The Center of Activity

The 84,000-square-foot Integrated Distribution Center helps North Shore-Long Island Jewish improve service, cut costs

When Pinak Shah joined North Shore-Long Island Jewish Health System in 2007, his responsibility was clear: Centralize the supply chain of this large and growing IDN.

North Shore-LIJ had already taken a step in that direction several years prior to his arrival, when it centralized procurement in conjunction with an ERP implementation. But the IDN took a big next step in December 2011, when its newly constructed Integrated Distribution Center, or IDC, went live with seven of the IDN’s 14 hospitals. Four more were implemented in March 2012, with the remaining three scheduled to follow by the end of 2012.

The decision to open its own distribution center in Bethpage, N.Y., on Long Island, was a logical one. “When we merged hospitals – and this is a normal healthcare scenario – we realized we needed to standardize products, so [our clinicians] would achieve similar clinical outcomes throughout the system,” says Shah, who is senior director, supply chain operations, Integrated Distribution Center. But to enforce standardization, the supply chain team needed to exercise some controls to ensure that nothing was coming through the back door. “You need a building to control that,” he says.

Optimize the supply chain
Building a distribution center made sense from a financial and logistics perspective, he says. First, it would give the IDN the opportunity to work directly with manufacturers and reduce distribution fees (though it should be noted that Cardinal Health is a major player at North Shore-LIJ). Second, it would allow the IDN to optimize its supply chain. Without a central distribution point, multiple hospital sites were receiving identical products from manufacturers, he points out. But having a distribution center would allow the IDN to buy in bulk, realizing some volume discounts. For the manufacturer, it would reduce the amount of labor required to pick and ship boxes of the same product to multiple locations. “That can be optimized and can come back as a savings,” points out Shah.

North Shore-LIJ had another consideration in mind when envisioning the IDC – disaster management. In case of emergencies, such as the H1N1 pandemic of a couple of years ago, the IDN wanted to centrally stock all emergency items, so it could monitor expiration dates, says Shah. In the case of a natural or man-made disaster, the IDN could direct needed supplies to the areas that needed them, to ensure the safety of staff, patients and the community.

Cardinal Health – one of the IDN’s two med/surg distributors prior to the start of the project – became North Shore-LIJ’s partner during the construction phase, says Shah. “We wanted them to be part of the mix, to share their knowledge with us.” The result was what Shah calls a “hybrid design,” bringing the best of Cardinal Health’s expertise and North Shore-LIJ’s experience.

20 hours a day
The IDC itself is 84,000 square feet. It has eight inbound/outbound dock doors, and is a seven-day-a-week, 20-hour-per-day operation. It is temperature-controlled, has full generator backup, and features Crown Equipment material handling equipment, InfoLink wireless technology and a Rite-Hite Wheel-Lok dock safety system. The facility includes a cross-dock staging area as well as a high-dollar security cage, in addition to bulk racking, shelving, and carton-flow and hand-stacking areas. Altogether, it contains more than 13,000 inventory storage locations. The facility has a staff of 62 people in the front office and warehouse, many of whom came to the center from the IDN’s hospitals.

High-volume med/surg products are shipped to the IDC by Cardinal, while manufacturer-direct items arrive from the vendors. “It’s a hybrid model,” says Shah. Through cross-docking, items that used to be delivered directly to individual hospitals are handled through the center, with exceptions made for items that require special handling and storage, such as frozen tissue.

The distribution center employs the AIMS inventory management system from Arlington Heights, Ill.-based Witron, the same system employed by Cardinal Health in its warehouse facilities. Warehouse personnel use a voice-directed warehouse picking system from Wexford, Pa.-based Lucas Systems. Wearing headphones, the warehouse workers are directed to the correct picking location by an automated voice; the voice also responds to information the associates speak back.

Inventory reduction
After the items are picked and packed, they are shipped in totes directly to North Shore-LIJ’s facilities by Penske Logistics. “We felt the transportation piece was very complicated, and it had to be optimized on the backhaul portion,” says Shah. “We felt that outsourcing would bring more expertise [to the operation].” Though the trucks and drivers are Penske’s, the trucks carry the IDN’s logo.

The distribution center opened with 2,000 unique items, and is expected to hold about 5,500 by the end of 2012. By standardizing items and consolidating inventory, the IDN has been able to reduce systemwide inventory substantially.

Next up? Expanding the reach of the Integrated Distribution Center into North Shore-LIJ’s many non-hospital facilities. “That’s where we’ll try to go in the next wave,” says Shah.

1 Comment on "The Center of Activity"

  1. Tim Ingram | April 23, 2012 at 5:57 pm |

    These “IDCs” are sprouting up, but what they have not produced on paper is where the actual savings lie. The whole concept is to reduce carrying cost, unless the IDN has access to $1 billion in spend or greater, the pricing they “might” see is max Tier or a unpublished Tier. To mention Cardinal’s name in this article already has me asking “show me the money” in a year, do a follow up and I willing to bet that they do not included the “total cost” of distribution…….like clinics, and the small out lyers that require special support. If I am wrong, then so be it, but I have not seen……to date, any white paper that supported lower cost to the customer with the IDC concept. That being said, I appreciate the effort to cut out the bigger disctributors (Cardinal, O&M, Medline), these companies are constantly being monitored for their “business practices” to bring lower cost. IF the total cost of distribution is lower, then great, but I would want to see the “total cost of distribution” for the whole system, and then give praise for actually delivering a better value to their customers.

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