FINAL PROJECT

LOGISTICS AND SUPPLY CHAIN MANAGEMENT

I. Introduction

A. Overview of hospital logistics and supply chain management:

This section provides an overview of the logistics and supply chain management
of the pharmacy department of JESSA hospital, which includes the procurement,
inventory management, dispensing, distribution of medicines and transportation,
and information management.
Hospital units have various areas of knowledge necessary to maintain their
activities, which must be conducted appropriately so that health services are
performed as effectively as possible. With this, we can see why it is an area of
such complexity.

The hospital pharmacy is part of the structure of the hospital. It has as its main
goal to ensure the excellence of the care that reaches the patient, being
responsible for promoting the safe and rational use of medicines and hospital
supplies, prescribed by the medical professional, in addition to meeting the
demands and needs of medications of patients hospitalized in the hospital. To do
so, it needs to keep under its guard the stocks of these products.

Hospital pharmacy logistics and supply chain management manage the

procurement, storage, distribution, and management of medication and other
pharmaceutical products within a hospital or healthcare.

The following are some key areas of hospital pharmacy logistics and supply
management.

Procurement

This involves the process of sourcing and purchasing medications and other
pharmaceutical products. This process includes identifying and accrediting
suppliers, negotiating pricing and contracts, and ensuring the products meet
regulatory standards.

Inventory management and Warehousing

This involves the management of medication inventory or stocks within the

hospital pharmacy. This includes monitoring inventory levels, and expiration
dates, and ensuring that the medication is properly stored and secured.

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Dispensing

This involves the process of dispensing medication to patients. This process

includes reviewing medication orders, preparing medication, and ensuring that
patients receive the correct medication, dosage, and instructions.

Distribution and transportation

This involves efficient and timely medication delivery to various hospital

departments and point-of-care units. This includes coordinating delivery
schedules, managing transportation routes, and ensuring that medications are
delivered on time and in quantity.

Information management:

This involves using technology and data to manage pharmacy logistics and
supply chain processes. This includes using electronic health records to track
inventory levels, using predictive analytics to forecast demand, and using data to
optimize supply chain operations.

Effective hospital pharmacy logistics and supply chain management are critical in
ensuring the pharmacy has the medications and pharmaceutical products
needed to provide quality patient care. By optimizing processes and minimizing
waste, hospitals can reduce costs, improve efficiency, and ultimately deliver
better patient outcomes.Top of Form

B. Importance of logistics and supply chain management in

healthcare:
This section highlights the critical role of logistics and supply chain management
in healthcare, which affects patient outcomes, financial performance, and overall
hospital operations.

Logistics and supply chain management in healthcare occupy a critical role as it

affects patient outcomes, financial performance and overall hospital operations.
Supply chain management is important in reducing costs while maintaining or
even enhancing performance. This is greatly enabled by information technology
and enterprise resource planning systems and specially developed supply chain
management systems. [Bialas et al 2014]

Logistics and supply chain management are crucial in hospital pharmacy

because it is vital to ensure that the right medication and other pharmaceutical
products are available at the right time, in the right quantity, and at the right cost.

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Logistics and supply chain management in hospital pharmacies is important for
the following reasons.

Improved patient care

Effective logistics and supply chain management can ensure the hospital
pharmacy has the necessary medication and pharmaceutical products to provide
high-quality patient care. This includes ensuring that the right medication is
available in the right quantity and dosage and that patients receive their
medication in a timely and accurate manner

Cost savings

Optimizing logistics and supply chain management can help hospital pharmacies
reduce costs by minimizing waste and streamlining processes. This includes
reducing inventory levels, negotiating better pricing and contracts with suppliers,
and optimizing delivery routes.

Regulatory compliance

Hospital pharmacies must comply with strict regulations and guidelines

concerning the procurement, storage, and distribution of medication and
pharmaceutical products. Effective logistics and supply chain management can
help hospital pharmacies meet these regulations and guidelines.

Efficiency

Effective logistics and supply chain management can help hospital pharmacies
operate more efficiently by reducing the time and effort required to manage
inventory, process orders, and manage delivery logistics. This can free up staff
time to focus on other critical tasks, such as patient care and medication
management

C. Purpose of the project:

This section explains the purpose of the project, which is to identify the
challenges and opportunities in the hospital's logistics and supply chain
management and to provide recommendations for optimization.

Knowing hospital logistics is important for the reason that an error in the
distribution of materials and medicines, a logistic function that is paramount, can
lead consequently to an irremediable disaster, affecting not only the hospital but
also patients.

The purpose of this project is to identify and account for the main challenges and
inefficiencies in the process of supply management in the identified hospital
pharmacy. It is also necessary to investigate how logistic flow occurs in the

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 hospital pharmacy, due to the complexity of this type of inventory and the
damage that inefficiency in the management process can cause to the patient.

The project also identifies opportunities in the Pharmacy Department’s logistics

and supply chain management, and finally, this project also aims to provide
recommendations for optimizing hospital pharmacy logistics and supply chain
management.

