Supply Chain is a Strategy … Not a Department Gene Kirtser President & CEO.
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Transcript of Supply Chain is a Strategy … Not a Department Gene Kirtser President & CEO.
Introduction & Background
Supply Chain as it relates to…
• Past: a Key Tactical Enabler
• Present: a Performance Optimizer
• Future: an Enabler of the Future
Care Model, Industry Collaboration
Summary / Discussion
Agenda
31 Acute Care Hospitals
4,400 Licensed Beds
38,000 Co-workers
200 Outpatient Facilities
1,500 Integrated Physicians
600 Advanced Practitioners
Mercy Footprint
Introduction & Background
Supply Chain as it relates to…
• Past: a Key Tactical Enabler
• Present: a Performance Optimizer
• Future: an Enabler of the Future
Care Model, Industry Collaboration
Summary / Discussion
Agenda
We began as
a holding company in 1986
We have become an
an operating company with extraordinarycompetencies in execution
The cultural evolution began in 1999 with
supply chain as the “tip of the spear.”
Mercy’s Transformational Journey
Supply Chain Touches Everyone
Future Customers(Physicians, IDN)• Value• Respect• Recognition
Corporate Senior Leadership (Corporate Staff)• “Systemness”• Relationship Management• Leadership (corporate)
SC Co-workers • Respect for individual input• Compensation/benefits• Tools to do the job
Industry Leaders (Influencers, Publishers)• Succinct Story• Advanced knowledge, involvement
understanding the model – New ideas• Reputable business model
Vendors• Partnership Relationships• Equal Opportunity• Profitability
Hospital/Clinic – Senior Leaders(C-Level, VP’s)• Accountability• Provider focused and based solutions – Assistance with
goals- respect, value, recognition• Leadership Collaboration
Facility - Mid-Managers(Supervisors, Dir., Mgrs., VP’s)• Harmonious with environment• Communication, be heard, access to information• Respect
Clinicians(Nurses, Pharmacists, Resp. – Lab tech)• Efficiency of product access• Involvement in product decision making• Quality of patient care delivery/ patient safety
Non-Integrated Physicians • Autonomy• Quality of life• Quality of care/ Patient Safety
GPO Distributor Provider
Traditional Supply Chain Model
Disintermediated Supply Chain
Waste
Waste
GPODistributor Provider
Silos
Integrated Contracting
Integrated Logistics
Integrated Processes
GPODistributor Provider
Waste
Waste
Waste
Large Commercial Silos
Direct Contracting
Internal Logistics
Integrated Supply Chain
Manufacturer
Integrated Processes
Waste
Manufacturer
Waste
Manufacturer
Many
Compressed
Total Business
Process
Traditional Models are Broken
Med/Surg Dist.
Lab Mfg.
Pharma Mfg.
Dietary Dist.
Film Mfg.
Lab Dist.
Radiology Dist.
Pharma Dist.
Med/Surg Mfg. Mercy Hospital
Mercy Clinics
Other Hospitals
Other Clinics
Retail Pharmacy
Home Health
Retail
Mass Merc.
Linen Service
Dietary Mfg.
Linen Mfg.
Other???
ISSUE: Complexity Complexity of product and information flow within the traditional healthcare supply chain.
ISSUE: Geographical Match
More than 90% of Mercy’s volume is OUTSIDE of the traditional distributors hub distribution service area
Service Complexity & Inconsistency
Time Spent
Area of Focus Savings / Avoid Opportunity
Examples
75% Price 3% - 18% Suture Gloves Med/Surg
10% Volume 0% - 5% Service line expansion, new physician
10% Utilization 25% - 50% Tubing Lengths SCD Length Drape
Technique Generics
5% Technology Adoption 100% - 500%
(cost avoidance)
CRM Spine Ortho Pharma
Time Spent
Area of Focus Savings / Avoid Opportunity
Examples
75% Price 3% - 18% Suture Gloves Med/Surg
10% Volume 0% - 5% Service line expansion, new physician
10% Utilization 25% - 50% Tubing Lengths SCD Length Drape
Technique Generics
5% Technology Adoption 100% - 500%
(cost avoidance)
CRM Spine Ortho Pharma
Traditional Supply Chains Chase Pennies
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VISION CLINICAL: Good Patient Outcomes OPERATIONAL: Happy Caregivers FINANCIAL: Positive Bottom Line
Invest in Technology, Process Improvement, Talent Make/But/Partner Decisions What Works: Stakeholder Input, Leverage, Commitment, Compression, Metrics
FOUNDATION
Supply Chain is a Strategy … Not a Department
Introduction & Background
Supply Chain as it relates to…
• Past: a Key Tactical Enabler
• Present: a Performance Optimizer
• Future: an Enabler of the Future
Care Model, Industry Collaboration
Summary / Discussion
Agenda
Facilities
Co-workers
• Corporate Office – St. Louis
• Consolidated Services Center – Springfield, MO
• Consolidated Distribution Center – St. Louis, MO
315 FTEs from varied clinical and business disciplines (growing to 750+ FTEs with Unified Supply Chain)
Mission: We will transform the Clinical, Operational and
Financial performance of those we serve through an integrated supply chain.
