ERP Cloud Supply Chain Advisory: Optimizing Your Supply Chain - Operations
Organizations are choosing to reinvent themselves to accelerate efficiencies and cost reduction strategies. One way to do this is through digital transformation to provide integrated systems and solutions for an immediate impact. Better collaboration and a single version of the truth align the enterprise and enable strategic decisions that improve efficiency and decrease costs. In our previous blog post, we shared insight about expense reduction strategies to help companies improve operations. In this blog post, we focus on various areas of operations optimization.
Having the data reports needed in a single source of truth prepares an organization for change. The following data reports are the most basic and give a supply chain leader or end-user the ability to review his operation appropriately.
Often the largest efficiency gained from moving to handhelds or to newer handhelds linked to Oracle is the ability to re-engineer processes. In our workshops for standard Oracle implementations, a review of the opportunity to enhance strategies for many areas of the supply chain is completed to include handheld signage, pic tickets, and store issues.
One of the larger challenges in today’s healthcare environment is how to best manage the purchase order (PO) environment so that the maximum visibility of purchase activity is captured with the optimal information necessary to provide audit oversight and implement best practices cost reduction strategies.
The key is to first identify where purchase activity breaks down. Next, a review of current data highlights areas that can move into the PO environment, and a cross walk of data provides a path to a clear project plan that matches data to a new policy for the organization. A new requisition process allows data to be tracked, followed, and processed onto a PO until the organization policy tracks to the most optimal PO-to-spend ratio determined by a full annual spending review process.
In the healthcare environment, it is common to see both understaffing and overstaffing take place across all parts of the supply chain operation: purchasing, distributing, receiving, equipment delivery, equipment cleaning, mailroom, courier, supervising, and specialty staffing for the operating room, catheterization lab, and angiography lab.
The first step is to learn how staffing compares to industry benchmarks at the most optimal staffing levels. By reviewing staffing by supply chain part and comparing underages and overages with various forms of data, any quality breakdowns can be identified. To determine next steps, it’s important to look at data for call down activity, missed pick activity, and PO line volume activity. By pulling these data, a real picture emerges of what is happening in the operation, and a gap analysis can be performed on any understaffing and overstaffing areas that exist as well as a gap-to-leading-practices analysis on every task by staff across the supply chain. Further, an overarching analysis of staffed versus productive time per employee can validate the findings. At that point, a future state plan can be created to outline the best and final course of action.
In the healthcare environment, most inventory overstocking occurs in the clinical departments that order outside the supply chain department’s organizational structure. A careful planning exercise with MIN and MAX levels is typically missed, and items are ordered in bulk as a starting point and maintained at these levels - or a stockout occurs, and a large quantity is ordered for that item and maintained for years with dollars lost in expirations year-over-year. Another industry trend is the use of faulty metrics. The inventory turns calculation of 10.5 turns is a ratio of total facility spending divided by total facility counted inventory. There are many problems with this ratio because a facility performing lots of specialty procedures will have a larger turns score than a facility that has done more to tighten up its inventory stocking levels while performing fewer specialty procedures. Furthermore, the turns calculation does not indicate which departments, vendors, and items are overstocked or needing to be consigned, leaving the end-user blind when reviewing his inventory levels. As a result, end-users often focus on the materials stores location, a low-cost, high-flow activity location that yields minimal returns compared to the clinical high-cost departments.
Analysis of the facility or organization’s inventory helps determine the following:
- Total count amount in the high-cost clinical departments
- US Benchmarking - to determine how close or far to target the department is
- Vendor activity - to identify where overstock exists and compare it to spend activity and analyze the opportunity to cash out, reduce, and consign
- Line item activity - analysis of overall opportunity to reduce with a new MIN and MAX review implemented based on real-time spend and lead-time activity
Through pulling this data and by reviewing case cart missed pick activity, the entire picture can be reviewed, and a strategy for the future can be developed based on attainable goals and actions.
The MIN and MAX Review
A careful MIN and MAX review helps organizations that are looking for inventory reduction and quality enhancement where they may be experiencing numerous missed picks from case carts in the operating room.
New MIN and MAX data points can be calculated based on purchasing activity and compared to current MIN and MAX data points.
One of the larger challenges in today’s healthcare environment is how to allow the nursing teams to work on quality care while the supply chain team works on ordering and delivering supplies for its departments. There are problems with this. For instance, there are hospitals and clinics that have neither enough holding space to deliver directly from stores nor enough space to hold product in the hospital department or clinic altogether. Some believe that manpower is an obstacle to fulfilling the clinical team’s duty of controlling its department. What we find; however, is that there is more time, energy, and cost wasted when a clinician controls the department’s supplies than when the supply chain team takes on the order because it is already performing the receiving and the delivery.
By reviewing locations that are on periodic versus locations that are currently on PAR, opportunities to move to a 100 percent PAR model can be identified. This allows one-person ownership of the area and eliminates unnecessary touchpoints and delivery paths to the same department by multiple staff as well as unnecessary call downs for missed orders. It also allows the reduction or ramp of inventory as needed.
Often after assessing the supply chain, we find workflows in areas of the supply chain that are operating at a suboptimal level of performance. Sometimes an evaluation using analytics and data can pinpoint new workflows to enhance the operation and eliminate redundancies. Examples of these workflows include the following:
- Operating room charge code flows
- Open orders
- Tissue tracking
- New item requests
- New item system adds
- Master file updates
- PO pricing reviews
- Daily reports reviewed
An operational assessment of all workflows and tasks performed by all staff allows a future state redesign.
Alithya has designed an assessment to review organizations’ operations in three to six weeks. Our simple model allows us to use our proprietary benchmarking techniques for labor, inventory, technology, and best practices to redefine operations and give clients a cutting edge.
For comments, questions, or suggestions for future topics, please reach out to us at firstname.lastname@example.org. Visit our blog regularly for new posts about Cloud updates and other Oracle Cloud Services such as Planning and Budgeting, Financial Consolidation, Account Reconciliation, and Enterprise Data Management. Follow Alithya on social media for the latest information about EPM, ERP, and Analytics solutions to meet your business needs.