Improving pharmaceutical supply chain performance: Pilot programme

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1 Improving pharmaceutical supply chain performance: Pilot programme National Seminar - 6 December 2005 Frank Hill, Head of Supply Chain Services NHS Logistics

2 Contents Background Objectives and methodology Key milestones and outputs Impacts/benefits - stakeholders Performance management Sharing good practice Communications roll-out 2

3 Background why a major project Pharmaceutical supply chain last independently reviewed on national basis in 1986 Supply chain generally given lower priority against other developments in hospital pharmacy Anecdotal evidence of poor/variable supply chain performance Increasing concern from pharmacists about service levels No consistent measures in place against which to test this out And yet: Supply chain integrated with medicines management and clinical processes Needs to be fit for purpose to ensure patients get the right medicines at the right time 3

4 Objectives To achieve and sustain improved performance in the pharmaceutical supply chain - systems and processes - policy and practice - relationships Right first time, every time 4

5 Potential benefits Improved patient care Reduced supply chain activity and costs Reduced errors and problem resolution Increased transactional efficiency and accuracy Improved supply chain visibility Reduced inventory investment Improved supply chain partnerships Manage performance within supply chain 5

6 Pharmacy Supply Chain Best Practice Implementation Pilot Project Organisation Programme Board Bournemouth Pilot Project Board Heart of England Pilot Project Board South Tyneside Pilot Project Board Wholesaler Lead Contacts Performance Measurement & Supplier Relations Procurement to Pay Bournemouth Pharmacy Project Team Performance Measurement & Supplier Relations Procurement to Pay Heartlands Pharmacy Project Team Performance Measurement & Supplier Relations Procurement to Pay South Tyneside Pharmacy Project Team Regional Procurement Specialists Inventory Management & Logistics Inventory Management & Logistics Inventory Management & Logistics Process Automation Process Automation Process Automation Pharmacy System Expert Users 6

7 Phase 1 programme activity Planning Gather data Project start Analysis Analyse Performance Management Map P2P Processes Analyse inventory management Identify automated processes Identify best practice opportunities Best practice testing Performance Management P2P Processes Inventory management Automated processes Implementation Plan Report findings Produce implementation plan Gateway 1 Gateway 2 Gateway 3 January 05 February 05 March 05 April 05 May 05 7

8 Phase 2 programme activity Planning Implementation P2P processes Benefits tracking Handover Inventory management Automated processes Performance management Transition to Pharmacy project team Case study Final report /case study Start Gateway 4 Gateway 5 Gateway 6 Sign off May 05 June 05 July 05 August 05 September 05 8

9 Analysis of findings Procurement to Pay processes Lack of clearly identified and documented supply chain processes Order process/transmissions not always standardised Poor understanding of supply chain process costs/drivers Need for improved waste/returns monitoring Current wholesaler service offering could lead to inefficient internal replenishment practices Invoice management process sometimes inefficient with invoice queries being passed and invoice reconciliation a manual process. 9

10 Analysis of findings Inventory management and logistics Opportunities identified to improve logistics flows and storage layout in Pharmacy store/dispensary. No formal stock classification and inventory policy for the majority of products which made inventory management a challenging task. Varying levels of stock across departments and product categories were often difficult to understand. Significant variations in inventory level across the pharmacy supply chain Lack of supply chain visibility up and down stream 10

11 Analysis of findings Performance management and supplier relationships Relationships with main wholesalers varied across the pilots No systematic performance management process in place Performance management managed by exception Main performance data provided by wholesalers in differing formats 11

12 Analysis of findings Process automation Varying levels of process automation existed across the pilot sites The use of e-commerce within the replenishment process could be extended In a number of cases process improvement was constrained by lack of systems functionality Process activities related to robotics were centred on the dispensing elements with in-bound replenishment being a secondary consideration. 12

13 Recommendations The development of core procurement to pay processes and identification of costs and cost drivers Optimise use of e-commerce within the overall procurement to pay process Development of an inventory classification/stocking policy to manage inventory and replenishment frequency Review of existing inventory stocking points and effectiveness of current materials management processes Review of existing logistics flows and storage layouts to improve efficiency 13

