I.5 Reducing Supply Chain
         Costs:
   Putting Standards to Work
Reducing Supply Chain Costs:
     Putting Standards to Work

            Dennis Byer
    Director of Information Technolog...
Reducing Supply Chain Costs
 Putting Standards to Work
 Today’s Agenda:
  Overview Of CHeS – Dennis Byer
  Healthcare Iden...
Reducing Supply Chain Costs
 Putting Standards to Work
Coalition for Healthcare eStandards
     Organized in 2001
     Mos...
Reducing Supply Chain Costs
 Putting Standards to Work
CHeS Mission
  Provide leadership to the healthcare industry in
  t...
CHeS Core Members
CHeS Initiatives
    Customer/Supplier Identification (GLN)
    Product Classification / Taxonomy (USPSC)
    Universal Pr...
Global Supply
    Chain
Identification
Customer Identification is
 one globally unique number for each
               location.




Customers use their number(s)...
Why this is important.
Hospitals
 • Do not always get correct prices from their suppliers
 • Have higher labor expenses
 •...
No Customer Identification Standard.
                          Rx: 2421435    Rx         Lab
                          Lab...
No Customer Identification Standard.
                                 Rx        Food
                             Distribu...
The Healthcare Supply Chain
                   A2342                                                   11121434
          ...
An Actual study from BD

Why does BD need
                                     An Actual Hospital
Customer Numbers?
 Proce...
00000000303
                                     3 Different
                                        2104372         12008...
GLN’s are widely used today in
                                        other industries. Healthcare is
       23 industrie...
The Healthcare Supply Chain
                     0123456789012                                                       M
   ...
GLN Benefits for Hospitals.

Benefit 1:   Labor savings.       Fewer numbers.

Benefit 2:   Exact definition of each locat...
International Product
    Classification (UNSPSC)
        United Nations Standard Products
               and Services Cod...
Product Classification / Taxonomy.
The United Nations Standard Products and Services Code (UNSPSC™)
  is a global referenc...
Product Classification / Taxonomy.

Segments Applicable to Healthcare Providers
  41 – Laboratory and Measuring and Observ...
UPN & Product Data
 Synchronization
Why are Standards Needed?
Standards are required in
order to achieve supply
chain e-COLLABORATION                         ...
Universal Product Number (UPN) & Data Synchronization
    DoD Manufacturer Names for Kendall

  Mfg Name                  ...
Universal Product Number (UPN) & Data Synchronization

 Industry Distributor Numbers
  for 3M Product #8630
              ...
Universal Product Number (UPN) & Data Synchronization

What is a Product Data Utility?
The Product Data Utility (PDU) conc...
Product Data Utility Data Flow


Manufacturers
                                                                Users
     ...
Universal Product Number (UPN) & Data Synchronization
Other Industries
   Procter & Gamble and their customer H.E. Butt
o ...
Universal Product Number (UPN) & Data Synchronization –
How does Data Synch affect Hospitals?
 Requests do not match suppl...
Current Industry Data
       Synchronization Pilot Partners

 Owens & Minor
 BD
 Premier
 Consorta
 Comergent
 GHX
...
Comments and
  Questions


         3   0   0   1   2   3   4   5   6   7   8   9   0   6
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I.5 Reducing Supply Chain Costs:

