Extend Your ERP – Lessons

from a $8B IDN

Opening Remarks

Jack CollettiCEO, Prodigo Solutions, LLC

Prodigo Solutions is focused on driving savings in the

healthcare supply chain. Launched by healthcare

supply chain professionals, the company's suite of

solutions and services drive compliance, automation,

data quality and user adoption.

Typical Environment

5

Internet

Item

Master~85% of Transactions

~15% of Transactions

Supplier Connections

Background

Bob PavlikDirector, Non-Clinical Sourcing

UPMC Profile

• Leading integrated health care system in Pennsylvania; one of the largest and most diverse in the nation

• 48,000 employees; second largest employer in Pennsylvania

• Hospital – 20 tertiary, community, and specialty hospitals

• Physician – more than 4,000 physicians with privileges at UPMC hospitals including about 2,300 employed

• Community Provider Services – extensive network of rehabilitation, home care and senior services

• Insurance – products covering commercial, Medicare and Medicaid segments, EAP, Behavioral Health (1.3 million covered lives in Health Plan)

How we stack up?

Supply Chain Profile

•Centralized Operation

•$1.8 billion in spend

•Process 4000+ Purchase requisitions per week

•Process 70,000+ invoices per month

•Receive 1.1 million+ packages per year through a

central distribution center

•Manage over 600 point of consumption material

carts

•Manage 30+ value analysis teams

Key Systems

Non-Clinical Team Spend

Overview

Overall Team Spend Spend

Corporate Admin Services $452,622,000

Information Technology $206,000,000

Facitilities, Construction, & Dietery $362,789,000

$1,021,411,000

Non-Clinical Sourcing Team

Transformation

• Sourcing organization that is driven by internal customer’s

business goals and objectives

– Commodity Council approach – cross functional teams, executive

sponsorship, etc..

• Utilizes a structured sourcing methodology

• Integrated organization from vendor selection through order

placement

– Stronger sense of ownership when implementing contract• Better accuracy will reduced match exceptions and returns

– Can be more proactive with career management• Clear path from Sourcing Specialist to Commodity Manager

– Can be more creative with regards to resource management• Split time between sourcing and order placement, etc.

• Leverage technology to reduce transactional work

– True North = 100% lights out

– Use efficiency gains to off set workforce reductions

– Move tactical FTEs to sourcing

18 Month Staff Impact

Sourcing Operations Total

Jan-08 8.5 13.5 22

Jul-09 9 10 19

Increase/Decrease 6% -26% -14%

Technology Impact

Next opportunities:

•Dietary (Sysco & GFS)

Vendor # % # %

Intercontinental Subscription Service Jan 9 2009 145 145 100% 143 99% 99%

Software House May 9 2008 1,067 255 24% 0 0% 0%

Airgas Mar 7 2008 554 435 79% 0 0% 0%

Worldwide Technologies Feb 26 2008 5,385 2,438 45% 678 13% 32%

Grainger Feb 19 2008 6,537 5,621 86% 5,055 77% 77%

WorkflowOne Oct 17 2007 45,209 44,043 97% 43,624 96% 96%

Jeter Sep 13 2007 4,951 3,859 78% 660 13% 84%

BatteriesPlus Oct 9 2007 382 197 52% 127 33% 53%

Franklin Interiors Oct 10 2007 2,674 435 16% 118 4% 13%

Corporate Express May 30 2007 331,362 326,993 99% 311,076 94% 97%

398,266 384,421 97% 361,481 91%

eMarket Lines Lights out linesTotal eligilble

LinesGo-live Date

Current

Run Rate

Category Recap Overview

Inventory Products 1,323 items Inventory Value = $ 975,363

Print On Demand 3,010 items Coordinate Options in UPMC Print Shop

OMS Program 47 Suppliers 2008 Annual Activity Value = $ 2,723,378

Stationery Program 8,167 Orders 2008 Annual Activity Value = $ 629,495

Promotional Products 428 Orders 2008 Annual Activity Value = $ 498,617

ePro Orders 81% Usage 2008 Annual Requisitions = 13,360

Workflow One

Requisitions via ePro accounted for 81% of activity (96%

lights out)

Reduced work load from 2 FTEs to .5 FTEs

Match Exception Improvement

15

Staples / Corporate Express

Month Oct 2008 Nov 2008 Dec 2008 Oct 2009 Nov 2009 Dec 2009

Metrics

Total Purchases $1,155,305.61 $938,648.63 $997,605.77 $833,603.39 $801,576.67 $824,456.72

Total Returns & Credits $48,627.01 $109,941.01 $47,976.72 $17,405.62 $17,248.61 $16,418.60

Total Net Purchases $1,106,678.60 $828,707.62 $949,629.05 $816,197.76 $784,328.05 $808,038.13

Avg Order Size $154.71 $155.76 $160.61 $156.65 $149.45 $149.46

Avg Lines Per Order 3.53 3.58 3.51 3.44 3.42 3.45

% CEB of Net Purch. 38.59% 38.44% 37.09% 18.47% 19.57% 18.82%

% Electronic of Net Purch. 89.34% 91.63% 93.35% 97.41% 97.45% 97.05%

% MWBE of Net Purch. 14.34% 14.17% 14.41% 18.67% 21.33% 20.00%

% CEXP Catalog Fill 93.01% 92.87% 93.80% 86.22% 86.93% 85.78%

% Total Returns/Credits 4.21% 11.71% 4.81% 2.09% 2.15% 1.99%

# of Orders Placed 7,428 5,563 6,153 5,292 5,343 5,491

# of Order Lines 26,220 19,941 21,583 18,191 18,277 18,965

Requisitions via ePro accounted for 97% of activity (97% lights out).