14 Recommendations Establish waste and pharmacy returns monitoring process to understand drivers and reduce activity Using the KPI outputs from previous studies partner with wholesalers to develop a set of standardised performance metrics and performance review process Identify requirements for core pharmacy systems functionality enhancements and escalate these where necessary through the national programme board Develop an Output Based Specification (OBS) for a new pharmacy system (South Tyneside). 14

15 Implementation Each pilot established an implementation plan based around a number of the recommendations dependant on local requirements In certain cases a pilot would lead on a particular topic for example: Bournemouth: inventory classification and policy Heart of England: performance management South Tyneside: development of a pharmacy system OBS 15

16 What has been have achieved? Short-term benefits for pilot trusts Prospect of longer-term benefits as action plans are progressively implemented Closer working relationship between trusts and main wholesalers and better mutual understanding of each others business processes A raised profile for the pharmaceutical supply chain amongst a wide range of stakeholders Shared learning across all areas/organisations 16

17 Supply Chain best practice outputs Process improvement end to end supply chain Process automation/standardisation Stock classification/inventory management Catalogue management Systems specification/ functionality Required systems enhancements Waste management returns monitoring Performance management KPI s/sla s in conjunction with Wholesalers Exemplar sites profile/maturity 17

18 Benefits Improved patient care by having the right product in the right quality at the right time - average order completion time reduced from 19 days to 5 days at Heart of England Measure and manage performance within the supply chain through improved performance management/partnerships - KPIs and Service principles developed at Heart of England in partnership with AAH and Unichem Efficient management of the invoice process between pharmacy and finance teams - invoice process clarified with opportunity for prompt payment discounts at Heart of England and South Tyneside 18

19 Benefits Improved order/invoice accuracy through increased use of e-commerce - increase in e-commerce trading partners at South Tyneside from 5 to 39 representing 90 % of suppliers capable of trading electronically Potential procurement saving through improved decision making and inventory reductions pharmacy supply chainsustainable inventory reduction of 351K at Heart of England Implementation of more efficient delivery arrangements - pharmacy store inventory reduction of 6% at Bournemouth 19

20 Benefits Reduced waste and returns through the pharmacy supply chain - savings potential of 48K together with a 5% reduction in rework at Heart of England Identification of essential system functionality change key requirements identified at Bournemouth being addressed nationally with systems suppliers Template for new pharmacy systems OBS developed at South Tyneside 20

21 Systems functionality Work has focused on the two leading suppliers: JAC and Ascribe Barriers to implementation of best practice and KPI s identified by the pilot programme (JAC) Meetings planned with JAC and Ascribe to discuss Understanding of existing systems functionality can also be poor within pharmacy South Tyneside has developed an output based specification for a new pharmacy system 21

22 Systems functionality enhancements JAC examples: Auto upload of prices Forward cover by product Invoice matching Average time to fulfil order Outer requirement flag 22

23 Impacts and benefits - stakeholders Materials management review at ward level Shift non pharmacy products out of pharmacy Improved management of invoice process Improved business processes Reduction in manual orders processing, increased use of e- commerce Development of agreed set of KPIs and SLA s framework Inventory reduction, smoother demand and less emergencies Focus on core products and supplier relationships Invoice efficiency-less invoice queries More efficient/intelligent supply chain trust partnerships Improved order efficiency-lower delivery discrepancy rates Supply Chain partnership with common measures/standards 23

24 Impacts and benefits - stakeholders Inventory management classification/policy Direct deliveries Bulk deliveries Reduction on order frequency and emergency orders (more lines per order) Cost and inventory reductions Potential impacts on delivery routes-increased efficiency/accuracy Changes to delivery profile (fewer deliveries) 24

25 Apr-04 May Jun Jul Aug Sep Oct Nov Dec Jan-05 Feb Mar Apr May Jun Jul Aug Sep % of Ecommerce Order Entry No of Order Errors Accuracy through Ecommerce Level of Ecommerce Ordering vs Order Errors % 90.00% 80.00% % % 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% OrderErrors Ecommerce order entry % 25

