Best Practices to Prevent Supply Chain Quality Issues

W H I T E P A P E R Best Practices to Prevent Supply Chain Quality Issues

INTRODUCTION A high-quality, vetted supply chain affects the efficiency and sustainability of health services at all levels, be it in a tertiary hospital setting with sophisticated life-support equipment, or at the primary healthcare level where simple equipment is needed for effective diagnosis and safe treatment of patients. What is vital at all levels and at all times is a critical mass of affordable, appropriate and properly functioning equipment used and applied correctly by competent personnel, with minimal risk to their patients and themselves. Clear policy, technical guidance and practical tools support supply chain quality programs, leading to better management of care and patient safety. Industry Challenges Clinical engineering departments encounter many challenges, namely: identifying quality issues early in the supply chain, gaining visibility into supplier performance and communicating with suppliers on quality. All of these factors are imperative to managing costs and improving performance because quality in the supply chain is about more than selecting the right supply chain partner. By failing to establish more comprehensive supply chain quality programs, hospitals and health systems are exposing themselves to large-scale quality issues, service deficiencies and increased costs that can influence profits and damage brand reputation. Examples include: Identifying and preventing quality issues early in the supply chain Visibility into supplier performance Quality issues can surface at any point in the supply chain, and it is imperative to catch quality issues as early as possible to manage costs and risk. Unresolved supplier quality issues can result in high process costs and lost revenue from asset down time. Risks may include: Adherence to Quality Vendors refuse to release their own quality supplier lifecycle management reports for your account, creating issues with organizing spend data and supplier performance. Pricing Lack of transparency and consistency across multiple sites within a hospital s or health system s clinical engineering department causes wasted budget dollars. Accuracy Inaccurate ordering reduces efficiency by creating re-work and problematic invoice reconciliation. Deliverability Unpredictable availability, cut-off times and delayed shipments cause equipment downtime. Policy Difficult to implement effective compliance policy or continuous improvement with multiple suppliers. Most clinical engineering departments utilize hundreds of suppliers, and many systems attempt to manage 600 800+ supply chain relationships. Finding, qualifying and managing suppliers is one of the biggest challenges while maintaining a stable, high quality supply chain. At first, it may seem logical to employ multiple suppliers that fit the organization s needs. Eventually though, the number of suppliers managed can easily get into the hundreds and the cost and resources spent on managing them can get out of control. The task of communicating and following-up with different suppliers is not only time consuming and costly, but also distracting and provides very little value. Most importantly, when a team member has to take time out of their job every day to manage supplier performance and handle administrative tasks, focus is shifted away from core business operations. Communicating with suppliers on quality Another key challenge of ensuring quality in the supply chain, despite investments in enterprise quality management systems, is communication. Many clinical engineering departments maintain decentralized supplier quality functions to be responsive to needs. However, there are no expectations that information received is shared immediately and what the KPIs are for this communication. While this approach can ensure responsiveness to issues, it limits the ability to trace, manage and report on supply chain related quality issues. As a result, true collaboration on quality is not possible. 2

Best Practices to Prevent Supply Chain Quality Issues Luckily, clinical engineering has evolved. Leading departments manage supply chain quality effectively by implementing best practices to reduce risks and improve efficiencies. Three practices most likely to be implemented by a best-in-class clinical engineering department are: 1 Broadening the scope of supplier assessments 3 Defining a clear measurement program 2 Investing in infrastructure to standardize workflow 3

BEST IN PRACTICE Broadening the Scope of Supplier Assessments Most clinical engineering departments restrict supplier performance measurement and monitoring, and typically focus supplier measurement and monitoring on: Suppliers that comprise the largest portion of spend Suppliers that have a strategic relationship with regard to a key medical product Suppliers that have a strategic relationship with the customer PartsSource employs an innovative approach to consolidating and managing suppliers through its Vendor Management Model available through the PartsSource Pro program. We offer an outsourced model that uses a data-driven, evidence-based methodology to evaluate vendors beyond cost. You do not have to invest your in-house resources to define and manage vendors. Our vendor management model continually vets over 6,000 OEMs and aftermarket suppliers based on a patented rating process with rigorous quantitative and qualitative criteria. PartsSource s goal is to ensure each item procured through the PartsSource supply chain is of the best quality possible so you can help keep patients safe. FIVE REASONS WHY A SINGLE VENDOR IS MORE EFFICIENT: Increased discount potential Simple administration, operations and training Integrated tools for optimal reporting Reliable and efficient processes Increased vendor accountability and a better established vendor relationship 4

