Caldwell Memorial Hospital wanted to streamline its supply chain.
Caldwell implemented Simpler Consulting to help standardize its overall supply chain process, including inventory visibility, demand flow optimization and management of physician preference items.
~ USD 4.1 million uncoveredin annual cost savings opportunities
~ USD 2.62 million savedby consolidating supplies and eliminating excess inventory
~ USD 421,000 identifiedin distribution cost savings
Business challenge story
Assessing the situation
Six years prior, Caldwell had enlisted Simpler, an IBM Company to implement Lean management principles in other areas of the organization. Based on the improvements achieved during that time, the organization turned once again to its Simpler coaches for help in streamlining its supply chain.
An initial value targeting assessment helped Caldwell outline the challenges facing its supply chain and identify solutions that would help it reach a more desirable state. Through quantitative and qualitative data collection and analysis, the team defined the scope of the project, determined targets for ROI and developed a comprehensive business plan based on the Lean philosophy of reducing waste to maximize value.
The assessment revealed three key areas for Caldwell to target: inventory visibility, demand flow optimization and management of physician preference items.
Simpler’s goal was to not only help drive substantial savings for Caldwell, but also make the team aware of how each individual affects the supply chain operation — and ultimately, the patients.
Gaining clarity and control
To tackle both inventory visibility and distribution flow, Simpler introduced Caldwell to a Lean-based visual replenishment system that stocks supplies based on actual need rather than forecasted need. This offers Caldwell more transparency around items moving through the system — from requisition to the bedside.
The resulting consolidation of supplies and elimination of excess inventory led to an annualized USD 2.62 million in savings over the 13-month initiative.
Plus, by using Lean methodologies to standardize the overall supply chain process, Caldwell identified another USD 421,000 that could be saved on distribution costs, as well as USD 366,000 from reducing the amount of time clinicians spent managing supplies.
Reigning in preference items
Simpler also wanted to help Caldwell understand how its supply chain costs were affected by the clinicians’ utilization of assets. This included not just supplies, but everything from pharmacy and lab resources to room and board.
Simpler used its proprietary PPI Manager Tool to break down utilization by factors such as All Patients Refined Diagnosis Related Groups (APR DRG), physician, revenue center and intensity of service to show how the variation in items and resources requested by different physicians and inconsistency in use, can add up to a significant expense.
The PPI Manager Tool uncovered an additional USD 4.1 million in cost savings opportunities for Caldwell by simply streamlining the number and variety of materials and resources used by clinicians.
As Caldwell continues to transform its supply chain using Lean techniques, new opportunities are being discovered for reducing costs, increasing operational efficiencies and helping improve the quality of patient care.
About Caldwell Memorial Hospital
Caldwell, located in Lenoir, North Carolina, is a 110-bed, not-for-profit community hospital and has been a part of the UNC Health Care system since 2013. It has 650 employees, including more than 50 primary and specialty care physicians.
About Watson Health
For more than a century, IBM has been creating innovations that matter. And with IBM® Watson Health™, we are committed to help build smarter health ecosystems. This means working with you to help you achieve simpler processes, better care insights, faster breakthroughs, and improved experiences for people around the world. Our core strengths combined — deep industry expertise in health, data and analytics, actionable insights, and our reputation for trust and security — can enable us to deliver support for our clients. Together with our clients and partners, IBM is putting smart to work. For more information, visit https://www.ibm.com/watson-health
About Lean Supply Chain Management
Supply chain management is the second highest expense after labor. Hospitals and health systems need a better way to save money and increase efficiency, while still maintaining high-quality standards and improving the patient experience. Lean management can help healthcare organizations meet the demands of a value-based system by creating competitive advantages during different stages of the supply chain, including product selection and sourcing to logistics and distribution.
Take the Next Step
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