supply expense reduction strategies - insights · pdf file1 © mfmer supply expense...

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Supply Expense Reduction Strategies

Dan Johnson, Principal Systems EngineerOctober 10, 2016

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DisclosuresRelevant Financial Relationship(s):

List or Nothing to Disclose

Off Label Usage:

List or Nothing to Disclose

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Agenda

• Inventory Management

• Evaluating Supply Reorder Levels

• Evaluating supply consumption using SPIDER


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The Need to Understand Laboratory Test Costs

• Providers under continual financial pressure• Patient needs• Medicare reimbursement• Third party payers


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Laboratory Test Cost Breakdown

• Labor

• Equipment Depreciation

• Overhead

• Supplies


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New Supply Process Planning

• Partner with Materials Management to develop inventory management processes

• Item and vendor selection

• Quality assurance• Regulatory, QC and lot tracking needs

• Establish inventory levels• Create standard approach for min/max and

safety stock levels


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Inventory Management System

• Organize stock locations using 5S• Sort• Set in order• Shine• Standardize• Sustain


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Inventory Management System

• Supply ordering system• Manual vs automated


Replenishment Cycle

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Inventory Level “Sawtooth” Graph


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Safety Stock

• Safety Stock Level = ADU * Lead time• Where ADU is the average daily usage

• Example calculation• ADU = 5 units per day• Lead time = 4 days• Safety stock = 5 * 4 = 20 units


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Reorder Point (ROP)

• ROP = ADU * Avg Lead Time + Safety Stock

• Example calculation• ADU = 5 units consumed per day• Avg Lead Time = 4 days• Safety Stock = 20 units• (5 * 4) + 20 = 40 units


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Maximum Inventory Level

• Target Days of Supply – how many days of supply is desired

• Factors• Item cost• Shipping charges• Validation requirements


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Evaluating Reorder Point & Reorder Quantity


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Evaluating Reorder Point & Reorder Quantity

• Review reorder levels for items with highest cost

• Review items that have more than 40-45 days supply on hand

• Review items that haven’t activated replenishment for extended period of time

• Work with vendors


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Manual Inventory System


Re-order Point

Supplies Arrive

Kanban ticket includes:• Item description• Reorder point• Item ID number• Re-order quantity• Item Storage location

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Automated Inventory System

• Automated systems use a touch probe to scan electronic buttons as supplies consumed

• Principals are the same as the manual system with the benefit of automatic order placement


Touch probe

Electronic button

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Inventory System Performance

• Inventory operational metrics and indicators• Supply expense• Inventory turns• Stock-outs / Rush orders• Planned vs actual usage• Scrap cost

• Quality fail• Expired product


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SPIDER:Supply and Process Improvement Dissector

for Expense Reduction

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SPIDER


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SPIDER


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SPIDER Case Study


• Select supply item for analysis from list of high expend supplies

• Obtain price per unit and quantity purchased over specified period of time

PCR Kit

Price per unit = $2,369Qty purchased = 65Total expenditure = $153,985

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SPIDER Case Study


• Determine what tests use that supply and how many clinical tests were run over the specified time period

• What is the max number of tests per kit?

• Calculate the total number of kits required to complete clinical tests

Test 1234: vol = 343 Test 5678: vol = 900

Test 1234: 343/27 = 12.7Test 5678: 900/27 = 33.3TOTAL: 46.0 kits

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SPIDER Case Study


• Determine % usage for other causes

• 6 of 27 samples are controls

• Multiply each usage percentage by the number of used required

Repeat: 8.3%Controls: 22.2%Quality Control: 2.0%

RepeatTest 1234: 12.7 * 8.3% = 1.1Test 5678: 33.3 * 8.3% = 2.8

ControlsTest 1234: 12.7 * 22.2% = 2.8Test 5678: 33.3 * 22.2% = 7.4

Quality ControlTest 1234: 12.7 * 2.0% = 0.3Test 5678: 33.3 * 2.0% = 0.7

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SPIDER Case Study


• Total known consumption

• Total Actual Usage

• Unknown

Clinical Testing: 46.0Repeat: 3.9Controls: 10.2Quality Control: 1.0Total: 61.1 kits

65.0 kits

3.9 kits

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SPIDER Case Study


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SPIDER Case Study


• Equate to expenditure

Usage TypePercent of Total

Expenditure by Usage Type

Clinical Testing 71% $109,045.07

Repeat 6% $9,052.12

Controls 16% $24,211.71

Quality Control 1% $2,181.23

Unknown 6% $9,494.86

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SPIDER Case Study


Analysis Period

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SPIDER Hints

• Be sure analysis period is long enough

• Account for seasonal usage variation

• Unknown quantity could be excess supply in storage either when analysis period began or when it ended

• Involve bench technicians in analysis


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Example Findings Using SPIDER


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Packaging

• SPIDER revealed uncategorized usage

• Theoretically max: 112 samples per kit using an automated liquid handling process

• Actual max: 87 samples per kit due to configuration of kit coupled with plate size, number of patient sample and controls

• Packaging configuration improved usage efficiency 22%


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Remove Unused Items

• Process may result in leftover of multi-reagent kits

• Request quote for “right-sized” quantities

• Reduce/eliminate buffer


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Automated Liquid Handler

• Automated vs manual pipetting

• Research liquid handler setup

• Tip depth


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Dilution

• Conservative dilution level 1:4

• Validate dilution to 1:10

• Cut reagent cost in half

• Ensure complete validation

• Put control plan in place to ensure failure rate unaffected


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Batching

• Incorporate batching and reduce number of runs per day

• Consume less reagent and controls• Must balance with turnaround time needs


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Getting That Last Bit

• Antibody reagent trapped in the vial or vial cap• By spinning down the vial, extra antibody

that would have been lost was captured

• Manual pipetting after automation


supply expense reduction strategies - insights · pdf file1 © mfmer supply expense...

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