26 Performance management Our KPI journey Proposed best practice KPI s Pharmacy Dept performance drivers Purpose of the measures KPI agreement Diagnostic measures proposed Pilot review Taking action Meaningful display of KPI s Data set Data set Unichem. measurement Heartlands Pharmacy measurement AAH measurement 3 month pilot 26

27 Performance management KPI s Line Fulfilment The order line delivered in full on the next day delivery inside the hour allocated window to the correct location Order Fulfilment The order completely fulfilled on the next delivery inside the 1 hour allocated window to the correct location 27

28 Performance managementa OTIF (On Time In Full) - Inputs & Impacts partnership Work routines planned to accommate timely orders Improved order aggregation through centralised purchases Low Cost Order processing method Order Generation routine Order Type 1, Bulk - low value/ High Volume 2, Routine Stock replen 3, Urgent Accurate/timely order information Supplier/Trust Strategic Partnership OTIF Order Aggregation E-commerce Timely Catalogue/ Contracts Updates Accurate and Upto Date Product Description/ Codification Opportunity for einvoicing Transparency of Demand Long Term demand planning Stock Availability 28

29 Performance managementa partnership OTIF (On Time In Full) -Outputs & Benefits Decrease in fragmented delivery Fewer Totes Fewer Receipts Fewer invoices Fewer w/saler pick errors Supplier/Trust Strategic Partnership Reduced lines received incorrectly Fewer line returns OTIF Increased Service Level at lower cost - Supplier/ Pharmacy Reduced qty's received incorrectly Reduced number of deliveries to wrong site Reduced Rework (i.e. Invoice Queries) Reduced number of Ktrans Prompt invoice payment Increased Service at lower Cost - Pharmacy/ End User Increased availability of Rx prescriptions within time req'd Less emergency & safety stock stock Reduced patients waiting/calling back (to follows) Fewer emergency orders Less inventory held by trust Release of bed Improved patient experience Avoids redispensing/non collections Release of capital Fewer Complaints 29

30 Performance managementa partnership % of lines fulfilled in 1st delivery vs % of e-commerce orders 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Jan Feb Lines Fulfilled in 1st Delivery Manufacturer Failings Mar April May June July Aug Sep Oct Nov Orders placed using Ecommerce route Orders fulfilled in first delivery Dec Target Service Level - Line Fulfilment 30

31 Line fulfilment monthly % of Lines Fulfilled in 1st Delivery vs % of e-commerce orders Performance level traditionally reported by wholesaler Manufacturer cannot supply (% failing) Performance level leaving RDC 100.0% 90.0% 80.0% 70.0% True performance level. OTIF Trust receipt ratification 31

32 Performance managementa partnership Average Time to complete invoice vs Average Time to Fulfill Order Jan Feb Mar April May June July Aug Sep Oct Nov Dec Average time to match invoice Average time to pay invoice Average time to deliver complete order 32

33 Pharmacy supply chain tool kit Best practice pilots-final reports Best practice case studies Critical success factors Tools and templates Exemplar site access Web site 33

34 Pharmacy supply chain tool kit Performance management - KPIs - Template SLA - Standard reason codes - Performance driver maps Implementation - Implementation matrix Systems functionality - Specimen systems specification 34

35 Pharmacy supply chain tool kit Process analysis and diagnostics - Supply Chain Assessment tool - Audit tool (supply chain section) - Process maps from each pilot - Prioritisation matrices Inventory management - Inventory categorisation - Inventory policy 35

36 Communications and stakeholder engagement Stakeholders include: NHS pharmacy community (and NPSG) NHS supply and finance communities All wholesalers serving hospital market Manufacturers Trade associations Systems suppliers 36

37 Communications and stakeholder engagement Wide range of mechanisms being used: Targeted letters and s and PASA s Procurement Bulletin PS magazine and NHS Supply Chain Forum News PASA and NHS Logistics websites Professional journals eg Hospital Pharmacist Face-to-face meetings High profile seminars/events Pharmacy tool kit CD 37

38 Communications and stakeholder engagement Events: Presentation to NPSG - 14 September Final pilot briefing - 27 September Engagement of wider wholesaler community BAPW - 12 October Presentation at PDIG - 3 November National NHS Seminar - 6 December 38

39 Pharmaceutical supply chain pilot Questions? 39

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