Supply Chain Costs

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					I.5 Reducing Supply Chain
         Costs:
   Putting Standards to Work
Reducing Supply Chain Costs:
     Putting Standards to Work

            Dennis Byer
    Director of Information Technology
                  Consorta
           Schaumburg, Illinois

            Joe Pleasant
        Chief Information Officer
                 Premier
        Charlotte, North Carolina
Reducing Supply Chain Costs
 Putting Standards to Work
 Today’s Agenda:
  Overview Of CHeS – Dennis Byer
  Healthcare Identifier – Dennis Byer
  Product Classification – Joe Pleasant
  Product Synchronization – Joe Pleasant
  Questions and Answers
Reducing Supply Chain Costs
 Putting Standards to Work
Coalition for Healthcare eStandards
     Organized in 2001
     Most of the Largest GPO’s
     Two eCommerce Exchanges
     The DOD and VA
     Additional Affiliate Members
     Working Together to Adopt and Promote
     Uniform Industry Data Standards
Reducing Supply Chain Costs
 Putting Standards to Work
CHeS Mission
  Provide leadership to the healthcare industry in
  the identification, definition, evaluation,
  adoption, and endorsement of standards that
  improve the accuracy and efficiency of the
  supply chain
CHeS Vision Statement
  The Coalition’s vision is to accelerate the
  adoption, implementation and active usage of
  industry-wide data standards for improving the
  efficiencies throughout the healthcare supply
  chain
CHeS Core Members
     CHeS Initiatives
    Customer/Supplier Identification (GLN)
    Product Classification / Taxonomy (USPSC)
    Universal Product Identification (UPN)
    Product Synchronization (PDU)

o Difficult Initiatives
o Attempting To Building Consensus
o Not Everyone Wants To Participate

For Success: Providers Must Demand
The Use Of These Standards
Global Supply
    Chain
Identification
Customer Identification is
 one globally unique number for each
               location.




Customers use their number(s) to identify
themselves with All Suppliers
   Why this is important.
Hospitals
 • Do not always get correct prices from their suppliers
 • Have higher labor expenses
 • Receive incomplete purchase reports from suppliers and their GPO


        Manufacturers and Distributors
         • Struggle with contract eligibility = leads to customer dissatisfaction
         • Have higher labor expenses
         • Must operate inaccurate chargeback and rebate processes


               Alliances and GPOs
               • Receive incomplete supplier reports
               • Have higher labor expenses
               • Slow implementation of contract pricing
    No Customer Identification Standard.
                          Rx: 2421435    Rx         Lab
                          Lab 624353 Distributor Distributor

                        Dist: 2315-32Y                           Mfgr: B342-985-3    Mfgr
                                                   Office Prod
                        Office: 1002-3 Distributor Distributor

                        Food: 3421633 Food       MRO                    Mfgr: 9438
                           MRO 633 Distributor Distributor                           Mfgr
   A Hospital
One Delivery Point       Supplier: 323
                                         Supplier   Supplier          Mfgr:8235      Mfgr
                          Supplier: 50

                       Supplier: 3R35                                 Mfgr: 97210    Mfgr
                       Supplier: E5-35   Supplier   Supplier

                       Supplier: 2827                                 Mfgr: T-234    Mfgr
     GPO: 453            Supplier:899    Supplier   Supplier


                       Supplier: Y654                                 Mfgr: 01924    Mfgr
        GPO                              Supplier   Supplier
        GPO          Supplier:24-98899
                      Supplier: 9871-3
                       Supplier:24P9     Supplier   Supplier
    No Customer Identification Standard.
                                 Rx        Food
                             Distributor Distributor
                              Primary Office Prod            Mfgr   Mfgr
                             Distributor Distributor
                             Secondary      Lab              Mfgr   Mfgr
                             Distributor Distributor
                                                             Mfgr   Mfgr

  A Hospital                                                 Mfgr   Mfgr
Multiple Delivery             Supplier Supplier   Supplier
     Points
                              Supplier Supplier   Supplier   Mfgr   Mfgr
                              Supplier Supplier   Supplier
                                                             Mfgr   Mfgr
                              Supplier Supplier   Supplier
                                                             Mfgr   Mfgr
                              Supplier Supplier   Supplier
                              Supplier Supplier   Supplier
                              Supplier Supplier   Supplier


        GPO
        GPO         GPO
                    GPO
                          Labor expense is required to manage
                             all these proprietary numbers.
                                 The Healthcare Supply Chain
                   A2342                                                   11121434
                                               Membership Alignment


One Hospital      4123144243                                               11121434
Delivery Point
                                                Eligibility & Pricing
                   or Supplier

                  4123144243                                            4123144243
                                                  Acquisition
                                                                            or Supplier

                 11121434                                               4123144243
                                                Rebate Processing


                 11121434                                                 A2342


      There are 3                                   Reporting
                                 4123144243                               A2342
  different numbers
  and 6 conversions              or Supplier
   where errors can
         occur                     No Customer Identification Standard.
An Actual study from BD

