How Grady Health System has enhanced visibility and efficiency in its supply chain.
By Graham Garrison
August 2024 – The Journal of Healthcare Contracting
Kevin Gordon gained his initial exposure to the processes and technologies used in the healthcare supply chain through organizations like HCA and Ochsner Health. Upon assuming the role of System Vice President of Supply Chain at Atlanta-based Grady Health System, Gordon anticipated having access to familiar daily reports and data sets similar to those from larger health systems he had worked with previously.
However, he discovered that Grady’s data was scattered across multiple systems, inconsistent processes were in place, and there was no centralized dashboard with key performance indicators (KPIs) for assessing the current state.
Recognizing the need for improvement, Gordon assessed the situation and identified outdated technology, opportunities to optimize the operations and inadequate data management processes as the main challenges.
Over the past year and a half, Grady Health System’s supply chain has undergone a transformation, enhancing visibility and efficiency – a critical milestone for both the health system and Atlanta’s healthcare delivery network and safety net.
High-volume trauma center
Located in the heart of Atlanta, Grady is a prominent healthcare institution with several remarkable features, Gordon said. It distinguishes itself through its exceptional trauma care, specialized burn center, stroke expertise, and unwavering dedication to serving the greater Atlanta community.
Grady is the only Level 1 trauma hospital in Atlanta and has one of the highest volumes of patient flow through an ED in the country. “Whether it’s car accidents, construction accidents, gunshots, you name it, the worst of the worst comes to Grady,” Gordon said.
Added to the complexity of its mission is the recent closures of nearby hospitals. Last fall, Wellstar announced the closing of its Atlanta Medical Center (AMC). Although AMC was a Level 2 trauma hospital, Grady still had to absorb much of its patient flow. Prior to the AMC closure, another hospital closer to the airport shut its doors, which put a strain on access to care south of the city.
“Despite those closures, I would say that we at Grady have definitely stood up and responded,” Gordon said.
A proactive approach
Like many healthcare organizations, Grady has encountered significant hurdles in its supply chain management, necessitating a thorough reevaluation to establish a more efficient, resilient, and standardized structure while advancing cost reduction initiatives.
“These obstacles encompassed the imperative of ensuring supplier resilience, optimizing staff and process performance through the adoption of best practices and KPIs, and harnessing the potential of the existing ERP system alongside healthcare-specific data,” Gordon said. By conducting a comprehensive assessment of the supply chain, Grady’s Supply Chain leadership aimed to pinpoint areas requiring improvement and implement effective strategies to address them. Through these endeavors, Grady aimed to identify a partner capable of not only accelerating these initiatives, but also bringing expertise and analytics to bolster the resilience and efficiency of its supply chain operations, fostering better patient care and organizational outcomes.
Several key obstacles involved in improving supply chain efficiencies included:
- Prioritizing clinical involvement.
- Evaluating and implementing leading edge operational methods to minimize redundancy.
- Cultivating a robust supply chain leadership team.
- Aligning personnel with streamlined processes centered on patient care.
- Enhanced data analytics and technological advancements.
Through the adoption of efficient supply chain management protocols and methodologies, Grady effectively pinpointed and eradicated expenses with manual or redundant procedures such as excess inventory and procure-to-pay inefficiencies, Gordon said. This led to significant cost savings and waste reduction systemwide.
Grady partnered with the Berkley Research Group (BRG) for the transformative work. “Adopting their Supply Chain Methodology and analytics has proven instrumental in expediting our organizational plan,” said Gordon.
This partnership has enabled Grady’s supply chain team to swiftly evaluate their organizational structure, processes, teams, and implement optimal practices across Procure-to-Pay (P2P), strategic sourcing/value analysis, inventory management, and operational efficiencies.
“Taking a proactive approach to addressing change management has been key to our success, allowing us to quickly realize tangible benefits for our organization,” Gordon said. “By leveraging BRG’s offerings and expertise, we have provided our team with a platform to pivot swiftly and facilitate staff adoption of optimal practices with agility and efficiency. Through this collaboration, we have streamlined our operations, enhanced our procurement processes, optimized inventory management, and improved overall operational effectiveness. The partnership with BRG has proven to be a strategic advantage, enabling us to accelerate our plans and drive sustainable growth.”
Grady’s Procure-to-Pay process and Two-Bin Kanban approach
Gordon noted two categories in particular where Grady was able to implement cost-saving and time-saving tools – P2P and a Two-Bin Kanban approach.
