"We've got a stockout." When it comes to crucial surgical products and medical devices, those are words that no hospital administrator, clinician, or supply chain professional ever wants to hear.
Unfortunately for Intermountain Healthcare, a not-for-profit health care system of 23 hospitals in Utah and Idaho in the United States, it was hearing those words far too frequently for certain surgical products from the Johnson & Johnson Medical Devices Companies (JJMDC).1 "Traditionally, our solution was to increase our safety stock and carry more inventory," explained Heber Everitt, demand planning manager at Intermountain Healthcare. "But that strategy was no longer working and was impacting overall efficiency."
Intermountain, which serves thousands of patients annually, wanted to act quickly to restore confidence among its supply chain and surgical personnel in the supply chain integrity of JJMDC products. To solve the problem, Intermountain approached JJMDC about how the two organizations could collaborate to identify process improvements that would reduce stockouts and improve customer service while also making the supply chain more efficient. Intermountain wanted the effort to focus specifically on Ethicon Inc. sutures.
Both organizations knew that delivering high-quality, efficient health care requires significant supply chain expertise. Afterall, understanding demand within a health system's supply chain can be a complex challenge requiring sophisticated and accurate data, as well as trust and transparency between many parties, including suppliers, distributors, and clinicians. To help diagnose and solve the complex problems that were causing stockouts of Ethicon sutures, the JJMDC team leveraged CareAdvantage from the Johnson & Johnson Medical Devices Companies—a holistic approach to help health care systems realize better care by aligning JJMDC's broad capabilities to customers' individual needs. It seeks to support a hospital system's goals of delivering "whole health" by reducing costs, improving outcomes, advancing patient satisfaction, and developing a healthier workforce.
Leveraging CareAdvantage, the JJMDC team starts by talking with the customer to understand its specific objectives, priorities, and challenges. The team then combines these insights with deeper, data-driven analyses to identify opportunities to make the most impact. A rigorous onsite assessment validates these findings to deliver a focused action plan with targeted metrics linked to each of the health system's goals.
Solving starts with listening
A fundamental component of CareAdvantage is the belief that solving starts with listening. With that as a focus, a key first step for the JJMDC team was to fully understand the challenges that Intermountain was facing and how it was currently managing its suture inventory. Together, JJMDC and Intermountain conducted a series of fact-finding meetings with the clinical supply chain specialists at the hospitals in order to understand pain points that interrupted supply flow. These fact-finding meetings are a best practice that Intermountain had already been using to assess its own supply chain efficiency. The JJMDC team spent time onsite within the health system to study product flow, map processes, and quantify system-level supply dynamics.
During the joint-planning meetings, both organizations recognized room for improvement in their own processes, including taking a more proactive approach to data gathering and improving transparency and communication. To help them work toward better aligning their processes and systems, the two companies used the Gartner Five-Stage Demand-Driven Maturity Model as a roadmap.2 The Gartner model helps companies to identify the current maturity level of their supply chain organizationand provides a standard series of steps for improving their supply chain sophistication.
1. React: In the first stage, business units operate autonomously in silos. There is no cross-divisional standardization of supply chain services and little coordination. Typically, systems are disconnected, and processes are often manual.
2. Anticipate: This stage focuses on creating standardized processes and centralizing some supply chain functions. These efforts typically begin to improve operational efficiency and productivity. Logistics and supply chain activities and performance are now being captured and reported on an organization-wide level, which enables the supply chain to better anticipate demand.
3. Integrate: The focus now is on integrating processes and systems across the overall supply chain. There is increased consideration of how logistics and supply chains will affect customer service and procurement.
4. Collaborate: This stage is characterized by a focus on fostering collaboration and visibility across the value chain network in a manner thatgoes beyond providing simple transactional services. Value chain partners have a shared supply chain management vision and recognize the trade-offs between profitability and customer value.
5. Orchestrate: The supply chain facilitates processes across an ecosystem of partners to capitalize on unique business opportunities. As a result, information flows across the supply chain network in real time. This enables better visibility, which helps organizations make fact-based decisions in a timely manner.
Changes drive significant results
To solve the stockout problem, the two organizations took a number of steps to improve end-to-end customer service and operational efficiency, which also helped to raise their supply chain maturity level. They began to track the on-time performance and consistent weekly deliveries of shipments. They also improved how they shared supply chain information between the two organizations. For example, they increased the number of usage reports for Ethicon surgical products from monthly to weekly, and sometimes even daily. Additionally, they revised their business planning processes and implemented prediction accuracy measurements, which allowed them to assess and then improve the accuracy of their demand and supply forecasting.
In addition, Intermountain implemented a "dock-to-stock" system, where deliveries of Ethicon sutures would be sent directly to Intermountain's distribution center dock for stocking. This lean process helped to eliminate lead time. The company also reduced lead time by switching to a 7:00 a.m. delivery time, when there is less congestion in the distribution center. These actions led to improved efficiencies at the distribution level and enhanced transparency among all partners. Specific results included:
- Reduced inventory-stocking lead time from dock to stock from 48 hours to 4 hours
- Reduced stockouts by 40 percent
- Reduced overall product lead time
- Increased early payment discounts from 40 percent to more than 90 percent
- Increased supply chain transparency
- Improved confidence and trust
There were other benefits, as well. Using the Gartner self-assessment tool, the organizations found they had progressed to stage 4 in their partnerships: Collaborate. But they aren't resting on their laurels. Both have their sights set on the collaboration reaching the highest stage of the Gartner Supply Chain Maturity Model: Orchestrate (stage 5), where logistics and the rest of the supply chain facilitate processes across an ecosystem of partners to capitalize on unique business opportunities.3
Five questions
We believe these learnings can provide a framework for other supply chain managers—in both the health care industry and beyond—to consider. To assess your organization's supply chain optimization, here are five key questions to get a conversation started:
- Are you and your customers confident about supply inventory?
- How reliable are your forecast capabilities?
- What are your metrics for stockouts, end-to-end customer service, and operational efficiency?
- How do you rank on the Gartner Five-Stage Maturity Model?
- What are your goals for your supply chain?
By asking these questions of your organization and your partners' organizations, you will have a better chance of streamlining your supply chain operations and, in the case of health care systems, delivering better value-based care.
Notes:
1.The Johnson & Johnson Medical Devices Companies comprise the surgery, orthopedics, and cardiovascular businesses within Johnson & Johnson's Medical Devices segment.
2.Noha Tohamy and Matthew Davis, "Introducing the Five-Stage Demand-Driven Maturing Model for Supply Chain Leaders," Gartner Inc. (March 26, 2013), https://www.gartner.com/doc/2389615/introducing-fivestage-demanddriven-maturity-model
3.Rob van der Meulen, "5 Stages of Logistics Maturity," Smarter with Gartner, (August 28, 2017), https://www.gartner.com/smarterwithgartner/5-stages-of-logistics-maturity/
