DHL’s Approach to Hospital Logistics - Editrice TeMievents.editricetemi.com/files/doc/supplychainsanitaria2013_DHL.pdf · Name of Department and/or Name of Presenter DHL’s Approach

Name of Department and/or Name of Presenter

DHL’s Approach to Hospital Logistics

Jonathan Blamey Ph.D.VP, Global Products

DHL | PageGlobal DHL Supply Chain Life Sciences & Healthcare 2

Objectives & Contents

• Share DHL’s experience of supporting hospitals and health services to improve the effectiveness of logistics (including procurement)

• Demonstrate the potential solutions using Case Studies from UK NHS & the Americas

Contents Objectives

• Overview of Health Spending & Reforms

• DHL Life Sciences Summary

• Hospital Logistics Overview

• NHS Supply Chain case study including savings


Life Sciences & Healthcare Industry in Transformation


Comparison of Healthcare Systems

Australia Canada France Germany Italy UK

Population 22.2 34.1 62.9 81.8 60.5 62.2

> 65 yrs (%) 13.0% 14.1% 16.9% 20.6% 20.3% 16.5%

Spend (% GDP)

9.1% 11.4% 16.9% 20.6% 9.3% 9.6%

Spend (€) € 2741 € 3320 € 2968 € 3240 € 2214 € 2564

Growth (%) 4.6% 4.5% 2.6% 2.1% 1.9% 4.9%

Smokers (%) 15.1% 16.3% 23.3% 21.9% 23.1% 21.5%

Obese (%) 24.6% 24.2% 12.9% 14.7% 10.3% 26.1%

Physicians (#) 3.1 N/a N/a 3.7 3.7 2.7

Hosp. Bed (#) 3.4 1.7 3.5 5.7 2.8 2.4

MRI diag. (#) 5.6 8.2 7.0 N/a 22.4 5.9

Ref: International Profiles of Health Care Systems, 2012, The Commonwealth Fund


Italian Healthcare System / Servizio Sanitario Nazionale

Metrics•Annual Spend ~ €132bn (€2214 per capita)•Co-payments of €36.15 per prescription (2010), including procures and visits•46,300 GPs (30.2%) & 107,000 hospital clinicians (69.8%).

Structure•Significant regional autonomy•Local health units are managed by a CEO appointed by the governor of the region and deliver primary care, hospital care, public health, occupational health, and health care related to social care.

Reform Aims •Improve cost effectiveness & sustainability

Reform Areas•24hr access to primary care•Updated tariffs•Governance restructure•Smoking & alcohol restrictions•Health technology assessment for pricing


Addressing Constraint of Spending

Ref: Based on Derek Feeley, Leading Health Care Innovation, Editors of Harvard Business Review and the New England Journal of Medicine

“while the budget ceiling were challenges, they provided discipline, incentivized the delivery of higher-quality care & improved population health. The constraints …. also required creativity, formation of new

partnerships, and an open-minded, outward-facing search for the best, most innovative models of care”

• Balance Investments in Population Health and Treatment

• A fixed budget forces you to invest in wellness

• Build a Strong System of Primary Care

• Core business of h’care devoted to support people with chronic diseases

• Work w. Partners on the Social Determinants of Health

• Address the environmental, behavioural & social issues that make up 80% of health

• Get Care Right the First Time

• Prevent infection, address re-admission, standardise processes & involve patient

Investment in Health Strong Primary CareSocial Determinants Right First Time


Cost & Responsibilities of Logistics Functions

Inefficient Logistics

• Receiving

• Internal Distribution

• Inventory Management

• Consigned Inventory

• Linen

• Food

• Homecare

• Purchasing**

Hospital Logistic Department Typical Responsibilities

Costs of Logistics•30 – 45% of hospital costs are associated with logistics activities •This includes staff, patients, materials•Impacting 2.5% of the overall hospital cost is circa. €5m for a 350 bed hospital


Aligning Hospital Initiatives & Supply Chain

• Understanding how these are influenced by the supply chain

• Mix of owned & consignment stock, implants & instrument, fast & slow movers

• What does a world class hospital supply chain look like

• Financial pressure

• Considerable initiatives

• Misaligned Objectives

• Clarity on Responsibilities

Complication Situation


Situational Assessment

• Strategic:

– How should the hospitals & national agencies use supply chain partners as a strategic resource ?

• Tactical / Engagement:

– How do we prove that a supply chain partner can deliver value ?

– Understanding where the greatest savings can be made ?

– How do we implement & measure success ?

