Chief Procurement Officer Outline 1. Trust info 2. Business - - PowerPoint PPT Presentation

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 PO’s and 1m PO lines
• 12 floors and 11 lifts

Supply Chain Data 13/14

2010 Observations - Push rather than Pull Manufacturer

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

• r Washing

Powder

Strangers

Low or Intermittent Demand Spice or Herb

From Generic to Structure

Strategic Consolidation Centre (SCC)

• 1. Months
• 2. Top 300 SKU’s
• 3. Daily Picks
• 4. Containers/Pallets

Advance Stock Location (ASL) 5 or 6 Locations

• 1. Top 300 Day (s)
• 2. Rep’rs and Strangers

Weeks

• 3. Outers

Point of Care/Use 115 Locations

• 1. Top 300 Hours/Day
• 2. Rep’rs – 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

• ne single room

Delivery charges and stock out sigificantly reduced

Trauma & Orthopaedic ASL

Main Theatre ASL

2012

• 181 SKU’s
• £320k stock value
• Stock outs and

uncontrolled 2014

• 1080 SKU’s
• 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 ASL’s built
• Symbol technology in use
• £15m Requisition to Replenishment initiative