II. Background

A. Description of the hospital:

This section provides a brief description of the hospital, including its size,
location, and services provided.
JESSA Hospital is a 500-bed hospital located in the heart of Metro Manila. It
was started in 1956 by a group of 14 doctors and has now grown to what the
JESSA hospital is today. It provides the following services:

24 hour Holter Monitoring Laboratory Services

Aesthetics Center Linear Accelerator (LINAC)

Cardiac Rehabilitation Magnetic Resonance Imaging (MRI)

Cardiovascular Catheterization Mammogram

Laboratory

Cardiovascular Center Marine Medical Services

Child Neurosciences Center Neurophysiology Services

Clinical Nutrition Management Nuclear Medicine

Services

Computerized Tomography (CT) Oncology Unit

Scan

Coronary Care Unit / Telemetry Unit Pain Management

Corporate Health Services Pharmacy

Dietary Department Pulmonary Physiology and Sleep

Laboratory

Directory Radiologic Imaging Center

Emergency Medicine Rehabilitation Medicine

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Endoscopy Unity Senior Citizen Surge Protection

Executive Health Check Sports Medicine

Hearing, Dizziness, Voice and ORL Ultrasound

Endoscopy Center

Heart Care Service Vision Center

Hemodialysis Wellness Hub

Intensive Care Unit (ICU) Wound Care Center

The JESSA Hospital Pharmacy is located in the JESSA Hospital, a tertiary

care hospital in Manila, Philippines. The pharmacy is responsible for the
procurement, storage, dispensing, and management of medication and other
pharmaceutical products for patients within the hospital.

The pharmacy is operated by registered pharmacists who work closely with

physicians and other healthcare providers to ensure patients receive the
appropriate medication in the correct dosage and administration route. The
pharmacy offers various services, including inpatient and outpatient
medication dispensing (including compounding services), medication therapy
management, and drug information services.

The pharmacy is included in the hospital information system for the

dispensing and charging of medicines to patients. Its inventory is also linked
to the hospital materials management system to monitor stock levels and for
inventory forecasting and planning.

The pharmacy also has a Pharmacy and Therapeutics Committee (PTC)

responsible for developing, maintaining, and updating the hospital formulary.
This involves evaluating new medications and determining which drugs
should be added, removed, or restricted on the formulary. Only medicines in
the formulary can be included in the regular inventory planning and
purchasing of medicines.

The Hospital Pharmacy operates 24 hours a day, 7 days a week, to ensure

patients can access medication and other pharmaceutical products at all
times. The pharmacy also offers a range of medication-related services to
patients, including medication counseling and education.

Hospital Pharmacy is critical in delivering quality patient care within the

hospital. By ensuring the availability and proper management of medication
and other pharmaceutical products, the pharmacy helps to improve patient
outcomes and ensure the safety of patients receiving treatment within the
hospital.

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B. Overview of the hospital's logistics and supply chain management:
This section describes the hospital's current logistics and supply chain
management, including the processes, tools, and stakeholders involved.

The JESSA hospital pharmacy logistics and supply chain management refer to
the processes and systems involved in ensuring the availability and timely
delivery of pharmaceutical products and supplies to support patient care within
the hospital.

The supply chain management of the hospital pharmacy involves the

management of the flow of products and services, including procurement,
inventory management, distribution, and delivery of medication and medical
supplies. The objective of the JESSA hospital pharmacy supply chain
management is to optimize the availability of essential medicines and supplies to
meet the needs of patients while minimizing inventory costs, reducing waste, and
ensuring regulations.

The JESSA hospital pharmacy logistics and supply chain management system
include a variety of processes and activities.

Ordering and purchasing

1. Determining the inventory needs: The first step in ordering and

purchasing is to determine the inventory needs of the hospital
pharmacy. This involves analyzing usage patterns and forecasting the
demand for medications and supplies through an inventory planning
system. The items and quantity to be purchased are based on the
previous month’s utilization, order processing time, lead time of
delivery, and maintained inventory days.

2. Sourcing suppliers: The next step is to identify and evaluate potential

suppliers of pharmaceutical products and supplies. MPHHI (group
purchasing organization) does this and involves negotiating with
existing suppliers to ensure competitive pricing and reliability.

3. Placing orders: The hospital procurement department will place

orders for the needed medications and supplies based on the
purchase requisitions prepared by the pharmacy. This may involve
generating purchase orders and communicating with vendors to
ensure timely delivery.

4. Managing invoices and payments: The hospital pharmacy staff will

manage the invoices and forward them to the central warehouse and
finance directorate for encoding and processing of payments for the
products and supplies received. This may also involve reconciling

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 invoices and resolving any discrepancies or issues related to
payment.

Storage and inventory management

1. Storage and handling: The pharmacy ensures that pharmaceutical

products and supplies are stored and handled appropriately. This may
involve storing medications and supplies at the appropriate temperature
and humidity based on the manufacturer’s recommendation, and ensuring
that they are protected from light, moisture, and other environmental
factors that may affect their quality. Biological refrigerators and
thermometers are regularly monitored, calibrated, and maintained.

2. Monitoring inventory levels: The hospital pharmacy staff monitors

inventory levels to ensure an adequate supply of medications and
supplies on hand to meet the needs of patients. This involves conducting
regular inventory counts (cycle count) (monthly), analyzing usage
patterns, and forecasting demand for medications and supplies. Inventory
levels are monitored through the electronic stock cards in the materials
and management system.

3. Reordering and restocking: When inventory levels reach a predetermined

threshold, the hospital pharmacy staff will reorder and restock
medications and supplies to maintain appropriate inventory levels. This
involves generating purchase requisitions and managing the delivery and
receipt of products.

4. Expired and damaged products management: The hospital pharmacy

staff manage the disposal of expired or damaged medications and
supplies. This involves removing expired or damaged products from
inventory two months before the expiration date, disposing of them in
accordance with regulatory requirements, and tracking and reporting any
disposal activities.

Distribution and delivery. These processes involve the safe and efficient
delivery of pharmaceutical products and supplies to the point of use, whether in a
patient care unit, emergency department, or another hospital department.

Medications are dispensed using the First-expiry-First-out system.

Requests for medications are made through the hospital information system or a
manual request (will depend on the type of requested medication). Before
products can be distributed, Pharmacists perform a drug appropriateness review
and prepare the requested medication. This involves grouping products together
by patient, unit, or department, and ensuring that they are labeled with the
appropriate patient information.

