Lean Supply Chain Automation

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2 Lean Supply Chain Automation The impact of RFID two bin replenishment on supply flow and JIT inventory management Jodi Panzini, Director Health Information Management Concord Hospital 2

3 Areas of Focus 38 locations 3 sterile areas for a total of 16 locations OR Day Surgery Central Sterile 3 specialty areas for a total of 4 locations Cath Lab Radiology PACU 4 nursing units for a total of 18 locations ICU Emergency 6N Family Place 3

4 Stimulus for Change Barcoding system was labor-intensive and an ineffective means to the reliable and accurate demand assessment needed for a JIT system Inability to easily locate items from floor to floor Nurses still involved with too many stat orders and manual requisitions Storage conditions messy and overloaded, resulting in hard-to-locate supplies, ad-hoc supply locations and poor expiry management 4

5 Objectives Improve inventory assessment on demand for accuracy and efficiency Realign SKU management to MM to reduce clinical involvement in logistics activities Enable greater MM responsibilities with fewer resources Improve ergonomics for clinical flow, expiration management and storage footprint reconciliation 5

6 Analysis of Priorities (Top 5) 1. Reduce on-hand inventory while ensuring stock availability 2. Accurately and automatically assess demand with real time statistics for JIT system through technology acquisition 3. Prevent expiry by eliminating duplicate SKU locations and integrating turns into replenishment methodology 4. Minimize clinical involvement in replenishment activities while yielding time efficiencies for both clinical and materials personnel 5. Decrease physical footprint used for supply storage, and organize supplies for improved ergonomics 6

7 2BIN-iD Overarching solution two-bin replenishment solution RFID-powered automatic replenishment triggers data-driven inventory management with real-time reporting 7

8 How the solution leverages RFID technology 1 Supplies are managed in batches Secondary batch Primary batch 8

9 How the solution leverages RFID technology 2 These batches are identified by primary and secondary labels Secondary batch label Primary batch label 9

10 How the solution leverages RFID technology 3 Each label contains a unique passive RFID transponder 10

11 How the solution leverages RFID technology 4 When a batch is depleted, the label is placed on an Active RF Board 11

12 How the solution leverages RFID technology 5 The passive RFID transponder is thereby activated, automatically transferring that batch depletion record to the business analytics software 12

13 How the solution leverages RFID technology 6 Analyzing RFID data against its database server, the software transfers replenishment orders to McKesson PMM, delivered onward to LUM provider ERP LUM 13

14 Results by Priority 1. Automatic demand assessment 2. Inventory reduction 3. Shrinkage control 4. Time and process efficiency 5. Space and ergonomics 14

15 Priority 3: Automatic demand assessment Embed Video 15

16 Replenishment Point of use capture Priority 1: Automatic demand assessment workflow Host Appl. 16

17 Priority 1: Automatic demand assessment Automatic demand assessment = Meaningful data Complete elimination of the time and resources spent assessing (scanning, counting) demand at the point-of-use More accurate record of on-hand inventory and replenishment need Real-time reports generated through LogiDATA-iD, the application software supporting 2BIN-iD, creates opportunity for continuous optimization and improvement 17

18 Priority 1: Automatic demand assessment New access to information Replenishment Optimization report Factoring in consumption rates, lead time, replenishment time Replenishment Analysis Replenishments by week, department or detail level for primary replenishments, secondary replenishments and actual secondary replenishments. Delivery Status reports Abnormal Replenishment Cycle Time Lead Time Analysis Automated Requisitions for LUM provider 18

19 Priority 1: Automatic demand assessment Improved LUM efficiency Per line item cost drastically reduced owing to regulated reorder thresholds at irregular time intervals 6:00 AM 8:00 AM 10:00 AM 12:00 PM 2:00 PM 4:00 PM 6:00 PM 8:00 PM Before - Sample Reorder Points Throughout the Day 0% 20% 40% 60% 80% 100% 6:00 AM 8:00 AM 10:00 AM 12:00 PM 2:00 PM 4:00 PM 6:00 PM 8:00 PM After - Sample Reorder Points Throughout the Day 0% 20% 40% 60% 80% 100% 19

