Chief Procurement Officer Outline 1. Trust info 2. Business - PowerPoint PPT Presentation

Transforming Internal Healthcare Supply Chains CIPS/CILTS 20 th February 2015 Andrew McMinn MCIPS Chief Procurement Officer

Outline 1. Trust info 2. Business Context 3. Supply Chain Observations and Analysis 4. Thinking 5. 2011 Supply Chain Beliefs and Aspirations 6. Examples of Delivery 7. 15/16

The Major Tertiary Centre in the South West • Over 900 Beds • Teaching Hospital • Major Trauma Centre • Cardiothoracic • Specialised Gastro and Liver • Specialised Long Term Conditions • Tertiary Cancer • Neonatal Intensive Care and High Risk Obstetrics

Plymouth Hospitals NHS Trust • Largest hospital on the UK South West Peninsula • 2013/14 Turnover £408m • 5300 employees • Delivered 4,854 babies • Operated on 38,696 patients • A&E attenders 88,815 of which 53,435 admitted • Completed 355,794 X-rays and Scans

“One of the best survival rates in the country. We have a mortality ratio which is approximately 10% better than expected, making Plymouth the best in the south west and among the best hospital trusts in the country” 1 1 Plymouth Hospitals Annual Report 2012/13

Painful Business Context • Rising annual demand • Increased scrutiny on quality of care • Non Pay inflation rising at around 5% • Falling income

What is a Hospital Supply Chain? Goods/Services Information / Cash Point of Care

Supply Chain Data 13/14 • Oracle • GHX Marketplace and Catalogue Mgt, Genesis VMI • £7.5m Inventory • £3-4m Consigned • Days Inventory Outstanding (DIO) = 37 days or ITR 9.8 • 115 Internal Deliver to locations / POC • 2000 suppliers • 175k unique items ordered • 90k PO’s and 1m PO lines • 12 floors and 11 lifts

2010 Observations - Push rather than Pull Manufacturer Promotion Manufacturer Patient Requirement Consumption

Win lose supplier relationships Orthopaedic Implant Industry Cost Structure 120% 100% NHS 100% Shift in thinking natural and focus here win/lose 80% focus 60% 40% 39% 35% 20% 20% 6% 0% Total SG&A Operating Margin Cost of Goods R&D Ref: “Orthopaedic Companies” 600bn, available at :www.600bn.com published Jan 2010

Win lose relationships are context dependent TOR & Cardio accounts for 20% of all influenceable PPI e.g. TOR and Non Pay spend. Cardio 20% of Trust income and 36% of trust inventory

ABC Analysis definition

E.g. – ABC Analysis No Inventory % Total % Annual Inventory Class Lines % of lines Value Stock Annual Spend Spend Turn Ratio A 299 6.66% £416,167.59 49.17% £10,684,073.55 77.82% 25.7 B 458 10.20% £167,747.55 19.82% £1,949,605.67 14.20% 11.6 C 3732 83.14% £262,425.26 31.01% £1,095,546.61 7.98% 4.2 Totals 4489 100.00% £846,340.40 100.00% £13,729,225.83 100.00% 16.2 • 842 lines had no annual consumption but have a inventory holding of £ 59628 or 7.6% total inventory value • 301 lines (6.7%) that have a inventory holding of more than one years consumption • 518 lines (11.5%) that have a inventory holding of more than six months consumption • Stock Out Risk - 39 Class A lines (13%) had no inventory

Inventory ABC X analysis % of Total % of Moving Stock Stock Stock Cover Class SKU's SKU's Items % Stock Value Value Turn (wks) A 149 14.30% 97.3 £94,707.81 35.05% 24.7 2.1 B 172 16.51% 90.1 £53,802.50 19.91% 8.7 5.9 C 567 54.41% 65.6 £45,832.06 16.96% 3.8 13.6 X 154 14.78% 13.6 £75,866.83 28.08% 0.4 136.6 1042 £270,209.20

Summary 2010 Observations • Push supply chain • Healthcare Supply Chain barcode variety or absence • Waste • Low consumer confidence • No Inventory Management System • 70% of inventory value controlled by clinical staff • Generic approach to inventory replenishment • Space a premium • Win/Lose supplier relationships • Storage methods hamper inventory management

