1. Building Resiliency The Case for Change Supply Chain Management Site Operations and Logistics Overview February 17, 2017

2. What Does It Mean to Be Resilient?
After going down three games to none against the Golden State Warriors, the Cleveland Cavaliers accomplished one of the greatest comebacks in modern era sports history.
“I had to change. I had to change my game.” LeBron James

3. Advocate Health Care Background

4. Advocate Health Care Background
Overview
$6.4 billion of revenue
1.6 million unique patients
865,000 value based lives
35,000 associates
Physicians/Ambulatory
1,400 employed APCs
Over 6,000 physicians
Over 450 sites of care
Hospitals (12)
4 teaching
2 children's
1 critical access
5 level 1 trauma centers
Post-acute
Home health, hospice, SNF and palliative care

5. Advocate Health Care Background

6. The Beginning of the Change Journey
The best time to plant a tree was ten years ago………..
The second best time is today.

7. Supply Chain Site Operations and Logistics
Site Operations and Logistics has the operational responsibility for the management of $800M in annual medical supply expense across all Advocate point-of-care locations.
Operating teams at all point-of-care facilities;
All logistics, distribution and inventory management responsibilities;
265 FTEs;
Annual Operating Budget: $42M;
24 / 7 / 365 Operating Schedule

8. Site Operations and Logistics - Leadership
Taking people to places that they would not have otherwise gone on their own.
Author Unknown
Be Strategic Advisors to the Enterprise

9. Site Operations and Logistics – Guiding Principles
Improve Patient Satisfaction / Outcome; Reduce Patient Risk
Reduce Operating Expense
Preserve Cash
Eliminate Expired Product by 2020
Reduce
Expense
Patient
Safety
Preserve Cash
Operational Excellence
Reduce OPEX by $36M
Reduce Inventory by $20M
Supply Chain Management has the responsibility for patient care.

10. Healthcare – The Case for Change

11. It’s Time to Look Forward
For many years healthcare has operated in a manner that is like driving a car through the rearview mirror…..
But, times are changing.

12. Healthcare is Changing – Rising Costs
McKinsey& Company evaluated the factors driving change in healthcare:
Decline in government reimbursement;
Changes in the commercial insurers;
Rise of consumerism and patient payments;
The healthcare network cost model is not sustainable without significant change.

13. Healthcare’s Burning Platform
The most striking finding from McKinsey’s provider research is how drastically providers are expecting revenues to decline, and their resulting willingness to make dramatic changes in their operations:
“We are facing 15-20% hard line reimbursement changes. We need to start making reductions in costs right now,” said one integrated delivery network (IDN) executive.
Another reported: “Our organization’s leadership has said we need to be willing to change everything with the exception of our primary value proposition that the needs of the patient come first.”

14. Driving the Next Level of Supply Chain Savings
While all costs are on the table, Supply Chain is universally considered one of the top priorities to contribute bottom line value.
Healthcare Network
Supply Chain

15. The Forces driving Change
Problem Statement – Chief Nursing Officer:
“We’ve got to reduce costs. I have been asked to eliminate 210 nurses and I don’t have a clue as to how to do this”
Solution Statement – Supply Chain Site Operations and Logistics:
We need to change. There are many back-office and operational support costs we can eliminate without impacting patient care”

16. Out of Balance Responsibilities
Materials Management
General Stores Supplies
Regulatory Performance Standards
Physician Satisfaction
Clinical Care / Patient Satisfaction
General Stores
Supply Management
Physician Satisfaction
Ordering, Buying, Logistics
Materials
Management
Product Expirations
Clinical
Associates
Clinicians have been burdened with non-clinical responsibilities;
Distracting the quality of patient care; and
Resulting in unnecessary costs. 16

17. Alignment of Core Expertise
Regulatory Performance Standards
Physician Satisfaction
Patient Satisfaction
General Stores
Supply Management
Supply Chain Management
All inventory management, distribution and logistics
Physician Satisfaction
Quality of Outcome Standards
Product Expiration
Clinical Care and Patient Satisfaction
Supply Chain
Management
Clinical
Associates
Site Operations and Logistics has the responsibility now to manage the medical supply network life cycle – Logistics, Distribution, Replenishment. 17

18. Optimizing the Logistics Network

19. Advocate Logistics Channels – Initial State

20. Advocate Logistics Channels – Future State Vision
Channel Optimization;
Enterprise-wide Freight Management;
Use of Logical Unit of Measure

21. Optimized Inventory Management

22. Automated 2-Bin Inventory Management
Each SKU is evaluated based on historic usage analytics and a PAR level established;
Two identical bins are prepared, each with the equivalent PAR value;
The bins are then organized according to patient usage type and placed into a standardized and systematic environment.
A predictable demand signal is now in place.

23. Inventory Management Standardization
Inventory reduced by 40%;
Supply Expense reduced by over $8M;
Labor reduced by $4.3M

24. Automated Inventory Management
* - Signifies Pilot Trial Candidate

25. Automated Clinical Workflows and Efficient Capture Data

26. Optimization through
Real-Time Analytics

27. Site Operations and Logistics – Real Time Analytics
Site Operations is focused on the development and advancement of real-time analytics:
Non-Conforming Product Index
Logistics Index
DemandTrack
Order Q
QSight

28. Managing Product Expirations
2014 Baseline
$3M in Waste = 35 Nurses

29. Managing Product Expirations

30. Managing Product Expirations

31. DemandTrack

32. DemandTrack

33. DemandTrack

34. Logistics Index

35. Logistics Index

36. Better Information | Better Management

37. Supply Chain Management
Site Operations and Logistics

38. Supply Chain Management
Site Operations and Logistics
Order Q Dataflow

39. Supply room data collection terminal All-in-one touch PC; RFID reader;
Supply Chain Management
Site Operations and Logistics
Order Q Components
Supply room data collection terminal
All-in-one touch PC;
RFID reader;
RFID tags affixed to bins
Order Q manager’s desktop console
Web-based dashboard;
Provides visibility and controls

40. Site Operations and Logistics – QSight Technology

41. The World of Real-Time Analytics – Situation Room

42. Q&A