1. Supply Chain Organization
Overview:
Past, Present and Future
Richard Bagley
Director Strategic Sourcing

2. Intermountain Healthcare Overview
Hospitals
Since 1975
22 hospitals (36% of Hospitals)
2,790 licensed beds
SelectHealth
Since 1983
Health plans (23% of Utah Insurance)
630,000 members
Medical
Group
Since 1994
1,100 employed physicians
150 clinics
Based in SLC, UT
34,000 employees
$4.5B revenues
$5B assets
AA+ Standard & Poor’s Aa1 Moody’s
Clinical
Programs
Since 1997
9 key service lines

3. What does the world look like in Supply Chain?

5. Our Supply Chain is One of the Industry’s Best
Critical Success Factors
Supply chain became a strategic focus by senior leadership
$3 Million initially investment and 25 new FTEs – skilled & talented
Centralized buyers and reporting relationships of the warehouse
Added couriers, travel services, publishing and central laundry
Earned trust of stakeholders – management & clinicians
Implemented effective strategies
Deliver on commitments - Savings, value, efficiency & more
“Skate to the puck”
Notable Recognitions
Garter’s 4th Best Supply Chain in Healthcare
2013 AHRMM Innovation Award
ECRI Healthcare Supply Chain Achievement Award
IntelliCentric’s 5-Rings Award
Cardinal Health
Mayo Foundation BD
Intermountain Healthcare
Owens & Minor
Abbott
Johnson and Johnson
Novartis
Mercy (MO)
Geisinger Health Systems

6. SCO’s Strategic Imperatives
Increase Savings and Value
Deliver $42M in savings
Deliver plan to support CPI + 1
Expand Scope
Optimize efficiency and minimize variation
Risk mitigation plan for supply chain
New Forms of Value
Develop capability to deliver post contract value
Rum/Lum
Enhance Technology
Project eLEV8 – Go Live in Q1 2014
Data Standardization
Generate Revenue
Cost Neutral in Five Years!

7. 7 Things You Need to Know About the Healthcare Supply Chain
Logistics costs in healthcare are more than 10X the costs of the retail industry The most expensive and high risk items often have the least control Personal preference drives many product decisions Healthcare outsources less than most other industries Healthcare industry has the lowest level of trust between buyers and suppliers Supply chain is still in the basement of many hospitals (literally) – even though non-labor expenses are approaching 50% of total costs Data standards, transparency, traceability…oh my!

8. Materials & Inventory Mgmt
Our Operating Model
Goods & Services
SUPPLIER
NETWORK P A T I E N S
SUPPLY CHAIN
PROCESSES
CLINICAL CARE
NETWORK
Category Management
Contract Mgmt
P2P
Logistics Mgmt
Materials & Inventory Mgmt
Source
Buy
Deliver
Supplier Relationship Management
Customer Relationship Management 8

9. Source (Procurement) Drive value up and cost down on $1.4B in spend
Facilitate governance to select best projects and manage prioritization of work
Facilitate the process to select best supplier(s) and products
Segment and manage suppliers we have sourced
Manage catalog of products/services/equipment
Manage category plans (spend analysis, opportunity assessment and calendar of events)
Manage supplier contracts (820 new agreements in 2013 with active agreements)

10. Sourcing Governance Framework
Who?
Purpose
Decision Making Role
Procurement Steering Committee
Direction Setting
Approves Complex Decisions Impacting the Entire Organization
Functional Steering Committee
(i.e. IS Leadership Team)
Functional Oversight
Approves Complex Decisions Impacting Function
Category Council
(i.e. Telecom)
Project Execution
Approves Straightforward Decisions Impacting Category
Tier 1
Tier 2
Tier 3

11. Strategic Sourcing Methodology

12. Supplier Segmentation
Strategic Impact Potential 10
Strategic
Growth
Maintain
Exit
We see many different definitions of strategic partnership — Clearly, they take time to develop, and some companies' product or service may limit the combined value that can be extracted from this type of relationship.
UPMC example — strict definition of "strategic"
GE example of how it approaches imaging — What level and what measures, and how that differs from the typical medical surgical or device approach.
Mayo example of SC cost as a % of procedure and tie to reimbursement
Supplier Performance

13. Buy (Purchasing)
Manage the daily transactions to ensure right product/service/software/equipment is at the right price at the right location
Support 22 hospitals and 186 clinics centrally with team of 30 buyers
Buying team is centralized and co-located with Accounts Payable to work together
Process 1.2M PO lines a year
3 way matching and moving towards perfect order (touchless)

14. Deliver (Logistics)
Ensure employees and clinicians have the products they need, when and where they need them
We do this by utilizing the best practices in warehousing, transportation, automated materials handling equipment, and inventory optimization.
This reduces variation and waste in our supply chain, and improves service to the end-users.