20 Priority 2: Inventory reduction Department Overstock Value PACU $ 0 Emergency $ 4,180 ICU $ 2,924 Cath Lab / AMU $ 0 Radiology $ 4,595 Central Sterile $ 1,560 OR $ 164,643 Day Surgery $ 105,785 Presumed Total $ 283,687 20% adjustment $ 56,737 Adjusted Total $ 340,424 Post Lean-Process Unidentified inventory

21 Priority 2: Inventory reduction

22 Priority 2: Inventory reduction Department PAR Before Lean Process PAR After Lean Process Current Capacity Inventory Snapshot After Replenish t Capacity Increase Inventory SKU Reduction Increase PACU $ 7,459 $ 7,363 $ 8,252 $ 7, % 4.36% 0% Emergency $ 41,829 $ 29,209 $ 26,170 $ 20, % 51.23% -8.48% ICU $ 44,511 $ 33,825 $ 39,772 $ 31, % 28.89% -1.61% Cath Lab/AMU $ 11,518 $ 12,406 $ 26,924 $ 22, % % 6.83% Radiology $ 18,681 $ 21,947 $ 36,562 $ 36, % % 7.47% Central Sterile $ 29,245 $ 21,930 $ 45,590 $ 37, % % 0% OR $ 539,150 $ 537,570 $ 659,031 $ 535, % 0.70% 12.81% Day Surgery $ 328,984 $ 294,777 $ 255,662 $ 210, % 35.96% 1.54% Total $ 1,021,377 $ 959,026 $ 1,097,963 $ 893, % 12.53% 4.7%

23 Priority 3: Shrinkage control Shrinkage factor is the evaluation of the global value of product loss based on the value of the purchases and the level of efficiency of the supply chain. Shrinkage is normally caused by: Expired products Poor knowledge of inventory levels Replacement of products with new products Products no longer used following the departure of surgeons Lack of data regarding excessive use of expensive products from one period to another Pilferage 23

24 Industry average of 8% shrinkage Shrinkage is normally caused by: Expired products Poor knowledge of inventory levels Replacement of products with new products Products no longer used following the departure of surgeons Lack of data regarding excessive use of expensive products from one period to another Pilferage Priority 3: Shrinkage control 24

25 Priority 3: Shrinkage control Current state features: Leaner inventory levels Less opportunity for supplies to expire Built-in stock rotation Better organization with decreased loss It is estimated that the new system has the capability to reduce this shrinkage rate to 3%, representing a 63% reduction in loss due to waste. 25

26 Number of SKUs Priority 3: Shrinkage Control Total Managed SKUs % 4600 Managed SKUs BEFORE Managed SKUs AFTER Total Automation has allowed the number of products managed by the MM department to be increased by 4.7%, while still reducing duplicate SKU locations by 11.2%. This translates to 43.2% fewer duplicated SKUs.

27 Number of SKUs Priority 3: Shrinkage Control Duplicated SKU Locations Before/After % SKU duplication BEFORE SKU duplication AFTER Total The implementation of the system has allowed the number of products managed by the MM department to be increased by 4.7%, while still reducing duplicate SKU locations by 11.2%. This translates to 43.2% fewer duplicated SKUs.

28 Number of SKUs Priority 3: Shrinkage Control Total Managed SKU Lines % SKU lines BEFORE SKU lines AFTER Total The implementation of the system has allowed the number of products managed by the MM department to be increased by 4.7%, while still reducing duplicate SKU locations by 11.2%. This translates to 43.2% fewer duplicated SKUs.