BEST IN PRACTICE Defining a Clear Measurement Program The majority of clinical engineering departments measure supply chain partner performance in specific areas: Quality On-time delivery Service Price Total cost Contract compliance Responsiveness Challenges for measurement include: Disparate data sources Large number of suppliers Inconsistent goals and metrics Limited systems and analytical tools SUPPLIER RANKING MODEL (SRM) VRM SCORE CHOICE LEVEL PartsSource provides its customers with a Supplier Ranking Model that uses a set of criteria in which the supplier meets or exceeds all metric thresholds and maintains the highest scores on KPI s. The Supplier Ranking Model is the platform that drives purchasing decisions for parts request when fulfilling orders. The SRM utilizes a supplier s Choice Level and a part s VRM score to produce a blended score that ultimately drives the procurement team in selecting which supplier to use for a request. Quality Percent of POs with no vendorrelated quality problems Call-to-Fill Rate Percent of calls where vendor had part Cost Deviation Vendor s average deviation above/below OEM list Vendor of Choice Percent of calls vendor was selected Quality Process-related returns Quality-related returns Process Process-related returns Quality-related returns Back-order frequency Price Quotes provided Best price Automated quote SRM 5

BEST IN PRACTICE Investing in Infrastructure to Standardize Workflow Leading clinical engineering departments are investing in infrastructure that more tightly connects their supplier ecosystem and automates what were manual or disconnected processes to open the lines of communication. The only way to overcome the challenge of providing quality care without adding staff or expanding budgets is to become operationally efficient and effective. Standardization is used to minimize procurement costs by keeping processes for obtaining parts and services as efficient and consistent as possible and effectively managing quality. This requires the creation of a streamlined and structured procurement workflow to make the most of your organization s resources. Standardization also helps identify bottlenecks and data gaps in the procurement process, allowing an organization to make meaningful changes to address shortcomings and improve outcomes. Enabling process-based communications and automating quality workflows delivers improved visibility and control. This in turn translates into a lower cost of quality. THE FIVE STEP SOLUTION: STREAMLINING THE OVERALL PROCUREMENT PROCESS STEP STEP STEP STEP STEP Identify and source part by integrating PartsSource with your asset management system. Submit order for management approval. Place order within fully integrated system. Track all shipments through system. Review electronic invoice. For every inbound request received by PartsSource, our proprietary workflow process is automatically applied. As a result, the customer is presented condition options from the highest-ranked supplier at the best price for multiple condition tiers: OEM Original, Replacement, Refurbished, and Tested conditions. This system gives our customers the absolute assurance they are receiving the best quality item at the most advantageous cost. The key to providing end-to-end supply chain quality is providing controlled access and transparency to accurate events and data in a timely fashion. This data includes transactions, content and relevant supply chain information between not only the different organizations involved but also different departments within a company. 6

CONCLUSION Supply chain management is not only a key business tool, but also an essential component in mitigating increases in expenses and supporting patient safety and care. Supply chain is a key to creating better end-to-end visibility about all of the products, devices and supplies used in healthcare. However, many hospitals are experiencing patient safety issues that could be prevented through supply chain improvements. Ultimately, everyone at the hospital plays a role in advocating for a more efficient supply chain that will allow physicians and nurses to put their time to its best use: delivering high-quality care more effectively and efficiently. PartsSource uses data to drive better procurement outcomes based on thousands of data points continually collected and analyzed using our patented, proprietary technology. This proven, repeatable method ensures healthcare providers are getting the highest quality products available every time, without exception or outside influence. Most areas of hospitals already rely on data to inform decisions. PartsSource brings this quality control best practice to medical parts procurement. Supply chain management in healthcare has grown to be more than about medical-surgical supplies, but complex in nature involving more technology, consolidation and partnerships within the supply chain community. Supply chain automation and analytics are the next frontier for improving care. QUALITY MANAGEMENT IMPACT 99.9 % PARTS ACCEPTANCE 77 % ORDERS ARE OEM ORIGINAL 99.6 % PARTS OUTLASTED WARRANTY Just 0.1% of OEM original parts ordered through PartsSource were returned for quality reasons. More than three-quarters of all parts ordered through PartsSource are OEM original parts. 0.4% of non-oem original parts ordered through PartsSource were returned due to failure before warranty expiration. 7