Prepared medications are then delivered through the pneumatic tube or nurse’s
aide to minimize travel time and ensure timely delivery to the appropriate unit.

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Pharmacy staff also secure transportation methods, such as locked carts or
containers, and maintain required storage conditions.

The hospital pharmacy staff also manages the returns and recalls of
pharmaceutical products as needed. This may involve identifying and tracking
recalled products, managing the return of expired or damaged products, and
ensuring that any affected patients or departments are notified of the recall or
return.

The hospital pharmacy works closely with vendors, wholesalers, and other
healthcare organizations to ensure the timely delivery of supplies and to monitor
the quality and safety of pharmaceutical products.

C. Analysis of current logistics and supply chain performance:

This section analyzes the hospital's current logistics and supply chain
performance, such as delivery time, inventory accuracy, and cost efficiency.

Current logistics and supply chain performance can be monitored through the
following parameters:

Inventory turnover is a key performance indicator that measures the number of

times the pharmacy's inventory is sold and restocked in a given period. Currently,
the pharmacy has an average inventory turnover rate because of the challenges
in the availability of stocks in the Philippine market.

Inventory accuracy is the degree to which the physical inventory levels match the
inventory levels recorded in the pharmacy's system. The pharmacy’s average
inventory accuracy rate may indicate that the pharmacy is tracking inventory
levels effectively.

Delivery performance measures the reliability and timeliness of product

deliveries. Analyzing delivery performance can help identify areas for
improvement in the delivery process, such as using more efficient delivery routes
or better communication with delivery personnel.

Waste and excess inventory can be costly for a hospital pharmacy. The
pharmacy religiously monitors expired medicines to minimize medication
wastage. Analyzing waste and excess inventory can help identify opportunities to
reduce waste and optimize inventory levels.

By analyzing these key performance indicators, the pharmacy can identify areas
for improvement in its logistics and supply chain management system. This
analysis can help the pharmacy optimize inventory levels, reduce waste, and
improve delivery performance, ultimately leading to improved patient care and
outcomes.

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 D. Identification of logistics and supply chain challenges and opportunities:
This section identifies the challenges and opportunities in the hospital's logistics
and supply chain management, such as high inventory levels, inefficient
transportation routes, or lack of visibility in the supply chain.

Challenges and opportunities in the hospital's logistics and supply chain

management.

Inventory management: One of the biggest challenges for hospital pharmacies is

managing inventory levels. Errors in receiving deliveries and inventory count still
exist in the hospital pharmacy. Opportunities to improve the inventory
management of the pharmacy include implementing a barcoding system and
using more advanced automated inventory systems.

Drug shortages: Drug shortages can impact patient care and increase costs for
the hospital. The hospital pharmacy still needs to be proactive in managing drug
shortages by developing a contingency plan and establishing relationships with
alternative suppliers.

Supply chain disruptions: The current pandemic disrupts the supply chain and
impacts the availability of drugs and medical supplies.

Technology adoption: The use of technology in hospital pharmacies can improve

efficiency and reduce costs. Opportunities to adopt technology include
implementing automated dispensing systems, using electronic prescribing, and
using data analytics to improve inventory management.

III. Hospital Logistics Management

Ref: Good PHARMACY Warehousing Practice
Search: good PHARMACY storage practice

A. Analysis of hospital logistics operations

This section analyzes the hospital's logistics operations, such as transportation,
warehousing, and material handling, to identify areas for improvement.

Pharmacy logistics operations involve the management of the flow of drugs and
other healthcare products from suppliers to the hospital pharmacy, and then to
patients or other departments. The logistics operations include ordering and
purchasing, storage and inventory management, and distribution and delivery
(refer to the overview of the Hospital’s logistics and supply chain management for

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details). It also involves regulatory compliance and collaboration with other
departments.

B. Application of logistics management tools:

This section applies logistics management tools, such as routing and scheduling,
order picking, and warehouse layout design, to optimize the logistics operations
The warehouse management system (WMS) is software designed to optimize
operational processes in a warehouse. By implementing a WMS, JESSA Hospital
Pharmacy has full visibility into real-time inventory levels and storage, staff
productivity, demand forecasting, and order fulfillment workflows within a
warehouse.
Warehouse management systems are important as they eliminate manual
processes and guesswork and instead streamline processes that save time, and
provide a more accurate snapshot of what’s going on inside a facility without
needing to conduct continuous warehouse audits. This information helps
warehouse managers identify areas of improvement and track progress to drive
optimizations throughout the supply chain, from when inventory hits the loading
docks to when it’s shipped out to its next destination. It also provides the tools to
drive strategic big picture improvements as well as those to monitor the day-to-
day. What a management team sees in the warehouse management system will
be different from a picker or packer who relies on the system to know what to
pick or pack next on the warehouse floor.
The most common operations that take place inside JESSA Hospital Pharmacy
warehouse that they monitor and manage are:
1. Receiving: In receiving, warehouse staff receive inventory or freight from
trucks at loading docks, and count the units to ensure they’ve been sent
the correct amount. They will also inspect the condition of the goods, and
document that the inventory has been received.
2. Put-away: Once inventory has been received, it needs to go somewhere.
Warehouse putaway is the process of transporting inventory from the
receiving area to the correct storage area. There are several different
approaches to warehouse putaway. JESSA Hospital Pharmacy should
experiment before finding the best putaway method by choosing a
putaway strategy that makes sense based on the type, volume, and
variety of inventory you have, as well as your available space and
inventory storage options.
3. Inventory storage: JESSA will almost always need to store inventory
within their warehouse for at least a little while before orders come in.
Inventory storage is one of the most strategic decisions they make in
warehousing, and should work for their business, not against it. Typically,
they will store inventory on warehouse racks in pallets or bins, so that
each SKU has a dedicated location.