Vision:We will be a recognized leader in supply chain management through innovation and application of the best People,
Processes and Technologies.
Values:Service, Excellence, Dignity, Alignment, Accountability
Supply Chain Solutions Warehousing and Distribution Services Inventory Management Transportation Management Process Improvement
Integrated Sourcing Solutions Product and Services Contracting Utilization Optimization Contract Compliance Monitoring Rebate Management Pricing Administration Member Services
ROi’s Structure
Manufacturing Solutions Pharmaceutical Repackaging Custom Procedure Tray Manufacturing Print Operations
Integrated Business Solutions Purchasing and Accounts Payable Services Information Solutions Account Implementation Customer Service
• One of the largest GPOs in the U.S.
• Highest $ penetration per bed
• Single Source negotiation strategy
• 500+ contracts ($800 million)
• International focus
• Demonstrated results in reducing cost
• Efficiency based sourcing
• Provider Integration
• 1st Provider based Private Label program in the US
• Growing interest with other providers
• Print Services
• Instrument Repair
• Largest Provider based CPT manufacturing operation in US
• FDA Registered
• Print Services
• Rx Unit Dose Repackaging
• Top 10 Volume Distributor according to HIDA
• Med/Surg
• Rx
• Office
• 80+ Vehicles
• +2.3 million miles per year
• Every location every day
• Back-haul common carrier
• Courier, TL and LTL
Integrated Business Model
ROi Supply Chain Operation
Springfield, MO
101,000 Square Feet Climate controlled Refrigerated and Frozen Storage Controlled Substance Cage and
Vault Suitable for all Healthcare supply
storage needs in one facility
Private Fleet (80+ vehicles) reduces third party transportation expenses
Shortened Order Cycle to 12 hours 66% increase in acute care Med/Surg
deliveries 42% Reduction in hospital inventory Elimination of 3,000 material service
failures (stock-outs) per week
Sourcing Strategy - Private Label
RATIONALE: End user design and ownership –
pride in ownership Reduces variation and
proliferation of SKU’s. Platform for provider collaboration Significant $ value
PRODUCTS: Basic Wound Care Pneumatic Compression Devices Can Liners Patient Positioning Products Cold Therapy Products Disposable Minor Procedure Kits IV Start Kits Isolation Gowns Hand Sanitizer Sterilization Supplies Disposable Blood Pressure Cuffs Patient Slipper Socks Alcohol Prep Pads Medical Tapes & Adhesive
Bandages Orthopedic Soft Good Line
Patient Bathing & Wipe Products Surface Disinfection Instrument Reprocessing Solutions Sterile Equipment Drapes Surgical Masks Surgical Apparel IV Tubing Sets OR Towels, Laps, Markers, Needle Ct OR Turn Over Kits DME - Canes, Crutches, Chairs,
Walkers ER Disposable Curtin System Special Procedure Kits Birthing & Neonatal Portfolio Non Acute Care Products Portfolio
Mercy Meds – Rx Repackaging & Distribution
Custom Packs - Why Change?
Traditional Custom Pack Model:
• Lack of cost containment
• Inconsistent pack utilization
• Unauthorized changes
• Inferior product quality
• Waste
• End-use mistrust
Who is paying for all of this
extra material ??
ROi Custom Pack Manufacturing
FDA Regulated, provider owned
Activity based costing model - complete pricing
transparency
Objectives aligned: No unauthorized substitutions
No commission for volume growth
5.5 sigma manufacturing quality
The Healthcare Supply Chain Top 25
Industry Recognition
Essential to the larger strategy Transparent Desire to do what is right – for all Significant bottom line contributor Leadership Engine for Mercy Integration is key distinction
FINANCIAL PERFORMANCE: Mercy Supply Chain - Value Report – FY12 ROi - Customer Value Category
Mercy Value
Fee Elimination …………………………………………………………………….$3,222,850.
Centralization / Consulting ….…………………………………………….…$5,109,250.
Contracting / Rebates …………………………………………………………..$21,549,560.
Total Supply Chain Contribution ……………………………………………
$29,881,660.Centralization Fee (to ROi from Hospitals) …………………………….
($6,711,810.) Net Financial Benefit to Customer (6.4:1) .……………………….…
$23,169,850.
ROi Net Income ……………………………………………………………………$9,205,000.
Total Net Financial Benefit …………………………………………………..$32,374,850.
