May 25 2016
Healthcare and Pharmaceutical Management
Within today’s complex healthcare supply chains we can find tens and tens of performance indicators that claim to facilitate all manner of operational, financial and strategic metrics.. Seldom, do we come across matrices that are focused on the community that matters the most, that is the patient and the clinical staff providing the care… Supply chain in general is anchored by three key performance indicators; efficiency, cost and service… Between and within those, the end to end demand and supply cycle is performed to achieve a “good or service” that aims to be efficiently delivered, at the lowest cost and from the best supplier to the intended end user. Healthcare supply chains are not different, unfortunately. Efficiency, lean, cost and customer service is what we tend to worry about the most.. To put it in prospective; I had the opportunity to work at the National Health Service many years back as a program director for supply chain innovation… The NHS is responsible for well over 1,600 hospitals and primary health care centers and deals with over 1 million patients every 36 hours in England alone. Among that gigantic healthcare system existed some 500 similarly grouped performance indicators that spanned everything from contract compliance to supply fill rates to price ratios.. 6 months of analysis, revealed that less than 50% of “all” supply chain and 80% of “non-managerial” staff knew such KPI matrices even existed; 60% of those KPI’s were over 8 years old and never revised or updated, and over 70% were measured and/or reported… Eventually, the NHS engaged with a consultancy firm that recommended scraping almost all of the existing metrics and start afresh. This white paper is intended to help hospital supply chain leaders to take a critical look at their current performance indicators with a vision to make them easy to understand, be reported and most importantly be shared across the entire organization….
Healthcare is an industry typified by countless unique processes and workflows. Because of this, assessing overall performance and efficiency is a complex task. When looking specifically at the supply chain, hospitals make large investments in supplies and people to ensure flawless execution and are constantly looking for ways to evaluate the success of their supply chain operation. Measuring the overall performance of your supply chain can be boiled down to a few key questions. Is the supply chain acquiring the things your healthcare organization needs? Is it providing caregivers with the things they need? And is it doing it all in the right time and for the right value (not price? This white paper is intended to focus on:
With this in mind; let us evaluate what the best in class hospital SUPPLY CHAINS are strictly focusing on… There are four crucial KPIs that can be assessed to check the health of a hospital supply chain.
Storage space utilization refers to the average amount of warehouse, or storage, capacity used over a specific amount of time. Total storage space in use (ft3 or m3) / Total storage space available (ft3 or m3) Storage space utilization can help managers assess whether they should change the layout and size of the storage area and identify obsolete products that should be removed. This formula can also be used to determine if material flow should increase or decrease. However, it is important to recognize that warehouses are not necessarily optimized if at maximum capacity. Some studies suggest that a warehouse capacity of 80-85 percent is optimal because that allows warehouse managers to respond to shifts in demand in a more feasible manner.
Order fill rate is defined as the percentage of orders that can be filled based on the inventory at hand. Orders filled complete on the first shipment / Total Orders Shipped Evaluating the order fill rate percentage helps to determine how balanced an inventory is and helping to forecast the supply demand that can be met. Generally, a higher fill rate signifies a better ability to meet delivery requests, keeping caregiver satisfaction high.
Depending on a hospital’s specific operational strategy, either on time delivery or on time shipments may be more important than the other. But the rationale for measuring them is the same. An on time shipment is classified as a shipment that is off the warehouse and in transit on schedule. An on time delivery is one that reaches the recipient on schedule. Number of orders shipped or delivered on time / total number of orders shipped The need for this KPI is perhaps the most obvious: caregivers expect on time deliveries and shipments. For this reason, it is in everyone’s best interest to ensure that on time delivery is as high as possible so that the supply chain runs smoothly and satisfaction remains high. In the healthcare world, a late delivery can have a huge effect on the patient care. For hospitals, the impact on delayed orders is more fragmented. Some hospitals will return late orders back to vendors; others will stipulate strict commercial and performance indicators, with the latter being the most followed globally. Bad performance will increase activity in customer service. This could be disastrous for hospitals that use suppliers to handle stock and shipping without integration of relevant data. It creates a black hole for the hospital until the product is delivered. Only then can they tell you there’s been a problem, eliminating the ability to be proactive on delays. In a recent 2014 survey by the American Association of Healthcare Administrative Management (AAHAM); it was revealed that unavailability of the required supplies contributed to the top three adverse effects of patient care…
The shipment metric ratio is the most significant indicator of logistics efficiency within the patient care operational measurements. It is a high level strategic and operational performance measure that is formed by a combination of six performance markers. It is a dynamic KPI that makes it possible to determine if various factors have successfully worked together, including if a shipment has been delivered in the right way, to the right point of care or use, at the right time, in the right condition, right quantity and the right process. Exactly what goes into the calculation depends on what is being delivered, but an example of 1,500 shipments taken randomly from the sample hospital participants looks like this:
SMR = 1.0 + 0.75 + 0.90 + 0.50 + 0.75 + 0.75 = 4.65 out of 6.00 = 78% The resulting percentage represents the shipment “order” metric ratio. The fail rate weightage of each performance indicator is customized by different hospitals to accommodate specific operational indices. The above weightage is taken from a 35 sample UK hospital portfolio with the following commonalities: A: Inpatient / Outpatient provider. B: 250 – 375 bed capacity. C: No Oncology, Orthopedic specialty. D: Min 4, Max 7 floor facility. E: Hub and Spoke based supply delivery. F: Partial automated delivery, storage, delivery and replenishment process. For SMR to work, a hospital must gather data for at least 3 months before determining a benchmark ratio. Among the 35 sample hospitals taken; a median of 87% (range 85% – 89%) was used for 1,500 shipments. For that particular shipment therefore; a ratio of 78% represents an opportunity of 9% to improve. Measuring the SMR is a holistic perspective on delivering supplies to the point of care or use. A nurse or physician will always expect an order to be perfect (6 out of 6), and poor performance in one aspect of a transaction that will overshadow the supply chain caregiver service delivery performance. This is why the SMR is so compelling and critical to the supply chain quality department; as it reflects how patients care is being served by a non-clinical department away and helps to ensure caregiver satisfaction by taking into account several related factors. While tracking a this metric is critical, it cannot stand alone to denote success. For example, if a SMR drops from one week to the next, it would not be immediately clear if that number went down in the timeliness or complete delivery, process etc. That’s why it is necessary to track all of the KPIs we’ve discussed in this paper to give us an accurate and holistic overview of how the supply chain is being operated. Management, accuracy and access to relevant non patient specific data has emerged as the most influential factor to helping hospitals find answers to complex business questions like the success of the supply chain. The above KPIs guide hospitals to look at both lagging indicators (statistics based on operational activates) and leading indicators (statics based on patient care activities). Utilizing operational and business intelligence through strict quality control to assess both, makes it possible to “drill down” data to track performance more accurately than ever before while shifting the attention systematically and emotionally from operational excellence towards patient excellence.
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