The ‘ Supply Chain ’ is
T not a chain , obviously , but more so a complex network , leading us to ask , “ How does a vendor supplier fit into this discussion ?” and “ How can a vendor go above and beyond to meet a healthcare system ’ s needs ?” To achieve the “ beyond ,” the focus has become all about the partnership — a move away from the transactional to a more sophisticated and relationship-oriented approach to managing the supply network , risk mitigation , bringing forward efficiencies and ensuring resiliency at its core .
When Stanford Medicine formed a prime distribution partnership with Medline five years ago , its goal was to build a more clinically integrated , resilient supply chain with its vendor supplier having an integral and proactive role . This goal of creating more transparent and collaborative partnerships is becoming more and more common across the industry .
“ In healthcare , most places haven ’ t built the infrastructure needed to compete ,” Nick Trzeciak , Vice President of Supply Chain Logistics at Stanford Medicine , said early on .
“ What we ’ re building sets the baseline for not just healthcare supply chain within Stanford , but for supply chain as an industry .” 1
Patients — and the systems that serve them — are both valuable customers The importance of reliability and service has never been more evident . Every organization aims to provide reliable and excellent service , but in the healthcare supply chain the stakes are even higher . What we have been doing for years has only been exacerbated by supply volatility requiring all parties to re-think how we operate along the continuum of the supply chain .
Case in point : Medline worked with Stanford Medicine ’ s supply chain team and GHX , the health system ’ s electronic data interchange and data analytics partner , to help solve vexing problems with auto-substitution , price assurance and exception management . 3 Specifically , the health system was facing three main challenges : 1 . Auto-substitution had never been successfully used in Lawson , one of Stanford ’ s ERPs . 2 . Conventional wisdom was that auto-substitution and
“ It ’ s a collaboration . It ’ s a partnership — different parts of the supply network must operate in coordination and complete alignment in pushing the boundaries of redefining the art of the possible . Our core mission is to provide products to the healing hands that care for our patients at the right time , right place and right value .” 3
— Amanda Chawla , SVP – Chief Supply Chain Officer at Stanford Medicine
TruePrice TM , a best-in-class price assurance solution that Medline offers , could not and had never been able to run at the same time .
3 . New and comprehensive internal structures and processes were needed to support resulting automation and alignment with GHX ’ s reporting .
The team ’ s first order of business was getting auto-substitution to work with GHX ’ s My Exchange and Stanford ’ s multiple Enterprise Resource Planning ( ERP ) platforms . The manual process of ordering substitutes up to this point was inefficient and costing Stanford labor , space and inventory carry costs , not to mention the risk of stockouts .
To implement an auto-substitution process for clinically approved equivalent alternatives at Stanford , Medline linked arms with the supply chain team and conducted a deep dive into issues associated with interfacing Stanford ’ s multiple ERP systems with its own inventory system , identifying and documenting a myriad of differences between the primary item and the substitute item .
However , technology automation alone would not fully solve challenges around auto-substitution . Auto-substitution necessitated a robust infrastructure , requiring both Stanford and its industry partners to develop new internal structures and joint workflow processes to support the automation .
• Medline , for example , worked to modify its inventory management practices and adopt a new standard of work to ensure that appropriate stock levels of substitute items would be available .
• Stanford , meanwhile , streamlined its substitute approval process to
Outcomes by the Numbers
< 0.5 % aged accounts receivable ( AR ) rate
75 % reduction in price exceptions , enabling Procurement teams to improve their collaboration with GPO , Vizient , and to focus on systemic issues related to price accuracy
More effective utilization of GHX My Exchange through item master , contracts and transaction data
98 % adjusted fill rate — higher than industry benchmarks and rapidly approaching bestin-class
40 % of manufacturer backordered lines filled with approved substitutions
ensure timely approval of relevant substitute items through the establishment of an internal workgroup and clinical facing task force .
• The Substitution Task Force convened daily to vet clinically acceptable equivalents — a process that used to take up to four weeks was streamlined to an average of five days and less than 72 hours in the most emergent cases .
• Both entities then came together to code a custom interface between
28 SUPPLY CHAIN OPTIMIZATION Issue 8 / 2024