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 4. Picking: As soon as an order is confirmed and processed, it’s time to pick
inventory from shelves. Technology and automation that JESSA Hospital
Pharmacy should employ in their warehouse is to either create or
generate pick lists for each picker to retrieve items in the most efficient
way. This may include zone picking, wave picking, or batch picking. For
each new order, the picker will receive a packing slip of the items ordered
and storage locations at the warehouse. The picker will collect the
ordered products from their respective locations.
5. Packing: Once an order is picked, it is handed off to a packer, who is
responsible for packing it. This means securely placing the items in a box
or poly mailer, adding in any needed packing materials, and putting a
shipping label on it.
6. Shipping: Based on the delivery options and shipping services you offer
to customers, shipping carriers like DHL, USPS, FedEx, and UPS will pick
up orders from the warehouse to ship packages to their next destination.
Once the order ships, the warehouse management system should be
able to automatically send ecommerce order tracking information back to
your store so your customers can track their shipments.
7. Slotting: Slotting — the process of organizing a warehouse to maximize
space and efficiency — is one of these functions. By carefully planning
your warehouse layout and inventory storage strategy, you can reduce
picking errors, unlock more storage space, and even reduce operating
costs. Some warehouse functions are not part of the supply chain, but still
impact its efficiency and performance.
8. Reporting: A warehouse management system should provide out-of-the-
box operational and inventory reports across the warehouse. This may
include accuracy in fulfilling orders (total mispicks, mis-packs, etc.), total
orders fulfilled by the hour to measure the efficiency of staff, orders
shipped on time, and much more. There are also reports relating to
people’s operations, including inventory forecasting to understand labor
management and staffing needs. With a warehouse management
tracking system, you can quickly find out which employees have
completed safety training, those who have licenses and certifications to
operate certain equipment, and other regulatory requirements you must
meet to operate a safe warehouse.

C. Identification of areas for improvement:

This section identifies the areas for improvement in the hospital's logistics
operations based on the analysis and the application of the logistics
management tools.

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The primary challenges of logistics operation for JESSA Hospital Pharmacy are
high costs, uncertain delivery dates and unpredictable lead times. These make it
hard for the Pharmacy to maintain ideal inventory levels and improve warehouse
efficiency and productivity. JESSA Hospital Pharmacy needs to improve the
following to maintain good quality of Pharmacy to patients and departments.

1. Maximize and optimize all available space. Rather than expand the footprint
of your warehouse, consider better use of vertical space. Adding taller storage
units and the right equipment to pick and store material can help you keep more
in the same square footage, rather than adding expansion costs. In addition,
think about the type and variety of shelving used. Storing small items on pallet
racks wastes space, and makes it easy to misplace items. Rather than using the
same racks throughout your warehouse, you may need various types of shelving
for different materials. Also, try using standardized bins to help keep shelves neat
and orderly.

2. Lean Inventory. Adopting lean inventory for the warehouse is just as

important as it is in manufacturing. The basic premise of lean is only what the
pharmacy needs, and nothing more. Possibly reduce or eliminate safety stocks,
and try to get suppliers to deliver smaller quantities more frequently.

3. Adopt enabling technology. ERP systems with a strong WMS module can
improve efficiency by suggesting the best routes and methods for picking or put-
away. In addition, the system provides automated pick lists that can be sent to
mobile readers and devices to help eliminate mistakes and reduce wasted time
and paper. Your warehouse will be neater and greener. Using barcode or radio
frequency identification (RFID) readers can improve accuracy of transactions,
and reduce picking errors.

4. Organize workstations. Organizing workstations improves productivity

because workers do not have to search for tools or equipment. Use the “5S”
method from lean manufacturing to ensure your workstations are as organized as
possible. It consists of: Sort; Set in order; Shine; Standardize; and Sustain — all
techniques designed to keep clutter at bay, reduce errors, and improve safety
and organization.

5. Optimize labor efficiency. If your WMS doesn’t have the ability to generate
efficient picking plans, create them manually. Analyze your material usage
patterns, and store high-volume items together near the front of the warehouse to
eliminate travel time. Also, store items that are frequently sold together near one
another. Basically, you will streamline operations if you try to keep the items you
pick most often in the most accessible locations to eliminate picking delays.

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 D. Recommendations for logistics management optimization:
This section provides recommendations for optimizing the hospital's logistics
operations, such as reducing transportation costs, improving inventory accuracy,
or increasing delivery speed.
Medicine represents a critical component of healthcare but negatively impacts
the quality of healthcare systems because it faces serious issues such as
medical errors, adverse impacts on the environment and the growing presence of
counterfeit products. Despite medicines specifications and inefficiencies could
contribute to their increasing cost in the healthcare sector, very little research has
been published on the main issues affecting the management of medicines and
how technology systems could collaborate to improve their management. Within
the scope of this paper, we will concentrate on analyzing the main inefficiencies
of logistics processes executed by the hospital pharmacy and identifying how an
RFID-barcode identification system could improve pharmacy operations. Based
on process mapping and qualitative data obtained from semi-structured
interviews, this paper describes six main inefficiencies namely incorrect inventory
management, medicine shrinkage, intensive manual labor, long procurement
cycles, time-consuming product recalls and improper use of technology. By
identifying cases and bundles with RFID technologies and primary and
secondary packages with barcode labels, hospital pharmacies could ensure that
medicines don’t severely affect the sustainability of the healthcare system in
general and the patient security in particular.

