This document summarizes a supply chain distribution and logistics improvement project at Northwestern Memorial Hospital. Key goals of the project were to centralize inventory management, automate replenishment, and reduce waste to optimize costs and inventory levels while ensuring product availability. The project included implementing an "implant store", barcode and RFID technology, and standardized processes. As results, expired inventory was reduced by over $200k, charge capture increased by over $3M, inventory value decreased by over $2M while turns increased by over 1, and clinical time spent on inventory fell from 46% to 1%.

1. Supply Chain Distribution & Logistics
Improvement Project
Northwestern Memorial Hospital Profile
• Licensed Beds: 868
• Annual Admissions:
• IP: 47,739
• ED: 80,696
• Annual Surgical Cases:
• IP: 13,275
• OP: 19,628
• Operating Rooms: 52
• Operating Room Inventory:
• Owned: $14.1M
• Consigned: $9.5M
• MMIS System: PeopleSoft
• ORIS System: Cerner

2. Supply Chain Distribution & Logistics
Overview of Complete Supply Chain Strategic Redesign
Supply Chain Portfolio
Exec Sponsors: Gary Fennessy, Nick Rave & Eric Conley
Strategic Contracting Distribution & Transaction
Product Utilization
Sourcing Management Logistics Management
(Nancy Hensley) (Jennifer McPherren) (Karen Anderson) (Nancy Hensley)
(Brian Stepien)
David Wente Colleen Schmiege Eric Hartlauf Arshia Wajid Michael Manalo
Goals
Ensure that Ensure contract Centralize Optimize the cost Leverage existing
investments in new compliance controls, give of medical purchasing system
products are safe associated with back nursing time supplies and drugs that drive optimal
and effective with price, terms, condi and improve cash by standardizing workflow in the
defined measures tions, and NMH flow by optimizing utilization, reducin supply chain.
for improved patient policy. par g variability, and
outcomes. (Medical levels, reducing increasing end
Device Committee) the risk of expired user awareness.
product and
automating
Focus for IDN Summit
replenishment .
Innovation Award

3. Supply Chain Distribution & Logistics
Problem Statement
Historically there was no centralized, standardized Inventory Management process in
Surgical Services. This resulted in excess inventory, waste, inefficiency and manual
replenishment practices and the potential for patient safety risks.
Key Issues/Concerns:
• Clinical Time Spent Managing Supplies
• Overall Awareness/Importance of Inventory Management
• Inaccurate & Surplus Inventory
• No Standardized Ordering Processes
• Decentralized Consignment Management
• Charge Capture Loss
• Manual Processes
• Waste (Expiration & Product Obsolescence)
• Product Availability Issues

4. Supply Chain Distribution & Logistics
Goal Statement
Develop a series of controls to optimize inventory levels, automate
replenishment, increase charge capture, and minimize waste and ensure product
availability to improve patient safety.
Key Deliverables:
• Create “Implant Store”
• Give Time Back to Nurses
• Establish Standardized Ordering Controls
• Reconcile Inventory
• Increase Inventory Turns
• Increase Charge Capture
• Decrease Waste (Product Expiration)
• Centralize Consignment Management
• Automate Replenishment

5. Supply Chain Distribution & Logistics
Collaborative Project & Initiatives
Workflow Redesign
and Technology
Integration Diagnostic
Imaging/ Supply
Professional Management
Services Transition
Development of
Internal Inventory
Turn Metrics/Goals
Surgical Charge Capture
Finance
Services
Reconciliation
Objective: Process
Decrease Cost
Implementation Minimize Waste
Streamline Slow Move/No
of Expired
Process Move Inventory
Product Reviews
Reduction
Maintain Quality
Patient Care
Supply
Physicians
Item Master Chain
Cleanse Initiative
Central
Special Requests Sterile
Elimination Instrument Tray
Controls Standardization
Initiative

6. Supply Chain Distribution & Logistics
Project Timeline
Phase I Phase II Phase III
Process Redesign Automation Expansion
• Centralized Surgical • Implemented • Reallocation of
Services Inventory Interim Barcode Resources to
Management Technology Centralize Remaining
Departments
• Created “Implant • Implementing RFID
Store” Technology to • Expansion of RFID
Automate Inventory Technology
• Inter-disciplinary Management
Collaboration to • Integration to
Develop Standardized Automate
Controls Replenishment &
(Consignment, Valuation Demand Planning
, Expiration, Charge
Capture)

7. Supply Chain Distribution & Logistics
Hard Dollar Results
Surgery Expired Inventory Surgery Charge Capture Increase
$3,315,259
$700,000 $665,040 $3,500,000
$650,000
$600,000 $3,000,000
$550,000 $2,500,000
$482,484
$500,000
$450,000 $2,000,000
$397,247
$400,000
$1,500,000
$350,000
$300,000 $1,000,000
$250,000
$200,000 $500,000
FY09 FY10 FY11 FY10Q1 FY10Q2 FY10Q3 FY10Q4 FY11Q1 FY11Q2 FY11Q3 FY11Q4
Surgery Inventory Value Surgery Inventory Turns
$19,000,000 6
$18,176,703
$18,000,000 5.5 5.5
6
5.2 5.2
$17,000,000
5 4.8
$16,000,000
$15,000,000 5 4.3
4.2 4.2
$14,072,301 4.1
$14,000,000 4
$13,000,000
4
$12,000,000
3
FY09 FY10Q1 FY10Q2 FY10Q3 FY10Q4 FY11Q1 FY11Q2 FY11Q3 FY11Q4

8. Supply Chain Distribution & Logistics
Soft Dollar Results
Baseline Current
1%
Patient Care Patient Care
% of Supplies 46% Managed Managed
Managed 54% Supply Chain Supply Chain
Managed Managed
(Nursing Time Spent on
Inventory Management)
99%
Other Key Improvements
• Streamlined Clinical Documentation
• Improved Accuracy of Clinical Documentation
• Improved Supply Availability for Patient Care
• Complete, Real Time Visibility to Available Inventory

9. Supply Chain Distribution & Logistics
Bringing Outside RFID Technology to Healthcare

10. Supply Chain Distribution & Logistics
Next Steps
Short Term (3-6 Months)
• Centralize and Implement RFID in the following Departments
• Cardiac Cath Lab
• Interventional Radiology
• EP Lab
• GI Lab
Long Term (6-18 Months)
• Develop Automated RFID Patient Billing/Documentation Tool
• Integrate RFID Technology for Instrument Tray Tracking
• Explore Opportunities in Pharmacy & Clinical Laboratories
• Develop Online Physician Request Portal