Supply Chain s Journey to Integration. Dennis Mullins, MBA, CMRP SVP Supply Chain Operations
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1 Supply Chain s Journey to Integration Dennis Mullins, MBA, CMRP SVP Supply Chain Operations
2 Indiana University Health By The Numbers Hospitals 18 Hospitals 3200 Beds Non Acute Facilities 465 Staff Team Members: More than 33,000 Patients Admissions 119,908 Outpatient Visits 2,879,430 Available Beds 2,683 ER Visits: 493,565 Surgery Cases: 115,737 Education and Research Total Grant Research Funding $320,066,316 Total Residents and Fellows 1,167 Total Research Studies 1,485 2
3 Integrated Supply Chain Transformation Reason for Action: IU Health s decentralized and independent supply chain operations and locations negatively affects our ability to leverage our economies, standardize our operations and effectively manage our assets. This impacts our ability to provide quality patient care in the most cost-effective manner. Future State Multiyear SC strategy and roadmap aligned to the IU Health vision and overall strategy. Strategy is governed across all SC functions at multiple process levels. Aligned initiatives and goals with consistent global crossfunctional processes and metrics. Performance, risk managed across functions. Decisions focus on financial and operational improvements. Inventory targets consider full risk-adjusted carrying cost. Clean master data, integrated SC systems of record. Current State Each supply chain function defines its own priorities and strategies. Objectives and metrics are business-unit specific. Deteriorating Assets 18 Inventory Asset Locations Multiple Storage Locations Gap Weak linkage between corporate and supply chain strategy. Supply chain functions are managed in isolation. Disparate organizational SC processes Missed opportunity to maximize economies Migration Plan Implement standardized and repeatable strategy. Establish integrated processes and cross-functional metrics. Develop program and businessprocess-management competencies. 3
4 Homework! 4
5 Integrated Service Center Explainer Component Question Response Reason Why is this change necessary? IU Health s decentralized and independent supply chain operations and locations negatively affect our ability to leverage our economies, standardize our operations and effectively manage our assets. AIM: Supply Chain needs to align to an integrated service center model. Vision What is our desired end result? We will improve the availability of supplies through the centralization of product and the standardization of operations, resulting in more efficient processes for our staff and improving patient care. This will enable other service lines to align services and logistics with Supply Chain Execution How will we get there? We will implement integrated service center strategies to improve our customer service levels. We will set new expectations for service levels with our internal staff as well as our key supply contracts. We will open a new integrated service center in Plainfield. 5
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7 Supply Chain Maturity Journey Foundational Model Optimization Model Transformation Model Departmental approach View Supply Chain as a pipeline for products Goal is to supply hospitals with required materials Limited focus on efficiency and productivity Focus: Operations ISC Business Case and Design System-wide approach Utilize vetted spend analysis, and standardization to support procurement Characterized by aligned support from Finance, Decision Support and Legal Focus: Overall Cost of Goods Sold -Centralized strategic sourcing and logistics Judge products based on their contribution to organizational and clinical goals Incorporate improvements in clinical protocols in SCM decision making Focus: Cost, Efficiency, and Quality Clinical Outcomes Strategy People - Quality Service Finance Evaluation of Facility Operations, Purchasing, Contracts and Business Applications Technology and Reporting Partnered with Real Estate to research leasing and or ownership options for distribution center model (ROI) Review of current personnel, skillset and needs to meet Supply Chain operational standards and recruiting Construction of ISC and Distribution Floor buildout Self Distribution Contracting (110 Suppliers) Reconciled old RNI, INR, MNR, Service PO, Open PO dating back to Updated Item Master, Lawson # and CDM Codes (ongoing) Eliminated Solstice Inventory Management System, Asset Management and BuyRite e-marketplace solution Installed Supplier Portal, Prodigo e-markeplace, ECRI Recall, Smartsheets, MedApprove, CCXpert and Savings Actualyzer Go-Live!! Optimized operational costs with a total cost of goods focus Systems integrated to reduce medical errors and improve safety (Recall Mgmt) Operational procurement processes and systems streamlined and automated Increased compliance with contracts to reduce organizational purchasing risk Balance between cost, efficiency, and ensuring positive patient outcomes 7
8 Integrated Service Center Implementation Strategy MULTI LEVEL PROJECT Warehouse Site Selection Warehouse Design & Material Handling ISC Operations Flow & Management Regulatory Requirements Hospital Inventory & Location Management Inventory and Par Optimization Standardization of Operational Procedures Item Master Data Cleanse Transportation Planning & Route Design Transportation Equipment Acquisition & Maintenance Product & Vendor Selection Strategic Sourcing KPI s WAREHOUSE MANAGEMENT SYSTEM AND AUTOMATED PICKING MODULE Business Continuity Plan & Emergency Preparedness Community Relations & Outsourced Services Additional Service Lines 8