Financial Contribution
Introduction & Background
Supply Chain as it relates to…
• Past: a Key Tactical Enabler
• Present: a Performance Optimizer
• Future: an Enabler of the Future
Care Model, Industry Collaboration
Summary / Discussion
Agenda
Local Regional Virtual
Today Healthcare is simultaneouslyLocal, Regional, and Virtual
BC - 1950 1950 - 2000 2000 - ? Air Travel, InternetFoot, Covered
WagonInterstate Highway System
Changing Healthcare Business Model
By Providing access to multiple touchpoints of care and reducing barriers, the redefined model will ease the path our customers take through the care process.
Home monitoring
Diseasemanagement
Medical Home Convenient orretail care
Day surgery
Endoscopy andoutpatientprocedures
Inpatientcare
ChronicDiseasemanagement
Home care
Traveling nurseor care coordination
Mobile/Electronicaccess
Imaging andother testsin many ofthe care venues
Self-directed health management will be supported by the care model.
Supply Chain’s Future Evolution
Source: Average of group as per public company financials.
SG&A Comparison Retail vs. Healthcare Suppliers
14.1%
HEALTHCARE RETAIL
29.3%
Opportunity(15.2%)
Healthcare Retail
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
Tax/Other (7.1%)
SG&A (32.0%)
R&D (11.3%)
COGS (29.8%)
NI (19.8%)
SOURCE: Company financials as reported in Reuters ProVestor Plus Company Report, December 27, 2009
Observations:▶ Company SG&A is…
▶ 2.8 X R&D▶ 1.1 X COGS▶ 1.6 X Net Income
▶ Mercy spent $16,447,000 for this company to sell us your products…
▶ Only 3 of Mercy’s 26 hospitals make more Net Income than this companies SG&A from our business.
Spend Breakdown of Mercy$51,396,800
$15.3
$5.8
$16.4
$3.6
$10.2
Are we the problem?
SG&A is an efficiency measure of the trading partner relationship
We have the ability to impact this… let us
The Cost of Doing BusinessCost Breakdown of a Major Trading Partner with Mercy
• 30% reduction in payables outstanding resulted in additional early pay discounts from faster payment that required less manual intervention.
• 73% reduction in discrepancies, includes a complete elimination of vendor part number and unit of measure (UOM) discrepancies by supplanting part number and UOMs with GTIN on purchase order.
• Improved sourcing of product by use of a single scan of a barcode to determine the right product and product UOM to reorder.
• Less calls to customer service in the sourcing process.
• Fewer stock outs due to the inherent simplicity offered to nursing staff of scanning barcodes at the bedside.
• Better charge compliance resulting from scanning as a surrogate to traditional practices
For more information go to www.roiscs.com
Industry Leadership & Transformation
Mayo Clinic Mercy Geisinger KaiserIntermountain Healthcare
► Formed in December of 2010
► Adoption of GS1 standards and improve operations through best practices
► Unified voice of well respected brands to uniformly move the industry to adoption
► Work with trading partners to assure there is value for all
► Agree reduce variation in practice where ever possible in our trading transactions
► Linking standards adoption of improved tracking of clinical effectiveness
Industry Leadership & Transformation
Industry Dynamics
The ProblemThe healthcare industry is facing a crisis. External forces will strain providers operating margins. Providers will look for ways to operate
more efficiently and cost effectively to remain relevant.
Our Aspiration To reform the healthcare industry through collaboration by optimizing
the Supply Chain.
Introduction & Background
Supply Chain as it relates to…
• Past: a Key Tactical Enabler
• Present: a Performance Optimizer
• Future: an Enabler of the Future
Care Model, Industry Collaboration
Summary / Discussion
Agenda
Proven method to reduce cost.
Proven method to improve patient
safety.
Proven method to integrate physicians
and clinicians in product decision making.
Proven service enhancement model that
is a key satisfier for nursing.
Proven method to unite culture.
Benefits of an Integrated Supply Chain
Secrets to Our Success
Stick to Guiding Principles
Take Risks to Innovate
Buy-In (at all levels)
Experienced Talent
Dedicated Resources
Strong Business Cases
Metrics Driven
Systems Investments
Industry Collaboration
CLINICAL: Can your supply chain be positively linked to better care?
OPERATIONAL: Is your supply chain known for improving patient or caregiver satisfaction?
FINANCIAL: Does your supply chain materially contribute to your bottom line?
STRATEGIC: Is your supply chain considered a department or a strategy?
Questions for Providers to Consider
CLINICAL: Do your products/services have a documented clinical
improvement in outcomes – science behind the marketing?
Are your solutions addressing needs in all patient care settings?
OPERATIONAL: Is your company efficient for providers to work with?
Provider Supply Chain leaders are becoming more – are you adjusting accordingly?
FINANCIAL: Does your product/service improve the provider’s
bottom line?
Questions for Suppliers to Consider
STRATEGIC: Suppliers are homogenized – are you differentiated?
Are you selling “your box” or a solution to your customer’s needs?
Lines between GPOs, Distributors and Providers are blurring. How are you responding?
Are you strategically aligning with providers that will survive future industry consolidation?
Questions for Suppliers to Consider