  1. 1. I.5 Reducing Supply Chain Costs: Putting Standards to Work
  2. 2. Reducing Supply Chain Costs: Putting Standards to Work Dennis Byer Director of Information Technology Consorta Schaumburg, Illinois Joe Pleasant Chief Information Officer Premier Charlotte, North Carolina
  3. 3. Reducing Supply Chain Costs Putting Standards to Work Today’s Agenda: Overview Of CHeS – Dennis Byer Healthcare Identifier – Dennis Byer Product Classification – Joe Pleasant Product Synchronization – Joe Pleasant Questions and Answers
  4. 4. Reducing Supply Chain Costs Putting Standards to Work Coalition for Healthcare eStandards Organized in 2001 Most of the Largest GPO’s Two eCommerce Exchanges The DOD and VA Additional Affiliate Members Working Together to Adopt and Promote Uniform Industry Data Standards
  5. 5. Reducing Supply Chain Costs Putting Standards to Work CHeS Mission Provide leadership to the healthcare industry in the identification, definition, evaluation, adoption, and endorsement of standards that improve the accuracy and efficiency of the supply chain CHeS Vision Statement The Coalition’s vision is to accelerate the adoption, implementation and active usage of industry-wide data standards for improving the efficiencies throughout the healthcare supply chain
  6. 6. CHeS Core Members
  7. 7. CHeS Initiatives Customer/Supplier Identification (GLN) Product Classification / Taxonomy (USPSC) Universal Product Identification (UPN) Product Synchronization (PDU) o Difficult Initiatives o Attempting To Building Consensus o Not Everyone Wants To Participate For Success: Providers Must Demand The Use Of These Standards
  8. 8. Global Supply Chain Identification
  9. 9. Customer Identification is one globally unique number for each location. Customers use their number(s) to identify themselves with All Suppliers
  10. 10. Why this is important. Hospitals • Do not always get correct prices from their suppliers • Have higher labor expenses • Receive incomplete purchase reports from suppliers and their GPO Manufacturers and Distributors • Struggle with contract eligibility = leads to customer dissatisfaction • Have higher labor expenses • Must operate inaccurate chargeback and rebate processes Alliances and GPOs • Receive incomplete supplier reports • Have higher labor expenses • Slow implementation of contract pricing
  11. 11. No Customer Identification Standard. Rx: 2421435 Rx Lab Lab 624353 Distributor Distributor Dist: 2315-32Y Mfgr: B342-985-3 Mfgr Office Prod Office: 1002-3 Distributor Distributor Food: 3421633 Food MRO Mfgr: 9438 MRO 633 Distributor Distributor Mfgr A Hospital One Delivery Point Supplier: 323 Supplier Supplier Mfgr:8235 Mfgr Supplier: 50 Supplier: 3R35 Mfgr: 97210 Mfgr Supplier: E5-35 Supplier Supplier Supplier: 2827 Mfgr: T-234 Mfgr GPO: 453 Supplier:899 Supplier Supplier Supplier: Y654 Mfgr: 01924 Mfgr GPO Supplier Supplier GPO Supplier:24-98899 Supplier: 9871-3 Supplier:24P9 Supplier Supplier
  12. 12. No Customer Identification Standard. Rx Food Distributor Distributor Primary Office Prod Mfgr Mfgr Distributor Distributor Secondary Lab Mfgr Mfgr Distributor Distributor Mfgr Mfgr A Hospital Mfgr Mfgr Multiple Delivery Supplier Supplier Supplier Points Supplier Supplier Supplier Mfgr Mfgr Supplier Supplier Supplier Mfgr Mfgr Supplier Supplier Supplier Mfgr Mfgr Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier GPO GPO GPO GPO Labor expense is required to manage all these proprietary numbers.
  13. 13. The Healthcare Supply Chain A2342 11121434 Membership Alignment One Hospital 4123144243 11121434 Delivery Point Eligibility & Pricing or Supplier 4123144243 4123144243 Acquisition or Supplier 11121434 4123144243 Rebate Processing 11121434 A2342 There are 3 Reporting 4123144243 A2342 different numbers and 6 conversions or Supplier where errors can occur No Customer Identification Standard.
  14. 14. An Actual study from BD Why does BD need An Actual Hospital Customer Numbers? Process customer orders St. Michaels Communicate with customers St Michaels Communicate with trading partners St. Michael’s Rebate Process Saint Michaels Transmit electronic orders 100084547 Measure/Track/Analyze Sales JAOE Pay our Sales Force CA2053 Demand planning/forecasting 50003000431 Recalls Etc.
