Demand Planning in Hospital Supply-Chains

Rosaline ParsonCorporate Director Supply-Chain Services

Key Issues in Demand Forecasting

1. What does demand forecasting mean to a healthcare provider?

2. How is Orlando Health’s Consolidated Service Center utilizing Demand Forecasting tools?

3. Does your forecasting data have value for your manufacturing partners?

Arnold Palmer Hospital for Children Winnie Palmer Hospital

for Women & Babies South Seminole Hospital

Orlando Regional Medical Center M.D. Anderson Cancer Center Orlando

Dr. P. Phillips Hospital

Lucerne PavilionSouth Lake Hospital Health Central Hospital

Product Selection &Purchasing Processes

Contracting ServicesValue-Based Procurement

Centralization of the Supply-Chain to Better Serve our Customers

Consolidated Information SystemsMMIS & WMS

Patient Care

Corporate Alignment of Strategic Goals

Service Hospitals, Clinics & MD Practices Self-Distribution

Drive Market-Share

Outcomes Driven

Vendor Relationships

Direct Sourcing

Demand Forecasting Clinical

Integration

Current Supply Chain Models

Traditional Supply Chain Model

Integrated Supply Chain Model

Disintermediated Supply Chain Model

Direct Contracting

Internal Logistics

Waste

Total Business Process

GPOs

Group Purchasing Distribution Hospitals

Group Purchasing Distribution Hospitals

Aligned Processes

Waste

GPO’s

Group Purchasing Distribution Hospitals

Commercial Silos

SilosCommercial

Waste

Waste Waste

5

Self Distribution – What does it look like?

6

Perfect Order

Business Case for Self Distribution

7

Direct SourcingCost Savings

1. Reduction in Distribution Fees

2. Reduction in GPO fees

3. Reduction in Transportation costs

4. Hospital space savings

5. Consolidate 3PL costs such as document retention costs

6. Hospital materials departmental FTE reduction

7. Product Standardization

8. Utilization Opportunities

1. Direct Purchase from manufacturer offer Price Point Improvements

• Product/volume aggregation

• Long term contract

• Single Point Delivery

• Incentives

• Freight

• Early-Pay discounts , rebates etc

2. Alternate Sourcing

3. Bulk buy Opportunities

4. Substitutions

Consolidated Service Center• Self-Distribution entity

• 90,000 sq ft• Climate-controlled• Radiofrequency technology• 24/7 operation• Warehouse Management Tool (Tesys Elite) manages picking, replenishment, put-

away, lots, Pedigree, UOM and all menu/non-menu logistic & operational processes including Demand Forecasting

• Low unit of measure (LUM) and Just in Time (JIT) product delivery to all hospitals, which includes Physician Preferred/Preference Items (PPI)

• Cross-Docking• Patient Charge Capture process starts here

How do we manage the Supply Sourcing Process?

• Dedicated Buyers/Customer Service Representatives• Assigned vendors• Set delivery schedules• Utilization of volumetric data to maximize pallet-order size• Daily monitoring of ABC activity

• Utilization of a Demand Forecasting tool• Close communication with our hospitals allowed us to validate

ordering patterns and other data provided from MMIS systems• We waited until we had a full year of data before we fully utilized tool• We still allow Buyers to mannually adjust data to reflect

manufacturer’s changes in product availablity (when subs have to be used) or customer demand

Self Distribution – Demand Planning and Procurement

Overview of Demand Solutions (DSFM)What is DSFM?

• A forecast management software tool available in our warehouse management system.

• Buyers utilize this tool for demand and inventory planning.

Buyer Customization

Why Use Demand Forecasting?• Manage inventory to prevent backorders, increase fill-rates and decrease cash

reserve use• ABC analysis of stock items (4500 SKU’s currently in tool) using the 80/15/5 rule • Twenty-one statistical formulas are used during the forecasting phase

• Accuracy• Data captured at item level and by facility• Captures seasonality and trending • Quick view graph (actual usage versus system forecast)• Availablity of customized reporting capabilities

98.60%

98.80%

99.00%

99.20%

99.40%

99.60%

99.80%

100.00%

Oct

ober

Nove

mbe

rDe

cem

ber

Janu

ary

Febr

uary

Mar

ch

April

May

June

July

Augu

stSe

ptem

ber

Fiscal YR 2011Fiscal YR 2010Fill Rate Required

Fill-Rates

Value of Demand Forecasting: Hospital• Higher fill rates• Less backorders- daily average of 15

items versus 60• Higher inventory turns-went from 5

to 10.8 annually• Decreased overall CSC inventory

value by $1.8 million within two months of use

• Hospitals can view what is available or ordered/allocated to manage budgets

• Decrease in returns related to expirations/obselence

Driving Clinical Integration with Demand Forecasting

• Fall prevention Committee• Visibility of items that met

their criteria• Sourcing of needed items• Dept level data related to past

demand-compared to risk injury data

• Identification of departmental opportunities

• Surgical Standards Committee• Drive clinical standards with

practice standardization• Custom Procedure Trays the

same at all sites for same service line procedure

• Utilization of “like” items to prevent infection & drive positive patient outcomes

• Follows established clinical policies

Value of Demand Forecasting: Manufacturer

• Automation of the forecasting process• 852 (pulls data from DSFM & WMS)

viewed nightly and projection of our & vendor’s need is made from this data• No PO needed• No backorders for last 18 months• All electronic tranactions including

payment• Manufacturer production is based on our

usage• Full-visability to departmental level• Acurate sales tracings

Order size

Date delivery required

Shipping location

How soon will order be utilized

Case Study: Trading Partner Value

• AVID Medical• Nightly visibility of

utilization of trays to actual facility & department

• Auto-replenishment to keep PAR levels

• Auto-Delivery based on needs

• Production Cycle & raw material acquisition based on utilization

• 100% fill-rates• CPT changes can be

done in 20 days• No PO’s• No delivery set-up• Full transparency

Demand Forecasting leads to Transparency & Trust

• Hospital Customer• Patient-focused• Dynamic supply versus

Segmented• Operational excellence• Alignment of product

decisions with patient outcomes & reimbursement

• Vendor Customer• Sharing for greater

visibility• Creation of joint value

propositions to drive efficiency & reduce costs

• Improvement in payment channels

Benefits realized because of joint value creation initiatives

24. What kinds of benefits have you realized because of your joint value creation initiatives? Please select all that apply.25. What kinds of benefits have your trading partners realized because of your joint value creation initiatives? Please select all that apply.-GARTNER

Base: Healthcare Providers, n=60

Questions?

QUESTIONS?