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IDN 2010SUPPLY CHAIN EXCELLENCE

Resource Efficiencies and Cost Savings

Scottsdale Healthcare, Scottsdale, AZ 85251

Mark Willmore, Purchasing Manager

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Problem StatementProblem Statement

Purchasing Department model at SHC (as of 2008)

• Buyer resources focused only on PO transactions• PO volumes extremely high for existing resources

• ~ 90K PO’s ( 52% from 2006) • 660K+ PO lines to manage ( 23% from 2006)• > $185M in purchases• Number of buyer resources remained stable at 7 FTE

• High volume of PO transactions has added impacts• Discrepant invoices (timely resolution to manage credit hold risk)• Little time to negotiate on off-contract requirements• Little time to engage in continuous improvement programs

• Rising PO volume trend demanded action

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• Plan: Secure additional Purchasing resources to manage increased volumes – justify with:

• Industry benchmarking• Solid definitions of roles and expectations• Improved cost savings targets and ROI commitments

• Timeline (Benchmarking):• February 2008: Launched benchmarking effort with local

AHMMA, GPO IDN, and other national industry contacts• Compared PO activity against number of dedicated resources

• # of PO’s, # of PO lines, and $ volume

• Compare over a 3 year period (2006 through 2008)

• Results: Average buyer volume activity ranked highest against benchmarked participants

Actions Taken (Plan & Timeline)Actions Taken (Plan & Timeline)

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• Timeline (Roles / Expectations):• June 2008: Data supports new resource request

• Create two (2) Purchasing Aide (PA) positions to absorb the majority of buyer administrative duties; including:

• Order acknowledgements

• Back orders follow-up

• Product returns / credits

• Free up buyers to focus on cost savings and CIP’s

• Over $40M spent on non-contracts items

• New electronic office initiatives to enable and support

• Timeline (Cost Savings and ROI)• June 2008: Measure cost of 2 new PA’s against increased

buyer savings on non-contracted spends• Savings target was 2% of $40M = $800K

• ROI target = 3 months

Actions Taken (Plan & Timeline)Actions Taken (Plan & Timeline)

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Results (by end of fiscal 2009)Results (by end of fiscal 2009)

• SHC Administration approved request (October 2008)• New PA positions hired (December 2008)• Began comparing buyer savings reports (March 2009)

• 1st Report: Buyers captured $485K (easily beat ROI goal)• Already exceeded 2008 total savings by ~$200K

• Overall 2009 non-contracted savings (September 2009)• $782K (‘09) vs. $290K (‘08) – a 270% improvement

• Other Benefits:• Discrepant invoice $ and volume reduction improvement:

• Invoice $ 55% and volume 62% • Implemented electronic requisition approval (June 2009)• Kicked off electronic return goods process in October

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BACK-UP DATA

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BENCHMARK DATA – PO’SBENCHMARK DATA – PO’S

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BENCHMARK DATA – PO’SBENCHMARK DATA – PO’S

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BENCHMARK DATA – PO LI’SBENCHMARK DATA – PO LI’S

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BENCHMARK DATA – PO VALUEBENCHMARK DATA – PO VALUE