© Copyright 2012, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE
are trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
April 30, 2013
Mastering the best practices in lab supply
management to boost your margins
Chris Dillinger
Director of Services – Cardinal Health Supply Solutions
Lean Six Sigma Master Black Belt
© Copyright 2012, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE
are trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
2
Learning objectives
• Understand the importance of managing laboratory
supply chain on financial performance, labor utilization
and patient care
• Recognize waste within the laboratory supply chain
• Identify lean countermeasures to common laboratory
supply chain pain points
© Copyright 2012, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE
are trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
3
What is the mission of your laboratory?
Serve physicians
Serve clients
Cost-effective healthcare
Serve patients
Research
Innovation
High-quality results
© Copyright 2012, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE
are trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
Labor Statistics
43 Percentage of laboratories experiencing
difficulties in recruiting or hiring personnel (1)
50 Average age of laboratory personnel (1)
81,000 Number of medical technologists and technicians
needed by 2014 to replace the retiring staff (2)
10,000 Number of new clinical laboratory scientists and
technicians needed each of the next 10 years (2)
5,000 Number graduating from lab science programs
annually (2)
(1) ASCP Wage and Vacancy Survey of U.S. Medical Laboratories, March 2008
& G2 Lab Industry Analysis 2010
(2) Bureau of Labor Statisics & G2 Lab Industry Analysis 2010
© Copyright 2012, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE
are trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
5
Lab supply expense
10%
25%
15%
50%
© Copyright 2012, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE
are trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
6
Supply chain improvement opportunity
3–7% average aggregate product savings
20–30% average inventory reduction
99.5% product availability at point of use
100% price and invoice accuracy
18.5% reduction in purchase orders
15–20% average freight spend savings
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are trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
Value
7
Lean thinking
• Understand value and focus key processes
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are trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
8
Lean thinking
• Maximize customer value while minimizing waste
• Understand value and focus key processes
Value
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are trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
9
Lean principles1
• Focus on the customer
• Identify and understand how the work gets done
• Manage, improve and smooth the process flow
• Remove NVA steps and waste
• Manage by fact and reduce variation
• Involve and equip the people in the process
• Undertake improvement activity in a systematic way
1 Lean Six Sigma principles as articulated by General Electric
© Copyright 2012, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE
are trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
10
Waste identification
Moving supplies from location to location – dock, lab, store, pou Transportation
Techs managing supplies, not engaging ee’s in problem resolution Resources
Supplies, reagents, forms, email, hoarding Inventory
Looking for supplies, physical layout, ergonomics Motion
Waiting for supply delivery, reagent reconstitution Waiting
Expired reagents, outdated forms, bulk buys Over Production
Standing order changes, expediting, freight mode, QC Over Processing
Stock out, non-catalog items, back order, climate control, rework Defects
© Copyright 2012, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE
are trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
11
High level Value Stream Map
Hospital
Delivery
EDI
clearinghouse
Intouch Laboratories
High Level Process Map
April 30, 2013
Supplier
Dist 2
Direct from
Manufacturer
Dist 1
MMIS
Weekly
Inventory
3-5x/wk
Daily
5 million tests per year 4 hospital labs + 1 core lab $30 million supply spend $600K physical inventory
Order 1x per week
Cutoff noon for next day
3x/wk
Daily
Hospital
Receipt
Lab Receipt
Lab Delivery
Stocking
2-3x/wk
Pull to POU
Consume
Stocking
Stocking
Pull to
POU
Pull to
POU
Consume
Consume
Core Lab
Stocking
Deliver to
client
Consume
Pull
supplies
Stocking
Supply
Requisition
© Copyright 2012, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE
are trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
12
High level Value Stream Map
Hospital
Delivery
EDI
clearinghouse
Intouch Laboratories
High Level Process Map
April 30, 2013
Supplier
Dist 2
Direct from
Manufacturer
Dist 1
MMIS
Weekly
Inventory
3-5x/wk
Daily
5 million tests per year 4 hospital labs + 1 core lab $30 million supply spend $600K physical inventory
Order 1x per week
Cutoff noon for next day
3x/wk
Daily
Hospital
Receipt
Lab Receipt
Lab Delivery
Stocking
2-3x/wk
Pull to POU
Consume
Stocking
Stocking
Pull to
POU
Pull to
POU
Consume
Consume
Core Lab
Stocking
Deliver to
client
Consume
Pull
supplies
Stocking
Supply
Requisition
Space
design
Space
design
Space
design
Space
design
Storage
design
Storage
design
Storage
design
Storage
design
Add-on
Add-on
Clutter
Clutter Clutter
Clutter
Clutter
E/O
E/O
E/O
Climate
control
Climate
control
Climate
control
Missed
cutoff
Missed
cutoff
Missed
cutoff
Expedite
Expedite
Expedite
Clinical
staff Clinical
staff
Clinical
staff
Clinical
staff
Clinical
staff
Manual
Manual
Manual
Freight
Mgmt
Freight
Mgmt
Standard
Standard Backorder
Poor
verification
Poor
verification
Poor
verification
System
integration
Purch
Svcs
Outreach/
POC
Purch vs
Use
Stock outs Stock outs
Visibility to
spend Unintentional
redundancy Excess
inventory
Excess
inventory
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are trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
13
Best demonstrated practices
• DEFINE
– High level business review of supply chain activity and spend
– Physical inventory
• MEASURE
– Process mapping
– Spaghetti diagram
– Storage location mapping
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are trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
14
Best demonstrated practices
• ANALYZE
– Usage data versus purchase history
– Review Standing Orders
– Contract compliance
– Freight management
– Labor utilization
– Product utilization
– Expiration/Obsolescence
– Outreach supply distribution
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are trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
15
Best demonstrated practices
• IMPROVE
– PAR levels
– Kanban
– Lean - 5S, visual management, space design
– Value analysis team
– Standardization team
– Maximize technology capabilities
– Minimize clinical staff performing supply chain activity
• CONTROL
– Balanced scorecard
– Be noticed, noticing
– Make it easy
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are trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
16
Action items
• Go to Gemba
• Ask questions – seek to understand
• Grant immunity
• Empower employees
• USA
• Recognize it, call it, have courage