Self-distribution initiative binds supply chain with Trinity Health’s larger goal – improving the delivery of cost-effective, people-centered care.
Trinity Health has a certain way of doing things. It’s something Lou Fierens, senior vice president, supply chain and fixed asset management, talks about a lot. It’s a way of delivering care, and it permeates the IDN, including supply chain.
Having a way of doing things connotes forethought, collaboration and discipline – all good things for an IDN the size of Trinity (with hospitals in 21 states), which is trying to create economies of scale and a uniform, high-quality care-delivery process. And all things for which Fierens has been laying the groundwork since coming to Trinity in 2001.
In March, Trinity’s supply chain team announced the next step on its way, when it announced plans to build – with XPO Logistics – the first of four Trinity Health supply distribution centers.
XPO Logistics will manage and operate the $26 million facility in Fort Wayne, Ind., as Trinity Health’s contract logistics manager. As the first of four supply distribution centers, the Fort Wayne logistics hub is intended to provide easy and affordable access to the Great Lakes/Midwest region and beyond. The facility – which should open by the end of 2016 – will represent the single entry point for all manufacturers and suppliers serving Trinity Health. As additional satellite warehouses are brought online over the next five years, Fort Wayne will serve as the central restock and inventory fulfillment site for those locations as well.
The new model is designed to give Trinity Health more direct control over the part of the supply chain that is typically managed by an intermediary, that is, a distributor. The shift to managing its entire supply chain is considered key to helping the system advance its initiatives for streamlining logistics processes in support of its larger goal, which is improving the delivery of cost-effective, people-centered care.
Things were different at GM
Before joining Trinity Health, Fierens spent 15 years at General Motors Corp. His last job there was serving as director of GMSupplyPower.com, the automaker’s global supply chain management portal. He found healthcare to be different from the automotive industry.
For example, the first challenge he encountered at Trinity Health was the lack of a common materials management information system among the IDN’s facilities. Each had different systems, with unique item and vendor masters. As a result, the corporate office had no way of measuring the IDN’s utilization and compliance. Fierens embarked on a multiyear project to convert Trinity Health to one information system.
“It went spectacularly well,” he says. “It has been filled with benefits for the organization, and it literally has become a cornerstone of our supply chain management work.” Trinity Health has expanded the scope of the system to accommodate newly acquired facilities, and is currently in the process of integrating the facilities of the former Catholic Health East, which Trinity acquired in 2013.
The common materials system “has offered us the ability to consolidate what is sometimes called ‘back office’ functions, such as procurement and accounts payable,” says Fierens. “That has helped us not only gain economies of scale, but also reinforce a common business process. How we receive product, get it the floors, manage inventory – we have built all of that from this common information systems platform.”
Prerequisite to self-distribution
The past few years has seen Trinity Health supply chain make tremendous progress in building what Fierens calls a clinically driven value analysis and supply chain strategy. “Really, this was a prerequisite to us pursuing self-distribution,” he says. Standardizing item numbers and descriptions has helped Trinity eliminate redundant items, which itself leads to variation. “And variation is always the enemy of quality and efficiency.
“We have been focusing on [building] a clinically driven, patient-centered way,” he continues. Nurses at each of the facilities work with supply chain to lead standardization from a clinical perspective. “In almost every instance where we have been able to standardize, we’ve been able to take out product cost. Even when we standardized on a more expensive product, we’ve taken out system cost, because it’s another product we don’t have to build in the item file and maintain in inventory. And it gives us control of our bill of materials, which is what we’re aspiring to.”
Ultimately, Trinity Health hopes to draw a thread between products and outcomes. “That’s where everybody is going – comparative effectiveness,” says Fierens. And that thread will stretch beyond the IDN’s acute care facilities. “Our people-centered 2020 strategic plan doesn’t include just acute care episodes, but it extends across the continuum.
“Healthcare is only getting more integrated, more challenging, as it extends across a broader spectrum,” he continues. In that way, it is similar to industry, such as Fierens’ old employer. “We tried to draw the thread not only at the supplier plant, but the assembly plant, the car dealership, all the way to the customer. It’s a more comprehensive look at things.”
It was General Motors, too, that made Fierens think about self-distribution. “Coming from GM, the idea of someone taking title to a product you were purchasing and acting as an intermediary was not a concept I was familiar with. So from the beginning, I was interested in the [third-party-logistics] model.
“And coming from an industry that uses 3PL providers extensively, I learned you build a natural comfort level with their expertise. It’s what they do every day. They have the fixed assets – information technology, transportation systems – to do the work, and they do it globally. That isn’t an expertise we have resident in our organization. And in my view, the time and expense of building that expertise would have been problematic. It’s a classic make-or-buy.
“With XPO, I have a global logistics provider that manages freight from all over the world every day – and a lot of my supplies come from all over the world. So they’re not just thinking about what happens between the warehouse and the patient bed, but what happens between the manufacturer – even the raw-materials provider – and the bed.
“It’s taken us a long time to get to this point, and it wasn’t our Number 1 priority. There were other opportunities for us to deliver better value to our patients. But now we’re in a position to execute in a way we weren’t 10 years ago.”
“Healthcare is an intensely personal business,” says Fierens. “The people I worked with in the automotive industry were passionate about cars, but people in healthcare have a whole different level of passion for their work.
When people can see they’re making a positive difference in an industry that is so personal and vital, it is inspiring. It means something at the end of the day.”
And that goes for the clinical staff and supply chain as well.