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Improving pharmaceutical supply
chain performance: Pilot programme
National Seminar - 6 December 2005
Frank Hill, Head of Supply Chain Services NHS Logistics
2
Contents
• Background
• Objectives and methodology
• Key milestones and outputs
• Impacts/benefits - stakeholders
• Performance management
• Sharing good practice
• Communications roll-out
3
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
4
Objectives
• To achieve and sustain improved performance in the
pharmaceutical supply chain
- systems and processes
- policy and practice
- relationships
‘Right first time, every time’
5
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
• Manage performance within supply chain
6
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
7
Phase 1 programme activity
Planning
Analysis
Best practice testing
Implementation Plan
January 05 February 05 March 05 April 05 May 05
Gateway 1 Gateway 2 Gateway 3Project start
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
May 05 June 05 July 05 August 05 September 05
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
9
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.
10
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
• Lack of supply chain visibility up and down stream
11
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
12
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.
13
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
improve efficiency
14
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).
15
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
• South Tyneside: development of a pharmacy system OBS
16
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
• Shared learning across all areas/organisations
17
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
• Exemplar sites – profile/maturity
18
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 Heart of England and South Tyneside
19
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
20
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
21
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
22
Systems functionality enhancements
JAC examples:
• Auto upload of prices
• Forward cover by product
• Invoice matching
• Average time to fulfil order
• Outer requirement flag
23
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
common measures/standards
24
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)
25
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%
Apr-
04
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan-0
5
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
% o
f E
co
mm
erc
e O
rder
En
try
0
10
20
30
40
50
60
70
No
of
Ord
er
Err
ors
OrderErrors Ecommerce order entry %
26
Performance management
Our KPI journey
Proposed best
practice KPI’s
Diagnostic
measures
proposedKPI agreement
Purpose of the
measures
Pharmacy Dept
performance
drivers
Meaningful
display of KPI’s
Unichem.
measurementData set
AAH
measurement
Heartlands
Pharmacy
measurementData set
Pilot review
Taking action
3 month pilot
27
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
28
Performance management-
a partnership
OTIFAccurate/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 DemandStock Availability
Long Term
demand
planning
Work routines
planned to
accommate
timely orders
29
Performance management-
a partnership
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
Less emergency
& safety stock
stock
Fewer emergency
orders
OTIF (On Time In Full) -Outputs & Benefits
Fewer Totes
Less inventory
held by trust
Release of capital
Release of bed
Improved patient
experience
Avoids
redispensing/non
collections
Prompt
invoice
payment
Fewer line
returns
Fewer
w/saler
pick
errors
Fewer
Complaints
Increased
Service at lower
Cost - Pharmacy/
End User
Supplier/Trust
Strategic
Partnership
30
Performance management-
a partnership
% 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 DecLines Fulfilled in 1st Delivery Manufacturer Failings
Orders placed using Ecommerce route Orders fulfilled in first delivery
Target Service Level - Line Fulfilment
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
Orders fulfilled in first delivery Target Service Level - Line Fulfilment
Performance level –
traditionally reported
by wholesaler
Manufacturer cannot
supply (% failing)Performance level
leaving RDC
True performance level.
OTIFTrust receipt ratification
32
Performance management-
a partnership
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
33
Pharmacy supply chain tool kit
• Best practice pilots-final reports
• Best practice case studies
• Critical success factors
• Tools and templates
• Exemplar site access
• Web site http://www.pasa.nhs.uk/pharma/pharma_supplychain.stm
34
Pharmacy supply chain tool kit
• Performance management
- KPIs
- Template SLA
- Standard reason codes
- Performance driver maps
• Implementation
- Implementation matrix
• Systems functionality
- Specimen systems specification
35
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
36
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
37
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
38
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
39
Pharmaceutical supply chain pilot
Questions?