Reduced work load from 1 FTEs to .25 FTEs

Match Exception Improvement

Better catalog control

Increased MWDBE business (improved business compliance and improved reporting)

Executing the Strategy

Jeff AndersenManager, Consulting Services

Supply Chain Profile

• Sourcing – implement contracted savings & improve data quality

• Accounts Payable – minimize Matching Exceptions

• Purchasing – focus on value-added transactions only

• Materials Management – reduce product returns

• CFO’s – ensure spend compliance

• CEO’s – maximize user efficiency/redistribute resources

• Business Unit Leadership – improve ease-of-use

• Department Users – “we want content too!…”

Enterprise-wide Stakeholders

Supply Chain Profile

•Platform

•Supplier Ramp

•User Experience

•Leverage PeopleSoft ERP Investment

•Low TCO

Ingredients For Success

A Look Back… 2 Yrs. Ago

19

Internet

Item

Master

~85% of Transactions

~15% of Transactions

Supplier Connections

Special

Requests

Ad-hoc

21

Content is King!

UPMC Implemented in mid 2007…

2008/2009 = tremendous supplier ramp

Catering Print Shop

eMarketplace isn’t solely for external suppliers!

Telecom

On the Horizon

Medical Media Services

Coming soon:

Resources

• Catalog Manager = 1 FTE

• IT Resources (post-integration) = None

• EDI Integration Manager = 0.5 FTE

Maintenance & Growth was/is inexpensive

Data

Management

User

ExperienceCompliance Automation

Drive more spend under management with improved contract compliance and rapid enablement of key suppliers and punchout suppliers.

Streamline item master management, and improve UNSPSC quality.

Realize extensive process savings and increased user adoption.

Reduce special requests and enable touchless (no buyer) purchasing, and improve overall connectivity with your supplier base.

Results

Success Story

25

In early 2007, UPMC made the decision

(after a thorough technology review) to

implement eMarketplace technology as an

enhancement to the existing PeopleSoft

eProcurement module.

Background

Decision Points

Results

UPMC had grown from $2b in revenues to

over $7b in 10 years. Despite having a major

ERP system in place, contract compliance

was below 20%, special requests and maverick

spending was rampant, and the growing user

base and supplier base was compounding the

issue. 24 months post implementation:

•UPMC is fully deployed at 20 locations (including Corporate)

•Transaction level: 340,000 (past 12 months)

•Compliance: 50% increase in contract compliance

•Automation: 15% increase ; currently 40% of total purchase

transactions are “touchless” (estimate $30 savings per

transaction).

•Process: 33% reduction in time spent on placing orders.

Also, UPMC experienced a 40% reduction in time spent on

item master management.

Solution

UPMC implemented the eMarketplace solution as a

single connection from PeopleSoft ERP. The supply

chain group then began a systematic onboarding of

punchout suppliers and hosted supplier catalogs.

Further, UPMC integrated the Item Master file

(60k+items; 850 suppliers) into the eMarketplace.

Metrics Tell the Story: Leveraging Best Practice

in Pursuit of “World Class”

Increase

eMarkeplace

transactions from

15% to 68%

Contract

Compliance Benefit

& FTE Impact

Increase “Lights

Out” (automated

transactions) to

remove tactical

FTE’s Every 5%

Increase Represents

a FTE

Results

Results of Deployment

• Eliminated Paper Disbursement Requests

• Eliminated Paper Requisitions

• Eliminated 60% of faxed/phoned PO’s to supply base and working toward 100%

Hard Impact

• eVoucher eliminated 4 FTE’s in the AP Entry Group

• eProcurement/eMarketplace eliminated 6 FTE’s that comprised the SCM Pre-Key Group

• Allowed for the reduction or limited the need to hire 15.31 FTE’s and counting as

eMarketplace and “Lights Out” programs expand………

Soft Impact

• Efficiencies gained with supply base

• Efficiency & effectiveness of remaining Procurement Operations staff

• Increased control through automation & interfaces: PO spend rogue (limit use of P-

Card, Flat File Invoice & Blanket PO) spend

What’s Next?

“According to a recent survey, the healthcare industry is at least 15 percent behind other industries when it comes to automation.” – Healthcare Finance News

“Hospitals are about five years behind non-healthcare industries in terms of adoption of paperless invoice processing. Of the survey respondents, more than 70 percent of the hospitals received in excess of 80 percent of their invoices in paper format. As a result, they said resolving matching errors and exceptions were their most challenging tasks.” – PayStream Advisors, a Charlotte-based research and consulting firm

UPMC is removing all paper based invoices.

The Future: Accelerate Benefit Capture

Continue aggressive push to access supplier hosted (and local)

content through single eMarketplace punchout

Incorporate services & internal purchases (telecom, print

services) into eMarketplace

Add more direct connects through eMarketplace for

“configurables” (furniture, clinical equipment, catering)

Leverage content and supplier enablement to drive back-end

Procure-to-Pay automation (ERS, Assumed Receipt, ASN

Receipt etc.) Lights Out Perfect Order

Segment Supply Base and funnel toward appropriate automated

flowpath – using the PeopleSoft SRM suite as the foundation

Q&A Session

Contact Information

Janette “J.P.” PerrettaDirector, Sales & Marketing

703.574.4479 (office)

412.445.8096 (cell)

JP@prodigosolutions.com

www.prodigosolutions.com