Transforming Internal

Healthcare Supply

Chains

CIPS/CILTS

20th February 2015

Andrew McMinn MCIPS

Chief Procurement Officer

Outline

1. Trust info

2. Business Context

3. Supply Chain Observations and Analysis

4. Thinking

5. 2011 Supply Chain Beliefs and Aspirations

6. Examples of Delivery

7. 15/16

The Major Tertiary Centre in the South West

Over 900 Beds

Teaching Hospital

Major Trauma Centre

Cardiothoracic

Specialised Gastro and Liver

Specialised Long Term Conditions

Tertiary Cancer

Neonatal Intensive Care and High Risk Obstetrics

Plymouth Hospitals NHS Trust

Largest hospital on the UK South West Peninsula

2013/14 Turnover 408m

5300 employees

Delivered 4,854 babies

Operated on 38,696 patients

A&E attenders 88,815 of which 53,435 admitted

Completed 355,794 X-rays and Scans

One of the best survival rates in the country. We have a mortality ratio which is approximately 10% better than expected, making Plymouth the best in the south west and among the best hospital trusts in the country 1

1 Plymouth Hospitals Annual Report 2012/13

Painful Business Context

Rising annual demand

Increased scrutiny on quality of care

Non Pay inflation rising at around 5%

Falling income

What is a Hospital Supply Chain?

Information / Cash

Goods/Services

Point of Care

Oracle

GHX Marketplace and Catalogue Mgt, Genesis VMI

7.5m Inventory

3-4m Consigned

Days Inventory Outstanding (DIO) = 37 days or ITR 9.8

115 Internal Deliver to locations / POC

2000 suppliers

175k unique items ordered

90k POs and 1m PO lines

12 floors and 11 lifts

Supply Chain Data 13/14

2010 Observations - Push rather than Pull

Man

ufactu

rer Patient Consumption

Manufacturer Promotion

Requirement

100%

39% 35%

20%

6% 0%

20%

40%

60%

80%

100%

120%

Total SG&A Operating Margin Cost of Goods R&D

Orthopaedic Implant Industry Cost Structure

Ref: Orthopaedic Companies 600bn, available at :www.600bn.com published Jan 2010

NHS natural

win/lose focus

Shift in thinking and focus here

Win lose supplier relationships

Win lose relationships are

context dependent

PPI e.g. TOR and Cardio

TOR & Cardio accounts for

20% of all influenceable

Non Pay spend. 20% of Trust income and 36% of trust

inventory

ABC Analysis definition

Class

No

Lines % of lines

Inventory

Value

% Total

Stock Annual Spend

% Annual

Spend

Inventory

Turn Ratio

A 299 6.66% 416,167.59 49.17% 10,684,073.55 77.82% 25.7

B 458 10.20% 167,747.55 19.82% 1,949,605.67 14.20% 11.6

C 3732 83.14% 262,425.26 31.01% 1,095,546.61 7.98% 4.2

Totals 4489 100.00% 846,340.40 100.00% 13,729,225.83 100.00% 16.2

842 lines had no annual consumption but have a inventory holding of 59628 or 7.6% total inventory value 301 lines (6.7%) that have a inventory holding of more than one years

consumption

518 lines (11.5%) that have a inventory holding of more than six months

consumption Stock Out Risk - 39 Class A lines (13%) had no inventory

E.g. ABC Analysis

Inventory ABCX analysis

Class SKU's % of SKU's

Moving Items % Stock Value

% of Total Stock Value

Stock Turn

Stock Cover (wks)

A 149 14.30% 97.3 94,707.81 35.05% 24.7 2.1

B 172 16.51% 90.1 53,802.50 19.91% 8.7 5.9

C 567 54.41% 65.6 45,832.06 16.96% 3.8 13.6

X 154 14.78% 13.6 75,866.83 28.08% 0.4 136.6

1042 270,209.20

Summary 2010 Observations

Push supply chain

Healthcare Supply Chain barcode variety or absence

Waste

Low consumer confidence

No Inventory Management System

70% of inventory value controlled by clinical staff

Generic approach to inventory replenishment

Space a premium

Win/Lose supplier relationships

Storage methods hamper inventory management

Summary 2010 Observations

What can we do? Who is Tim Wood?