  15. 15. 00000000303 3 Different 2104372 120080 00000000952 2104379 BL2710312 Numbers 2108919 046026900075 004000 004000-200 Identifying customers 046028103030 10002503 50003000305 50003000306 134278003 10002504 50003000308 374633036 10002506 4 Different 475307001 20005659 50003000309 50003000312 Numbers 515097002 20005660 50003000313 20005662 CA2053 50003000314 20005664 1000014082 50003000315 20005666 1000014769 50003000316 08900A 20005669 1000042141 50003000330 20005670 1000118699 16 Different 50003000366 20005671 Numbers 21010126 50003000406 50003000422 50003000426 50003000431 4 Numbers 50003000432 JGGG 08501882 50003000433 JAOE 08511881 50003000440 50003000442 50003000453 2 Different 50003000456 2 Different Numbers 50003000468 Numbers 50003000472 50003000473 50003000476 93 Different 50003000477 Numbers 50003000480 50003000482…. 93 Total
  16. 16. GLN’s are widely used today in other industries. Healthcare is 23 industries not achieving the benefits of the in US. GLN. Food and Beverage Furniture Automotive Computer Hardware 286,000 Companies already Lawn & Garden Publishing participate. Pharmaceuticals Apparel Chemicals Baby Products Grocery OTC Utilities MRO: Material, Repair, Operations 98 Like a Social Security Number.. countries.
  17. 17. The Healthcare Supply Chain 0123456789012 M Membership Alignment One Hospital M Delivery Point Eligibility & Pricing or Supplier Acquisition GLN or Supplier Registry Rebate 1 Name Processing 1 Address 0123456789012 1 Class of Trade 1 Organizational Hierarchy Reporting or Supplier With GLN as the Customer Identification Standard.
  18. 18. GLN Benefits for Hospitals. Benefit 1: Labor savings. Fewer numbers. Benefit 2: Exact definition of each location. Enables price/contract eligibility accuracy. Benefit 3: Faster access to GPO pricing. A common definition of each location. Benefit 4: More complete & accurate supplier reporting. No confusion about who is/is not a member
  19. 19. International Product Classification (UNSPSC) United Nations Standard Products and Services Code The Problem: Product Classification Providers must manage ever-increasing costs of materials with limited resources. There are no standard product names. There was no industry standard product classification
  20. 20. Product Classification / Taxonomy. The United Nations Standard Products and Services Code (UNSPSC™) is a global reference taxonomy for the efficient and accurate classification of products and services. UNSPSC is a Four Level Hierarchical Classification o Logical aggregation of families for analytical purposes Segment o 54 segments in current code set o Commonly recognized group of interrelated commodity categories Family o 340 Families in current code set o Group of Commodities Sharing a Common Use or Function Class o 1716 Classes in Current Code Set o Group of Substitutable Products or Services Commodity o 12473 Commodities in Current Code Set
  21. 21. Product Classification / Taxonomy. Segments Applicable to Healthcare Providers 41 – Laboratory and Measuring and Observing and Testing Equipment 42 – Medical Equipment and Accessories and Supplies 43 – Communications and Computer Equipment 44 – Office Equipment and Supplies 47 – Cleaning Equipment and Supplies 50 – Food and Beverage and Tobacco Products The Benefits of Using the UNSPSC: Spend analysis requires structured data Quickly query P.O. history by UNSPSC code Support objective product standardization Reduce off contract spend Increase contract compliance Prepare for vendor negotiations Identify trends, be proactive, act strategically
  22. 22. UPN & Product Data Synchronization
  23. 23. Why are Standards Needed? Standards are required in order to achieve supply chain e-COLLABORATION 7. Collaborative insight & product development 6. Collaborative sales & promotion planning 5. Collaborative supply chain management 4. Collaborative transaction management Benefits 3. Item synchronization 2. Single item registry 1. Common data standards Time / Degree of trust & complexity Source: A. T. Kearney for GMA -FMI