Summary 2010 Observations

What can we do? Who is Tim Wood? http://www.youtube.com/watch?v=ZaUWr4E sEB4

Value Hierarchy of Waste in Hospital Supply Chains £ Inventory – How much, handling, capital employed, stock take costs, insurance, instrumentation, duplication and generic structure Defects – obsolescence from product or technology changes, out of date, incorrectly opened goods, damaged goods Motion & Transport - walking and delivering, expediting, chasing, delivery charges and urgent deliveries Over Processing (Purchase orders and Invoices) - How many, cost, average value per, frequency £ Over Processing (Paperwork) - delivery notes, requisitions, pick lists and NJR data collection Over Processing – Admin, time to place orders, order approval, stock management, stock take costs, receipting, goods inwards checking

2011 SC Beliefs and Aspiration • No clinical involvement in inventory management • Reduce inventory • Reduce variety • From Push to Pull • 7 day service • Single trust wide inventory management system • Lean supply redesign – Runners/Repeaters/Strangers 1 , Automated and consolidated orders, Internal Supplier concept and Kanban • Storage methods that influence the correct behaviour • Real time demand capture – POC, Wi-Fi, GS1, RFID • Supply Chain & Inventory Structure - ABC Analysis, RRS 1 • Joint working - NHS/Supplier supply chain improvement projects • Lean and inventory management skills and capabilities 1 The New Lean Toolbox by John Bicheno 2004

Runners, Repeaters and Strangers Regular Tea Bags Runners Demand and Milk Sunday Joint Intermediate Repeaters or Washing Demand Powder Low or Spice or Strangers Intermittent Herb Demand

From Generic to Structure Runners Runners Runners Repeaters Repeaters Strangers Point of Care/Use Strategic Advance Stock 115 Locations Consolidation Centre Location (ASL) 1. Top 300 Hours/Day (SCC) 5 or 6 Locations 2. Rep’rs – Hours and Days 1. Months 1. Top 300 Day (s) 3. Strangers – Weeks 2. Top 300 SKU’s 2. Rep’rs and Strangers /Months 3. Daily Picks Weeks 4. Daily and Weekly deliveries 4. Containers/Pallets 3. Outers 5. Each and Outers

Genesis VMI – 2014 • Consolidated Ordering • GS1 Ready • Wireless PDA Data capture • Interfaces to both Oracle and GHX eCatalogue • Automated ordering • Patient Level Costing • Supplier access for consignment management • Symbol (Tesco) technology for clinical shopping

Joint Trust Supplier Project

Future State Orthopaedics Suppliers Supplier Supply Chain VMI NJR & PLC Date Mgt Real time Consumption signal Monthly ( RTCS ) Genesis Usage requisition Monthly Invoice VMI Theatre 9 ASN Monthly GLN Catalogue Consolidated RTCS Feed PO Oracle GHX Nexus Exchange Theatre 10 GLN Monthly Invoice Receipt ASN Monthly Consolidated Real time PO Consumption Signal (RTCS) Theatre 11 GLN Supplier Delivery Stock Ortho Store Advanced stock Transfer (GLN) Location (GLN) Theatre 12 GLN Key Blue = Material Delivery Green = Clinical Pull Orange = Demand signal Purple = Clinical task Red = Eproc Black = Supplier Action Theatre 16 GLN

Trauma & Orthopaedic ASL £300k owned stock converted to cash Five store rooms compressed to one single room Delivery charges and stock out sigificantly reduced

Main Theatre ASL 2012 • 181 SKU’s • £320k stock value • Stock outs and uncontrolled 2014 • 1080 SKU’s • Reduced stores space by 50% • £214k stock value • £3m of spend • C class approx 76% • 12 hour operated • Deliver & Billed to POC

Strategic Consolidation Centre - Runners £1m or 25% CRES

Value Summary Entirely • Reduced Patient Risk Self Funded • Enabled Improved Patient Care • £1m cash flow • Reduced Waste • Over £1m CRES • Improved Governance

15/16 Plans • 55% of inventory value under SCM control • £500k CRES • Peppol and GS1 implementation • First wards Kanban supply • Remaining ASL’s built • Symbol technology in use • £15m Requisition to Replenishment initiative