5 Our Supply Chain is One of the Industry’s Best Critical Success FactorsSupply chain became a strategic focus by senior leadership$3 Million initially investment and 25 new FTEs – skilled & talentedCentralized buyers and reporting relationships of the warehouseAdded couriers, travel services, publishing and central laundryEarned trust of stakeholders – management & cliniciansImplemented effective strategiesDeliver on commitments - Savings, value, efficiency & more“Skate to the puck”Notable RecognitionsGarter’s 4th Best Supply Chain in Healthcare2013 AHRMM Innovation AwardECRI Healthcare Supply Chain Achievement AwardIntelliCentric’s 5-Rings AwardCardinal HealthMayo FoundationBDIntermountain HealthcareOwens & MinorAbbottJohnson and JohnsonNovartisMercy (MO)Geisinger Health Systems
6 SCO’s Strategic Imperatives Increase Savings and ValueDeliver $42M in savingsDeliver plan to support CPI + 1Expand ScopeOptimize efficiency and minimize variationRisk mitigation plan for supply chainNew Forms of ValueDevelop capability to deliver post contract valueRum/LumEnhance TechnologyProject eLEV8 – Go Live in Q1 2014Data StandardizationGenerate RevenueCost 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!
9 Source (Procurement) Drive value up and cost down on $1.4B in spend Facilitate governance to select best projects and manage prioritization of workFacilitate the process to select best supplier(s) and productsSegment and manage suppliers we have sourcedManage catalog of products/services/equipmentManage category plans (spend analysis, opportunity assessment and calendar of events)Manage supplier contracts (820 new agreements in 2013 with active agreements)
12 Supplier Segmentation Strategic Impact Potential10StrategicGrowthMaintainExitWe 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 reimbursementSupplier Performance
13 Buy (Purchasing)Manage the daily transactions to ensure right product/service/software/equipment is at the right price at the right locationSupport 22 hospitals and 186 clinics centrally with team of 30 buyersBuying team is centralized and co-located with Accounts Payable to work togetherProcess 1.2M PO lines a year3 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 themWe 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.
16 Supply Chain Center Overview Opened - October Q – LEED Certified327,000 sq ft – Distribution Center – and much, much more151k sq ft Warehouse space (area of three football fields)111k sq ft Office and logistics management space65k sq ft Ancillary Services space
17 SCO Leadership & Administration What is the Supply Chain Center? So much more than a self-distribution center!ReceivingDistributionCross-dockingBulk StoragePick/Pack/ShipCourier ServicesHeavy Fleet ServicesEquipment LogisticsAsset RecoveryEmergency PreparednessProduction Print CenterDesign ServicesPrint FulfillmentImaging Equipment ServicesPharmacy ServicesRetail Central FillCompoundingUnit Dose PackagingInventory OptimizationBulk Buy SupportIS Asset Management ServiceComputer ImagingMFD DeploymentAsset DispositionLogistics CenterAncillary ServicesSCO Leadership & AdministrationNbEverything Supply Chain co-located here at the SCCSolutions, Sourcing, Contracting, Analytics, Systems, Purchasing, Accounts Payable, Logistics plus programsProfessional and technology-enabled meeting spacesSpaces designed to facilitate collaborationHeath & 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 strategyEverything Supply Chain resides at our Supply Chain Center!
19 Objectives of Logistics Center Supply Chain CenterObjectives of Logistics CenterLower Unit CostsLower Transportation CostsStreamlined ProcessesProductivity GainsBetter Use of Hospital SpaceNew Revenue from Third PartiesEnables Product StandardizationEnables SustainabilityStreamlined Data ExchangeEnhanced ResponsivenessImproved Fill RatesValue-Added Ancillary ServicesSupports StandardizationDeliver in Right Unit of MeasureSingle Shipment to Each LocationOne-Stop-Shop Customer ServiceEmergency PreparednessReduce Product VariationExpiration Date MgmtImproved TraceabilityRecall ManagementEnhanced ControlsMitigate Product ShortagesLower CostImproveServiceReduceRisk
20 Legacy Distribution Model Hospital 1Med/Surg Mfg.Med/Surg Dist.Hospital 2Pharma Mfg.Pharma Dist.Lab Mfg.Lab Dist.Hospital 3Film Mfg.Radiology Dist.HospitalsDietary Mfg.Dietary Dist.ClinicsHome HealthDirect ManufacturersExample: Total JointsRetail PharmaCentral LabSurgical CenterCentral Office
22 Supply Chain Center Location….Location ….Location 80 % of Hospital beds within 50 miles radiusLongest 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 BenefitsImproved employee engagement and collaboration throughout the SCOConsolidation of ancillary services, which leverage logistics platformValue-generating direct relationships with suppliersImproved transparency throughout value chainTechnology-enabled data synchronization and exchangeProcess effectiveness and efficiencyReduced Variation = Quality Improvement = Cost ImprovementEnables clinicians to focus more time on clinical careEnables SCO to invest more time on other supply chainsPharmacyOR & Cath LabEnvironmental stewardship