IV. Hospital Supply Chain Management:

Ref: Hospital Pharmacy Supply Chain Management

A. Analysis of hospital supply chain operations:

This section analyzes the hospital's supply chain operations, namely,
procurement, distribution and transportation, inventory management, and
forecasting.

Procurement

Procurement is the process of finding and acquiring the goods and services the
hospital needs to fulfill in its business operations. In order for a hospital to make
a profit, the cost of procuring goods and services must be less than the amount it
can sell the goods for, minus whatever costs are associated with processing and
selling them. Hence, the goal of procurement management is to ensure that the
hospital receives goods, services, or works at the best possible price. To do this
effectively, a procurement manager must assess factors like quality, quantity,
time, and location on a continual basis, along with negotiating to find the best
available pricing (and therefore savings) for the hospital. It’s also important to
note that healthcare facilities can engage in both direct procurement and indirect

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procurement. Direct procurement involves expenditure on goods and services
that directly impact the hospital bottom line, whereas indirect procurement is
expenditure on day-to-day operations and other requirements that do not have a
direct impact on hospital profit. In the overall supply chain process,
procurement’s responsibilities stop once your company has possession of the
goods.

The following are the current pharmacy procurement procedures being practiced
by JESSA Hospital:

1. Determining the inventory needs: The first step in ordering and purchasing is
to determine the inventory needs of the hospital pharmacy. This involves
analyzing usage patterns and forecasting the demand for medications and
supplies through an inventory planning system. The items and quantity to be
purchased are based on the previous month’s utilization, order processing
time, lead time of delivery, and maintained inventory days.

2. Sourcing suppliers: The next step is to identify and evaluate potential suppliers
of pharmaceutical products and supplies. MPHHI (group purchasing
organization) does this and involves negotiating with existing suppliers to
ensure competitive pricing and reliability.

3. Placing orders: The hospital procurement department will place orders for the
needed medications and supplies based on the purchase requisitions
prepared by the pharmacy. This may involve generating purchase orders and
communicating with vendors to ensure timely delivery.

4. Managing invoices and payments: The hospital pharmacy staff will manage
the invoices and forward them to the central warehouse and finance
directorate for encoding and processing of payments for the products and
supplies received. This may also involve reconciling invoices and resolving
any discrepancies or issues related to payment

Distribution and transportation

Distribution and Transport refers to the hospital methodology for getting products
to consumers or patients. With a formal distribution plan that’s implemented
rigorously, the hospital more specifically the Pharmacy department reduces cycle
times for product deliveries. These processes involve the safe and efficient
delivery of pharmaceutical products and supplies to the point of use, whether in a
patient care unit, emergency department, or another hospital department.

The following are the current pharmacy distribution procedures being practiced
by JESSA Hospital:

1. Medications are dispensed using the First-expiry-First-out system.

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 2. Requests for medications are made through the hospital information
system or a manual request (will depend on the type of requested
medication). Before products can be distributed, Pharmacists perform a
drug appropriateness review and prepare the requested medication. This
involves grouping products together by patient, unit, or department, and
ensuring that they are labeled with the appropriate patient information.

3. Prepared medications are then delivered through the pneumatic tube or

nurse’s aide to minimize travel time and ensure timely delivery to the
appropriate unit.

4. Pharmacy staff also secure transportation methods, such as locked carts

or containers, and maintain required storage conditions.

5. The hospital pharmacy staff also manages the returns and recalls of
pharmaceutical products as needed. This may involve identifying and
tracking recalled products, managing the return of expired or damaged
products, and ensuring that any affected patients or departments are
notified of the recall or return.

6. The hospital pharmacy works closely with vendors, wholesalers, and

other healthcare organizations to ensure the timely delivery of supplies
and to monitor the quality and safety of pharmaceutical products.

Inventory management
“Pharmacy inventory management is the science and art of managing the
inventory of pharmacy effectively whereby the process or system helps the
manager/owner reduce cost, improve operational efficiency, and minimize
overstocking and opportunity loss.” (Karexpert.com)

Managing the inventory of a hospital pharmacy requires not only managing

pharmacy inventory costs, but also conserving time and working capital,
improving purchasing accuracy, and maximizing pharmacy labor productivity.
(McKesson.com). This includes processes such as identifying and focusing
buyer’s (patient’s) time on fast moving or A items, capitalizing on purchase
history trends to guide in pharmaceutical ordering, maximizing contract
compliance, minimizing labor spent on receiving, streamlining pharmaceutical
product receiving, and rationalizing pharmaceutical distributor delivery frequency.
(McKesson.com)

Among the challenges encountered in hospital drug inventory management were

listed by Jeter in 2019. This includes:

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 1. Value-based reimbursements. This burdens a hospital pharmacy to stock
on the most effective drugs at the lowest possible cost. Managing the
inventory and eliminating waste are more critical.

2. Drug shortages. Shortages of critical drugs have been increasingly felt

during this COVID pandemic, and exacerbated by the Ukraine-Russia
war. These add layers to the complexity of work in the pharmacy. It is a
delicate balance between ensuring the pharmacy has enough stocks
without tying up capital.

3. Specialty drugs. The increase in specialty drugs opens up a new

relationship with suppliers (not just your regular wholesalers). Separate
processes, invoices, payment schemes, delivery systems, and delivery
times, can increase the load on a hospital pharmacy. These drugs are
also usually expensive and short in supply.

4. Drug costs. Overstocking on high-cost drugs or wastage of these

drugs can make a significant dent in hospital pharmacy operations.
This is currently being experienced by a lot of hospitals, including
the JESSA Hospital, that have stocked up on COVID antivirals.

