Demand Planning in Hospital Supply-Chains

Rosaline Parson Corporate Director Supply-Chain Services

Key Issues in Demand Forecasting

1. What does demand forecasting mean to a healthcare provider? 2. How is Orlando Healths Consolidated Service Center utilizing Demand Forecasting tools? 3. Does your forecasting data have value for your manufacturing partners?

Orlando Regional Medical Center

Dr. P. Phillips Hospital

M.D. Anderson Cancer Center Orlando

South Seminole Hospital

Arnold Palmer Hospital for Children

Winnie Palmer Hospital for Women & Babies

South Lake Hospital

Lucerne Pavilion Health Central Hospital

Centralization of the Supply-Chain to Better Serve our Customers

Direct Sourcing
Product Selection & Purchasing Processes

Vendor Relationships

Corporate Alignment of Strategic Goals

Outcomes Driven

Consolidated Information Systems MMIS & WMS

Patient Care
Demand Forecasting
Value-Based Procurement

Drive Market-Share Clinical Integration

Contracting Services

Service Hospitals, Clinics & MD Practices

Self-Distribution

Current Supply Chain Models

Group Purchasing Distribution Hospitals

Traditional Supply Chain Model

GPOs

Commercial

Silos

Waste

Waste

Waste

Disintermediated Supply Chain Model

Group Purchasing

Distribution

Hospitals

GPOs

Commercial

Silos

Waste

Waste

Group Purchasing

Distribution Internal Logistics

Hospitals Aligned Processes

Integrated Supply Chain Model

Direct Contracting

Total Business Process

5

Self Distribution What does it look like?

Perfect Order
6

Business Case for Self Distribution

Cost Savings
1. Reduction in Distribution Fees 2. Reduction in GPO fees 3. Reduction in Transportation costs 4. Hospital space savings 5. Consolidate 3PL costs such as document retention costs 6. Hospital materials departmental FTE reduction 7. Product Standardization 8. Utilization Opportunities

Direct Sourcing
1. Direct Purchase from manufacturer offer Price Point Improvements Product/volume aggregation Long term contract Single Point Delivery Incentives
Freight Early-Pay discounts , rebates etc

2. Alternate Sourcing 3. Bulk buy Opportunities 4. Substitutions

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Consolidated Service Center

Self-Distribution entity
90,000 sq ft Climate-controlled Radiofrequency technology 24/7 operation Warehouse Management Tool (Tesys Elite) manages picking, replenishment, putaway, lots, Pedigree, UOM and all menu/non-menu logistic & operational processes including Demand Forecasting Low unit of measure (LUM) and Just in Time (JIT) product delivery to all hospitals, which includes Physician Preferred/Preference Items (PPI) Cross-Docking Patient Charge Capture process starts here

How do we manage the Supply Sourcing Process?

Dedicated Buyers/Customer Service Representatives
Assigned vendors Set delivery schedules Utilization of volumetric data to maximize pallet-order size Daily monitoring of ABC activity

Utilization of a Demand Forecasting tool

Close communication with our hospitals allowed us to validate ordering patterns and other data provided from MMIS systems We waited until we had a full year of data before we fully utilized tool We still allow Buyers to mannually adjust data to reflect manufacturers changes in product availablity (when subs have to be used) or customer demand

Self Distribution Demand Planning and Procurement

Overview of Demand Solutions (DSFM)

What is DSFM? A forecast management software tool available in our warehouse management system.

Buyers utilize this tool for demand and inventory planning.

Buyer Customization

Why Use Demand Forecasting?

Manage inventory to prevent backorders, increase fill-rates and decrease cash reserve use ABC analysis of stock items (4500 SKUs currently in tool) using the 80/15/5 rule Twenty-one statistical formulas are used during the forecasting phase
Accuracy Data captured at item level and by facility Captures seasonality and trending Quick view graph (actual usage versus system forecast) Availablity of customized reporting capabilities

100.00%

99.80%

Fill-Rates
Fiscal YR 2011 Fiscal YR 2010 Fill Rate Required

99.60%

99.40%

99.20%

99.00%

98.80%

98.60%
A u g u s S t e p te m b e r O c to b e r N o v e m b e r D e c e m b e r F e b ru a ry J a n u a ry M a rc h J u n e A p ri l M a y J u ly

Value of Demand Forecasting: Hospital

Higher fill rates Less backorders- daily average of 15 items versus 60 Higher inventory turns-went from 5 to 10.8 annually Decreased overall CSC inventory value by $1.8 million within two months of use Hospitals can view what is available or ordered/allocated to manage budgets Decrease in returns related to expirations/obselence

Driving Clinical Integration with Demand Forecasting

Fall prevention Committee
Visibility of items that met their criteria Sourcing of needed items Dept level data related to past demand-compared to risk injury data Identification of departmental opportunities

Surgical Standards Committee

Drive clinical standards with practice standardization Custom Procedure Trays the same at all sites for same service line procedure Utilization of like items to prevent infection & drive positive patient outcomes Follows established clinical policies

Value of Demand Forecasting: Manufacturer

Automation of the forecasting process 852 (pulls data from DSFM & WMS) viewed nightly and projection of our & vendors need is made from this data
No PO needed No backorders for last 18 months All electronic tranactions including payment Manufacturer production is based on our usage Full-visability to departmental level Acurate sales tracings

Order size

Date delivery required

How soon will order be utilized

Shipping location

Case Study: Trading Partner Value

AVID Medical
Nightly visibility of utilization of trays to actual facility & department Auto-replenishment to keep PAR levels Auto-Delivery based on needs Production Cycle & raw material acquisition based on utilization

100% fill-rates CPT changes can be done in 20 days No POs No delivery set-up Full transparency

Demand Forecasting leads to Transparency & Trust

Hospital Customer
Patient-focused Dynamic supply versus Segmented Operational excellence Alignment of product decisions with patient outcomes & reimbursement

Vendor Customer
Sharing for greater visibility Creation of joint value propositions to drive efficiency & reduce costs Improvement in payment channels

Benefits realized because of joint value creation initiatives

24. What kinds of benefits have you realized because of your joint value creation initiatives? Please select all that apply. 25. What kinds of benefits have your trading partners realized because of your joint value creation initiatives? Please select all that apply.-GARTNER Base: Healthcare Providers, n=60

Questions?

QUESTIONS?