Importance Of Supply Chain Management In Healthcare – Chapter 11. Supply Chain and Inventory Management Yasar A. Ozcan Chapter 11: Supply Chain and Inventory Management 1
Distributors, Wholesalers Group Purchasing Groups (GPOs) e-Distributors Flow of Materials in the Supply Chain Supply Chain Management Issues for Providers Current Issues in Medical Inventory Management Just-In-Time (JIT) & Stockless Inventories Single vs. Multiple Vendors Traditional Inventory Management Requirements for Effective Inventory Management Universal Product Codes (UPCs) Lead Time Costs EOQ Model Classification Systems Reorder Point Chapter 11: Supply Chain & Inventory Management Yasar A. Ozcan
Importance Of Supply Chain Management In Healthcare
In health care organizations, the supply chain is a new way of thinking about medical supply management. The supply chain is defined as “a virtual network that facilitates the movement of products from production, distribution and consumption” (McFadden and Leahy, 2000). Yasar A. Ozcan Chapter 11: Supply Chain & Inventory Management
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Improving Operations Increasing Levels of Outsourcing Increasing Transportation Costs Competitive Pressure Increasing Globalization Importance of E-Commerce Supply Chain Complexity Inventory Management Yasar A. Ozcan Chapter 11: Supply Chain and Inventory Management
Pharmaceutical Medical-Surgical Devices manufacturers/Suppliers Group Purchasing Organizations (GPOs) Upstream wholesalers e-Distributors Distributors Hospitals Hospital Systems Physicians Integrated Delivery Networks (IDNs) Providers Downstream Patients/Individuals Employers Omployers Oudominal Drugencies HMOs Drug user agents. : Supply Chain & Inventory Management
Manufacturer/supplier. Medical device manufacturers can be divided into three categories: pharmaceuticals/pharmaceuticals, medical-surgical devices and equipment. Some manufacturers produce supplies in more than one type or in all types. Yasar A. Ozcan Chapter 11: Supply Chain & Inventory Management
Famous pharmaceutical manufacturers include Abbott, Aventis Pharma, Bristol-Myers Squibb, Eli Lilly, Merck, GlaxoSmithKline, Hoffmann-La Roche, Janssen, Johnson & Johnson, Pfizer, Schering-Plough and Wyeth. 25 percent of pharmaceutical products are distributed to providers (hospitals and other institutional settings) through distributors. The medical-surgical company manufactures items such as needles and syringes, blood and specimen collection kits, hospital laboratory products, wound management products, and intravenous solutions. 3M, Abbot, Baxter, Johnson & Johnson are some of the well-known surgical companies that sell most of their products through distributors. Yasar A. Ozcan Chapter 11: Supply Chain & Inventory Management
Importance Of Supply Chain Management In Healthcare Of Third World Countries
Medical devices can be described as expensive, technologically sophisticated and advanced devices used in diagnosis and treatment. Medical equipment includes surgical and medical equipment, orthopedic, prosthetic and surgical equipment (for example, shoulder, knee, and hip replacement), X-Ray equipment, tubes, irradiation equipment, medical equipment and electro-therapy. Boston Scientific, Dupuy Synthes, Medtronic, and Zimmer are examples of companies that manufacture such devices. Yasar A. Ozcan Chapter 11: Supply Chain & Inventory Management
Supplier Storage } Patient Services Implants Knee Replacement Valve Replacement Yasar A. Ozcan Chapter 11: Supply Chain & Inventory Management
Medical-Surgical Equipment Distributors are independent intermediaries that operate their own warehouses; They buy products from manufacturers/suppliers to sell to service providers. Similarly, pharmaceutical intermediaries buy drugs/medications from manufacturers and wholesale them to pharmacies or to service providers. Well-known pharmaceutical distributors include AmeriSourceBergen, Cardinal Health, and McKesson. The middleman is called a distributor or wholesaler depending on whether the final resale of the product has another layer before reaching the customer (Burns, 2002; p.127). Cardinal Health, Owens & Minor, and McKesson are major distribution companies in the hospital market. Yasar A. Ozcan Chapter 11: Supply Chain & Inventory Management
Linking service providers through electronic communication with their distributors is formally defined as electronic data interchange (EDI). EDI provides direct, real-time computerized electronic transmission of purchase orders, shipping notices, invoices, etc. between service providers and distributors. EDI also extends to the manufacturer’s transactions with other parts of the healthcare supply chain; More than a third of their business transactions use EDI. Costs for standard EDI transactions for orders, compared to costs with manual systems, save operational costs for both service providers and distributors. Yasar A. Ozcan Chapter 11: Supply Chain & Inventory Management
Top 25 Supply Chain Metrics & Kpis For Your Dashboards
