Supply Chain Organization Overview: Past, Present and Future Richard Bagley Director Strategic Sourcing.

Supply Chain Organization

Overview:Past, Present and Future

Richard BagleyDirector Strategic Sourcing

• Since 1975• 22 hospitals (36% of

Hospitals)• 2,790 licensed beds

• Since 1983• Health plans (23% of

Utah Insurance)• 630,000 members

• Since 1994• 1,100 employed

physicians• 150 clinics

• Since 1997• 9 key service lines

Hospitals

SelectHealth

MedicalGroup

ClinicalPrograms

• Based in SLC, UT• 34,000 employees• $4.5B revenues• $5B assets• AA+ Standard &

Poor’s Aa1 Moody’s

Intermountain Healthcare Overview

What does the world look like in Supply Chain?

Critical Success Factors• Supply chain became a strategic focus

by senior leadership

• $3 Million initially investment and 25 new FTEs – skilled & talented

• Centralized buyers and reporting relationships of the warehouse

• Added couriers, travel services, publishing and central laundry

• Earned trust of stakeholders – management & clinicians

• Implemented effective strategies

• Deliver on commitments - Savings, value, efficiency & more

• “Skate to the puck”

Notable Recognitions

Garter’s 4th Best Supply Chain in Healthcare

2013 AHRMM Innovation Award

ECRI Healthcare Supply Chain Achievement Award

IntelliCentric’s 5-Rings Award

Our Supply Chain is One of the Industry’s Best

SCO’s Strategic Imperatives

•Deliver $42M in savings

•Deliver plan to support CPI + 1

Increase Savings and Value

•Optimize efficiency and minimize variation

•Risk mitigation plan for supply chain

Expand Scope

•Develop capability to deliver post contract value

•Rum/Lum

New Forms of Value

•Project eLEV8 – Go Live in Q1 2014

•Data Standardization

Enhance Technology

•Cost Neutral in Five Years!

Generate Revenue

7 Things You Need to Know About the Healthcare Supply Chain

Logistics costs in healthcare are more than 10X the costs of the retail industry

The most expensive and high risk items often have the least control

Personal preference drives many product decisions

Healthcare outsources less than most other industries

Healthcare industry has the lowest level of trust between buyers and suppliers

Supply chain is still in the basement of many hospitals (literally) – even though non-labor expenses are approaching 50% of total costs

Data standards, transparency, traceability…oh my!

SUPPLIERNETWORK SUPPLY CHAIN

PROCESSESCLINICAL CARE

NETWORK

Goods & Services

PATIENTS

Source

Buy

Deliver

Category Manageme

nt

Contract Mgmt

P2P

Logistics Mgmt

Materials & Inventory

Mgmt

Our Operating Model

Supplier Relationship ManagementCustomer Relationship Management

• Drive value up and cost down on $1.4B in spend

• Facilitate governance to select best projects and manage prioritization of work

• Facilitate the process to select best supplier(s) and products

• Segment and manage suppliers we have sourced

• Manage catalog of products/services/equipment

• Manage category plans (spend analysis, opportunity assessment and calendar of events)

• Manage supplier contracts (820 new agreements in 2013 with 5400+ active agreements)

Source (Procurement)

Sourcing Governance FrameworkTier 1

Tier 2

Who? Purpose Decision Making Role

Procurement Steering

CommitteeDirection Setting

Approves Complex Decisions

Impacting the Entire

Organization

Functional Steering

Committee(i.e. IS

Leadership Team)

Functional Oversight

Approves Complex Decisions Impacting Function

Category Council(i.e. Telecom)

Project Execution

Approves Straightforward

Decisions Impacting Category

Strategic Sourcing Methodology

Supplier Segmentation

Strategic

Growth

Maintain

Exit0 10

10

Supplier Performance

Stra

tegi

c Im

pac

t P

oten

tial

Buy (Purchasing)

• Manage the daily transactions to ensure right product/service/software/equipment is at the right price at the right location

• Support 22 hospitals and 186 clinics centrally with team of 30 buyers

• Buying team is centralized and co-located with Accounts Payable to work together

• Process 1.2M PO lines a year• 3 way matching and moving towards perfect order

(touchless)

• Ensure employees and clinicians have the products they need, when and where they need them

• We do this by utilizing the best practices in warehousing, transportation, automated materials handling equipment, and inventory optimization.

