The Time to Review your Supply Change Management Solution is Now

“Never before has the business case for transformation in the healthcare supply chain been so persuasive…While the future is unclear, most agree that at least some things are certain. Healthcare costs must come down. Hospitals and other care providers will be reimbursed on value, not volume. And hospitals will need to survive on Medicare reimbursement levels.” Driving Transformation in the Healthcare Supply Chain: Change Can Be Good for Your Bottom Line, GHX 2012

Today’s health care Supply Chain Management (SCM) challenge require process improvement, rapid development and implementation timelines that will meet evolving governmental mandates and address today’s high-velocity as hospitals are under increasing pressure to keep supply costs down…despite the near constant business change. The Procurement & Material Manager departments must not only be responsive, they must be flexible – it’s about having the ability to allow your hospital to respond rapidly to changing business landscapes (merger & acquisitions) and physician demands.

As our healthcare industry remains at a crossroads, many are looking to their supply chains to help drive change.  This mean turning supply chains into a “strategic asset,” so the health system can have success controlling costs and increasing business efficiencies. They can do this by evolving into “best practice”, leveraging LEAN methodologies and demanding enabling technologies that allow them to do more with less.

Now, considers the abundance of untapped information you already have available in the hospital, your methodologies for demand forecasting (and consider those developed in other industries, but which can be adapted to healthcare), and the recent growth and maturation of some information technologies that enable an unprecedented level of integration of data from desperate systems.

Where to start: Consider the Strategic Marketplace Initiative and the adoption of the Ten (10) elements that are recommended (and to be measured) to verify the achievement of a Perfect Order:

  1. Electronic Purchase Order
  2. Delivered on Time
  3. Delivered to the Correct Location
  4. Undamaged
  5. Correct Price
  6. Delivered Complete
  7. Electronic Invoice
  8. Electronic Payment
  9. Payment on Time
  10. Payment in Full

If your current SCM solution does not allow for all ten, then now is the time to begin a review for a solution. Because of the benefits that a “strategic” SCM solution can bring, and the long period during which those benefits may manifest themselves, a review of the original SCM implementation is always a good and strategic investment for a hospital.   With increased productivity, reduced operating expenses, improved information flow and enhanced performance management at stake, it about time to get strategic and challenge the system and processes.

Additionally, integration of clinical data into the supply chain equation can revolutionize the management process, enabling us to transform the existing, yet often segregated mix of information into actionable intelligence for our health care decision makers. Unique and customized application of some proven principles of supply chain management from the retail industry, and some recent technological advances, can gain health care supply chain efficiencies that we have been anticipating for years. These efficiencies, in turn, will open the door to numerous corollary benefits such as improved patient safety, more favorable clinical out-comes, revenue enhancement, and an even more healthful work environment for clinicians.

If the hospital is experiencing one or more of the following SCM business conditions, it is time to seriously consider re-evaluating the SCM solution or replacing the current one:

  • Fast and uncontrolled growth: Is your hospital growing at a very fast pace? Your hospital has recently opened multiple operational clinics/offices in multiple locations. There is significant increase in volumes of production, processes, and work force.
  • Lack of sufficient and accurate information on your department’s performance: You are facing problems in capturing exact figures or are receiving mismatched data on your hospital’s performance indicators.
  • Consistent mismatch between inventories: There is a lack of coordination between SIC processing and inventory management in your hospital.
  • Duplication of effort: The Clinical, CDM and Procurement departments store and maintain supplier details separately. There are instances of duplication in the hospital.
  • The right information is not accessible at the right time: You are not able to access accurate data on stock in inventory, PARs, orders in transit and other required information on time.
  • Little or no ability to forecast and plan: The hospital’s strategic and planning division is not equipped to forecast and often relies on conventional methods for future projections.
  • Your current system is becoming obsolete: The existing enterprise system in your hospital is no longer efficiently supporting your day-to-day processes and is negatively impacting the growth.

Now consider the following best practices for supply chain process improvement.