Hospitals are more efficient with the use of EDI to create purchase orders and large, distributors provide high-use supplies such as syringes, needles, dressings, catheters, etc., which are used throughout the clinical unit. Using traditional inventory management analysis periodic automatic replenishment (PAR) is established for these items. Hospitals also use Material Management Information Systems (MMIS) to manage their PAR using two bin systems or other methods such as Automated Dispensing Units (ADU). MMIS can automatically generate purchase orders for regular stock items. ADUs represent the most efficient method currently available for managing healthcare inventory orders. Routine order requests in hospitals with advanced supply chain practices are released without requiring any intervention. Automated requisitions generated by MMIS (i.e., Infor Lawson Supply Chain Management for Healthcare) are sent through EDI intermediary companies such as GHX to suppliers (Hospital Procurement Study, 2012). Yasar A. Ozcan Chapter 11: Supply Chain & Inventory Management
Increased productivity Reduced lead time and inventory reduction Facilitation of electronic payment systems Improved operational control Reduced technical staff accuracy Increased accuracy Yasar A. Ozcan Chapter 11: Supply Chain and Inventory Management
Group purchasing organizations provide significant financial benefits to service providers, especially hospital and hospital systems, by negotiating contracts to purchase non-labor products and services. A normal GPO has many hospital organizations as its members and uses this as a collective purchasing power in negotiating contracts with many suppliers: of medicine, medical-surgical, supplies, laboratories, imaging, durable medical equipment, site maintenance, information technology, insurance, food. and food products and services. Contracts usually last for three to five years, providing price protection to service providers (Burns, 2002, pp ). Yasar A. Ozcan Chapter 11: Supply Chain & Inventory Management
More than 600 GPOs operate in the United States; Maybe half of them focus their business in the hospital. It is estimated that GPOs mediate contracts for more than 70% of spending by hospitals on medical-surgical supplies. Contract negotiations for drugs cover almost 90 percent of what hospitals spend on them. The largest GPOs are MedAssets, Amerinet, Novation, MAGNET, HealthTrust, and Premier. Yasar A. Ozcan Chapter 11: Supply Chain & Inventory Management
Why Study Supply Chain Management?
16 e-Distributors e-commerce in health care can be viewed from different perspectives. Here we will focus on two aspects: business to business (B2B) trade and business to customer (B2C). Examples of B2B companies are GHX, and OmniCell. These companies provide e-Catalog, e-Request for Proposal (eRFP), e-Auction, and e-Specials. Yasar A. Ozcan Chapter 11: Supply Chain & Inventory Management
17 Material Flow It is important to note that depending on the type of medical supply, the material flow in the supply chain may take a direct route to the provider or the end user. Suppliers may bypass GPOs by not entering into contracts or negotiating prices. High-end implants and medical devices, specialty items with low volumes but high prices, are good examples of medical devices where suppliers use direct delivery, usually via express services (such as FedEx, UPS, or DHL) or have their own locations. Regional sales representatives enable just-in-time (JIT) delivery and consult with physicians. In some cases, company representatives provide technical input to surgeons on surgical acupuncture equipment. Other cases where suppliers may bypass GPOs in contracting are for small quantities, esoteric items, and for branded, specialty drugs used to treat cancer and cardiovascular problems. Yasar A. Ozcan Chapter 11: Supply Chain & Inventory Management
Just-in-Time (JIT) and non-stock inventory. Inventory management in healthcare organizations is becoming increasingly decentralized. JIT means goods arrive before they are needed. Non-stock inventory refers to obtaining the majority of supplies from a single source (primary vendor) in small packaging units that are ready to be delivered to the user department. Same seller as many sellers. The essence of the purchasing function is to obtain the right equipment, supplies and services, and of the right quality, in the right quantity from the right source at the right price at the right time. Yasar A. Ozcan Chapter 11: Supply Chain & Inventory Management
Traditional Inventory Management Inventory Is. . . STOCK OR STORE OF GOODS or Stock Keeping Items (SKUs) Yasar A. Ozcan Chapter 11: Supply Chain and Inventory Management
Operations Management: Understanding And Using It
20 inventory disaster! Imagine the following scenario, in which a health care supply chain manager must explain to a member of senior management why the emergency room finds itself without needles. …I’m sorry, but when she (the patient) came into the ER, we ran out of needles. Our expected stock was depleted because we did not adjust the order pattern for seasonal changes. Then, the snow delayed the shipment from the supplier, and our safety stock was not good enough! You know we order in bulk to take advantage of bulk size economies and reduce our order cycle. Our last order was especially large because we wanted to prevent the expected price increase! In the final analysis, our inventory is not enough to allow smooth operations… Yasar A. Ozcan Chapter 11: Supply Chain & Inventory Management
21 Coo’s answer (i.e., the purpose and requirements of inventory, I hope you know that it is your duty to maintain a high level of customer service and reduce the cost of ordering and transporting inventory to a minimum! I ask you as you.
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