• This reduces variation and waste in our supply chain, and improves service to the end-users.

Deliver (Logistics)

Logistics’ fundamental Role = Balance

Opened - October Q3 2012 – LEED Certified

327,000 sq ft – Distribution Center – and much,

much more

• 151k sq ft Warehouse space (area of three

football fields)

• 111k sq ft Office and logistics management

space

• 65k sq ft Ancillary Services space

Supply Chain Center Overview

What is the Supply Chain Center?So much more than a self-distribution center!

Logistics Center

Ancillary Services

SCO Leadership & Administration

Production Print Center• Design Services• Print Fulfillment

Imaging Equipment ServicesPharmacy Services• Retail Central Fill• Compounding• Unit Dose Packaging• Inventory Optimization• Bulk Buy Support

IS Asset Management Service• Computer Imaging• MFD Deployment• Asset Disposition

Everything Supply Chain co-located here at the SCC• Solutions, Sourcing, Contracting, Analytics, Systems, Purchasing,

Accounts Payable, Logistics plus 12-15 programs

Professional and technology-enabled meeting spaces Spaces designed to facilitate collaborationHeath & Wellness Center (for use by all SCO employees)Room for expansion

Receiving• Distribution• Cross-docking

Bulk StoragePick/Pack/ShipCourier ServicesHeavy Fleet ServicesEquipment LogisticsBulk Storage Asset RecoveryEmergency Preparedness

Why is this Significant?

Demonstration that Intermountain senior leadership understands the critical importance of supply chain as a key

corporate strategy

Everything Supply Chain resides at our Supply Chain Center!

Supply Chain Center Objectives of Logistics Center

Enhanced ResponsivenessImproved Fill Rates

Value-Added Ancillary ServicesSupports Standardization

Deliver in Right Unit of MeasureSingle Shipment to Each LocationOne-Stop-Shop Customer Service

Lower Unit CostsLower Transportation Costs

Streamlined ProcessesProductivity Gains

Better Use of Hospital SpaceNew Revenue from Third PartiesEnables Product Standardization

Enables SustainabilityStreamlined Data Exchange

Emergency PreparednessReduce Product Variation

Expiration Date MgmtImproved TraceabilityRecall ManagementEnhanced Controls

Mitigate Product Shortages

Lower Cost

ImproveService

ReduceRisk

Legacy Distribution Model

Med/Surg Dist.

Lab Mfg.

Pharma Mfg.

Dietary Dist.

Film Mfg.

Lab Dist.

Radiology Dist.

Pharma Dist.

Med/Surg Mfg.

Hospital 1

Hospital 2

Hospital 3

Hospitals 4 - 23

Clinics 1 - 150

Home Health

Retail Pharma

Dietary Mfg.

Surgical Center

Direct ManufacturersExample: Total Joints

Direct ManufacturersExample: Total Joints

Central Lab

Central Office

SCC-Enabled Distribution Model

Lab Mfg.

Pharma Mfg.

Film Mfg.

Med/Surg Mfg.

Dietary Mfg.

Linen Mfg.

Supply Chain Center

Mfg. Direct

Pharmacy

IT Asset Management

Production Print

Consolidated Transportation

Hospital 1

Hospital 2

Hospital 3

Hospitals 4 - 23

Clinics 1 - 150

Home Health

Retail Pharma

Surgical Center

Central Lab

Central Office

Ancillary Services

Logistics Center

Equipment Services

DistributorsDistributors

Supply Chain Center Location….Location ….Location

80 % of Hospital beds within 50 miles radius

Longest distance to facility = 300 miles (Dixie Medical Center)

Improved employee engagement and collaboration throughout the SCO

Consolidation of ancillary services, which leverage logistics platform

Value-generating direct relationships with suppliers

Improved transparency throughout value chain

Technology-enabled data synchronization and exchange

Process effectiveness and efficiency

Reduced Variation = Quality Improvement = Cost Improvement

Enables clinicians to focus more time on clinical care

Enables SCO to invest more time on other supply chains• Pharmacy• OR & Cath Lab

Environmental stewardship

The Supply Chain Center is More than a WarehouseIt is also an Enabler of other Non-Logistics Benefits

Questions?