15. Logistics’ fundamental Role = Balance

16. Supply Chain Center Overview
Opened - October Q – LEED Certified
327,000 sq ft – Distribution Center – and much, much more
151k sq ft Warehouse space (area of three football fields)
111k sq ft Office and logistics management space
65k sq ft Ancillary Services space

17. SCO Leadership & Administration
What is the Supply Chain Center? So much more than a self-distribution center!
Receiving
Distribution
Cross-docking
Bulk Storage
Pick/Pack/Ship
Courier Services
Heavy Fleet Services
Equipment Logistics
Asset Recovery
Emergency Preparedness
Production Print Center
Design Services
Print Fulfillment
Imaging Equipment Services
Pharmacy Services
Retail Central Fill
Compounding
Unit Dose Packaging
Inventory Optimization
Bulk Buy Support
IS Asset Management Service
Computer Imaging
MFD Deployment
Asset Disposition
Logistics Center
Ancillary Services
SCO Leadership & Administration Nb
Everything Supply Chain co-located here at the SCC
Solutions, Sourcing, Contracting, Analytics, Systems, Purchasing, Accounts Payable, Logistics plus programs
Professional and technology-enabled meeting spaces
Spaces designed to facilitate collaboration
Heath & Wellness Center (for use by all SCO employees)
Room for expansion

18. Why is this Significant?
Demonstration that Intermountain senior leadership understands the critical importance of supply chain as a key corporate strategy
Everything Supply Chain resides at our Supply Chain Center!

19. Objectives of Logistics Center
Supply Chain Center
Objectives of Logistics Center
Lower Unit Costs
Lower Transportation Costs
Streamlined Processes
Productivity Gains
Better Use of Hospital Space
New Revenue from Third Parties
Enables Product Standardization
Enables Sustainability
Streamlined Data Exchange
Enhanced Responsiveness
Improved Fill Rates
Value-Added Ancillary Services
Supports Standardization
Deliver in Right Unit of Measure
Single Shipment to Each Location
One-Stop-Shop Customer Service
Emergency Preparedness
Reduce Product Variation
Expiration Date Mgmt
Improved Traceability
Recall Management
Enhanced Controls
Mitigate Product Shortages
Lower Cost
Improve
Service
Reduce
Risk

20. Legacy Distribution Model
Hospital 1
Med/Surg Mfg.
Med/Surg Dist.
Hospital 2
Pharma Mfg.
Pharma Dist.
Lab Mfg.
Lab Dist.
Hospital 3
Film Mfg.
Radiology Dist.
Hospitals
Dietary Mfg.
Dietary Dist.
Clinics
Home Health
Direct Manufacturers
Example: Total Joints
Retail Pharma
Central Lab
Surgical Center
Central Office

21. SCC-Enabled Distribution Model
Supply Chain Center
Consolidated Transportation
Mfg. Direct
Logistics Center
Hospital 1
Hospital 2
Hospital 3
Hospitals
Clinics
Home Health
Retail Pharma
Surgical Center
Central Lab
Central Office
Med/Surg Mfg.
Pharma Mfg.
Lab Mfg.
Film Mfg.
Dietary Mfg.
Linen Mfg.
Ancillary Services
Pharmacy
Distributors
IT Asset
Management
Production Print
Equipment
Services

22. Supply Chain Center Location….Location ….Location
80 % of Hospital beds within 50 miles radius
Longest distance to facility = 300 miles (Dixie Medical Center)

23. The Supply Chain Center is More than a Warehouse
It is also an Enabler of other Non-Logistics Benefits
Improved employee engagement and collaboration throughout the SCO
Consolidation of ancillary services, which leverage logistics platform
Value-generating direct relationships with suppliers
Improved transparency throughout value chain
Technology-enabled data synchronization and exchange
Process effectiveness and efficiency
Reduced Variation = Quality Improvement = Cost Improvement
Enables clinicians to focus more time on clinical care
Enables SCO to invest more time on other supply chains
Pharmacy
OR & Cath Lab
Environmental stewardship

24. Questions?