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

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 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 one 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