5 building blocks of supply chain excellence

The past year’s challenges have shown the healthcare industry that there is always room for improvement within your supply chain strategies. Read the following building blocks of supply chain excellence from Paul Farnin, director of Supply Chain Solutions at Cardinal Health, to improve your own:

  1. Define your supply chain strategy
    Some attributes include replenishment five days per week or fewer and having Operating Room (OR) and catheterization labs on Periodic Automatic Replacement (PAR) levels and managed by materials. Another attribute involves daily or weekly nursing communication on stockouts, back orders, fill rates, etc. PARs should also be located together for each unit rather than spread out across multiple locations. Track your optimization through raw and adjusted fill rates, inventory value, time from request to Purchase Order (PO) creations, and time from PO creations to receipt.

  2. Establish stocking location philosophy
    One attribute involves bins built to hold proper stock levels and make them easily accessible. There should also be collaboration with nursing to build “correct” PARs and a logical unit of measure ordering. Regarding managing PAR levels, it’s helpful to have a process for adding or deleting items from PARs and updating PAR (min/max) levels. Finally have bins or labels color coded for product groups. Track stocking metrics including inventory obsolescence rate (PAR and storeroom), return rate percent for OR activity, and picks per hour.

  3. Implement (semi) automated replenishment system
    Enforce a point-of-use system with a two-day min/max logical unit of measure program. Customer groups should be defined and maintained for order separation. Another attribute for a replenishment system is using barcode-scannable bins with the use of handhelds. Observe percent of POs auto-received, stockout rate per number of call downs, average dollars per line, percent of lines through logical unit of measure (LUM) program, and dock receipt to stock or delivery.

  4. Utilize PAR optimization/ongoing adjustment
    To get your supply chain optimization score to 80%, utilize PAR optimization tools and micro-order reports. Another attribute includes a signal system for items expired, added, deleted, or changed, stockouts and allocations. Signage in PAR room with contact and stocker information is also helpful. Metrics to track include micro-order percent and count of bin turns.

  5. Achieve supply chain excellence
    To achieve 100% supply chain optimization, have continuous improvements of touch points in the supply chain, a value analysis program, and defined and published metrics. Metrics to observe include cost per adjusted patient day, payment cycle time (invoice to payment), percent contract compliance, employee turnover, and overtime rate.

See our complete “The building blocks of supply chain excellence” one-pager and find more insights on how to achieve supply chain optimization on our Supply Chain Center.  

More about the author
Paul Farnin is the Director of Supply Chain Solutions for Cardinal Health. He is responsible for new business development and leadership of the company’s Supply Chain Solutions service offerings. Paul has more than 30 years of experience providing leadership to hospitals and health care systems.

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