Mike Hobbs Owens


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  • As you know, Owens & Minor is a healthcare supply chain management company and the nation’s leading distributor of national, name-brand medical/surgical supplies. We serve a diverse array of customers – from large, multifaceted organizations such as yours to healthcare centers in major urban areas and small towns nationwide. Each of our customers has a unique set of needs in process improvement, cost control, inventory management, product standardization and contract compliance, knowledge management and other supply chain issues. Thus, we have developed a breadth and depth of supply chain solutions for improving our customers’ supply chains from end to end. Today, our realm of services includes supplier management, distribution & logistics, benchmarking & analysis, resource management & consulting, and clinical supply management. The extent to which individual customers engage with these services depends on their short-term and strategic supply chain goals and their readiness for change. Those that engage all of our services – our integrated enterprise solutions – extend their opportunity to optimize the flow of product, process and information, as well as operational and financial return, across their entire medical supply chain – both commodity and clinical. A smoothly running supply chain from point of manufacture to delivery to patient bedside translates to clinical satisfaction, and most importantly, patient satisfaction. [DETAIL on Service Categories, if needed] Owens & Minor’s Supplier Management approach involves building strong, collaborative relationships with the nation’s leading suppliers of national name-brand medical-surgical supplies so we can offer the broadest and deepest selection of branded products and deliver exceptional customer service to our mutual healthcare provider customers. In addition to our branded supplier relationships, we also partner with industry-leading manufacturers to offer a private-label line of high quality, competitively priced commodity products to support your product standardization and cost-savings. Owens & Minor’s Distribution & Logistics services provide an integrated approach to acquiring all types of medical products, as well as the expertise, planning and resources to cost-effectively manage the product, workflow and information related to your internal supply chain. These services range from fundamental distribution and warehousing services to full-scale logistics assessments, process improvement, inventory management, in-bound transportation, space utilization and more to promote cost-savings and increased productivity. Owens & Minor’s Benchmarking & Analysis services provide unprecedented supply chain visibility system wide and actionable intelligence through Internet-based solutions, augmented by expert analysis and implementation. Our dedicated business analysts helping you realize the cost-savings and value we identify. We invest in developing industry-leading technology and expertise that place real-time, mission-critical supply chain information and expert analysis at your fingertips to inform your day-to-day and strategic business decisions. Owens & Minor’s Resource Management & Consulting provide experienced people, proven processes and leading-edge technology to improve the flow of product, staff and information within your medical supply chain. Scaleable and tailored to your exact needs, these services help ensure you have the right people and practices in place to advance your supply chain initiatives in the short- and long term. Our expertise extends from full-scale assessment to comprehensive recommendations to hands-on implementation. Owens & Minor’s Clinical Supply Management services apply operational best practices, Internet-based technology and in-depth analysis, and hands-on education for your clinical management staff to streamline your clinical supply chain – from the operating room to your high-dollar, invasive diagnostic and therapeutic clinical specialty suites. Available are options for on-site analytical staff or monitored arrangements. These services encompass the most efficient, cost-effective ways of managing the flow of specialty product, staff and information for increased clinician satisfaction and enhanced patient care.
  • Consignment Expiration/obsolescence Inventory-carrying cost Inefficient order management: Expedited delivery Non-consolidated orders Cost of invoice (phone, fax) Unit of measure issues, short shipments, overage Incorrect par levels in MMIS Rebates/Terms, prompt pay discounts missed
  • Poor sales visibility (avg. reporting delay of 3-6 months) Small order size – avg. 1-2 lines per order High order frequency – avg. 1.5 orders per day per facility High freight charges High front-office cost: order mgmt., invoice processing, etc. Manual order process (phone/fax)
  • By managing clinical supply chain process, installing integrated technology (interface ADT, billing, mmis, hemodynamic), apply resources in the end CSS becomes the enabler for Value Analysis and Sourcing/Contracting by delivering: Clinical utilization data Contract management Spend analytics Revenue enhancement Inventory management Benchmarking Also opens the opportunity to utilize OMS Clinical consulting team on VAT and Contracting.
