by Jim Richardson
Senior Consultant, Supply Chain Operations

It may be summer, but that doesn’t mean we can’t cover a little schoolwork.

Today’s lesson is on a concept that has been adopted by many large health care systems and integrated delivery networks (IDNs): the consolidated service center (CSC). A CSC is a centralized facility from which supply chain or other departments can provide services for all of the different care facilities within the system.

Often, the centerpiece of the CSC is a centralized supply distribution center, but other services might include patient kit packing, procedure packs assembly, print shop, pharmacy distribution, mail services, laundry, pandemic supplies storage and capital equipment staging.

Take note of the benefits

For large health care systems, the benefits of having a CSC mean a consolidation of inventories for better control, supply standardization and increased productivity, procurement savings through increased volume contract pricing, and logistics savings from reduced distributor and transportation costs.

In addition to the advantages of centralized supply distribution and the improved service levels that brings to supply chain customers, there are also synergies with other systemwide services that can be realized. Organizations have been able to benefit from these synergies by implementing Lean management principles that result in more efficient and effective processes. Because products and services such as patient kit packing and assembly of procedure packs can be produced in the CSC, overall savings to the organization’s bottom line can be a major benefit as well.

Do your homework

If the CSC sounds like an attractive option for your health care system, it’s important to consider some of the challenges associated with implementing one. My experience with recent CSC implementations has revealed several important factors for success, starting with having some baseline elements in place.

The most important element is support from organization leadership – a commitment that’s critical in order for the project to have the necessary allocated resources. These resources include a dedicated project team, staff training, all required technology hardware and software, a suitable building (either leased or constructed), and capital equipment for the facility. In addition to these resources, a successful implementation should have several organizational components in place, such as a project management and governance structure, a change management plan with clear objectives and goals for the project, realistic timelines and expectations for project completion, a communications plan for the organization, and a willingness to embrace opportunities for improvement.

Study hard, plan accordingly and be rewarded

A recent large IDN implementation of a CSC had all of these components in place, and yet faced many challenges and obstacles to success. Here are some of the important lessons learned from this IDN’s experience, ranked according to impact on the project:

  1. The development of interfaces from the warehouse management system (WMS) to other hospital systems (e.g., ERP) are not as easy as the WMS vendor will tell you. Specialized IT-skilled personnel are required from the IDN, and can be difficult to find. Significant development and integrated testing time is also required, often taking much longer than anticipated. The interfaces need to be developed and thoroughly tested as early as possible in the WMS implementation timeline.
  2. The actual times for major tasks will generally be longer than planned; it’s essential to build extra contingency time into the overall timeline for unexpected delays. For example, even simple storage equipment (especially if purchased in large quantities) can experience manufacturing delays; material handling equipment (e.g., forklifts, order pickers) can also have very long (six to nine months) lead times. The long lead time (10 months) for an emergency back-up generator for this facility caused a major delay.
  3. Volumetric data (e.g., cubic size, weight of items to be stored) is hard to obtain from outside sources, and the accuracy of the data from those sources can be suspect. This IDN had to devote two FTEs for nine to 12 months and purchase a costly weighing system to measure all of the items to be stored. This data had to be collected for each item and input into the WMS in order for it to function properly.
  4. There are numerous systems data and process issues related to item units of measure (UOMs) which should be addressed early in the process. For example, what UOMs will be purchased? What UOMs will be issued for each item? This has to be standardized throughout the health care system for every item. Also, many items have three to four different UOMs which must be identified with conversion factors and then weighed and measured. Some manufacturers and distributors do not regularly ship their items in standard case or box sizes with consistent multiples of smaller UOMs.
  5. An unexpected loss of key resources may occur, especially at critical times in the implementation process. (Three key project team members on this project were lost in the middle of the project for various reasons.) It’s important to remain flexible and have contingency plans in place for when this happens.
  6. To achieve an appropriate amount of employee training and testing, significant planning and overtime is a must. This can be an issue, especially when you’re keeping current operations going with the same personnel.
  7. The capital budget should have a 40-50% contingency for unexpected capital purchases (e.g., generators, lights, signs, dock equipment, furniture, price increases, etc.).

Although the challenges to success were great, and the implementation project lasted much longer than anticipated, the IDN is now reaping many of the benefits of having a CSC. Customer service has significantly improved, inventories are better managed and reduced, and much greater efficiencies in the distribution and inventory management processes are starting to be realized. Procurement and logistics savings are beginning to be seen, and are projected to exceed a million dollars per year.

Hopefully the lessons learned by this IDN will prove to be valuable for other CSC implementations.

About the author. With more than 30 years of experience in the health care industry, Jim Richardson has partnered with GPOs, manufacturers, distributors and service providers to implement new agreements, business processes, programs and technology solutions, bringing millions of dollars in savings to health care organizations. He has managed a variety of successful supply chain projects for more than 100 hospitals and IDNs in the U.S. and Canada. He is particularly experienced in logistics and inventory management solutions, including warehouse management systems, PAR level department inventory management, and transportation management solutions. Richardson is a member of the Association for Healthcare Resource & Materials Management (AHRMM) and holds a Professional Engineer (PE) certification, as well as a Lean Six Sigma Green Belt (LSSGB) certification.

Published: July 8, 2019