5. Ambulatory care. The addition of out-patient ambulatory care being

provided for by hospital pharmacies dictate the need for a solid inventory
management system.

Some of the strategies suggested include optimizing existing technology,

creating monthly reports that can be used for analysis and forecasting, develop
action plans, monitor drug supply, track non-formulary items, and add (a logistics
and supply chain) expertise. (Jeter C, 2019)

SHERYLL… re JESSA HOSPITAL

Forecasting
“In the context of pharmaceutical supply chains, forecasting can be defined as
the process of predicting sales and consumption of pharmaceuticals so that they
can be purchased in appropriate quantities in advance.” (Likuyani B, 2022) The
demand for pharmaceuticals should be balanced with supply, but an excess
supply will mean increasing storage and warehousing costs as well as
astronomical financial losses.

In this regard, Likuyani discussed 5 principles.

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1. Focus on demand not customer orders. There is a fine line between
customer orders and actual demand in pharmaceutical forecasting. It is the
latter that needs to be the anchor in forecasting.

2. Forecasts are rarely accurate. Forecasts should be viewed as estimates,

and form the basis of orders for stocks. They can be affected by external
factors, such as an epidemic or war, as the world has recently experienced.
The goal is to minimize or reduce forecasting error. It is also unwise to
base forecasts on goals. Forecasts should be based on actual demand.

3. Always include an estimate of error. Careful statistical analysis of the

variability of demand should be carried out to determine the error estimate
and this should be in monetary terms. If a huge estimate of forecast error is
noted, going back to the drawing board, reviewing the forecasting steps or
restructuring the pharmaceutical supply chain to accommodate the
uncertainty of demand your medicines are experiencing should be done.

4. Forecast pharmaceutical classes rather than a single drug. This concept of

forecasting is referred to as risk pooling. Alternatively, one can as pool risk
by forecasting for a group of customers ordering the same item, rather than
forecasting an individual medicine for an individual customer.

5. Short-term forecasts are better than long-term forecasts. Shorter-term

forecasts permit appropriate forecast accuracy reviews to reduce estimate
error. “Pharmaceutical supply chain managers are also encouraged to
ensure short lead times as this reduces the forecasting horizon thereby
increasing accuracy of the forecast.”

Exponential smoothing and ARIMA models are the two most widely used
approaches to time series forecasting, commonly used in pharmaceutical
forecasting. (Burinskiene A, 2022)

JESSA Pharmacy Forecasting….

B. Application of supply chain management tools:

This section applies supply chain management tools, such as demand
forecasting, vendor managed inventory, and supply chain visibility, to optimize
the supply chain operations.
Some of the tools that can be used in the pharmacy supply chain management to
optimize supply chain operations include:

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1. Demand forecasting.
“Demand forecasting is the process of using predictive analysis of
historical data to estimate and predict customers' future demand for a
product or service. Demand forecasting helps the business make better-
informed supply decisions that estimate the total sales and revenue for a
future period of time.” (Hand R, 2022)

Demand forecasting models (DFM) have been studied and shown that
DFMs based on shallow neural networks can effectively estimate future
demand for pharmaceutical products. (Rathipriya 2023)

2. Vendor managed inventory (VMI).

The fundamental concept in vendor management inventory is to shift the
responsibility of for restocking or replenishment to the supplier or vender
(may or may not be the producer). This necessitates that the customer,
in this case the JESSA Hospital pharmacy, will be required to share or
make data on demand information. (Krichanchai S and MacCarthy B,
2017). This makes the implementation of VMI challenging to implement.
Some of the factors that may affect the adoption of VMI includes hospital
characteristics or type of hospital, management perspectives, hospital’s
willingness to share information. (Krichanchai S and MacCarthy B, 2017).

3. Supply chain visibility

Visibility of the supplier’s production rates, shipment lead times, in-house
inventory, historical data, and customer sales projections can drive
benefits in efficiency, lower inventories, and improve fulfillment rates. It is
crucial in healthcare, where prompt treatment delivery under the right
conditions is critical. Visibility also assures if not guarantee quality of
supplies. (Hospital and Healthcare management, 2023)

Visibility is driven by a company’s need to be more proactive and

systematic in supply chain operations; track and trace products from
cradle to grave in the supply chain; proactively alert customers of product
availability and status of shipments, improve delivery in full on time
(IFOT), reduce lead time and time variability, reduce or redirect working
capital as well as fixed and variable costs. (Hospital and healthcare
management, 2023).
4. Systems Applications and Products (SAP ®) [Ref. Saponlinetutorial]
This is a business software package designed to integrate all areas of the
business, including but not limited to the following: business technology
platform, enterprise resource planning (ERP), analytical data platforms,
and business planning platforms.

SAP has several products, namely SAP R/3 and R/3 Enterprise, mySAP
Business Suite, SAP ERP, SAP Industry Solutions, SAP xAPPS, and

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 SAP Solution Manager. SAP R/3 is the client/server version of the
software.
The figure below shows the functional modules in the SAP R/3 software.

Figure ___. Systems Applications and Products (SAP) Functional

Modules. FICO: Finance and Control; PP: Product Planning; MM:
Material Management; SD: Sales and Distribution; WM: Warehouse
Management; QM: Quality Management; HR: Human Resources; CRM:
Customer Relationship Management. The technical modules include:
ABAP: Advanced Business Applications Programming; XI: Exchange
Infrastructure; Net Viewer; Basis; BIW: Business Information
Warehousing. Image from https://www.saponlinetutorials.com/what-is-
sap-erp-system-definition/.

