Utilizing Key Performance Indicators (KPIs) to Optimize Supply Chain Initiatives

Transcription

1 Utilizing Key Performance Indicators (KPIs) to Optimize Supply Chain Initiatives Nick Gaich Partner, Chief Strategy Officer Appleseed Healthcare Resources

2 Agenda and Objective Alignment Identify and effectively communicate KPIs to your organization. Evaluate the importance of KPIs in a successful Supply Chain Strategy. Outline the benefits of utilizing KPIs within your organization.

3 Why Measure? Why keep score at a ball game? Why do engineers concern themselves with tolerances? Why do we manage to an earning statement? Why do we track supplier quality? To improve performance toward a goal

4 Performance Management Performance Management is a systematic and data-oriented approach to managing people at work that relies on positive reinforcement as the major way to maximize performance. P e r f o r m a n c e Time Performance Management International Want to Discretionary effort Have to

5 What it takes to get from have to, to want to: Goal awareness (why are we doing what we re doing?) Goal alignment (do I care? intrinsic & personal) Role definition (how do I contribute and add value?) Resource availability (do I have the tools? physical & intellectual)

6 Vision Statement Our Vision Is To : become a world class healthcare supply chain operation ensuring the lowest cost and highest quality care for the patients we serve. We will achieve this Vision by successfully executing our Mission by: constantly optimizing our efficiency and tenaciously reducing the total delivered cost of goods and services. We will steward the resources entrusted to us and perform respectful of the responsibility bestowed us as integral members in the delivery of patient care. Establishing a long-term Vision is the basis for Creating a multi-year Strategy which will drive. We will shape our Operating Principles and establish our Goals and Objectives by integrating a Voice of the Customer assessment process Goal 1 Goal 2 Goal 3 Goal 4 Goal 5 Goal 6 A set of actionable Goals. Which will be deconstructed into a set of representative and Measurable Objectives. Objective 4.1 Objective 4.2 Successfully implemented and measured by a set of OUTCOME Directed TARGETS Financial & Operational Customer Service Employee Satisfaction Service Quality 6

7 Performance Management Infrastructure Phases 1. Mission, Vision & Values Focusing SCM Statements Derived from the Organization Statements 2. Strategic & Business Plan Development SCM Plans Derived from the Organizations Vision and Leading Imperatives Integration of the Voice of the Customer Balancing the Initiatives 5 R s Operationalizing the Plan 3. Performance Management Objective Crafting Developed with Staff & S.M.A.R.T. Tested Quarterly Targets Operational, Financial & Developmental 4. Execute (Measure & Communicate) Routine Staff Meetings Reviews Conducted Quarterly Calibration Exercises Annually Generate, Annotate & Post Results

8 Performance Management Infrastructure Phases 1. Mission, Vision & Values Focusing SCM Statements Derived from the Organization Statements 2. Strategic & Business Plan Development SCM Plans Derived from the Organizations Vision and Leading Imperatives Integration of the Voice of the Customer Balancing the Initiatives 5 R s Operationalizing the Plan 3. Performance Management Objective Crafting Developed with Staff & S.M.A.R.T. Tested Quarterly Targets Operational, Financial & Developmental 4. Execute (Measure & Communicate) Routine Staff Meetings Reviews Conducted Quarterly Calibration Exercises Annually Generate, Annotate & Post Results

9 What do you see as your 3 leading imperatives over the next 3 to 5 years? Of these imperatives how can an efficient Supply Chain Management Program contribute to your success? How dependent/critical will the Supply Chain be in the ultimate success of your programs over the next 3 to 5 years? Relative to supply chain activities over the next 3 to 5 years, how much involvement do you envision for either yourself or your direct reports? How open are you to engage in creative changes in supply chain strategy/design over the next 3 to 5 years? V.O.C. OPERATIONAL V.O.C. SUPPLY CHAIN STRATEGY V.O.C. INTEGRATION V.O.C.