http://www.youtube.com/watch?v=ZaUWr4E

sEB4

Inventory How much, handling, capital employed, stock take costs,

insurance, instrumentation, duplication and generic structure

Defects obsolescence from product or technology changes, out of

date, incorrectly opened goods, damaged goods

Motion & Transport - walking and delivering, expediting, chasing,

delivery charges and urgent deliveries

Over Processing (Purchase orders and Invoices) - How many, cost,

average value per, frequency

Over Processing (Paperwork) - delivery notes, requisitions, pick lists

and NJR data collection

Over Processing Admin, time to place orders, order approval, stock

management, stock take costs, receipting, goods inwards checking

Value Hierarchy of Waste in Hospital

Supply Chains

2011 SC Beliefs and Aspiration

No clinical involvement in inventory management

Reduce inventory

Reduce variety

From Push to Pull

7 day service

Single trust wide inventory management system

Lean supply redesign Runners/Repeaters/Strangers1, Automated

and consolidated orders, Internal Supplier concept and Kanban

Storage methods that influence the correct behaviour

Real time demand capture POC, Wi-Fi, GS1, RFID

Supply Chain & Inventory Structure - ABC Analysis, RRS1

Joint working - NHS/Supplier supply chain improvement projects

Lean and inventory management skills and capabilities

1 The New Lean Toolbox by John Bicheno 2004

Runners, Repeaters and Strangers

Runners Regular Demand Tea Bags and Milk

Repeaters Intermediate Demand Sunday Joint or Washing

Powder

Strangers Low or

Intermittent Demand

Spice or Herb

From Generic to Structure

Strategic

Consolidation Centre (SCC)

1. Months

2. Top 300 SKUs

3. Daily Picks

4. Containers/Pallets

Advance Stock

Location (ASL)

5 or 6 Locations

1. Top 300 Day (s)

2. Reprs and Strangers Weeks

3. Outers

Point of Care/Use

115 Locations

1. Top 300 Hours/Day

2. Reprs Hours and Days

3. Strangers Weeks /Months

4. Daily and Weekly deliveries

5. Each and Outers

Runners Runners

Repeaters

Runners

Repeaters

Strangers

Genesis VMI 2014

Consolidated Ordering

GS1 Ready

Wireless PDA Data capture

Interfaces to both Oracle and GHX eCatalogue

Automated ordering

Patient Level Costing

Supplier access for consignment management

Symbol (Tesco) technology for clinical shopping

Joint Trust Supplier Project

Suppliers

Ortho Store

(GLN)

Theatre 11

GLN

Advanced stock

Location (GLN)

Theatre 10

GLN

Theatre 9

GLN

Theatre 12

GLN

Theatre 16

GLN

Oracle

Genesis

VMI

Receipt

Stock

Transfer

NJR & PLC

Real time

Consumption signal

(RTCS)

Future State Orthopaedics

Supply Chain

Monthly

Usage requisition

Key

Blue = Material Delivery

Green = Clinical Pull

Orange = Demand signal

Purple = Clinical task

Red = Eproc

Black = Supplier Action

GHX

Exchange

Monthly

Consolidated

PO

Monthly

Consolidated

PO

Monthly

Invoice

Supplier

VMI

Date Mgt

Real time

Consumption

Signal

(RTCS)

Supplier

Delivery

ASN

ASN

Monthly

Invoice

RTCS

Nexus

Catalogue

Feed

300k owned stock converted to cash Five store rooms compressed to one single room Delivery charges and stock out sigificantly reduced

Trauma & Orthopaedic ASL

Main Theatre ASL

2012 181 SKUs 320k stock value Stock outs and

uncontrolled 2014 1080 SKUs Reduced stores

space by 50% 214k stock value 3m of spend C class approx 76% 12 hour operated Deliver & Billed to

POC

Strategic Consolidation Centre - Runners

1m or 25% CRES

Value Summary

Reduced Patient Risk

Enabled Improved Patient Care

1m cash flow

Reduced Waste

Over 1m CRES

Improved Governance

Entirely

Self

Funded

15/16 Plans

55% of inventory value under SCM control

500k CRES

Peppol and GS1 implementation

First wards Kanban supply

Remaining ASLs built

Symbol technology in use

15m Requisition to Replenishment initiative