Best Practice


PeopleSoft Capability



Online purchase requisition systems utilizing Web-based supplier
catalogs with pre-populated account and financial information
PeopleSoft is fully Web-enabled from the end-user’s perspective.  This allows data entry and inquiry from web based catalogs via a Web browser. Reduces time and resources spent handling paper; eliminatesredundant work steps and approvals; easier to manage
Self-service requisitioning capabilities PeopleSoft supports self-service through the development and use
of on-line catalogs and the process of creating requisitions on-line.
Allows purchasers to self-procure standard and commodity products
Integrated systems for purchasing, payables, receiving, budgets
and general ledger covering validation, approvals and supplier issue resolution
PeopleSoft is fully integrated with other financial applications
such as Payables, Budgets, Receivables, Asset Management, etc.
Reduces redundant efforts, lowers cost, reduces amount of time and the number of resources handling and processing documents.  Increases data accuracy and integrity.
Commitment tracking capability (Expense Budgeting, Project
Accounting, Fixed Assets, Treasury, etc.,)
PeopleSoft supports Commitment Control throughout its suite of
Financial modules.
Enables better control and cost monitoring; facilitates better and more timely decision-making
Auto-validation of required data fields to reduce errors in processing PeopleSoft uses a default control hierarchy and requisition defaults Reduces the need for resources to calculate and resolve variances; easier reconciliation
Routing and approval verification automated By enabling PeopleSoft workflow the routing and approval process is automated. Controls risk through exception-based reporting; easier to manage
Approved requisitions converted to purchase orders automatically Through the PO Stage process requisitions are loaded and PO line
items are automatically created.
Reduces redundant work steps and lessens cycle time
Either EDI or supplier Web-based intranets used to submit purchase orders PeopleSoft is fully Web-enabled from the end-user’s perspective.  This allows data entry and inquiry via a Web browser Lower transaction costs and greater productivity; multiplication of buying opportunities
Receipts posted real time to customer inventory systems PeopleSoft supports real time inventory updates during the
Receiving Putaway process
Reduces time and resources spent; reduces redundant efforts; lowers processing costs
Bar coding used to record receipts of goods The information from the PO system can be downloaded into a file and loaded into a certified partner bar code scanning device. Reduces redundant work steps and lessens cycle time
Receipts posted online by receiving departments PeopleSoft’s web enabled architecture supports on-line transaction processing Decreases error rates, processing problems, and increases the level of accuracy in data transfer between systems
Receiving data automatically transferred to accounts payable
system for automatic vouchering
Through the designed integration of all PeopleSoft modules, PO receipt information is automatically directed to AP upon completion of the Receiving process and is virtually seamless. Reduces redundant efforts; reduces the amount of time and number of resources handling paper
Purchase Order /Invoice/Bill of Lading discrepancy reports
forwarded to buyer and supplier for resolution
PeopleSoft MarketPay supports this functionality Reduction of time and effort because the issue is handled by those with the needed expertise
Visibility of inventory levels available at Supplier PeopleSoft is fully Web-enabled from the end-user’s perspective.  This allows data entry and inquiry via a Web browser. Decreases error rates, processing problems, and increases the level of accuracy in data transfer between systems
Purchasing suite (module) and accounting module run on the same
underlying database engine
All PeopleSoft modules are fully integrated and designed to run
on a single database.
Reducing in exception handling
Purchasing suite has built in capability to recognize business
events and thresholds and react to them via user-defined business rules
PeopleSoft’s is flexible in the configuration of set-up options,
that enables it to be able to react to various user defined business rules
Minimizes the use and maintenance of off-line manual or spreadsheet-based systems to supplement the purchasing activities

Next Steps

  1. Focus on the ways your SCM solution can optimize your business processes. First you must understand how your hospital operates, and then you can identify the true SCM functionality that can support your various departments’ business processes. It’s important to be open to some change. However, a SCM implementation can alter some business processes, and your hospital will need to adapt its processes to match.
  2. Understand your back office workflows. SCM is vast and impacts your core business workflows in financials, supply chain and inventory, and more. You need to know how your employees perform their jobs every day as well as which business applications should be integrated in the SCM solution to best support them.
  3. Involve clinical staff and business owners supported by IT and the departments impacted by SCM in the process improvement/business objective (KPIs). The employees, who will be using the new and improved SCM solution day-to-day, such as unit clerks and departments with high expense spend.  They all should have some responsibilities in the new SCM solution. They know best what functions they need a system to deliver to help them make better decisions more quickly.
  4. Don’t expect the new solution to go live overnight. Most SCM deployments take several months or even a year to be fully implemented. SCM solution modules should be installed in phases, a set of models at a time, and they must be thoroughly tested. Employees need training, which can further slow down the process. But your implementation is more likely to be successful if you take the time to test and train.
  5. Dedicate members of your IT staff to your SCM implementation. Even if you’re working with a vendor to install a SCM solution, you should have some employees focused only on the implementation. This project team should include employees from IT plus from the functional areas that will use the new solution, who will return to their usual jobs when the implementation is complete.
  6. Limit customization of the SCM solution. Many core SCM functions are rooted in “best practice”, and enough solutions exist to find one that will generally align with your health system’s business processes and business objectives. Some customization is usually necessary, but the less you need to customize the solution, the easier it will be to maintain and upgrade, particularly if your current IT staff changes roles or leaves.
  7. Budget for training. Most software is so user-friendly that most people can boot up and go — that’s not today’s SCM. Leave room in your budget for extensive training for everyone who will use the new system. This includes how-to classes and detailed instructions for each
    function in the system.
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