  • Cleveland and OSU, monitored model Yale, Stanford, TJU, managed model
  • Mike Hobbs Owens

    1. 1. Opportunities in Clinical Supply Chain Innovation Michael Hobbs Vice President Clinical Supply Solution Owens & Minor, Inc. September 10th, 2008
    2. 2. Owens & Minor Today
    3. 3. Agenda <ul><li>Clinical Market – Devices & Implants </li></ul><ul><li>Supply Chain Issues </li></ul><ul><li>Elements of a Solution </li></ul><ul><li>Opportunities for Diversity </li></ul>
    4. 4. Supplies have overtaken labor as the fastest growing line item . Expense Growth Rates 2002-2004 Source: The Advisory Board Company 2005 Total Operating Cost Salary Expense Benefits Expense Supply Expense Supply expense increasing 64% faster than total operating costs
    5. 5. Supply chain management expenditures will reach 45% of total cost 25% Labor Supplies Logistics & Distribution Others Total * Figures based on HFMA estimates. Labor cost includes salaries, wages and benefits based on average of leading hospitals in the U.S. and Others is inclusive of profits to the hospitals Source: S&P Industry Surveys: Healthcare Facilities; HFMA; industry reporting; Pipal Research analysis Supply Chain Management 100% 45% 15% 15% Total Cost Incurred by Hospitals
    6. 6. Medical Supply Industry - US Acute Care US $58B Med-Surg Supplies US $76B Non-Acute US $18B Commodity $20B Devices & Implants $38B
    7. 7. Clinical Supply Chain Issues
    8. 8. The traditional “Supply Highway” is complex and expensive. <ul><li>70% of Total Transactions </li></ul><ul><li>35% of Total Spend </li></ul><ul><li>Purchasing FTEs - 1 </li></ul><ul><li>Receiving FTEs - 1 </li></ul>Suppliers Direct Purchases <ul><li>30% of Total Transactions </li></ul><ul><li>65% of Total Spend </li></ul><ul><li>Purchasing FTEs - 6 </li></ul><ul><li>Receiving FTEs - 3 </li></ul>Organized Totes & Pallets Distributed Purchases 3PL 3PL
    9. 9. Clinical/Direct supply chain is 4 to 5 times less efficient than the distributed supply chain Inventory Turns Cost per PO Nursing Cost per PO Delivery Cost per Line Electronic Order Fulfillment 4 18 $12 $60 $0.70 $3 $2 $9 25% 75% 1x 2x 3x 4x 5x Commodity Device & Implant
    10. 10. What drives this model? <ul><li>Customer intimacy </li></ul><ul><li>High industry gross margins </li></ul>
    11. 11. MD&I suppliers experience certain challenges in servicing this market… <ul><li>Poor sales visibility </li></ul><ul><li>Small order size </li></ul><ul><li>High order frequency </li></ul><ul><li>High freight charges </li></ul><ul><li>High front-office cost </li></ul><ul><li>Manual order process </li></ul>
    12. 12. Suppliers have issues with consignment… % of respondents citing issue as significant or highly significant Source: Archstone Consulting, “Medical Device Supply Chain Council Consignment Survey Results”, January 6, 2006
    13. 13. Medical device manufacturers cash cycle is 4x slower than O&M *Note: Lower numbers are better Source: CFO Magazine 2006 Working Capital Survey
    14. 14. … and, customers experience substantial supply chain costs with MD&I. 1 st Time Order Accuracy Lines/ Order Turns Expiration Target Performance 78.8% 1.5 2.1x 5% GAP EDI% 25% Charge Capture 75%
    15. 15. “ Having RNs and techs manage product databases, manipulate inventories to avoid expiration, cross level stock, analyze physician utilization patterns, etc. is at best a profound distraction from their clinical value .” Thad MacKrell, O&M, as quoted in Healthcare Purchasing News , December 2006
    16. 16. Elements of a Solution
    17. 17. Clinical supply chain components & savings opportunity
    18. 18. <ul><li>Resources (On-site & Off-site Normalize Data, and Analyze Spend Data) </li></ul>What Clinical Departments Need Inventory/Order Supply Mgt. (Visibility, Expiration, and product recalls) Collaboration (Business Reviews) Price Mgt. (Tier Maximization, Digitize Contracts) + + + Clinical Supply Chain Services Managed or Monitored Solutions Revenue/Clinical Utilization Mgt. (100% charge capture) + Equals a 3-4 Return On Investment Not Software
    19. 19. O&M Specialty 3PL Offering <ul><li>Value-added Services </li></ul><ul><li>Transportation Optimization </li></ul><ul><li>ePedigree Compliance / Track and Trace </li></ul><ul><li>Cross Docking / Order Consolidation </li></ul><ul><li>Asset tagging / Custom Packing / Kitting </li></ul><ul><li>Product Recall Management / Reverse Logistics </li></ul><ul><li>ISO Certification </li></ul><ul><li>Management of Global Distribution and Logistics </li></ul><ul><li>Integration to Demand Planning and CRM Systems </li></ul><ul><li>Basic 3PL Services </li></ul><ul><li>Shared Warehousing Management </li></ul><ul><li>Inventory Management </li></ul><ul><li>Transportation Management </li></ul><ul><li>Order to Cash Systems </li></ul><ul><ul><li>Order Management </li></ul></ul><ul><ul><li>Accounts Receivable </li></ul></ul><ul><ul><li>Chargeback Processing </li></ul></ul><ul><ul><li>EDI </li></ul></ul><ul><li>Outsourced Order to Cash Processes </li></ul><ul><li>cGMP Regulatory Compliance </li></ul>Distribution Network Hospital Distributor / Wholesaler Physician Office Patient Specialty Center Or Department Sales Agent
    20. 20. Our solution is working in… <ul><li>Over 100 clinical departments nationwide including: </li></ul><ul><ul><li>The Cleveland Clinic </li></ul></ul><ul><ul><li>Yale New Haven Hospital </li></ul></ul><ul><ul><li>The Ohio State University Medical Center </li></ul></ul><ul><ul><li>Stanford University Hospital </li></ul></ul><ul><ul><li>Thomas Jefferson University Hospital </li></ul></ul>
    21. 21. Services for Clinical Supply Chain <ul><li>Hospitals </li></ul><ul><li>IT Services (RFID, Interfaces etc.) </li></ul><ul><li>Clinical staffing services (RN/RT) </li></ul><ul><li>Educational Services (CME, CEU etc..) </li></ul><ul><li>Clinical Outcomes services (tie supply chain to outcomes, utilization review) </li></ul><ul><li>Supply Spend Analytics </li></ul><ul><li>Contract Management service </li></ul><ul><li>Reimbursement Services (Billing/Coding) </li></ul><ul><li>Direct Bill services </li></ul><ul><li>Recall Management Services </li></ul><ul><li>Supplier Service </li></ul><ul><li>Customer Service </li></ul><ul><li>Direct Bill Services </li></ul><ul><li>Clinical outcomes post market entry </li></ul><ul><li>Research and Development (New Product development) </li></ul><ul><li>Recall Management </li></ul><ul><li>Clinician Educational Services </li></ul>
    22. 22. Thank You!