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Improving Supply Chain Efficiency at Scottsdale Healthcare

Addressing resource challenges in Purchasing Department resulting from high volume of purchase orders - actions, timelines, and results.

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Improving Supply Chain Efficiency at Scottsdale Healthcare

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  1. IDN 2010SUPPLY CHAIN EXCELLENCE Resource Efficiencies and Cost Savings Scottsdale Healthcare, Scottsdale, AZ 85251 Mark Willmore, Purchasing Manager

  2. Problem Statement • Purchasing Department model at SHC (as of 2008) • Buyer resources focused only on PO transactions • PO volumes extremely high for existing resources • ~ 90K PO’s ( 52% from 2006) • 660K+ PO lines to manage ( 23% from 2006) • > $185M in purchases • Number of buyer resources remained stable at 7 FTE • High volume of PO transactions has added impacts • Discrepant invoices (timely resolution to manage credit hold risk) • Little time to negotiate on off-contract requirements • Little time to engage in continuous improvement programs • Rising PO volume trend demanded action

  3. Actions Taken (Plan & Timeline) • Plan: Secure additional Purchasing resources to manage increased volumes – justify with: • Industry benchmarking • Solid definitions of roles and expectations • Improved cost savings targets and ROI commitments • Timeline (Benchmarking): • February 2008: Launched benchmarking effort with local AHMMA, GPO IDN, and other national industry contacts • Compared PO activity against number of dedicated resources • # of PO’s, # of PO lines, and $ volume • Compare over a 3 year period (2006 through 2008) • Results: Average buyer volume activity ranked highest against benchmarked participants

  4. Actions Taken (Plan & Timeline) • Timeline (Roles / Expectations): • June 2008: Data supports new resource request • Create two (2) Purchasing Aide (PA) positions to absorb the majority of buyer administrative duties; including: • Order acknowledgements • Back orders follow-up • Product returns / credits • Free up buyers to focus on cost savings and CIP’s • Over $40M spent on non-contracts items • New electronic office initiatives to enable and support • Timeline (Cost Savings and ROI) • June 2008: Measure cost of 2 new PA’s against increased buyer savings on non-contracted spends • Savings target was 2% of $40M = $800K • ROI target = 3 months

  5. Results (by end of fiscal 2009) • SHC Administration approved request (October 2008) • New PA positions hired (December 2008) • Began comparing buyer savings reports (March 2009) • 1st Report: Buyers captured $485K (easily beat ROI goal) • Already exceeded 2008 total savings by ~$200K • Overall 2009 non-contracted savings (September 2009) • $782K (‘09) vs. $290K (‘08) – a 270% improvement • Other Benefits: • Discrepant invoice $ and volume reduction improvement: • Invoice $  55% and volume  62% • Implemented electronic requisition approval (June 2009) • Kicked off electronic return goods process in October

  6. BACK-UP DATA

  7. BENCHMARK DATA – PO’S

  8. BENCHMARK DATA – PO’S

  9. BENCHMARK DATA – PO LI’S

  10. BENCHMARK DATA – PO VALUE

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