• Any supply chain solution must reduce risk & improve care

• Many internal stakeholders have an interest in the supply chain

• Any investment must have a clear Return as there is limited investment funds available

• Waste is not measured now, it is difficult to gain a baseline

• Regulatory requirements are increasing the safeguards within the supply chain eg batch control

• Patient level procedure costing is a growing requirement

• Technical limitations and integration needs with Hospital procurement systems

Key Questions Complication

• Hospitals & heath services are currently reviewing their supply chain strategy to drive efficiency & patient service

• The national quality improvement programmes (e.g. UK) are providing impetus for this strategy

• In developed markets 2% of the population (staff and volunteers) provide health services

• Hospitals want to achieve financial stability but have limited baseline information

• Regulatory requirements are increasing the safeguards

Situation


A strategic resource to optimize your supply chain

Employees: ~ 470,000/Revenue: EUR 52.8 bn1)

Employees: ~ 275,000/Revenue: EUR 40.1bn

The Logistics Company for the World

Employees: ~ 180,000/Revenue: EUR 13.9bn

Die Post für Deutschland

DHL Supply Chain is part of the DPDHL group with a global network and an extensive logistics portfolio

SUPPLY CHAIN

Contract Logistics & Business Process Outsourcing

EXPRESS

InternationalExpress

GLOBAL FORWARDING & FREIGHT

Air and Ocean Freight

RoadFreight

1) Excluding Corp. Center/Other/Consolidation = EUR 1.2bn


> 150 Life Sciences & Healthcare facilitiesaround the globe1

Overview: DHL Life Sciences & Healthcare facilities

Poland (1)

Sweden (2)

Turkey (5)

Egypt (2)

South Africa (3)

UAE (2)

Korea (3)

Japan (3)

Singapore (5)

Guatemala (1)

Argentina (1)

El Salvador (1)Costa Rica (2)

Colombia (3)

Peru (1)

India (7)

China (6)

Panama (3)

Brazil (7)

Mexico (5)

USA (29)

Israel (1)

Russia (3)

Ukraine (1)Canada (1)

Chile (1)

Belgium (4)

Italy (15)

France (5)

Netherlands (1)

Portugal (1)Spain (4)

Germany (3)

Life Sci. Warehouses

Clinical Trials Depots

Lebanon (1)

Australia (11)

New Zealand (3)

1) Across DHL Supply Chain; 48 in AMERICAS, 57 in EUROPE, 48 in APMEA, 24 across GLOBAL CLINICAL TRIALS, many co-located

A global network of facilities focused on Life Sciences & Healthcare

UK & NI (13)

2.058 mil m2

1.893 mil pallets

Dubai (3) Philippines (1)

Venezuela (1)

Ireland (3)

Hungary (2)

Hong Kong (2)

Vietnam (1)Thailand (2)

Taiwan (2)


Supply Chain Consulting (SCC)

Lead Logistics Provider (LLP)

We create competitive advantage for your business by delivering exceptional operational service and innovative solutions across your supply chain

DHL Supply Chain portfolio

Procurement Services

Inbound to Manufacturing

Packing Services incl. Serialization & Postponement

Rework Services

Home Healthcare

Order to Cash

Promo Logistics

Clinical Trials

Pandemic Planning

Hospital Logistics

Reverse logistics

Envirosolutions

Plan Make Source ReturnDeliver 1 2 3 4 5

Our Services: Warehousing | Transportation | Value Added Services | Management Services


Hospital“We struggle with traffic around the site which increases costs from

suppliers."

Hospital“We struggle with traffic around the site which increases costs from

suppliers."

Hospital“Our inbound

activities are space constrained and flow is often delayed and

inefficient”

Hospital“Our inbound

activities are space constrained and flow is often delayed and

inefficient”

Hospital“We have no system

to show what we have, even with our stocks we have stock outs”

Hospital“We have no system

to show what we have, even with our stocks we have stock outs”

Hospital “We feel that our

deliveries to wards & other internal logistics

processes are inefficient ”

Hospital “We feel that our

deliveries to wards & other internal logistics

processes are inefficient ”

Customer Opinion

Approach is based primarily on industry expert opinion

Hospital“We believe we can procure in a different

way to achieve savings”

Hospital“We believe we can procure in a different

way to achieve savings”

Hospital”We have limited storage and very

little view of inventory value & which

inventory is ours and which is

consignment”

Hospital”We have limited storage and very

little view of inventory value & which

inventory is ours and which is

consignment”

Approach

• Understand Customer’s business & the drivers within the hospital

• Design the logistics network & operational flows to meet the current & future global demands of the Customer

• Implement facility design, systems & processes to deliver operational efficiency, inventory optimisation, information & continuous improvements across the Customer Hospital

1

2

3

DHL proposed approach for Customer Hospitals is split into three stages :

DHL’s Approach to Hospital Logistics ~ Customers


xx

10: HOSPITAL LOGISTICS

Procurement Material Management

• Targeted materials management for high value products

• Linking demand & supply

• Consignment & owned stock

On Site Logistics

• Inbound & stock location manage-ment.