Why does BD need
                                     An Actual Hospital
Customer Numbers?
 Process customer orders              St. Michaels
 Communicate with customers           St Michaels
 Communicate with trading partners    St. Michael’s
 Rebate Process                       Saint Michaels
 Transmit electronic orders           100084547
 Measure/Track/Analyze Sales          JAOE
 Pay our Sales Force                  CA2053
 Demand planning/forecasting          50003000431
 Recalls                             Etc.
                                                                       00000000303
                                     3 Different
                                        2104372         120080
                                                                       00000000952
                                        2104379         BL2710312
                                      Numbers
                                        2108919         046026900075
                                                                       004000
                                                                       004000-200
Identifying customers                                   046028103030
                                                        10002503
                                                                       50003000305
                                                                       50003000306
                                      134278003         10002504
                                                                       50003000308
                                      374633036         10002506
                                     4 Different
                                       475307001        20005659
                                                                       50003000309
                                                                       50003000312
                                      Numbers
                                       515097002        20005660
                                                                       50003000313
                                                        20005662
         CA2053                                                        50003000314
                                                        20005664
                        1000014082                                     50003000315
                                                        20005666
                        1000014769                                     50003000316
                                      08900A            20005669
                        1000042141                                     50003000330
                                                       20005670
                        1000118699                 16 Different        50003000366
                                                       20005671
                                                    Numbers
                                                       21010126
                                                                       50003000406
                                                                       50003000422
                                                                       50003000426
                                                                       50003000431
                        4 Numbers                                      50003000432
         JGGG
                                                        08501882       50003000433
         JAOE
                                                        08511881       50003000440
                                                                       50003000442
                                                                       50003000453
                                               2 Different             50003000456
          2 Different                           Numbers                50003000468
           Numbers                                                     50003000472
                                                                       50003000473
                                                                       50003000476
                                                                    93 Different
                                                                     50003000477
                                                                     Numbers
                                                                     50003000480
                                                                       50003000482….
                                                                       93 Total
                                       GLN’s are widely used today in
                                        other industries. Healthcare is
       23 industries                   not achieving the benefits of the
           in US.                                    GLN.
    Food and Beverage

  Furniture       Automotive

 Computer         Hardware
                                            286,000 Companies already
Lawn & Garden         Publishing
                                                    participate.
Pharmaceuticals        Apparel

 Chemicals       Baby Products

 Grocery        OTC        Utilities

 MRO: Material, Repair, Operations




           98                                Like a Social Security Number..
        countries.
                                   The Healthcare Supply Chain
                     0123456789012                                                       M
                                                    Membership Alignment

One Hospital     M
Delivery Point
                                                 Eligibility & Pricing
                     or Supplier



                                                   Acquisition
                                                          GLN
                                                                           or Supplier
                                                         Registry

                                                        Processing
                                                 Rebate 1 Name
                                                      1 Address
                       0123456789012               1 Class of Trade
                                                   1 Organizational
                                                      Hierarchy

                                                           Reporting


                                   or Supplier

   With GLN as the Customer Identification Standard.
                GLN Benefits for Hospitals.

Benefit 1:   Labor savings.       Fewer numbers.

Benefit 2:   Exact definition of each location.
             Enables price/contract eligibility accuracy.

Benefit 3:   Faster access to GPO pricing.            A
             common definition of each location.

Benefit 4:   More complete & accurate supplier
             reporting. No confusion about who is/is not a
             member
     International Product
    Classification (UNSPSC)
        United Nations Standard Products
               and Services Code

The Problem: Product Classification

 Providers must manage ever-increasing costs of materials with limited resources.
 There are no standard product names.
 There was no industry standard product classification
       Product Classification / Taxonomy.
The United Nations Standard Products and Services Code (UNSPSC™)
  is a global reference taxonomy for the efficient and accurate
  classification of products and services.
          UNSPSC is a Four Level Hierarchical Classification

            o Logical aggregation of families for analytical purposes
Segment     o 54 segments in current code set


            o Commonly recognized group of interrelated commodity categories
 Family     o 340 Families in current code set



              o Group of Commodities Sharing a Common Use or Function
   Class      o 1716 Classes in Current Code Set


               o Group of Substitutable Products or Services
 Commodity     o 12473 Commodities in Current Code Set
     Product Classification / Taxonomy.

Segments Applicable to Healthcare Providers
  41 – Laboratory and Measuring and Observing and Testing Equipment
  42 – Medical Equipment and Accessories and Supplies
  43 – Communications and Computer Equipment
  44 – Office Equipment and Supplies
  47 – Cleaning Equipment and Supplies
  50 – Food and Beverage and Tobacco Products

The Benefits of Using the UNSPSC:
   Spend analysis requires structured data
   Quickly query P.O. history by UNSPSC code
   Support objective product standardization
   Reduce off contract spend
   Increase contract compliance
   Prepare for vendor negotiations
   Identify trends, be proactive, act strategically
UPN & Product Data
 Synchronization
     Why are Standards Needed?
Standards are required in
order to achieve supply
chain e-COLLABORATION                                                 7. Collaborative
                                                                      insight &
                                                                      product
                                                                      development
                                                                 6. Collaborative
                                                                 sales & promotion
                                                                 planning
                                                           5. Collaborative supply
                                                           chain management
                                                       4. Collaborative transaction
                                                       management




