established, you can begin to gain a clear picture of where you are and where you may need to go. In subsequent posts, we’ll examine how you can use this information as the building block to take you from your current state of supply chain operations to a more fully integrated and advanced future state.

Learn more about Intalere’s supply chain solutions.

Four Key Capabilities for Supply Chain Excellence

Brent-Johnson-Amerinet-President-and-CEOBy Brent Johnson, President and CEO, Intalere

Healthcare entities have long been behind the curve when it comes to supply chain success. But in recent years, I have noticed we are beginning to “turn the corner,” and focusing on equipping our organizations and people with the resources and knowledge to elevate the supply chain as a strategic driver of change. At the forefront of this movement, the Association for Healthcare Resource and Materials Management (AHRMM), the premier membership group for healthcare supply chain professionals, began an initiative several years ago built around CQO – Cost, Quality and Outcomes.

Supply chain is now at the intersection of CQO and is best positioned to be a champion of it within their organizations. As such, supply chain professionals should understand and teach the importance of CQO to physicians, stakeholders and other supply chain employees. In a fee-for-value world, progress towards true CQO is absolutely critical. It’s never been a better time to be a supply chain professional. With that in mind, what are some of the foundational capabilities that will best position your healthcare supply chain organization for success?

      1. Analytical Excellence – Understanding links between cost and clinical outcome is impossible without advanced data, analytical and reporting capabilities. Appropriate, applicable data forms are the foundation for financial clarity and also provides the evidence to tie together clinical and operational functions so that all those involved can see the true picture from both aspects. Investing in and utilizing high quality data and spend analysis tools is imperative to reducing costs and maintaining clinical outcomes.
      2. Infrastructure for Physician Collaboration – Effective physician collaboration depends on specialized technological, political and administrative capabilities. Physicians must have a “seat at the table,” from the outset so that they can understand the tools, processes and challenges that affect all decisions. Physicians and others will be better able to support any initiatives because they have collaborated from the outset through collection and analysis of data, identifying opportunities, vendor selection (if necessary) and strategy development. Success depends on their full confidence in the integrity of the process and their voice in determining acceptable solutions. Above cost, their primary concerns include maintaining quality of care, quality outcomes and product/process choice to suit patient needs.
      3. Value-Oriented Culture & Processes – Understanding cost implications of clinical decisions across the care continuum is an indispensable capability in new markets. The ultimate focus should be on patient and clinical benefits, with savings as a secondary consideration. What you will find in most cases is that if you also keep an eye towards minimizing variation in product, service and process, significant savings will be achieved as well. A value-oriented culture which involves stakeholders throughout the organization allows supply chain to be an equal partner in important decisions. Goals must be closely aligned throughout the organization, which allows for leveraging shared strengths and encourages growth and expansion across the continuum of care.
      4. Collaborative Supplier Relationships – “Beating up” suppliers on price is a profoundly limiting strategy. Success depends increasingly on creative, collaborative partnerships. Suppliers reward commitment, so focus on a contracting strategy and portfolio where volume will drive pricing, especially in the case of commodities. Develop appropriate relationships with suppliers that support your mission, vision and values and endeavor to use suppliers as extensions of your teams and capabilities.

Visit Intalere’s website to learn more about our supply chain solutions.

The 12 Fundamental Best Practices of Supply Chain Management (#10-12)

Brent-Johnson-Amerinet-President-and-CEOBy Brent Johnson, President and CEO, Intalere

In my last post of this series, we focus on the final three fundamental supply chain best practices, around internal business costs and processes.

Manage inventory – The key to maximizing your strategy should include aspects of inventory control (access), management (establishing par levels, etc.) and integrity (expiration), and can take some trials and errors in your approach until you find the best fit. One particular example includes a very large hospital system that recognized its need to manage inventory and the basic steps that needed to be put in place which included establishing par levels. The challenge came with trying to apply a particular behavior across all areas. Not all general strategies apply to each department within the hospital. Specifically in high expense areas like Surgical Services, Radiology or Cardiac Cath Labs, the needs are specific to the patient load being serviced. What works in the general supply areas in relation to delivery frequency, numbers of locations of those products, and the number of users having access to the ordering process can vary across these highly specific areas. Make sure to account for that.