C. Identification of areas for improvement:

This section identifies the areas for improvement in the hospital's supply chain
operations based on the analysis and the application of the supply chain
management tools.
The areas that can be improved for JESSA Hospital’s Pharmacy supply chain
include but are not limited to the following:
1. Improving supply chain visibility

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 2. Non utilization of vendor management inventory
3. No bar coding utilized in JESSA pharmacy
4. Rudimentary cooperation with suppliers and vendors
5. Sharing demand and forecast data with more vendors and suppliers
6. Inventory management systems utilizes crude excel file for forecasting

D. Recommendations for supply chain management optimization:

This section provides recommendations for optimizing the hospital's supply chain
operations, such as reducing inventory waste, improving order accuracy, or
enhancing supplier relationships.
1. Engage suppliers to provide supply chain visibility.
2. Engage suppliers and vendors to cooperate and use vendor management
inventory systems.
3. Utilize bar coding for pharmaceuticals and other products in JESSA
Hospital Pharmacy to prevent errors in encoding, receiving, inventory,
etc.
4. A comprehensive automation and digitalization of the whole hospital
pharmacy system–including warehousing, inventory, paperwork, delivery,
etc, can be utilized to improve efficiency and time management, and
maximize labor productivity in the pharmacy department.
5. Use of modern warehouse management software. (Odoo.com)
6. Third party asset management software (e.g, McKESSON.com)
7. Utilize advanced demand forecasting models.

V. Integration of Logistics and Supply Chain Management:

A. Analysis of the integration between hospital logistics and supply chain

management:
This section analyzes the integration between the hospital's logistics and supply
chain management processes, to identify gaps and overlaps.
The pharmacy department is a critical unit in the JESSA Hospital. It is in the core
of the delivery of health care and safe treatment of patients. The main difficulty
encountered was the effective control of inventories. Lack of some materials,
equipment or medication can spell harm for the patient. (Oliveira R, 2020) Just as
there are lack of materials, there are also an excess supply of expiring COVID
drugs as we end the world crisis of the COVID pandemic.
Logistics and supply chain and its management are integral components of a
hospital information system (HIS) especially that which involves the Pharmacy
Department.

20
 The pharmaceutical supply chain provides the means through which
prescription medicines are delivered to patients. (Mensah et al 2015) The
supply chain starts at the manufacturing sites, transfers to wholesale
distributors, delivered by wholesalers or third party logistics providers,
stocked in retail at the Pharmacy department of the JESSA hospital,
dispensed, and ultimately delivered to the patient. When inefficient, a product
can be discontinued, out of stock, have poor performance, affect safety
profile, dispensing errors, and technological errors cause pharmacy
shortages. If efficient, smarter, safer, lower cost of pharmacy operations can
also translate to lower cost of medicines, reduced errors, optimize supplies,
improving patient safety and satisfaction.

B. Identification of gaps and overlaps in the logistics and supply chain

processes:
This section identifies the gaps and overlaps in the logistics and supply chain
processes that hinder the smooth flow of medical supplies and equipment.
The full integration of the logistics and supply chain especially of the pharmacy
department is not yet part of the hospital information system. Real-time tracing of
logistics, pharmaceuticals, and supplies are not automated. There is no full
integration of the electronic medical records, physicians computerized order
entries, supplies and medication utilization among the different units and
departments to the logistics and supply chain with the HIS. Reports are not
automatically generated, and manual counts and reporting are still utilized that is
subject to errors. (Hua-Li et al 2015)

C. Recommendations for improving the integration between logistics and

supply chain management.
This section provides practical and feasible suggestions for addressing any gaps
or overlaps that were identified in the integration analysis conducted in the
previous section. The recommendations should be based on best practices and
industry standards, and should take into consideration the specific needs and
challenges of the hospital.
Supply chain management is greatly enabled by information technology and enterprise
resource planning systems and specially developed supply chain management systems.
(Bialas C, Manthou V, 2014). The use of modern warehouse management
software, even that provided for free can already greatly improve the integration
between logistics and the supply chain. (Odoo.com)
Full integration of logistics and supply chain into the hospital information system
should be funded and pursued. (Hua-Li et al 2015)
Supply chain integration into pharmacy operations can improve operational
efficiencies and meet drug demands of patients. (mensah et al 2015)

21
VI. Implementation Plan
For this section, the implementation plan for the following recommendations will be
discussed:
1. Utilization of barcoding for pharmaceuticals and other products in the hospital
pharmacy to prevent or minimize error.
2. Use of advanced demand forecasting models
3. Utilization of a comprehensive automation and digitalization of the whole hospital
pharmacy system–including warehousing, inventory, paperwork, delivery, etc., to
improve efficiency, time management, and maximize labor productivity in the
pharmacy department.

A. Detailed action plan for implementing the logistics and supply chain
optimization recommendations: This section should provide a detailed plan on how to
implement the recommendations provided in the previous sections. It should outline the
specific steps that need to be taken, who will be responsible for each step, and how long
each step will take.

B. Timeline for implementation: A timeline should be included to indicate when each

step will be taken and the overall timeline for the project. (Show Gantt Chart)

C. Roles and responsibilities of stakeholders: This section should outline the specific
roles and responsibilities of each stakeholder involved in the implementation process.
1. Pharmacy Manager
a. Oversee the implementation of the recommendations
b. Call and preside over the quarterly meetings
c. Call emergency meeting if necessary
2. Pharmacists
3. IT Professional (in house)
4. Software vendor
5. Transportation head
6. Supplier Liaison
7. Management or Executive Committee
D. Budget and resource requirements: This section should outline the budget required
for implementing the recommendations and the resources that will be needed.