                                                                                      Benefits
                                              3. Item synchronization
                                    2. Single item registry
                 1. Common data standards
                                                Time / Degree of trust & complexity

                 Source: A. T. Kearney for GMA -FMI
Universal Product Number (UPN) & Data Synchronization
    DoD Manufacturer Names for Kendall

  Mfg Name                         # Mfg Items

  KENDAL HEALTHCARE PRODUCTS            1
  KENDAL LTP                            1
  KENDALL                               1
  KENDALL COMPANY                       2
  KENDALL COMPANY LP                   3340
  KENDALL HEALTHCARE                   172
  KENDALL HEALTHCARE CO                 43
  KENDALL HEALTHCARE COMPANY            4
  KENDALL HEALTHCARE PROD CO            38
  KENDALL HEALTHCARE PRODUCRS            1
  KENDALL HEALTHCARE PRODUCT CO           2
  KENDALL HEALTHCARE PRODUCTS           222
  KENDALL LTP                           1
  THE KENDALL CO. LP                    1
  THE KENDALL COMPANY LP               2502
  TYCO HEALTHCARE – KENDALL             7
Universal Product Number (UPN) & Data Synchronization

 Industry Distributor Numbers
  for 3M Product #8630
                                         Nearly every hospital has a
Allegiance           - M8630             different Product ID for 3M
Owens & Minor        - 4509008630                 8630!
BBMC-Colonial        - 045098630
BBMC-Durr            - 081048
Kreisers             - MINN8630              10% of Packaging Data
Midwest              - TM-8630               Provided to DOD
Pacific              - 3/M8630               by Manufacturers are Wrong
UnitedUMS            - 001880                or Incomplete!

     Industry Unit of Measure Errors
                      DOD          Prime Vendor 1     Prime Vendor 2
                     Case   Case      Case Case         Case   Case
     Mfr    Part #
                     SUP    UOM       SUP UOM           SUP    UOM
                     Qty              Qty               Qty
    3M     1222-1N   18     CA        1080   CA         18     CA
    3M     512       100    CA        2000   CA         2000   CA
    BD     305903    500    CA        400    CA         400    CA
Universal Product Number (UPN) & Data Synchronization

What is a Product Data Utility?
The Product Data Utility (PDU) concept is modeled after
common utilities that exist for other types of
commodities and services
 Definition: A Common Utility is a business organization
and system that provides an essential commodity or service
to a community.
 Characteristics:
  o Network With Multiple Connectivity Points
  o Controls & Standards
  o Scalable Input & Delivery
  o Community Governance
Product Data Utility Data Flow


Manufacturers
                                                                Users
                                  Aggregators              (GPOs, IDNs, etc)
 Distributors




Manufacturers                      PDU/Repository
                                                                Users
 Distributors                                              (GPOs, IDNs, etc)
                                        data inputs
                                        data outputs


 NOTE: Aggregators can represent data or trading partner
 aggregators, including exchanges.
Universal Product Number (UPN) & Data Synchronization
Other Industries
   Procter & Gamble and their customer H.E. Butt
o 75% reduction in invoice deductions due to invoice pricing and product delivery
  discrepancies
o 30% improvement in the number of accurate purchase orders received
o 80% improvement in "speed to retail" for new items, price changes, and
  promotions (reduced the average time required to communicate and execute
  changes from 10 days to 2 days

    Wal-Mart Data Synch w/Procter and Gamble resulted in:
 o Reduction in data maintenance time from 15-30 days down to 1 day
 o 98% up-to-date synchronization
 o 15% market share (up from 5% in the early weeks of a new item introduction)

   Electrical industry saved 1.75% of sales through error
 reduction and improved efficiency. Electrical industry
 distributors saved .75% of sales annually.
Universal Product Number (UPN) & Data Synchronization –
How does Data Synch affect Hospitals?
 Requests do not match supply chain data
 Logistics Systems not “classification” oriented
        o Item descriptions not clinician friendly
        o Difficult for materiel managers to match requests to most available items
        o Systems not integrated: Operating Room Management, Physician Order-Entry, etc.
 Products not available in Customers’ systems
 Customers can not find desired products & try to buy obsolete products
 Pricing and Shipping Errors

  PDU Value to Providers.
  Reduced product cost through improved contract compliance
  Identification of non-contract/contract opportunities
  Increased transaction accuracy for ordering through bill payment
  Improved accuracy in product sourcing
  Increase in patient safety due to accuracy of product information
  Rapid access to information on new, discontinued and recalled products
  Accurate info. to generate usable barcodes
          Current Industry Data
       Synchronization Pilot Partners

 Owens & Minor
 BD
 Premier
 Consorta
 Comergent
 GHX
 SAIC
 Coalition for
Healthcare eStandards
 Health Care
eBusiness
Collaborative
Comments and
  Questions


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Description: Supply Chain Costs document sample