Manage distribution and logistics – Healthcare logistics costs are much higher than other industries and we are stuck in traditional practices with traditional models where there is a lack of best practices. Distribution and logistics can comprise up to 38% of supply costs in healthcare. For this reason alone, it is imperative that every touch be quantified and managed. To get a true picture of your logistics effectiveness, you must make sure to include and evaluate these ten dimensions:

  • Facility layout and design.
  • Use of equipment and design.
  • Warehousing processes.
  • Material storage and preservation.
  • Material transportation and routing.
  • Material handling and flow.
  • Use of 3rd party logistics providers.
  • Supplier integration and value-added services.
  • Performance management.
  • Organization and culture.

In healthcare, some systems pursue self-distribution as an avenue to inventory and logistics best practices and improved outcomes. In my previous role as vice president of supply chain at Intermountain Healthcare, we did build our own warehouse. Not everyone should pursue self-distribution, but everyone should have a passion to standardize products, reduce inventories and reduce the touches for each product before it reaches the patient. This can be done by working closely with your distributor. You should manage your distributor as an extension of your own business. But many of the touches are inside our hospitals and clinics, hence we need to do some good self-assessment. 

Establish and monitor controls – As part of the entire supply chain management operation, key performance indicators must be established and regularly monitored. The bottom line is that when you don’t have standards you pay more. You pay for every salesperson and every delivery truck. You pay for the cost of a backorder, late delivery, invoice problem, over-shipment, damaged product and recall. You should seek to be continuously improving in terms of qualitative assessment (logistic processes and practices) and quantitative assessment (key logistic costs, metrics and benchmarks).

This post concludes our look at the 12 fundamental best practices of supply chain management. Working from this strong base, you can adopt a best practice for your facility.

Also, remember that being able to move quickly on what you have learned is a best practice, and last, but not least, remember that in any situation, maybe the best “best practice” is eliminating “bad practices.”

To learn more about how you can become more strategic when it comes to supply chain, click here.

The 12 Fundamental Best Practices of Supply Chain Management (#4-6)

Brent-Johnson-Amerinet-President-and-CEOBy Brent Johnson, President and CEO, Intalere

In my last post, I began highlighting the fundamental best practices of healthcare supply chain management, with the goal of helping you elevate your supply chain operation into a strategic resource. We started with a few building blocks – developing a strategy, aligning the supply chain organization and recruiting supply chain professionals. This week, we’ll move on to performance management, establishing a strategic sourcing strategy and managing the total cost of ownership.

Be dedicated to performance management – One of the building blocks covered previously is the importance of recruiting and developing well-rounded and multi-skilled supply chain personnel and fostering a commitment to innovation, excellence and growth. The organization should view supply chain as a high-value generator that responds to market changes and local requirements while keeping a focus on corporate needs. They should then provide incentives for procurement process excellence, linking procurement metrics to strategic objectives and to corporate results and proactively controlling procurement processes.

Establish the strategic sourcing strategy – This step applies advanced sourcing techniques and drives simplification and standardization of sourced products and services. This strategy should focus on elimination of redundancies, refinement of business processes, ideas for continuous improvement and formalized savings tracking systems. A strong strategic sourcing function offers numerous benefits around lower costs, higher quality and greater customer service, while also leading to more predictable and positive patient outcomes. In healthcare, both group purchasing organizations (GPOs) and hospital systems do strategic sourcing. Often hospital systems don’t have the resources to do strategic sourcing for all of the needed categories, products and services, hence they rely on a GPO. Strategic sourcing for commodities and basic med-surg products are best done by GPOs because they are less complex and can be aggregated for the benefit of many customers.

Manage total cost of ownership – More than just the purchase costs and what you actually pay at the time of transaction, supply chain professionals must develop a keen understanding and control of some of the more unseen costs involved in purchasing. For example, they must know, “How much do my usage patterns and processes add to cost?” Also, “How much does the way I work with my vendor affect my cost?” Understanding aspects like inventory carrying costs, expired products, physician preference costs, logistics and distribution, expediting and special delivery and payment, can bring further clarity and cost savings to your operation.

In my next post, we’ll review establishing alliances, developing supplier management processes and streamlining the order-to-payment process.

To learn more about how you can become more strategic when it comes to supply chain, click here.

