Supply Chain Road Trip

Driving logistics beyond the boundaries of healthcare

No childhood event provides a more vivid picture than a family vacation, aka road trip. These memories are certainly not all warm and fuzzy; squeezing all of us in a station wagon and rambling far from home was often both exhilarating and perilous. This is the brief story of a modern day road trip, one our hospital’s “supply chain family” recently undertook.

Our destination? Far beyond the relatively safe boundaries in which we regularly travel, to the Technology Plains of the Private Sector. We wanted to travel far to bring back an automated inventory management solution enhanced with RFID technology, one that provides a lightning fast ROI and a true perpetual inventory platform – a system that significantly affects the bottom line while giving clinicians valuable time to concentrate on direct patient care.

Our destination
Why did we choose this particular spot on the map? Think back to the lessons Dad was always trying to teach us. It seems like every trip I can remember had an educational component, perhaps a piece of history and a few lessons along the way about “good value.”

The value component on our trip at Northwestern was obvious: Every hospital system or IDN that we talk to is concerned about reducing cost. We all spend time, energy and resources trying to beat up our suppliers for deeper and deeper savings. The sourcing and contracting side is definitely where we spend the lion’s share of our collective efforts, but this avenue is far from an endless opportunity to achieve our budgetary targets. A substantial financial opportunity exists within our very infrastructure, within our daily inventory workflow; it just takes a little journey to get the most out of it. The souvenir we wanted to bring back from this vacation was a technology solution for supply distribution, one that would bring a strong ROI by reducing waste and optimizing revenue.

As we headed out on our jaunt, we knew we would run into a lot of road hazards before we even got down the street. Hospitals and IDNs are trying to drastically reduce costs. The specter of healthcare reform has everyone scrambling to prepare themselves to survive reimbursements at a Medicare/Medicaid level. This means that every stone is being turned to shave expense. Supply chain is a key component in this equation, because reducing costs on “stuff” is far more attractive than reducing staff. Across the pond, healthcare costs are lower and patient outcomes are as good if not better than those in the United States. Life expectancy is significantly higher in countries where the cost of treatment per capita is a fraction of our own. Supply chain is not the entire solution to this financial crisis, but we certainly are being relied on to make a major contribution to the overall cost-cutting effort.

Getting the kids in the car
When we were kids, we used to fight to get the best seat in the car. A window seat was the very best you could hope for. Our trip at Northwestern, if successful, would need to promote some serious family harmony. The sibling group would include brothers and sisters from nursing, supply chain, IT, finance, and senior leadership. We could simply have attempted to travel locally, and visit plenty of healthcare vendors that supply inventory technology – cabinets, handheld devices, tools that weigh the product, etc. The problem is, these solutions tend to be expensive, reliant on multiple disciplines following a strict workflow, inflexible, or too dependent on IT man-hours. During our recent trip, we talked to all of the usual healthcare suspects and found one or all of the above to be true.

What is critical when looking for a technology solution is buy-in from all of the siblings mentioned previously. That means deciding on a system that is intuitive and user-friendly, one that requires very little infrastructure and doesn’t negatively affect clinical workflow. Oh yeah, there are lots of departments competing for very few capital dollars, so make sure it’s cheap as well. A strong ROI will get your brother in finance strapped into his car seat very quickly.

Build the solution together. In our case, we had nurses at the table every step of the way. They chose everything from how to pick patients to badge swipes, and when it came time to roll out the new model, they were proud to say that it was their solution! Get physicians – especially surgeons – into the discussion, too. Once they are actively promoting these tools, others will quickly follow.

Travelling on the cheap
Dad was a very practical, frugal kind of guy. Chances are your senior leadership is as well. This is where that “good value” piece comes in. When I was a kid, we never stayed at the Ritz; it was camping out in tents or a roadside motel that advertised that they would “leave the light on for you.” And in the end, that was exactly what we needed.

This journey was no different. Choosing our technology solution was like packing chicken salad sandwiches instead of eating at the diner when you rolled into town. Ask yourselves a few quick questions when setting the budget for such an adventure:

  • How much are we being quoted for hardware or infrastructure?
  • What are the installation and ongoing maintenance costs?
  • Are there customizable tools to easily validate expected results?
  • What are we solving to? Are we getting every feature we need for a good price?

At our hospital, we found the perfect technology solution by partnering with folks from the automotive and retail world. These industries have had RFID technology for decades, but in hospitals, it is still in its infancy. We found a company that basically asked our clinicians what their workflow was, so they could customize a solution to match existing practice. No change in workflow equals no resistance from staff.

RFID solutions within healthcare often rely on expensive cabinetry. These devices are effective, but very costly, especially when you are looking at a solution that will capture the entire high-dollar inventory throughout your institution. We were able to implement things like automated kiosks and portals built into doorframes. We used old shelving and even bookcases, and turned them into “smart shelves” by simply adding a couple of well-placed readers and antennae. The results were dramatic.
The mechanics: How it runs

No sojourn is ever successful without a well-oiled machine to keep you moving. In a nutshell, the solution that we partnered to build works like this:

  • Inventory comes into the facility and is tagged with a label that includes several key pieces of information. The tag has a small RFID chip embedded in it, which stores a product’s lot, serial number, price, and expiration. The tags are applied by an inventory technician with a completely wireless, mobile receiving station.
  • The inventory is placed in a room, on a shelf, or in a cabinet that electronically inventories it on a constant basis.
  • When inventory is removed from one of these spaces, we know one or more of the following – when it left, who took it, how many they took, and what case it was used in. Any product used for a procedure is automatically replenished, completing a fully perpetual inventory.
  • Every 24 hours, the supplies that were billed are compared to the inventory that was decremented. Any delta is captured immediately and added to our patient billing. Built-in alerts and safeguards track product that is close to expiration so it can be used or returned to the vendor.

All of this results in a very smooth-running process that keeps all sides happy. The bottom line is better than ever, and other than adding some technology, it was all accomplished within our own four walls.

Postcards and souvenirs
We have just about completed our journey at this point. Our hospital family is safe within our four walls, but this adventure changed our outlook forever. When we started down the driveway, supply chain controlled less than 50 percent of our total medical/surgical supplies inventory. We now manage over 99 percent of the hospital spend.

We have automated and centralized inventory for departments with very high-cost supplies, such as surgical services, GI, cath lab, interventional radiology, mammography and pathology. Over a two-year period we have achieved each of the following:

  • Produced a documented hard-dollar ROI in less than six months.
  • Reduced our on-hand inventory by over $8 million.
  • Taken a baseline of over $600,000 per year in expired product down to a small fraction of what it used to be.
  • Captured over $4 million (cost) of supply charges that would have been missed in the old decentralized model.
  • Made product availability better than ever; and our process for product recall – should one occur – calls for little more than a touch of a button.
  • Given many productive hours back to nursing for direct patient care.

Dreaming the next trip
Once you get the travel bug, you will never be happy simply staying at home. Once a platform like this is in place, the only limit to where you go next is your imagination. We plan to use this technology to track patient movement, product utilization in packs and kits in central sterile, and patient specimens and pharmaceuticals. We are working with our distributor and various OEMs to eventually create cradle-to-grave tracking of medical and surgical supplies.

The sky is the limit. Happy travels.

Brian Stepien is director, supply chain distribution and logistics, Northwestern Memorial HealthCare, Chicago.

About the Author

Brian Stepien

Brian Stepien is director, supply chain distribution and logistics, Northwestern Memorial HealthCare, Chicago.