•Internal (milk-round) deliveries & portering

• Procurement of products & consumables from implants & scanners to stationary

• On-line product catalogue & consol. invoicing

Off Site Consolidation

• Consolidation centres & bulk inbound transport

• Vendor managed inventory

• Pick to ward requirement (e.g. fluid de-consol.)

Patient Transport

• Non emergency patient collection & delivery (incl. high dependency)

• Staff inter-site transport

• Sample collection & delivery

DHL’s Approach to Hospital Logistics ~ Solutions

Our goal is to provide hospitals with supply chain solutions that deliver sustained clinical and business excellence


AS IS

TO BE

Simplification

AS IS

Real example from 350 bed hospital involves includes 51 activities, 10 handovers & considerable risk

TO BE

Simplified flow with 23 activities (55% redn.); 3 handoffs (70% redn.) & 80% reduction in technicians, nurse & support staff involvement in logistics

Benefits

More efficient operation with reduced cost, consolidation of services within the logistics function & platform for further process improvement

Improving On-Site Materials Flows


AS IS

TO BE

Aligning Demand & Supply

AS IS

Stock values very high, high incidence of stock on shelf for > 90 days, obsolete, damaged & expired stock, limited control

TO BE

Inventory based upon demand at point of use (in theatre), stock value visible & on balance sheet, purchasing holiday & consignment to owned shift

Benefits

Purchasing holiday, zero obsolescence, price reductions based upon known volumes & consignment to owned shift, drives inventory (& SKU) reduction

Improving Materials Management in Key Areas


AS IS

TO BE

Reduced Traffic & Cost

AS IS

Example of 350 bed inner city hospital with circa. 200 vehicle movements into the hospital per day, delay on inbound

TO BE

Off site centre takes traffic & conducts inbounds, consolidated (3 x daily) deliveries to hospital

Benefits

Reduction in traffic movements (circa. 100 journeys per day), reduced procurement cost, faster availability to wards, greater process compliance

Off-Site Consolidation for City Hospitals


Current DHL Activities

Space Design

- Specialised Racking

Goods In Management

Demand Capture

Optimisation

Replenishment to Ward

Ongoing Stock Manage

Mail/Postal Deliveries

Patient Record Logistics

Departmental Records

Specimen Collection

Linen Delivery

Online booking

Non emergency patient

- Stretcher, wheelchair

& walking

> 300 drivers

> 150 vehicles

Off Site Consolidation

Off-Site Consolidation

- DHL Logistics Centre

Receipt & Distribution

Vehicle Control’s

Enables Bulk Buy

Break Bulk (Fluids)

Short term storage

Materials Management On Site Services Patient Transport

Integration of Financial & Purchasing Systems, Overall Integration with Hospital Departments

Example of Service Provision at Imperial Hospital Group

DHL Product Development Mexico | Page Ensure Quality – Increase Visibility – Reduce Cost 19

Centro Medico ABC – Solution Overview

Solution is divided in 4 main phases, each one with a clear value proposition

Demand Management

Cash flow release based on inventory optimization

Transportation Savings

• Supplier transport cost optimization by consolidating freight according to regions

Supply staff resource optimization

• Supply staff outsourcing Resource optimization rollout plan

Inbound Logistics

On-site Logistics

Observatorio

Santa Fe

Ops Savings and Hospital space release

• Inventory consolidation on an external DC. Medtrac Analyzer tool implementation to study demand

Phase 1 Phase 2 Phase 4Phase 3

• Medtrac IT solution implementation in material point of consumption – demand planning and capture base on historic consumption

Medtrac Analyzer

II III IVOff-site Consolidation

I

Proveedor 1

Proveedor 2

Proveedor 3

Proveedor 4

Región B

Proveedor 1

Proveedor 2

Proveedor 3

Proveedor 4

Región AControl Tower

www.supplychain.nhs.uk

An Overview of NHS Supply Chain

Understanding the contractNHS Supply Chain

► Unique contract for Procurement & Logistics

► Act as an agent to NHS Business Services Authority on behalf of Department of Health A closed book contract with open audit rights

Commercial returns are capped for DHL

► Contract scope covers circa £5 billion spend on: Medical and non-medical consumables

Capital medical equipment

► Through all it’s activities, NHS Supply Chain aims to

deliver £1 bn (€1.2bn) savings for the NHS

► £120 m (€142m) invested by DHL

The NHS Procurement Landscape

Specialist Surgical ProductsMarket €1.30 bn

Suppliers

Capital & MaintenanceMarket €1.05 bn

Medical ConsumablesMarket €2.15 bn

Clinical ConsumablesMarket €0.48 bn

Facilities & EstatesMarket €1.02 bn

Market – circa €6.0 billion

Acute Foundation€3.80 bn (NHS SC €1.90 bn)

