Improving pharmaceutical supply chain performance: Pilot programme

Improving pharmaceutical supply

chain performance: Pilot programme

National Seminar - 6 December 2005

Frank Hill, Head of Supply Chain Services

Contents

• Background

• Objectives and methodology

• Key milestones and outputs

• Impacts/benefits - stakeholders

• Performance management

• Sharing good practice

• Communications roll-out

Background

– why a major project

• Pharmaceutical supply chain last independently reviewed on national basis in 1986

• Supply chain generally given lower priority against other developments in hospital pharmacy

• Anecdotal evidence of poor/variable supply chain performance • Increasing concern from pharmacists about service levels

• No consistent measures in place against which to test this out And yet:

• Supply chain integrated with medicines management and clinical processes

• Needs to be fit for purpose to ensure patients get the right medicines at the right time

Objectives

• To achieve and sustain improved performance in the

pharmaceutical supply chain

- systems and processes - policy and practice

- relationships

Potential benefits

• Improved patient care

• Reduced supply chain activity and costs • Reduced errors and problem resolution

• Increased transactional efficiency and accuracy • Improved supply chain visibility

• Reduced inventory investment

• Improved supply chain partnerships

Pharmacy Supply Chain Best Practice

Implementation Pilot Project Organisation

Heartlands Pharmacy Project Team Performance Measurement & Supplier Relations Procurement to Pay Inventory Management & Logistics Process Automation Heart of England Pilot Project Board Regional Procurement Specialists Pharmacy System Expert Users Wholesaler Lead Contacts Programme Board Bournemouth Pharmacy Project Team Performance Measurement & Supplier Relations Procurement to Pay Inventory Management & Logistics Process Automation Bournemouth Pilot Project Board South Tyneside Pharmacy Project Team Performance Measurement & Supplier Relations Procurement to Pay Inventory Management & Logistics Process Automation South Tyneside Pilot Project Board

Phase 1 programme activity

Planning

Analysis

Best practice testing

Implementation Plan Gather data Analyse Performance Management Map P2P Processes Analyse inventory management Identify automated processes Identify best practice

opportunities Performance Management Inventory management P2P Processes Automated processes Report findings Produce implementation plan

8

Phase 2 programme activity

Planning

Implementation

Benefits tracking

Case study Handover

Start Gateway 4 Gateway 5 Gateway 6 _{Sign off}

Performance management P2P processes Inventory management Automated

processes Final report

/case study Transition to

Pharmacy project team

Analysis of findings

Procurement to Pay processes

• Lack of clearly identified and documented supply chain processes

• Order process/transmissions not always standardised • Poor understanding of supply chain process costs/drivers • Need for improved waste/returns monitoring

• Current wholesaler service offering could lead to inefficient internal replenishment practices

• Invoice management process sometimes inefficient with invoice queries being passed and invoice reconciliation a manual process.

Analysis of findings

Inventory management and logistics

• Opportunities identified to improve logistics flows and storage layout in Pharmacy store/dispensary.

• No formal stock classification and inventory policy for the majority of products which made inventory management a challenging task.

• Varying levels of stock across departments and product categories were often difficult to understand.

• Significant variations in inventory level across the pharmacy supply chain

Analysis of findings

Performance management and supplier relationships

• Relationships with main wholesalers varied across the pilots • No systematic performance management process in place • Performance management managed by exception

• Main performance data provided by wholesalers in differing formats

Analysis of findings

Process automation

• Varying levels of process automation existed across the pilot sites

• The use of e-commerce within the replenishment process could be extended

• In a number of cases process improvement was constrained by lack of systems functionality

• Process activities related to robotics were centred on the dispensing elements with in-bound replenishment being a secondary consideration.

Recommendations

• The development of core procurement to pay processes and identification of costs and cost drivers

• Optimise use of e-commerce within the overall procurement to pay process

• Development of an inventory classification/stocking policy to manage inventory and replenishment frequency

• Review of existing inventory stocking points and

effectiveness of current materials management processes • Review of existing logistics flows and storage layouts to

Recommendations

• Establish waste and pharmacy returns monitoring process to understand drivers and reduce activity

• Using the KPI outputs from previous studies partner with wholesalers to develop a set of standardised performance metrics and performance review process

• Identify requirements for core pharmacy systems

functionality enhancements and escalate these where necessary through the national programme board

• Develop an Output Based Specification (OBS) for a new pharmacy system (South Tyneside).