10 Acceptance of Change: Q 5 Progress Focusing our Activities Activities Tactical Enterprise Drivers: Q 1 Cost Management- Expense Driven Physician Integration- Inclusion Volume Growth- Service Line Sustainability Call To Action: Q 2 Purchasing Leverage through standardization Champion Decision Support (data transparency, benchmarking, analytics) Increase Margin Performance Stakeholder Significance: Q 3 Relevance Moderately Dependant Willingness to Engage: Q 4 Moderate- Active Applying Lessons Learned Cultural & Behavioral Considerations!! Professional Conservative.. Slow and Steady.. Time 10

11 Cultivating Excellence The graphic on the following page details a roadmap of specific investments in Technology, People, Policy, Processes and Culture required to create the future state supply chain capability necessary to achieve and sustain year-over-year supply cost optimization and meet customers expectations. Policy Process The Cultivating Excellence Tests are offered as a framework to assist in the development of action-oriented objective statements from the Strategic Plan milestone elements. Culture People Technology Enablers Voice of the Customer Themes Cultivating Excellence Tests CI Clinical Integration PE Process Efficiency SV Supply Value SG Service Line Growth (Strategic Business Unit) TM Transparency / Measurement CS Customer Service Relevance Relationships Rigor Rhythm Responsibility Is this relevant to the work we do? Are relationships in place to succeed? Is the discipline in place? Is this repeatable / replicable? Is ownership and accountability clear?

12 Technology Enablers Culture People Policy Process TM-1 Document System Admin. Processes SV-1b Publish New VAT Processes Cement Processes in Technolog y CI-2 OR & SPD Supply Process Integration CS-3 Staff Service Excellence Plan SG-2 Pilot the Mobile Case Cart Concept CI-4 Cath Lab Supply Process Integration SG-3 Increase the Mobile Case Cart scope SV-1 Recreate VAT w/steering Team & Goals Senior Leadership Critical to Success SV-2 Hire Purchasing Mgr SV-3 Segregate Contracting & Purchasing SG-1 Affiliate Milestone Plan SV-1a Establish VAT Governance CS-1 Survey Tool PE-3 Test Service Center Feasibility TM-3 Publish SCM Balanced Scorecard PE-1 Implement GS1 Standards PE-2 Maximize EDI TM-2 Create Redundancy with Select System Admin Functions PE-5 Create an Inventory Control Position SG-1 Affiliate Milestone Plan CI-1 Pilot Patient BOM Dashboard SV-1c Cement VAT Processes in Lawson LPI s PE-4 Implement Contract Management CI-2a OR & SPD Inventory Integration SV-4 Test Alternate Contracting Strategies CS-2 Staff Continuing Education Plan CI-2c OR & SPD Supply Technician Reporting Structure Alignment CI-3 Service Line Cost Analysis PE-3 Test Service Center Feasibility CI-4a Cath Lab Inventory Integration TM-4 Budgeting with Service Line Cost Analysis (CI-4) Greatest Senior Leadership Return in Critical Clinical to Preference Success SG-1 Affiliate Milestone Plan CI-5 Mature Dashboards to Address Patient Resource Intensity Visibility CI-2b Interface SurgiNet & Lawson_Facility A _Facility B _Facility C _Facility D Data Integrity must be Job A good data foundation One CI-4b Interface Cath Lab FY 09 Milestones FY 10 Milestones FY 11 Milestones

13 As strategic milestones are transformed into tactical plans/objectives, these tests are offered to help ensure success and sustainability. Relevance Is this relevant to the work we do? Is ownership and accountability clear? Responsibility Relationships Are relationships in place to succeed? Excellence Is this repeatable / replicable? Rhythm Rigor Is the necessary discipline in place?

