How to find $650,000 in materials savings

Step One Define the Problem

A client of ours said that needed to cut $650,000 out of their Perioperative budget Staffing and other labor expenses was off limits A premium was put on savings that would be realized year to year

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Plan of Action
Savings were targeted from three areas:
Reducing PAR Levels Reprocessing single use items Better pricing from vendors / consolidation

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Reduction of PAR Levels

Our on-site interim materials manager set up a complete audit of all their inventory throughout the OR and Central Sterile Supply Management Health Solutions (MHS) out of Connecticut came in with several people and, overnight, manually counted every piece of inventory
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Reduction of PAR Levels

Over several weeks MHS analyzed and compared what was found in inventory against the clients purchase history
Low quantities in inventory and frequent orders of an item meant it had several turns. Frequency and quantities of orders were also used to calculate the ideal PAR (Periodic Automatic Renewal) level

A month and a half later, the report came back to us and the client
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Reduction of PAR Levels

Savings if inventory is dropped to suggested level
Savings Potential (Unit price x reduced inventory Inventory Quantity (ea) IVR LUOM UNIT Cost IVR HIGH UOM QTY

Lawson Number

BX BX EA BX CA BX EA EA EA EA

6 6 1 6 5 6 1 1 1 1

601859 RELOAD 60 MED/THICK 601490 RELOAD 60 VASC/MED 6/BX 890230 PROGRAMMABLE SHUNT 601917 RELOAD 60 CVD VASC/MED 600112 DURASEAL DURAL SEALANT 5/BOX 602684 EGIA30 CVD ART VAS MED RELOAD 601924 HAKIM VALVE INLINE MED LO 70MM 601434 STENT FULLY COVERED 10X60 602822 NANOKNIFE 25CM ELECTRODE PROBE 602500 NANOKNIFE 15 CM PROBE

USS COV COD USS USS COV JJ BOS ANGI ANGI

118 98 7 98 30 63 9 5 7 7

$34,043.00 $26,143.62 $29,988.00 $18,790.00 $20,100.00 $9,514.03 $12,852.00 $14,221.70 $12,701.99 $10,841.32

19.67 16.33 7.00 16.33 6.00 10.50 9.00 5.00 7.00 7.00

$288.50 Exces s PI Va l ue $266.77 Exces s PI Va l ue $4,284.00 Exces s PI Va l ue $313.17 Exces s PI Va l ue $670.00 Exces s PI Va l ue $179.51 Exces s PI Va l ue $1,428.00 Exces s PI Va l ue $2,844.34 Exces s PI Va l ue $1,814.57 Exces s PI Va l ue $1,806.89 Exces s PI Va l ue

60 $1,732.70 48 $1,600.63 5 $4,284.00 36 $1,780.33 20 $3,342.86 18 $1,077.06 5 $1,424.00 3 $2,846.72 4 $1,808.97 3 $1,804.78

POUnitPriceCalc

ExcessFoundv3

PAR Quantity

Manu Name

MinOfPACK

Desription

INVValue

UOM

($16,733.00) ($13,338.58) ($8,568.00) ($7,516.00) ($6,700.00) ($6,282.85) ($5,712.00) ($5,688.68) ($5,443.71) ($5,420.66)

What MHS Found in Inventory

What MHS Suggests for PAR Levels

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Reduction of PAR Levels

Why had inventory gotten so high?
Items stored in multiple locations No PAR values set No visual as to when to reorder No guidance on how much or when to order
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Reduction of PAR Levels

Awareness of the problem would not solve it. A new process needed to be put in place to realize the opportunities Decided to implement a Kanban (which is Japanese for Signal) system. It has two advantages:
Makes it easy to determine when an item needs to be reordered to eliminate being out of stock of vital supplies Allows you to keep just the right amount of inventory at hand
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Reduction of PAR Levels

For each item, signal cards were developed Cards have relevant information: Lawson Number, Reorder Quantity, Safety Stock, Cost, and PAR Levels Room for eventual barcode and more robust item storage locators

Time to Reorder!
When restocking, please place

2 ea
in a Rubber Band with this card.

Item Number:
Reorder Quantity:
Item Description:

600949
1 bx

HARMONIC WAVE18S 6/BOX

Cost Each:
$ 360.06

Main Storage Location: OR Storage Room

PAR Level
6

Barcode:

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Reduction of PAR Levels

Signal Cards are secured to the relevant safety stock.
Safety stock is calculated based on usage and turnaround time Staff is trained not to order until the safety stock is needed

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Reduction of PAR Levels

When staff come across the card, all they do is drop it in the nearby To Be Ordered envelope Instead of having to assess each individual item storage location to determine whether it is at PAR, the person doing the ordering only has to check the envelope. Time spent ordering products is significantly reduced
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Reduction of PAR Levels

Also looked for ways to reduce storage locations. For example the Evicel was reduced from 4 locations to just 1 Reduced storage locations means lower overall PAR levels
Evicel was originally stored in 4 locations
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Reduction of PAR Levels

Supply levels in each room were assessed. Staff were queried as to what they really needed day to day Excess inventory was removed and new PAR levels were labeled and staff informed
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Reduction of PAR Levels

The one time savings from the reduced PAR levels on the items we personally set up the Kanban system = $227K By following the same process on the next 144 items on the MHS list (12 a week for 12 weeks), the client would realize another $175K in savings.

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Reprocessing
The client had been looking into reprocessing of single use items for the past year with no results A simple web inquiry into Stryker Sustainabilitys website got a response that same day they came in to present 3 days later The clients materials manager (who was the one looking into it), magically, was able to get an appointment with SterileMed the next week
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Reprocessing
Both vendors had similar processes for item retrieval, processing, and reordering In addition to reprocessing of single use items, they can re-sterilize expired items or opened and unused items Reprocessing alone was estimated to save the client $248,000 a year
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Vendor Consolidation
The biggest opportunity for savings from consolidation involved the endomechanical equipment (staplers, scissors, and other items used in laparoscopic surgery) Their main endomechanical vendor said that they could save the client $125K if they converted completely
The clients chief of surgery liked the competitor This would be a difficult conversion

The vendor did offer pricing for trocars that would save the client $21K a year an easy conversion
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Put It All Together

Opportunity
PAR Reductions

Savings
$402,000

Reprocessing
Trocar Consolidation

$148,000
$21,000

Total: $671,000

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