VII. Evaluation and Monitoring:

22
A. Metrics for evaluating the success of the logistics and supply chain
optimization: This section outlines the metrics that will be used to measure the
success of the logistics and supply chain optimization. These metrics should be
clearly defined and measurable.
1. Probability of the perfect order also known as the perfect order
index. The most important supply chain management metrics is the
probability of the perfect order (O’Bryne, 2019) also known as the perfect
order index. (Jones S, 2017). This index measures the error-free rate of
the entire supply chain process. [Figure ]

Figure ___. Key Performance Indicator: The Probability of the Perfect

Error-Free Order. The probabilities of factors (namely: order entry
accuracy, inventory availability, warehouse delivery in full on time
[DIFOT] service level, carrier delivers in full on time [IFOT], customer
accepts order and accurate invoice paid) are multiplied to arrive at the
value of perfect order probability. (Screen grab from O’Bryne 2019.)

In the illustration shown above, the factors that affect the probability of a
perfect order include order entry accuracy, inventory availability,
warehouse DIFOT [delivers in full on time] service level, carrier delivers
IFOT [in full on time], customer accepts order and accurate invoice paid.
The probabilities of each of these factors are multiplied to get the perfect
order probability. In the example above this is 68%, whereas the best
registered perfect order probability is 93%. In trying to improve the
perfect order probability illustrated in the figure 5, the company should
address foremost, inventory availability which is glaringly low at 80%.
Improving this will necessarily improve on the perfect order probability,
which provides the ultimate customer service measure.

23
 It is a composite metric; perfect orders from every stage are multiplied
to give an overall performance indicator. Even if five of six stages are
performing at 90% or better, when multiplied together, the entire
process attained only a 68%. The perfect order index is an excellent
benchmark for the overall supply chain performance. One can drill
down to investigate, pinpoint and correct issues. The index can then
be assessed over time to measure process improvement progress.

2. Cash to cash time or cycle, also known as cash conversion time.

(Jones S, 2017) This is another compound metric that measures the time
between when the hospital sends cash to its suppliers to the time it
receives cash from its customers. The cash-to-cash (C2C) cycle is
made up of several supply chain measurements including days of
inventory, days of payables, days of receivables. External benchmark
showed that a C2C cycle of less than a month is ideal. With a shorter
cycle, money is spending less time in the hands of others instead of
being applied to your core operations. A study showed a direct
correlation between shorter C2C cycles and greater probability in 75%
of cases.

Figure _. Diagrammatic representation of the cash conversion cycle.

Figure from https://www.wallstreetmojo.com/cash-conversion-cycle/.

3. Supply chain cycle time.(Jones S, 2017) “Supply chain cycle time is

an all-encompassing metric measuring how long it would take to
complete a customer’s order if all inventory levels were zero at the
time the order was placed. This metric is the sum of the longest
possible lead times for every stage of the supply chain cycle. This
metric is an excellent indicator of the overall efficiency of your supply

24
 chain. A shorter cycle means the process is flexible, agile and
responsive to environmental changes. Tracking supply chain cycle
time identifies existing or potential problems, so your business can
take corrective action.”

4. Fill rate or demand satisfaction rate.(Jones S, 2017) “The fill rate,

also known as the demand satisfaction rate, is the amount of customer
demand that is met through stock availability, without backorders or
lost sales. Knowing your fill rate is important because it represents the
sales you can recover or service better if you improve inventory
performance. One method for improvement is access to inventory
data. The better you and your sales team understand available
inventory, the better able you are to ship accurate, complete, and
timely orders, improving customer satisfaction along the way.
Research found that improving the relationship between a supplier and
a retailer resulted in an 80% improvement in fill rate. Changes
included accelerating price-change negotiations, improving responses
to surges in demand, streamlining order management processes, and
changing incentives for the sales force.”

5. Inventory Turnover (Jones S, 2017) “Inventory turnover measures

the number of times your entire inventory is sold in a specified time
period. It provides an accurate, comprehensive image of the efficiency
of the entire supply chain process. Inventory turnover benchmarks
vary greatly from one type of company to the next. In general, a low
inventory turnover relative to the company’s industry implies that a
company has excess inventory due to weak sales. Improving the
inventory turnover metric creates strong sales and an agile, efficient
process.The supply chain carries the lifeblood of your company. Just
as doctors can measure your body’s circulatory efficiency and remove
blockages, tracking the supply chain metrics that will have the most
impact on your business and making improvements will lead to a
sound and successful future.”

B. Methods for monitoring the implementation plan: This section should

outline the methods that will be used to monitor the implementation plan to
ensure that it is on track and that any issues are identified and addressed in a
timely manner.
1. All metrics discussed above should be recorded, obtained and updated
on a quarterly basis.
2. These reports should be collated, and the performance over time
tabulated and graphed.

25
 3. Quarterly meetings among the stakeholders after these metrics are
gathered are held to identify issues that can be addressed in a timely
manner.
C. Contingency plan for unexpected challenges: This section should outline a
contingency plan for any unexpected challenges that may arise during the
implementation process.
1. The unexpected challenges that may arise during the implementation
process can be raised and addressed during the next quarterly meeting of
the team.
2. If an emergency meeting is necessary, the pharmacy manager is tasked
with this role.
3. Manual excel file recording can serve as back up until all systems go fully
live.

VIII. Conclusion:
A. Summary of the project: This section should provide a summary of the
project
B. Implications for hospital logistics and supply chain management: This
section should outline the implications of the project for hospital logistics and
supply chain management, including any potential benefits or drawbacks.
C. Future research directions: This section should outline potential areas for
future research in hospital logistics and supply chain management based on the
findings of the project.

26
IX. References:
This section should include a list of sources cited in the report, including scholarly
articles, reports, and other relevant materials. The group should follow a consistent
citation style and include all necessary information for each source.

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