14 Performance Management Infrastructure Phases 1. Mission, Vision & Values Focusing SCM Statements Derived from the Organization Statements 2. Strategic & Business Plan Development SCM Plans Derived from the Organizations Vision and Leading Imperatives Integration of the Voice of the Customer Balancing the Initiatives 5 R s Operationalizing the Plan 3. Performance Management Objective Crafting Developed with Staff & S.M.A.R.T. Tested Quarterly Targets Operational, Financial & Developmental 4. Execute (Measure & Communicate) Routine Staff Meetings Reviews Conducted Quarterly Calibration Exercises Annually Generate, Annotate & Post Results

15 SCM Strategic Plan Focus 1: Patient Safety FY 09 FY 10 Strategies Activities S1 Increase the percentage of supply chain managed supplies S2 Increase the accuracy of patient product consumption information S3 Implement a Disaster Preparedness Plan for SCM S1.A1 Define and baseline Supply Chain Managed Supplies (SCMI) S1.A2 Develop system data queries and add the SCMI to SCM Balanced Scorecard S2.A1 Cleanse the MMIS Item and Vendor Master files S2.A2 Include industry standards when available S3.A1 Rationalize necessary item list and design maintenance and access protocols S3.A2 Author and distribute the associated administrative policy and procedure. S1 Increase the percentage of supply chain managed supplies S2 Increase the accuracy of patient product consumption information S1.A1 Include OR stock and non-stock items in MMIS and SCM processes S1.A2 Include Cath Lab stock and non-stock items in MMIS and SCM processes S2.A1 Interface the MMIS to the ORIS S2.A2 Interface the MMIS to the Cath Lab IS Ownership Supply Chain Leader Supply Chain Leader

16 Linking Performance Management Objectives Focus 1: Patient Safety Strategies FY 09 S1 Increase the percentage of supply chain managed supplies S2 Increase the accuracy of patient product consumption information S3 Implement a Disaster Preparedness Plan for SCM Supply Chain Management Goals and Objectives for SC Leader, Q1 FY 09 Focus 1: S1 Increase the percentage of supply chain managed items A1 Define and baseline Supply Chain Managed Items (SCMI) Document the criteria to qualify an item as supply chain managed by 8/30/09 Query the necessary databases and establish a baseline for total SCMI effective 9/30/09. A2 Develop system data queries and add the SCMI to SCM Balanced Scorecard Document the steps required to pull the total SCMI figure monthly by 9/30/09. Incorporate the SCMI figure into the SCM Balanced Scorecard by 9/30/09. Train an administrative assistant to perform the system queries and publish the figure in the SCM Balanced Scorecard monthly beginning 10/30/9, provided IS grants the necessary security access.

17 Vision Statement Our Vision Is To Be: XXXXXXXX Establishing a long-term Vision is the basis for We will achieve this Vision by successfully executing our Mission by: constantly optimizing our efficiency and tenaciously reducing the total delivered cost of goods and services. We will steward the resources entrusted to us and perform respectful of the responsibility bestowed us as integral members in the delivery of patient care. We will shape our Operating Principles and establish our Goals and Objectives by integrating a Voice of the Customer assessment process Goal 1 Goal 2 Goal 3 Goal 4 Goal 5 Goal 6 Financial & Operational Customer Service Objective 4.1 Objective 4.2 Employee Satisfaction Service Quality Creating a multi-year Strategy which will drive. A set of actionable Goals. Which will be deconstructed into a set of representative and Measurable Objectives. Successfully implemented and measured by a set of OUTCOME Directed TARGETS 17

18 Balanced Score Card Balanced Scorecard = A set of measures, dials and indicators that answers the following questions: Customer Perspective: How do customers see us? Financial Perspective: How do we look to our stakeholders? Internal Business Perspective: What must we excel at? Innovation: Can we continue to improve and create value? Source: Adapted from The Balanced Scorecard- Measures that Drive Performance, R.S. Kaplan, D.P. Norton, Harvard Business Review, 2000.