9 Multiple Value Streams - Principle of Alignment - There is more value in overall alignment than local excellence - Don Reinersten System Supply Chain Operational Value Stream - Steps used to provide goods and services Trigger Contracting Value Analysis Item Master Vendor Mgmt Procurement Service Center Value Hospital Supply Chain Internal Customers Patients Hospital Supply Chain Internal Customers Patients Hospital Supply Chain Internal Customers Patients Hospital Supply Chain Internal Customers Patients Functional Value Stream - Local steps used to care for patients System Standardization System Business Service Maximized Economies 9
10 Current Distribution Model Med/Surg Mfg. Back End Incentives Medline Suture Express Distribution Markups and Freight Costs Hospital 1 Pharma Mfg. Cardinal Hospital 2 Lab Mfg. Fisher Scientific Blood Hospital 3 Radiology Mfg. IT Mfg. Contrast Hospitals 4-23 Clinics 250+ Guy Brown, Henry Schein, Fluids Specials Home Health Retail Pharmacies Central Lab IUHP Central Offices 10
11 Self Distribution Model Med/Surg Mfg. Backend Incentives Integrated Service Center Supply Chain Ops Consolidated Transportation South Central Region Hospitals AHC Hospitals Pharma Mfg. Lab Mfg. Radiology Mfg. IT Mfg. West Central Region Hospitals Indy Suburban Hospitals East Central Region Hospitals Specials Home Health Ancillary Services Retail Pharmacies Distributors Home Health Central Lab Pharmacy IT Asset Mgt Print Shop Clinical Engineering IUHP (Regional Hub and Spoke) Central Offices 11
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13 New Product Introduction Process STRATEGY MedApproved Submission Post Approval EXECUTION New Product Introduction Product Description and Use Clinical Needs Assessment Proforma Organizational Impact Expense, Revenue, Contractual & Clinical Launch Package Communication Plan Product Addition/Conversion Phases and Activities Approval Approval Agreement Executed Masterfile Education Inventory Prep Conversion Regional Value Analysis Product Evaluation Facility Based Justification (In person) Clinical Councils Practice Variation Final Approval Contracting Negotiation Legal Review Financial Review Business Apps Price File Load Item Master Changes Nursing Education and Training Communication to Patient Care Field Staff ISC Assistance With Transition of Old Stock as Needed New Inventory Stocked Facility Ops Transition of Old Stock Facility Based PAR Changes Communication Back to ISC Upon Completion Commodity Requests Bypass Clinical Council Review 13
14 Integrated Service Center Floorplan Integrated Service Center Floorplan High $ Inventory 14
15 Goods-to-Person Automation: AutoStore Automated Storage and Picking System
16 Enhancing Warehouse Performance Through Automation Fully automates bin storage, retrieval and delivery, increasing picking speed by up to 250 picks per person per hour Decreases inventory storage footprint by an average of 60% -- utilizing all available space to maximize storage capacity Delivers a 90% improvement in picking error rates versus non-automated distribution centers
17 Strategic Growth and Expansion of ISC Cost Ancillary Services Investment Technology WMS, AUTOMATION Transportation & Logistics Pharmacy Services Wholesale - Retail Non Acute Sites & Home Health Opportunity ISC Building Enabler Value Time / Return 17
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19 Reason For Action Contracting Informatics Value Analysis IU Health s decentralized and independent supply chain operations and locations negatively affect our ability to leverage our economies, standardize our operations and effectively manage our assets. Pre-Award Solicitation RFx Negotiation Legal Review Facility ERP Structure Procure to Pay Charge/Item Master Standardization Practice Variation Clinical Trials Vision Contract Award / Execution Vendor Mgmt Quality Alignment of system support services Price File Submission Data Source of Truth - PUSH, DSS & SCO New Technology Introduction Support LRP goals through standardization of product & centralization of operations Improve service levels for our patients, staff & key strategic partners Implementation Contract Mgmt G/L Standards Recall Mgmt Product Selection Process Cost Benefit Analysis Problem Statement No True Visibility of Cost Of Goods Sold Future State Aligned initiatives and goals with integrated cross-functional processes and metrics. Distribution Freight Mgmt Physical Inventory Procedural Area Supply Mgmt Prompt Pay Discounts Vendor Returns IUH Depts with Supply Chain Functions Records Mgmt Consignment Process Credit Memos Supply Chain Equipment Disposition Clinical Trials Specials IT, Finance, Home Health, Lab, Pharmacy, Food Service, EVS, D&C Possibly Others Fleet Mgmt Receiving Transportation Inventory Control Standards Receiving Conversions Buying Authority Logistics Hospital Operations Purchasing Service Pos Capital Purchasing 19
20 Key Committee Tenets Reports to System EVP/COO Strategy Growth Purpose The Integrated Service Center (ISC) Governance Committee gains: Authority it needs to promote system wide supply chain and logistical change effectively. Helps the System EVP/COO carry out the duediligence functions related to the development and operation of the Integrated Service Center. Performance/ROI ISC Optimization Operations Scope of work Planning Compliance Strategic review of growth/expansion opportunities Business policies Quarterly ISC performance reviews Service Level Agreement [TBD] that addresses ISC management functions including HR, Finance & Accounting, Purchasing, Logistics, etc. Reporting 20
21 Committee Alignment with System Strategy Direction ISC Governance Committee Prioritization IU Health System Strategy (Level 0) Integrated Service Center Delivery Strategy Prioritization ISC Governance Committee Feedback Supply Chain Operations ADHOC Support HR/Real Estate/D&C Growth Opportunities, Reporting, Expenses, Savings Analysis, Risk Mitigation, Project Schedules 21
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