Six Sigma through the Supply Chain

Overview

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Supply Chain Overview

Retail PharmacyWholesaler

Supplier

Manufacturer National Chain Pharmacy

Acute Care Facility

Six Sigma Quality

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McKesson Progress

Since 2003 McKesson has completed 822 projects, and has 205 projects currently active.

•14 Supplier Projects•132 McKesson Focused Projects•59 Direct Customer Impact Projects

By Project Type

•380 DMAIC•494 Baseline•153 Translation

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Overview

• Suppliers• Wholesaler• Customers

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Supplier Projects

•Lead Time Delivery

•Quality of Delivery

•Aging on Products

•Communications

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Sample Project – Quality of Delivery

Opportunity– Quantity Debits Occurrences = 973 / $972,369– AddBacks PODs = 263 / $125,592– AddBacks Free Astrays = 552 / $822,855

Key Findings– Supplier X ranks #1 in quantity debit occurrences and dollars– In-transit times can exceed 12 days, creating a free-astray situation– Issues with damage due to packaging methods

Targeted Improvements– Reduction of Supplier X Quantity Debit creations

Targeted Benefits– Reduction of: In-transit damage and reduced transit times to reflect

contract payment terms of 1% net 15 days for Supplier X

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Nashville DC #020

Key Findings

– Three skids were over packed and leaning, packed skid was over 90 inches tall

– Bottom boxes were skin prep trays (00179) of approx 5 pound each

– Top boxes were scrub care prep (4465B) approx 25 pounds each.

– McKesson PO#s 419235, 437633, 446970

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Nashville DC #020

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Nashville DC #020

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Improvements

Improvements Efforts

– Working with Supplier X to address packaging and pallet build considerations making for more accurate and efficient receiving.

– Brainstorming session with joint McKesson and Supplier X participation.

– Created List of Improvement Ideas• Supplier to look at palleting process• Data shows larger single orders having statistically significant impact on

defect, McKesson to order smaller quantities more frequently.• McKesson discussing change in policy

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Overview

• Suppliers• Wholesaler• Customers

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Wholesaler Projects

•Efficiency of Resources

•Order Quality

•Financial Impact

•Communications

•Productivity

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Sample Project – Order Quality

In order to increase sales, reduce inventory write-offs this project will improve the order filling at the Slidell Distribution Center. Currently the DC's Quality Index is approximately .10%. A goal of this project is to reduce the Quality Index to .05%. In addition this project will focus on reducing the defects seen by the Customers.

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Baseline Performance

Defect Breakdown by Rx and OTCCTQ D U OP DPM O Low er UpperRx

Rx Shorts 54 27932 1 4933 1453 2522Rx Overages 41 27932 1 1468 1054 1991

Rx Wrong Items 23 27932 1 823 522 1235

OTCOTC Shorts 60 12535 1 4787 3655 6157

OTC Overages 53 12535 1 4228 3169 5527OTC Wrong Items 18 12535 1 1436 851 2269

Wrong Item X's being trackedWrong Item s D U OP DPM O Low er Upper

Label Slid 22 41 1 536585 374248 693441Same shelf 29 41 1 707317 544626 838701Wrong Bay 3 41 1 73171 15351 199246

Location Overf ill 4 41 1 97561 27228 231315Wrong Product 10 41 1 243902 123633 403046

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Improvement Ideas

• Training • Picking clips • Shelf dividers • Location tags• Requiring amount to be entered for Rx and OTC• Stocking Procedures-

– a. Some locations have too much product on the shelf, these should be moved to a larger shelf location or be put in a backup location if available.

– b. Plastic not being cut also is showing some impact on the number of shorts and overages.

• RF units have scratches on the display glass.

