improving pharmaceutical supply chain performance: pilot...

Improving pharmaceutical supply

chain performance: Pilot programme

National Seminar - 6 December 2005

Frank Hill, Head of Supply Chain Services NHS Logistics

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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’

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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

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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

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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

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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

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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.

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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

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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

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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.

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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

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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).

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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

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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

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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

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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

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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

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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

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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

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Systems functionality enhancements

JAC examples:

• Auto upload of prices

• Forward cover by product

• Invoice matching

• Average time to fulfil order

• Outer requirement flag

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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

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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)

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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 %

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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

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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

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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

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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


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

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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


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

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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

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• Performance management

- KPIs

- Template SLA

- Standard reason codes

- Performance driver maps

• Implementation

- Implementation matrix

• Systems functionality

- Specimen systems specification

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• 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

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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

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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

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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

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Pharmaceutical supply chain pilot

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improving pharmaceutical supply chain performance: pilot...

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