The Supply Chain turnaround for the Arizona health system began in 2022.
By Daniel Beaird
October 2024 – The Journal of Healthcare Contracting
When John Candito joined Arizona-based Yuma Regional Medical Center (YRMC) in 2022 as Administrative Director, Supply Chain Management, its Supply Chain department was still feeling the effects of the COVID-19 pandemic and had several long-term vacant positions that needed to be filled.
“We had 90% of our 55,000-square-foot warehouse consumed with product,” Candito said. “There was very little available space with pallets consuming aisleways and there was no order to where or how products were placed.”
The organization was in transition, moving away from pandemic protocols and shifting back to normal operations. Candito says the warehouse staff was rundown from months of frantic effort but showed resilience in being open to trying new approaches.
The Kanban inventory practice used in just-in-time manufacturing was implemented to manage the inventory and increase team productivity. It offers Supply Chain a way to set the right PAR (periodic auto replenishment) limits, decrease product touch points, eliminate expired products and maximize efficiency throughout the department.
YRMC’s Supply Chain brought on new leaders and added several key positions to the team. It has introduced improvements to its order fulfillment process and purposefully married its coordinators to their technician partners to better define responsibilities.
“The newly formed teams break up the barriers to relationship management and area responsibility,” Candito said. “PAR areas have been optimized to remove items not being used and to adjust inventory levels to align with current volume utilization. These utilizations are also now adjusted for the drastic seasonality that Yuma County experiences each winter. All of this work enables us to put our patients first and support the organization’s goals to Build a Healthier Tomorrow.”
Some of these changes were completed in just a few weeks while others, like Kanban, required a longer period to implement across the organization.
Inventory Right Sizing initiative
The majority of the initial success was achieved through YRMC’s 2023 “Inventory Right Sizing” initiative. Almost 2,500 items in the warehouse were reviewed and the necessary adjustments were made.
The 406-bed not-for-profit hospital serves a region that lies halfway between Phoenix and San Diego. Approximately 96,000 residents call Yuma, Ariz., their full-time home with about 204,000 living in Yuma County and another 90,000 staying in Yuma during the winter.
The hospital is staffed by more than 2,400 employees, over 450 clinicians and hundreds of volunteers to serve Yuma and the surrounding area.
“Living in a rural community, we operate without the often taken-for-granted external resources that larger city facilities benefit from,” Candito explained. “Because of this, we have an obligation to do a better job of managing our supplies. We pride ourselves on being rooted in the community and understanding what it takes to be successful here.”
A multi-disciplinary team looked at 100 items per week and pulled data showing usage numbers over time. They set a boundary on how much inventory YRMC wanted in stock at a given time around usage, and factoring in safety stock considerations. Targeting 30 days of inventory on-hand based on seasonality usage and five days of safety stock, the team factored in adjustments from summer to winter months, and the impacts that vendor lead times have on reorder points and safety stock.
“We communicated with our customers and our strategic sourcing team to verify lead times with our vendors and applied an equation to determine our inventory levels,” Candito said. “We were able to reduce our inventory by 52%, removing over 700 items that weren’t being used from our warehouse. We also cut inventory carrying costs by 48% or $2.1 million.”
Candito says these changes helped YRMC Supply Chain increase its fill rate by having the right amount of inventory on the shelf, having better access to the inventory and ensuring counts were accurate through its material resource planning system.
Its fill rate has grown from 89% to 97.8% over the 18 months since the Inventory Right Sizing initiative was implemented.
“That’s considered a world-class fill rate,” Candito said. “Now we can manage our inventory on a repeatable and standardized basis, no longer requiring an individual to make a decision that could err too high or too low.”
Everything has changed to support the lower inventory carrying cost and increased fill rate, from the manner in which inventory is brought into YRMC’s Supply Chain and the quantity it carries at any given time to its distribution methods across the board. Its commitment to progress has touched every part of the Supply Chain model.
“Cycle counts needed to occur weekly, so we knew our true on shelf quantities,” Candito said. “New warehouse labels were created to reflect the new PAR quantities and reorder points, and a determination of inventory was set in order to adjust our stocking limits for the future.”
Where expiration date wasn’t a consideration, YRMC used the inventory until it hit its needed levels. Other inventory was sold or donated so it could be used before its expiration date.
Tracking team efficiency
Team productivity has jumped since the Inventory Right Sizing initiative started. Several key metrics have been used to measure and improve the team’s efficiency.
YRMC measures pick speed or the time it takes a team member to pick products. Pick error rates are also measured, which looks at how many times a product is picked that is incorrect or how many times a technician partner goes to the wrong location to pick a product.
“We wanted to track root cause,” Candito said. “So, we put action plans in place to mitigate these issues that arise.”
Using its material resource planning system, YRMC Supply Chain knows how many times a product is picked in a month, and it relays this data to its warehouse team to build its ABC inventory system. “A” items are picked the most and positioned toward the front of the warehouse for the quickest access, while “B” items and “C” items are picked less often and positioned in other areas of the warehouse.
“We also place the heaviest items first in our pick routing process, so they are loaded on carts first and lighter items are loaded on top,” Candito explained. “This (ABC inventory) structure change has allowed us to pick orders 40% faster than we did before.”
A technician partner has been able to almost cut his steps in half on a given 20-item order from approximately 1,200 steps down to 700 steps.
“That’s just one example of how our team is becoming more efficient,” Candito said. “We analyze this information twice annually and make product placement adjustments as necessary for any changes in usage.”
Candito jokes that the less amount of attention Supply Chain gets from the clinical side the better. While the Supply Chain strongly values its trusting relationships with its clinical partners, there is something to be said for doing a great job and flying under the radar, he explains.
“Physicians appreciate having the medical supplies they need to take the best care of our patients, and that defines the Supply Chain’s goal of putting patients first,” he said. “We work with physician champions in several areas and they’re very appreciative of our ability to both keep the right level of supplies on the shelf and bring new technology to the table when it’s needed.”
YRMC Supply Chain has been recognized by its ELT (Executive Leadership Team) members for creating a world class department within the organization.
That’s the right kind of attention to get.