Customers

Acute – Non Foundation€0.90bn (NHSSC €0.40bn)

Community includesPrivate & NHS Community providersHDSMental HealthAmbulance TrustsGP’sCCG’s€1.30 bn(NHS SC €0.25 bn

Market – circa €6.0bn

NHS Supply Chain€2.55 bn

3rd Party Distributors€0.25 bn

Collaborative Procurement Hubs€0.06 bn

Nat. Service Provider Aggregated Demand

~ Max Leverage

Direct Supply Disaggregated Demand

~ Min Leverage

circa €3.14 bn

Intermediaries

Private h

om

esN

ursin

g h

om

es

Distribution

Centres

Consolidation &

Managed Inventory

Supply

Centre

Sourcing &procurement

Raw

mat

eria

ls p

rod

uct

ion

E-commerce

Supplier Services

Procurement Services

Logistics Services

Supply Chain Services

Patient Services

The Span of Influence and Value Management

Hospitals / Trusts

Customer Engagement Options The journey to strategic partnership

Value/Compliance

Collaboration/Partnership

Fully integrated

supply chain

partnershipAdvanced service

solutions

Supply chain review

Committed & aggregated

spend

Joint savings plan

Standardisation

Benefits to Hospitals ~ Incr. Engagement

Ad hoc use of frameworks

• Assurance in procurement

• Back office efficiencies

• Service reliability and dependability

• Internal supply chain efficiencies

• Freeing up internal staff

• Improved effectiveness of internal SC

• Accelerated savings

Procurement Capability

All underpinned by the Procurement Competency

Model

Procurement Academy

• 238 Procurement staff

• Corporate CIPS accreditation

• 40% staff CIPS accreditation

• Plan for 80% staff CIPS

accreditation by 2016

187 frameworks for over 600,000 products50 frameworks tendered each year

Cost Avoidance

Consolidated Supply Services

CompliantProcurement

Services

E-Order to Payment

Services

* paper under review with Supply Chain Management International Journal.

£1m Cost AvoidanceSouthampton University Hospital NHS Trust valued the service NHS Supply Chain provided at £1.03m (9.8%) on £10.5m spend

(Cranfield University and the European University of Rome, 2011)*

Full suite of integrated systems provided free at point of use to trust enabling electronic order to payment

Consolidated finance processes – 1 consolidated trust invoice per month for up to 850 suppliers

Payment by NHS Supply Chain of all suppliers on behalf of the trust

Comprehensive management information, inventory management and demand management

Online catalogue (for 187 frameworks compliant with EU public procurement regulations covering 850+ suppliers)

Capital solutions incorporating finance and maintenance, that are compliant with EU public procurement regulations

Local choice limitation (enabling spend leverage and clinical compliance)

Bespoke contracting for local needs under national frameworks

Clinical and implementation support within trusts to facilitate savings opportunities

Robust national infrastructure providing resilient supply chain

Consolidated supply (of 850+ suppliers) to individual trust requisition points (to 22,000 in the NHS)

Materials management enabled with NHS Supply Chain Electronic Data Capture hand held devices

Transport and Warehouse Provision

>600,000 Catalogue Products

4.6 million Orders

Ordering points

22,000 Delivery points

321 million Units

37.5 million Orderlines€2.55 bn Sales

850 Districts

662 DOH customers

>1,000 Suppliers

HospitalsClinics

Health CentresGP Surgeries

Medical CentresMOD sites

Current MSA Scope*

Existing stocked NHS Supply Chain Warehouse

Existing NHS Supply Chain Outbase

910,000 Sq ft operating space

7 Depots and 3 Outbases

Operations employ 1,800 people

Transport and Warehouse ProvisionNational Reach and Scalability

Fleet –184 vehicles

10.5 million annual miles run

375,000 deliveries made to our customers

3,800,000 litres of fuel used

£60M national stockholding

37,500,000 lines delivered

2 weeks of stock cover


Values of Hospital Logistics

Reduction in stock level due to inventory control and traceability

Reduction in product flow due to the consolidation of products

Product availability due to optimization and restructuring of warehouse space

More focus on patient care due to less time devoted on materials management

Businesscapital

Reduction in emergencies

Control of productflows in hospital

Focus on Patient care

Product availability,

spaceoptimization

Reduction in delays and extra resource usage due to the optimization of secondary warehouse


Summary

• Share DHL’s experience of supporting hospitals & health services to improve the effectiveness of logistics (& procurement)

• Demonstrate potential solutions using Case Studies

• Deep dive into the NHS Supply Chain contract

Documents

DHL’s Approach to Hospital Logistics - Editrice TeMievents.editricetemi.com/files/doc/supplychainsanitaria2013_DHL.pdf · Name of Department and/or Name of Presenter DHL’s Approach