Implementation

Each pilot established an implementation plan based around a number of the recommendations dependant on local

requirements

In certain cases a pilot would lead on a particular topic for example:

• Bournemouth: inventory classification and policy • Heart of England: performance management

What has been have achieved?

• Short-term benefits for pilot trusts

• Prospect of longer-term benefits as action plans are progressively implemented

• Closer working relationship between trusts and main wholesalers and better mutual understanding of each others’ business processes

• A raised profile for the pharmaceutical supply chain amongst a wide range of stakeholders

Supply Chain best practice outputs

• Process improvement end to end supply chain • Process automation/standardisation

• Stock classification/inventory management • Catalogue management

• Systems specification/ functionality • Required systems enhancements

• Waste management returns monitoring

• Performance management KPI’s/SLA’s in conjunction with Wholesalers

Benefits

• Improved patient care by having the right product in the

right quality at the right time -

average order

completion time reduced from 19 days to 5 days at

Heart of England

• Measure and manage performance within the supply

chain through improved performance

management/partnerships -

KPIs and Service

principles developed at Heart of England in

partnership with AAH and Unichem

• Efficient management of the invoice process between

pharmacy and finance teams

- invoice process clarified

with opportunity for prompt payment discounts at

Benefits

• Improved order/invoice accuracy through increased use of e-commerce - increase in e-commerce trading partners at South Tyneside from 5 to 39 representing 90 % of suppliers capable of trading electronically

• Potential procurement saving through improved decision making and inventory reductions – pharmacy supply chain-sustainable inventory reduction of £351K at Heart of

England

• Implementation of more efficient delivery arrangements -pharmacy store inventory reduction of 6% at Bournemouth

Benefits

• Reduced waste and returns through the pharmacy supply chain - savings potential of £48K together with a 5%

reduction in rework at Heart of England

• Identification of essential system functionality change – key requirements identified at Bournemouth being addressed nationally with systems suppliers

• Template for new pharmacy systems OBS developed at South Tyneside

Systems functionality

• Work has focused on the two leading suppliers: JAC

and Ascribe

• Barriers to implementation of best practice and KPI’s

identified by the pilot programme (JAC)

• Meetings planned with JAC and Ascribe to discuss

• Understanding of existing systems functionality can

also be poor within pharmacy

• South Tyneside has developed an output based

specification for a new pharmacy system

Systems functionality enhancements

JAC examples:

• Auto upload of prices

• Forward cover by product • Invoice matching

• Average time to fulfil order • Outer requirement flag

Impacts and benefits - stakeholders

• Materials management review at

ward level

• Shift non pharmacy products out

of pharmacy

• Improved management of invoice

process

• Improved business processes

• Reduction in manual orders

processing, increased use of e-commerce

• Development of agreed set of

KPIs and SLA’s framework

• Inventory reduction, smoother

demand and less emergencies

• Focus on core products and

supplier relationships

• Invoice efficiency-less invoice

queries

• More efficient/intelligent supply

chain trust partnerships

• Improved order efficiency-lower

delivery discrepancy rates

• Supply Chain partnership with

Impacts and benefits - stakeholders

• Inventory management classification/policy

• Direct deliveries • Bulk deliveries

• Reduction on order frequency and emergency orders

(more lines per order)

• Cost and inventory reductions • Potential impacts on delivery

routes-increased efficiency/accuracy

• Changes to delivery profile (fewer deliveries)

Accuracy through Ecommerce

Level of Ecommerce Ordering vs Order Errors

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00% p r-0 4 M a y J u n J u l A u g S e p O c t N o v D e c a n -0 5 Fe b M a r A p r M a y J u n J u l A u g S e p % of E c om m e rc e O rde r E nt ry 0 10 20 30 40 50 60 70 N o of O rde r E rr ors

Performance management

Our KPI journey

Proposed best practice KPI’s Diagnostic measures proposed KPI agreement Purpose of the measures Pharmacy Dept performance drivers Meaningful display of KPI’s Unichem. measurement Data set Heartlands Pharmacy measurement Data set Pilot review Taking action 3 month pilot