In the P2P process, match exceptions can significantly disrupt operations and strain resources, particularly when they lead to credit holds and necessitate rework by accounts payable (AP) and purchasing staff. Match exceptions occur when there are discrepancies between purchase orders (POs), receipts, and invoices. These discrepancies may include incorrect quantities, prices, or items ordered, they often trigger credit holds, preventing payment to suppliers until the discrepancies are resolved.
To tackle these challenges, Grady’s Supply Chain and AP worked together with BRG implementing measures, leveraging analytics to assess and refine its approach to preventing match exceptions, and streamlining resolution processes. This involves enhancing data accuracy and visibility throughout the P2P lifecycle, swiftly detecting discrepancies, and addressing root causes in real-time. Fostering collaboration among AP, purchasing, and suppliers has been crucial in promptly resolving issues.
“Through these optimizations, we have significantly reduced rework, strengthened supplier relationships, and ensured the seamless flow of goods and services to support patient care,” Gordon said. “Our efforts have yielded impressive results, slashing outstanding match exceptions by 77% and improving the average invoice age by 33%.”
Additionally, Grady directed attention to enhancing the purchasing front end, aiming to bolster order automation and elevate electronic ordering by an impressive 45%. By concurrently reducing orders outside the item master (57% reduction), they significantly boosted buyer efficiency, improving same-day processing of purchase orders, and enhancing throughput. Additionally, Grady instituted P2P performance KPIs that were powered by BRG’s Supply Chain Analytics, enabling daily monitoring of their productivity (% of orders placed the same day, daily package delivery rate) to ensure optimization and the delivery of top-tier service to the departments they support.
Grady also implemented the Two-Bin Kanban approach in their nursing units. At first, they encountered numerous challenges and inefficiencies that required resolution, Gordon said. By collaborating with BRG supply chain consultants, Grady took a strategic pause to assess operational processes, staff flow/process, inventory flow and identify avenues for optimizing the Periodic Automatic Replacement (PAR) management process in alignment with patient care objectives. This collaboration involved leveraging the expertise of BRG’s supply chain professionals and molding Grady’s methodology, staff training, centralizing orders through LUM (low unit of measure), and performance analytics.
These tools and methodologies furnished Grady with invaluable inventory insights and highlighted areas for improvement that were not readily accessible through Grady’s ERP system, Gordon said.
“The BRG analytics inventory insights afforded us a health index KPI for each PAR location, offering invaluable guidance on necessary adjustments to align our inventory with patient care requirements,” he said. “For example, we were able to reduce the inventory days on hand by 54% and no move inventory by 45%. Moreover, we are leveraging BRG’s Visual 2BK Insights Dashboard, equipping our inventory specialists with crucial insights into daily product performance. This allows us to identify areas of opportunity for PAR adjustments, highlights stagnant inventory that can be removed, and pinpoints instances of stockouts, prompting necessary PAR adjustments.”
One of the most exciting features is Grady’s ability to monitor inventory performance across their entire entity, providing service level performance metrics at a departmental level down to individual units, Gordon added. This capability will enable their team to proactively engage with nursing staff in PAR management, sharing KPIs and fostering more efficient and collaborative processes.
The value of analytics
Analytics modernized Grady’s supply chain management, empowering them with insights and decision-making ability. Previously, Grady’s teams were limited by disparate datasets and the ability to download clean data.
For example, key data fields were previously not built within Grady’s item master which prohibited the ability to clearly analyze operational data across the entire supply chain. Through sophisticated data analysis and a continued focus on data integrity, Grady attained a profound understanding of its supply chain dynamics, spanning from procurement to payment, inventory control, supplier evaluation, and logistics enhancement, Gordon said.
“By harnessing the power of analytics, we pinpointed emerging trends, detected patterns, and preemptively addressed potential bottlenecks in real-time, thereby streamlining our operations,” he said. These enriched insights facilitated prompt identification of underlying issues, leading to proactive corrective measures. Additionally, they facilitated continuous monitoring of performance metrics, enabling Grady to meticulously track key indicators and pinpoint areas ripe for enhancement, consequently optimizing our resource allocation.
Ultimately, Gordon said, analytics played a pivotal role in elevating the efficiency, adaptability, and resilience of Grady’s supply chain, “ensuring our ability to meet customer demands efficiently while minimizing expenses and maximizing value.”
Editor’s note: For more information on the Berkley Research Group (BRG), visit thinkbrg.com, or contact Joseph Arruda, Director, at jarruda@thinkbrg.com.