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Improvements

Total Defects CTQ D U OP DPMO Lower Upper

Overage 94 40467 1 2,323 1,878 2,842Short 114 40467 1 2,817 2,324 3,383

Wrong Item 41 40467 1 1,013 727 1,374

Total Defects CTQ D U OP DPMO Lower Upper

Overage 324 230984 1 1,403 1,254 1,564Short 424 230984 1 1,836 1,665 2,019

Wrong Item 147 230984 1 636 538 748

Old

New

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Overview

• Suppliers• Wholesaler• Customers

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Customer Projects

•Internal Quality

•Financial Impact

•Customer Satisfaction

•Inventory Control

•Regulatory Compliance

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Sample Project – Hospital X

•Assist in implementing Six Sigma•Structure•Project Selection•Mentoring/Testing

•Provide Training•Greenbelt•Blackbelt•Executive

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Project Funnel (High Level)

Hospital X Project FunnelProject Area 10 7 7 4 7 2 1 10 10 RANKPro 7 Scope 9 9 9 1 9 9 3 1 9 404Patient Sat 3 3 3 3 9 9 3 1 9 268Supply Chain 3 9 9 1 3 1 1 1 9 284outpatient growth 3 9 9 3 3 1 1 3 9 312Improve admissions to Hartwycks 1 1 1 9 1 1 1 3 9 190Pharm Robot ROI 3 1 3 1 1 1 1 3 9 192Staff Competency 9 9 3 9 9 1 1 1 9 376talent management 9 3 3 3 9 1 3 3 9 332employee sat 9 3 3 3 9 1 1 3 9 330JCHO Safety Goals 9 3 1 3 9 3 3 1 9 302IHI (save 100,000 lives) 9 3 3 1 3 9 1 3 9 296Length of Stay / Varinace of Care 9 3 1 3 3 1 1 1 9 254Phy. Practice - Discharge 9 3 1 3 3 1 1 1 9 254Clinical documentation program 3 1 9 1 3 1 1 3 9 248ITPMO 3 1 3 1 3 1 1 3 9 206Desc. Spending 3 3 3 1 3 1 1 9 1 200LUR's 3 1 1 1 3 1 1 3 9 192Eval of phsych patients 9 1 1 1 3 1 1 3 3 192Safety Report System 9 1 1 1 3 3 1 1 3 176Charge capture 1 1 3 1 3 1 1 1 9 166Pharmacy - Timeliness 3 1 3 1 1 1 1 3 3 132Rev. cycle 1 1 3 1 3 1 1 1 3 106

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Funnel to Project

• Pro 7 Scope– At Hospital X, the appropriate care measures for eligible patients

diagnosed with Acute Myocardial Infarction (AMI) is not meeting our compliance goal of 100%. We scored 82% in 2004 and 87% for the first half of 2005. As a result we are not reported in the top 10% of NJ hospitals that provide the best care for AMI patients.

• Patient Satisfaction– Patient Satisfaction has been identified as one of three major initiatives for

Hospital X for 2005-2006. During the 2Q 2005, 3W was one of several nursing units with patient satisfaction scores below the mean score for the hospital system. Of the top 10 priority index (importance of aspect of patient visit most important to them), 3W achieved a score of 77.8 in the area of communication of information to patient/familiy regarding condition or treatment (2nd on the top 10). This score was well below what was necessary to reach the 80th percentile

• Supply Chain– Financial viability has been identified as one of three major initiatives for

Hospital X 2005-2006. In FY 2004-2005, a revenue loss was identified in the Emergency Room (ER) which prompted a charge capture project to be initiated. During this project, it was identified that charges for medications being maintained as floor stock or in the Omnicell (automated inventory unit) are not consistently being captured.

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Accomplishments to Date

•One Executive Class Completed

•Project Funnel (High Level) Completed

•Three Blackbelts Trained

•Three Projects Underway (in Analyze/ Improve)

•One Introductory class completed

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Supply Chain Overview

Retail PharmacyWholesaler

Supplier

Manufacturer National Chain Pharmacy

Acute Care Facility

Six Sigma Quality