How one hospital made simple changes and trimmed supply costs by 2%

Three years ago, Caldwell Memorial Hospital partnered with Simpler Consulting to replace the hospital's transactional approach to supply chain with a strategic methodology for inventory management.

Laura Easton, CEO of the Lenoir, N.C.-based community hospital, credits this partnership as the beginning of her education in supply chain management.

With the help of Simpler, Caldwell Memorial leadership identified six areas of focus. They started in what Ms. Easton calls "low hanging fruit" — the inventory system.

"Having the right products go to the clinician at the right time is crucial for a successful supply chain," says James Spann, global practice leader for supply chain and logistics at Simpler. "Having pipeline visibility of your product — even as far back as the vendor — and knowing what you have on the shelf can not only lower costs, but help prevent delays when taking care of patients."

Caldwell Memorial struggled with effectively moving products from the loading dock to the nursing station or point of use, according to Mr. Spann. Products and supplies were distributed all over the facility with little visibility. Physician preference items involved substantial variation and inefficiency, representing an additional opportunity for Caldwell Memorial to standardize and consolidate products.

To assess its inventory, the hospital tapped Simpler's LEAN methodology services and conducted a 6S events analysis in every area of the hospital. Through a series of rapid improvement projects, front-line staff members helped organize supplies stored in each of the hospital's clinical settings.

"Engaging front-line staff in initiatives to drive improvement will help garner the involvement of the staff — and their awareness and participation in those solutions — to allow for more sustained and beneficial results," says Ms. Easton. "You have to help them understand that supplies on a shelf are equivalent to dollar bills on the shelf if they're not used."

Mr. Spann cites staff involvement and lack of supply chain knowledge as two often overlooked challenges for many hospitals. "Making sure you have a team who is capable and knowledgeable is crucial to the success of your supply chain," he says.

In terms of ordering and replenishing, Caldwell Memorial implemented a 2-Bin system through the hospital, which Ms. Easton says is a transparent, easy method for front-line staff to manage inventory. The system change helped reduce "pick and replenish" levels and switch ordering and replenishing responsibilities back to the materials management department, rather than front-line staff. Clinicians no longer spend three or four hours a week on inventory management and instead spend that regained time on patient care, according to Ms. Easton.

By standardizing inventory and lowering minimum stock levels, Caldwell Memorial saw a 2 percent reduction in supply cost over the first year. Ms. Easton is planning to multiply this figure over several years for multi-million-dollar cost savings.

"Those changes are just the beginning of the work we need to do to transform supply chain," she says. "We still have significant challenges going forward."

The next step is ensuring products ordered by Caldwell Memorial bring the greatest value possible to their patients, according to Ms. Easton. In 2017, the hospital will establish a value analysis system for products, along with pharmacy and therapeutics.

"Looking into the future, the supply chain is going to be very strategic as we shift into a value-based world, and value adds to the total outcome of patient care," says Ms. Easton.

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