Like many provider organizations, Spectrum Health has relied on paper and pencil for years to manage its supply chain. But despite its best efforts, the 12-hospital delivery system never really had a good handle on the current status of needed supplies.
Now, Spectrum is automating and optimizing much of the supply chain with advice and technology from the Johnson & Johnson Medical Devices Companies.
The initiative will do more than computerize orders—the plan calls for establishing “the plan for every part” to understand the value of each product and how often that product is delivered, or if the product is no longer necessary or should be replaced with a newer version.
Johnson & Johnson is conducting data analytics on behalf of Spectrum Health, which serves the metropolitan area of Grand Rapids, Mich. The company is providing assessments of ordering processes, says Kurt Knoth, who has a background in process improvement and recently was named vice president of the system supply chain at Spectrum.
Each week, the organization and vendor meet, generally via a conference call, to go over historical data and whether changes should be made to Johnson & Johnson services. Soon, Spectrum will be making the same types of decisions concerning other suppliers.
“Johnson & Johnson uses its computing power to pull data, run reports and give recommendations on changing a particular part number,” Knoth says. “For example, we had 20 of a part number when analysis showed we should have had 50, or we had too much of another part.”
For now, Spectrum’s supply operations still primarily operate with paper and pencil, while it develops new skill sets with electronic processes. Some employees still act as “fire fighters,” trying to get supplies that have run out to clinicians on an as-needed basis, but the organization expects soon to have personnel with analytics skills in the supply department.
“The plan is to eliminate the reason for fire-fighting and transition the skill sets in the department to be more proactive rather than reactive,” Knoth explains.
As the move toward an automated supply chain progresses, the delivery system expects to see benefits such as reducing “stock-outs” to make sure patients have the supplies they need, and a reduction in expedited freight charges because Spectrum won’t be paying for overnight deliveries because it ran out of stock.
As “the plan for every part” initiative expanded, it became clear that there was a major flaw in historical perceptions of how well the supply chain was working. The organization thought it was doing a good job at setting the right levels of inventory, but those levels had been set several years earlier when Spectrum had a half-dozen hospitals, and now it has 12.
“Some part numbers had not been looked at for a while and we were using more supplies and running out as the delivery system grew,” Knoth says. “We never looked back to see.”
Now, Spectrum is starting to realize benefits from supply optimization, he adds. “There is so much opportunity out there that just gets hidden. Every dollar saved through the supply chain means less worrying about how to pay for doctors and nurses, or cutting people or supplies, while better supporting clinicians.”
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