The 12 Fundamental Best Practices of Supply Chain Management (#1-3)

Brent Johnson Intalere President and CEOby Brent Johnson, President and CEO, Intalere

In previous posts, I’ve shared with you how important a role the supply chain plays in the efficient operation of your healthcare facility. Over the next several weeks, I’ll be offering a series of posts highlighting the fundamental best practices of healthcare supply chain management, in the hopes that these tips can help you mold your supply chain operation into a strategic resource for your organization in 2016. We’ll start with a few building blocks this week – developing a strategy, aligning the supply chain organization and recruiting supply chain professionals.

Develop the strategy – This begins with defining needs and opportunities and then coming up with a game plan that allows for the ability to optimize the people, processes and technology within the organization to deliver greatest value. The supply chain mission and vision should align with the corporate mission and vision. When senior leadership recognize supply chain as critical to their mission and success, then supply chain becomes very important to them. Often the first steps of a good supply chain strategy starts with educating senior leadership on the benefits of implementing good supply chain strategies and practices in their company. If you don’t have that, it’s an uphill battle. One of the most important things that healthcare facilities can do to become more efficient and cost effective is to stop thinking like a healthcare facility. Look beyond traditional industry solutions and study proven business strategies used outside of healthcare.

Align the supply chain organization – Optimizing the healthcare supply chain may mean very different things, depending on the size and scope of your organizations, but at the very least, it mandates a change in thinking as well as practice. It means that supply chain management needs to define its strategic role and begin to execute value-added activities across all aspects of the supply chain. Advantages of optimizing your supply chain include:

  • Enhanced operational costs with a total cost of ownership focus.
  • Improved quality through increased compliance with contracts and reduced organizational risk.
  • Improved patient outcomes and safety through integrated systems to reduce errors and streamline procurement via automation.

Completing this should include C-Suite buy-in and support, setting clear leadership in terms of responsibility and authority, building supporting infrastructure and investing in technology.

Recruit and develop supply chain professionals – In healthcare we generally lack supply chain talent because of our focus on patient care and not best business practices. As possible, senior leadership must commit resources to bring in skilled and talented people as part of the supply chain function or partner with someone who can bring that expertise. By talent, I mean people who are strategic thinkers, analytical and have good interpersonal relationship skills. It helps if they understand supply chain best practices, but you can always give them the exposure or training to apply their talent to supply chain.

Developing well rounded and multi-skilled supply chain personnel and fostering a commitment to innovation, excellence and growth is a high priority. Provide incentives for procurement process excellence.

In my next post, we’ll look at performance management, strategic sourcing and managing total cost of ownership.

To learn more about how you can become more strategic when it comes to supply chain, click here.

Supply Chain Strategies in Healthcare Reform Will Require Much More than Price Management

Brent Johnson
by Brent Johnson, Intalere President and CEO

Supply Chain Management is practiced by most large companies with significant financial success, but what exactly is Supply Chain Management? More than just seeking to pay a lower price on products and services, it entails a disciplined, systematic process of analyzing corporate expenditures and developing strategies to reduce the total costs of externally purchased materials and services. It involves:

  • What you buy.
  • Who you buy from.
  • How you buy.
  • What you inventory.
  • How you use the products and services you buy.
  • –How you can make those products and services better.

This is where the idea of “strategic sourcing” comes in and represents a core step in elevating the supply chain function. It generally includes basic steps such as collecting data and analyzing spend, as well as research of the market including suitable products and suppliers. Within this step, it is important to understand the total cost of ownership. This generally includes purchase costs, which are much easier to see and basically how much you pay at the time of transaction. Less apparent are things like internal business costs and joint supplier/customer costs.

Internal business costs include things like inventory carrying costs, expired products, physician preference costs, procure to pay costs, lack of standardization and non-compliant utilization. Joint supplier/customer costs can include logistics and distribution, damaged products, expediting and special delivery and payment.

Total cost of ownership forms the basis for strategic sourcing, which yields numerous benefits all aimed at lower costs, higher quality and greater customer service. In term of supplier interactions, it can lead to a reduced number of suppliers, and perhaps some new ones, but also stronger relationships with those who remain partners, including better service levels and longer-term contracts.

On the business side, consolidated buying and rigorous negotiation naturally yield lower prices. But beyond that, with an expanded focus on value, strategic sourcing offers elimination of redundancies, refinement of business processes, ideas for continuous improvement and formalized savings tracking systems. But most important to the end user – the patient – standardized product specifications can help lead to more predictable and positive patient outcomes.

Access Intalere’s library of resources to learn more about various supply chain related topics.