29 Priority 3: Shrinkage Control Factors leading to improved shrinkage control: Fewer duplicate locations means less misplaced or forgotten stock Leaner inventory levels means shrinkage risk avoidance Integrated turns means supplies do not expire due to overstocking Real-time visibility means proactive response to supplies nearing expiry

30 Frequency Time (min) Frequency Time (min) Frequency Time (min) Frequency Time (min) Time (min) Time (min) Priority 4: Time and process efficiency Reduction in time spent by materials personnel Department Before Scanning Put away / ordering After Scanning / Put Away ordering Gain / week Scanning / Put away ordering PACU Emergency ICU Cath Lab / AMU Radiology Central Sterile OR Day Surgery About $28,000/year Sub total Total 2260 minutes 30

31 Priority 4: Time and process efficiency Reduction in time spent by clinical personnel requisitioning supplies Department Before # of # of Requestors Requests PACU NA NA Emergency 3 45 ICU 4 6 Cath Lab / AMU Radiology 3 85 Central Sterile OR Day Surgery 7 55 Anesthesia 3 18 Totals After # of # of Requestors Requests Gain / week # of Requestors # of Requests NA NA NA NA % 28.9% % 0.0% % 23.2% % 17.6% % 79.3% % 25.5% % 76.4% % 50.0% % 37.2% About $37,000/year 31

32 Priority 4: Time and process efficiency Reduction in time spent by clinical personnel searching for products and picking cases Department # of nurses Search/Access (min/day/nurse) Time (hours/wk) # case/day Time/case (min) Time (hours/wk) PACU Cath Lab / AMU ICU ED Radiology CS DSC OR Total Total About $112,000/year About $83,000/year 32

33 Priority 4: Time and process efficiency Reduction in time spent by clinical personnel searching for products and picking cases Comments gathered during interviews with staff confirm savings: Search/Access Time Department Products are # of grouped nurses by specialty/family for case picking (min/day/nurse) (hours/wk) # case/day Time/case Time Reduction in the number of locations means all products are grouped (min) in the (hours/wk) same PACU room Cath Lab Improved / AMU ergonomics 10 provide 5 direct access 4.17 to the products Less ICU paperwork, 12 particularly for 5 case picking 5.00 in the CS department ED Reduction in the number of stockouts less running around looking for products Radiology In case of a stockout, the look-up function allows users to find the product directly, CS without wasting time searching for it. DSC OR Total Total About $112,000/year About $83,000/year 33

34 Priority 4: Time and process efficiency Recap of the time efficiencies generated through automation Staff Improvement field Hours saved per year Gains per year Material specialists Clinical staff Ordering 1216 $ 18,240 Put away 667 $ 10,005 Ordering 927 $ 37,080 Ergonomics/ organization 2083 $ 83,320 Case picking 2820 $ 112,800 Total 7713 $ 261,445 34

35 Priority 5: Space and ergonomics Emergency Department Red Room example BEFORE

36 Priority 5: Space and ergonomics Emergency Department Red Room example AFTER

37 Department Priority 1: Space and ergonomics Before Footprint (ft 2 ) After Footprint (ft 2 ) Footprint Reduction PACU % Emergency % ICU % Cath Lab / AMU % Radiology % Central Sterile % OR % Day Surgery N/A N/A Total % Throughout the hospital, 5% more products within 22.8% less space. In the OR, 12.8% more products within 16.8% less space.

38 Other gains identified during the transformation The following are additional advantages gathered during the many interviews conducted with clinical staff and MM managers but that have not been specifically quantified. Prevention of further overstock Automated stock rotation Anyone can now put away supplies Easy to maintain Accessibility to the information There is no longer a need to move shelving units to pick items

39 Next Steps Evaluate implementation of 2BIN-iD in newly constructed 5N Expand 2BIN-iD to nursing units to realize similar gains in other clinical areas Engage nursing personnel to demonstrate value and time savings Use realized ROI in other areas to quantify benefits in remaining areas 39

40 Next Steps Integrate automation to achieve item-level traceability to manage consignment and high value products Radiology Cath Lab OR Day Surgery 40

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