  24. 24. Universal Product Number (UPN) & Data Synchronization DoD Manufacturer Names for Kendall Mfg Name # Mfg Items KENDAL HEALTHCARE PRODUCTS 1 KENDAL LTP 1 KENDALL 1 KENDALL COMPANY 2 KENDALL COMPANY LP 3340 KENDALL HEALTHCARE 172 KENDALL HEALTHCARE CO 43 KENDALL HEALTHCARE COMPANY 4 KENDALL HEALTHCARE PROD CO 38 KENDALL HEALTHCARE PRODUCRS 1 KENDALL HEALTHCARE PRODUCT CO 2 KENDALL HEALTHCARE PRODUCTS 222 KENDALL LTP 1 THE KENDALL CO. LP 1 THE KENDALL COMPANY LP 2502 TYCO HEALTHCARE – KENDALL 7
  25. 25. Universal Product Number (UPN) & Data Synchronization Industry Distributor Numbers for 3M Product #8630 Nearly every hospital has a Allegiance - M8630 different Product ID for 3M Owens & Minor - 4509008630 8630! BBMC-Colonial - 045098630 BBMC-Durr - 081048 Kreisers - MINN8630 10% of Packaging Data Midwest - TM-8630 Provided to DOD Pacific - 3/M8630 by Manufacturers are Wrong UnitedUMS - 001880 or Incomplete! Industry Unit of Measure Errors DOD Prime Vendor 1 Prime Vendor 2 Case Case Case Case Case Case Mfr Part # SUP UOM SUP UOM SUP UOM Qty Qty Qty 3M 1222-1N 18 CA 1080 CA 18 CA 3M 512 100 CA 2000 CA 2000 CA BD 305903 500 CA 400 CA 400 CA
  26. 26. Universal Product Number (UPN) & Data Synchronization What is a Product Data Utility? The Product Data Utility (PDU) concept is modeled after common utilities that exist for other types of commodities and services Definition: A Common Utility is a business organization and system that provides an essential commodity or service to a community. Characteristics: o Network With Multiple Connectivity Points o Controls & Standards o Scalable Input & Delivery o Community Governance
  27. 27. Product Data Utility Data Flow Manufacturers Users Aggregators (GPOs, IDNs, etc) Distributors Manufacturers PDU/Repository Users Distributors (GPOs, IDNs, etc) data inputs data outputs NOTE: Aggregators can represent data or trading partner aggregators, including exchanges.
  28. 28. Universal Product Number (UPN) & Data Synchronization Other Industries Procter & Gamble and their customer H.E. Butt o 75% reduction in invoice deductions due to invoice pricing and product delivery discrepancies o 30% improvement in the number of accurate purchase orders received o 80% improvement in "speed to retail" for new items, price changes, and promotions (reduced the average time required to communicate and execute changes from 10 days to 2 days Wal-Mart Data Synch w/Procter and Gamble resulted in: o Reduction in data maintenance time from 15-30 days down to 1 day o 98% up-to-date synchronization o 15% market share (up from 5% in the early weeks of a new item introduction) Electrical industry saved 1.75% of sales through error reduction and improved efficiency. Electrical industry distributors saved .75% of sales annually.
  29. 29. Universal Product Number (UPN) & Data Synchronization – How does Data Synch affect Hospitals? Requests do not match supply chain data Logistics Systems not “classification” oriented o Item descriptions not clinician friendly o Difficult for materiel managers to match requests to most available items o Systems not integrated: Operating Room Management, Physician Order-Entry, etc. Products not available in Customers’ systems Customers can not find desired products & try to buy obsolete products Pricing and Shipping Errors PDU Value to Providers. Reduced product cost through improved contract compliance Identification of non-contract/contract opportunities Increased transaction accuracy for ordering through bill payment Improved accuracy in product sourcing Increase in patient safety due to accuracy of product information Rapid access to information on new, discontinued and recalled products Accurate info. to generate usable barcodes
  30. 30. Current Industry Data Synchronization Pilot Partners  Owens & Minor  BD  Premier  Consorta  Comergent  GHX  SAIC  Coalition for Healthcare eStandards  Health Care eBusiness Collaborative
  31. 31. Comments and Questions 3 0 0 1 2 3 4 5 6 7 8 9 0 6

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