Demand Planning in Hospital Supply-Chains. Rosaline Parson Corporate Director Supply-Chain Services
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1 Demand Planning in Hospital Supply-Chains Rosaline Parson Corporate Director Supply-Chain Services
2 Key Issues in Demand Forecasting 1. What does demand forecasting mean to a healthcare provider? 2. How is Orlando Health s Consolidated Service Center utilizing Demand Forecasting tools? 3. Does your forecasting data have value for your manufacturing partners?
3 Orlando Regional Medical Center Dr. P. Phillips Hospital M.D. Anderson Cancer Center Orlando South Seminole Hospital Arnold Palmer Hospital for Children Winnie Palmer Hospital for Women & Babies South Lake Hospital Lucerne Pavilion Health Central Hospital
4 Centralization of the Supply-Chain to Better Serve our Customers Direct Sourcing Product Selection & Purchasing Processes Vendor Relationships Corporate Alignment of Strategic Goals Outcomes Driven Consolidated Information Systems MMIS & WMS Value-Based Procurement Demand Forecasting Patient Care Clinical Integration Drive Market-Share Contracting Services Service Hospitals, Clinics & MD Practices Self-Distribution
5 Current Supply Chain Models Traditional Supply Chain Model Group Purchasing Distribution Hospitals GPOs Commercial Silos Waste Waste Waste Disintermediated Supply Chain Model Group Purchasing Distribution Hospitals GPO s Commercial Silos Waste Waste Integrated Supply Chain Model Group Purchasing Distribution Hospitals Direct Contracting Internal Logistics Aligned Processes Total Business Process 5
6 Self Distribution What does it look like? Perfect Order 6
7 Business Case for Self Distribution Cost Savings 1. Reduction in Distribution Fees 2. Reduction in GPO fees 3. Reduction in Transportation costs 4. Hospital space savings 5. Consolidate 3PL costs such as document retention costs 6. Hospital materials departmental FTE reduction 7. Product Standardization 8. Utilization Opportunities Direct Sourcing 1. Direct Purchase from manufacturer offer Price Point Improvements Product/volume aggregation Long term contract Single Point Delivery Incentives Freight Early-Pay discounts, rebates etc 2. Alternate Sourcing 3. Bulk buy Opportunities 4. Substitutions 7
8 Consolidated Service Center Self-Distribution entity 90,000 sq ft Climate-controlled Radiofrequency technology 24/7 operation Warehouse Management Tool (Tesys Elite) manages picking, replenishment, putaway, lots, Pedigree, UOM and all menu/non-menu logistic & operational processes including Demand Forecasting Low unit of measure (LUM) and Just in Time (JIT) product delivery to all hospitals, which includes Physician Preferred/Preference Items (PPI) Cross-Docking Patient Charge Capture process starts here
9 How do we manage the Supply Sourcing Process? Dedicated Buyers/Customer Service Representatives Assigned vendors Set delivery schedules Utilization of volumetric data to maximize pallet-order size Daily monitoring of ABC activity Utilization of a Demand Forecasting tool Close communication with our hospitals allowed us to validate ordering patterns and other data provided from MMIS systems We waited until we had a full year of data before we fully utilized tool We still allow Buyers to mannually adjust data to reflect manufacturer s changes in product availablity (when subs have to be used) or customer demand
10 Self Distribution Demand Planning and Procurement
11 Overview of Demand Solutions (DSFM) What is DSFM? A forecast management software tool available in our warehouse management system. Buyers utilize this tool for demand and inventory planning.
12 Buyer Customization
13 Why Use Demand Forecasting? Manage inventory to prevent backorders, increase fill-rates and decrease cash reserve use ABC analysis of stock items (4500 SKU s currently in tool) using the 80/15/5 rule Twenty-one statistical formulas are used during the forecasting phase Accuracy Data captured at item level and by facility Captures seasonality and trending Quick view graph (actual usage versus system forecast) Availablity of customized reporting capabilities % 99.80% 99.60% Fill-Rates 99.40% 99.20% Fiscal YR 2011 Fiscal YR 2010 Fill Rate Required 99.00% 98.80% 98.60% October November December January February March April May June July August September
14 Value of Demand Forecasting: Hospital Higher fill rates Less backorders- daily average of 15 items versus 60 Higher inventory turns-went from 5 to 10.8 annually Decreased overall CSC inventory value by $1.8 million within two months of use Hospitals can view what is available or ordered/allocated to manage budgets Decrease in returns related to expirations/obselence
15 Driving Clinical Integration with Demand Forecasting Fall prevention Committee Visibility of items that met their criteria Sourcing of needed items Dept level data related to past demand-compared to risk injury data Identification of departmental opportunities Surgical Standards Committee Drive clinical standards with practice standardization Custom Procedure Trays the same at all sites for same service line procedure Utilization of like items to prevent infection & drive positive patient outcomes Follows established clinical policies
16 Value of Demand Forecasting: Manufacturer Automation of the forecasting process 852 (pulls data from DSFM & WMS) viewed nightly and projection of our & vendor s need is made from this data No PO needed No backorders for last 18 months All electronic tranactions including payment Manufacturer production is based on our usage Full-visability to departmental level Acurate sales tracings Order size Date delivery required Shipping location How soon will order be utilized
17 Case Study: Trading Partner Value AVID Medical Nightly visibility of utilization of trays to actual facility & department Auto-replenishment to keep PAR levels Auto-Delivery based on needs Production Cycle & raw material acquisition based on utilization 100% fill-rates CPT changes can be done in 20 days No PO s No delivery set-up Full transparency
18 Demand Forecasting leads to Transparency & Trust Hospital Customer Patient-focused Dynamic supply versus Segmented Operational excellence Alignment of product decisions with patient outcomes & reimbursement Vendor Customer Sharing for greater visibility Creation of joint value propositions to drive efficiency & reduce costs Improvement in payment channels
19 Benefits realized because of joint value creation initiatives 24. What kinds of benefits have you realized because of your joint value creation initiatives? Please select all that apply. 25. What kinds of benefits have your trading partners realized because of your joint value creation initiatives? Please select all that apply.-gartner Base: Healthcare Providers, n=60
20 Questions? QUESTIONS?
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