19 Balanced Score Card Organizational Vision Service Strategic Goals Quality PATIENT Productivity

20 Lagging vs. Leading Indicators The central principle of the BSC framework is achieving a balance between driver & outcome measures Lagging Indicators Definition: A measure that reflects only OUTCOMES of past successes, not current activities and decisions Purpose: Focused on the performance results at the end of a time period or activity Examples: Year End Sales, Market Share, Yield Results Strengths: Usually objective and easily captured Leading Indicators Definition: A measure based on hypothesis of strategic cause and effect, looking at DRIVING process measures going forward Purpose: Measures intermediate processes and activities Examples: Hours spent with customers Revenue mix Strengths: More predictive in nature, allows organizations to adjust behaviors for performance Source: MAQIN, Developing Strategic Measures

21 Balanced Scorecard Exercise How do customers see us? Fill Rate Inventory: Stock Cycle Time Inventory Accuracy Requisitions: Receipt Cycle Time Returns Stock/Non-Stock Ratio Customer Calls/Complaints Customer Satisfaction Score Supply Availability Supply Accessibility Staff Courtesy/Helpfulness Staff Responsiveness Staff Professionalism Access to Information Internal Business Financial Perspective Innovation Perspective

22 Balanced Scorecard Exercise How do we look to shareholders? Days Cash on Hand Days Inventory on Hand Return on Assets Budget vs Actual Budget Results Actual: PY Variance Supply Cost per Supply Cost per Adjusted Supply Cost Trend Supply Cost Trend vs CPI Total Non-Labor Cost per Customer Perspectiv e Internal Business Innovation Perspectiv e

23 Balanced Scorecard Exercise What must we excel at? Purchasing Productivity Purchasing Accuracy Receipt Accuracy Inventory Accuracy Contract Compliance Logistics Handling Productivity On/Off Contract Purchase Ratio Supply Chain Managed Item Ratio Supply Chain Managed Inventory Ratio Supply Chain Managed Spend Ratio Quality Errors, Defects, Rework Speed, Cost, Time Productivity Customer Perspectiv e Financial Perspectiv e Innovation Perspectiv e

24 Balanced Scorecard Exercise Can we continue to improve and create value? Innovations Log Employee Suggestions Employee Retention Employee Capabilities Employee Productivity Continuing Education Formal Education Certifications On-Line Classes Conference Attendance Book Reviews Customer Perspectiv e Internal Business Financial Perspectiv e

25 Setting Targets Getting to Attainable and Realistic is the most critical component of objective setting and the most difficult Begin with a collaborative and iterative process By the end of the iterations you will have established: Goal Awareness and process understanding Role Definition and expectation clarity Resource Availability or limitations Goal Alignment

26 Destination Metrics IDN CI PE Implemented Decision Support Capability Per Patient/Procedure/Service Line Top % Performance in from [XX for at Least Reporting Periods SV Top % [Service Line Quality Metrics] and Top % Patient Resources Consumed CI PE SV SG TM CS SG TM Evidence of Direct Contribution of Service Line Profitability and/or Evidence of Infrastructure Service Line Enablers Stakeholder Access to Activity Based Costs and Resource Consumption Information CS Maintain a Rating in Customer Satisfaction for at Least Reporting Periods

27 Challenges and Barriers Measurement Trap: Excessive measures with no clear understanding of directional effects Functional Metrics: When left unchecked, the system is gamed to meet individual measures Setting targets is only half the battle Leadership: You must be able to maintain the targets by overcoming: People s resistance to measurement Technology advancements Energy to consistently measure across time

28 Summarizing Today s Thoughts Optimizing KPI s Align, Synchronize and Harmonize our SC Strategic Plan with Organizational Strategic Vision and Operating Imperatives Create an infrasutruce for current and future progress reporting based upon TARGETED-MEASURABLE indicators Establish and reinforce ownership and accountability based upon Realistic goal setting Founded upon an cultural model of Support vs Punishment

29 Utilizing Key Performance Indicators (KPIs) to Optimize Supply Chain Initiatives Nick Gaich Partner, Chief Strategy Officer Appleseed Healthcare Resources