Performance management

• KPI’s

– Line Fulfilment

• The order line delivered in full on the next day delivery inside the hour allocated window to the correct location

– Order Fulfilment

• The order completely fulfilled on the next delivery inside the 1 hour allocated window to the correct location

Performance

management-a pmanagement-artnership

OTIF Accurate/timely order information Order Generation routine Order Type 1, Bulk - low value/ High Volume 2, Routine Stock replen 3, Urgent E-commerce Accurate and Upto Date Product Description/ Codification Timely Catalogue/ Contracts Updates

Low Cost Order processing

method

Order Aggregation

OTIF (On Time In Full) - Inputs & Impacts

Improved order aggregation through centralised purchases Opportunity for eInvoicing Supplier/Trust Strategic Partnership Transparency

of Demand Stock Availability

Long Term demand planning Work routines planned to accommate timely orders

Performance

management-a pmanagement-artnership

OTIF Increased Service Level at lower cost -Supplier/ Pharmacy Decrease in fragmented delivery Fewer Receipts Fewer invoices Reduced lines received incorrectly Reduced Rework (i.e. Invoice Queries) Reduced qty's received incorrectly Increased availability of Rx prescriptions within time req'd

Reduced patients waiting/calling back (to follows) Reduced number

of deliveries to wrong site

Reduced number of Ktrans

OTIF (On Time In Full) -Outputs & Benefits

Fewer Totes Release of bed Improved patient experience Avoids redispensing/non collections Prompt invoice payment Fewer line returns Fewer w/saler pick errors Increased Service at lower Cost - Pharmacy/ End User Supplier/Trust Strategic Partnership

Performance

management-a pmanagement-artnership

% of lines fulfilled in 1st delivery vs % of e-commerce orders

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

Jan Feb Lines Fulfilled in 1st DeliveryMar April May June July Manufacturer FailingsAug Sep Oct Nov Dec Orders placed using Ecommerce route Orders fulfilled in first delivery

31

Line fulfilment – monthly

% of Lines Fulfilled in 1st Delivery vs % of e-commerce orders

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Jan Feb Mar April May June July Aug Sep Oct Nov Dec

Base Line Service Level - Total Failings %

Total Failings % exc of Manufacturers Failings

Manufacturers Failings

Orders placed using Ecommerce route

Performance level – traditionally reported by wholesaler

Manufacturer cannot

supply (% failing) Performance level _{leaving RDC}

True performance level.

Performance

management-a pmanagement-artnership

Average Time to complete invoice vs Average Time to Fulfill Order 0 5 10 15 20 25 30 35 40 45 50

Jan Feb Mar April May June July Aug Sep Oct Nov Dec Average time to match invoice Average time to pay invoice Average time to deliver complete order

Pharmacy supply chain tool kit

• Best practice pilots-final reports • Best practice case studies

• Critical success factors • Tools and templates • Exemplar site access •

Pharmacy supply chain tool kit

• Performance management - KPIs

- Template SLA

- Standard reason codes - Performance driver maps

• Implementation

- Implementation matrix

• Systems functionality

Pharmacy supply chain tool kit

• Process analysis and diagnostics

-

Supply Chain Assessment tool

- Audit tool (supply chain section)

- Process maps from each pilot

- Prioritisation matrices

• Inventory management

- Inventory categorisation

- Inventory policy

Communications and stakeholder

engagement

Stakeholders include:

• NHS pharmacy community (and NPSG)

• NHS supply and finance communities

• All wholesalers serving hospital market

• Manufacturers

• Trade associations

• Systems suppliers

Communications and stakeholder

engagement

Wide range of mechanisms being used:

• Targeted letters and emails and PASA’ s Procurement

Bulletin

• PS magazine and NHS Supply Chain Forum News

• PASA and NHS Logistics websites

• Professional journals eg Hospital Pharmacist

• Face-to-face meetings

• High profile seminars/events

• Pharmacy tool kit CD

Communications and stakeholder

engagement

Events:

• Presentation to NPSG - 14 September

• Final pilot briefing - 27 September

• Engagement of wider wholesaler community BAPW

-12 October

• Presentation at PDIG - 3 November

• National NHS Seminar - 6 December

Pharmaceutical supply chain pilot