Supply Chain: Health care reform
Health care manufacturers and distributors have recognized the importance of their supply chain operations for years. Large hospital systems with 600 to 1,000 beds are coming to realize that they, too, are supply chain organizations and are developing hospital logistics to optimize the storage and flow of inventory through a facility.
“Health care provider groups are facing tremendous financial pressures,” says Tecsys’ Brereton. “Medicare and insurance payments are being squeezed as patient expectations are rising. They no longer have unlimited funds. They are trying to improve patient care while improving their business model.”
In fact, hospitals have many of the same complications as a direct-to-consumer distribution center. For instance, a large hospital delivers thousands of individual orders to hundreds or even thousands of delivery addresses within a complex. What’s more, the range of products and number of SKUs is complex: a typical hospital delivers surgical kits to an operating room, replenishes supplies in the supply rooms at a nurse’s station, manages the hospital gift shops, fills thousands of individual prescriptions and meal orders, as well as items like towels and sheets. It also has a reverse logistics requirement, removing trash, dirty laundry and empty food trays from the hospital.
Inventory is a significant cost.
For example, physicians have the ability to order Physician Preference Items, or PPIs. The result is that three different physicians in the same department may each use similar tools from different manufacturers for the same procedures or treatments. “Imagine if every client who walked into a drug store could design their own shampoo and asked you to carry it and you get a sense of the problem,” says Brereton.
Warehouse management systems are bringing the same level of inventory management to hospital logistics that they brought to the distribution center a decade or two ago.
“You can translate millions of dollars of inventory back into cash within the first year by not having to replenish areas that may already have inventory squirreled away because nurses and doctors didn’t trust the old system,” Brereton says. Those same systems are then used to direct the order fulfillment processes at a very granular level. “We are working with a hospital system in St. Louis that is using a WMS to break down bulk items into patient dosages that are tracked right to the bedside and to the patient’s bill,” says Brereton.
Similarly, hospital systems are adopting the same automated materials handling and data collection solutions for their systems as health care manufacturers and distributors. Those include horizontal carousels, mini-load systems, pick-to-light and voice-directed fulfillment systems for storage and picking as well as AGVs to deliver product from the warehouse area into the hospital itself.
“You don’t want the same person handling patient dosages who is handling food trays and hauling trash,” explains Jay Yale, managing director for Frog AGV Systems. “A stainless steel AGV virtually eliminates contamination from human handling. What’s more, we can build in three or four security checks to ensure the accuracy of a delivery. And, an AGV delivers on time on a 24/7 basis.”
Those same requirements for clean, timely and accurate deliveries are driving the implementation of other technologies such as carousels and pick-to-light. “The hospitals we are working with are using automation to improve accuracy and control labor costs like any other facility,” says Denny Arciero, director of distribution solutions for Systems Logistics. However, automation works well with the heightened urgency associated with hospital operations. “You’re supplying the nursing stations, operating rooms and patient rooms,” Arciero says. “On-time delivery is a must.”
Adds Brereton: “Our industry has always been about delivering the right product to the right place at the right time. Hospitals are realizing that automation and supply chain software drives down the cost of providing health care, saves lives, and improves the patient’s experience. That’s what this is all about.”
Companies mentioned in this article
Frog AGV Systems: frog.nl
System Logistics: systemlogistics.com
TAKE Solutions: takesolutions.com
Cleveland Clinic’s health care reform
One of the nation’s premier medical centers transformed a manual, paper-based warehouse into a state-of-the-art facility using automated materials handling technologies to optimize the delivery of food, supplies, medications and surgical tools to more than 14,000 locations.