how to find $650,000 in materials savings

How to find $650,000 in materials savings

ResultsLab, Inc ©2013 2

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

Guess Who?


Plan of Action

Savings were targeted from three areas:

– Reducing PAR Levels– Reprocessing single use items– Better pricing from vendors /

consolidation


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



• Over several weeks MHS analyzed and compared what was found in inventory against the client’s 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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BX 6 601859 RELOAD 60 MED/THICK USS 118 $34,043.00 19.67 $288.50 Exces s PI Val ue 60 $1,732.70 ($16,733.00)

BX 6 601490 RELOAD 60 VASC/MED 6/BX COV 98 $26,143.62 16.33 $266.77 Exces s PI Val ue 48 $1,600.63 ($13,338.58)

EA 1 890230 PROGRAMMABLE SHUNT COD 7 $29,988.00 7.00 $4,284.00 Exces s PI Val ue 5 $4,284.00 ($8,568.00)

BX 6 601917 RELOAD 60 CVD VASC/MED USS 98 $18,790.00 16.33 $313.17 Exces s PI Val ue 36 $1,780.33 ($7,516.00)

CA 5 600112 DURASEAL DURAL SEALANT 5/BOX USS 30 $20,100.00 6.00 $670.00 Exces s PI Val ue 20 $3,342.86 ($6,700.00)

BX 6 602684 EGIA30 CVD ART VAS MED RELOAD COV 63 $9,514.03 10.50 $179.51 Exces s PI Val ue 18 $1,077.06 ($6,282.85)

EA 1 601924 HAKIM VALVE INLINE MED LO 70MM JJ 9 $12,852.00 9.00 $1,428.00 Exces s PI Val ue 5 $1,424.00 ($5,712.00)

EA 1 601434 STENT FULLY COVERED 10X60 BOS 5 $14,221.70 5.00 $2,844.34 Exces s PI Val ue 3 $2,846.72 ($5,688.68)

EA 1 602822 NANOKNIFE 25CM ELECTRODE PROBE ANGI 7 $12,701.99 7.00 $1,814.57 Exces s PI Val ue 4 $1,808.97 ($5,443.71)

EA 1 602500 NANOKNIFE 15 CM PROBE ANGI 7 $10,841.32 7.00 $1,806.89 Exces s PI Val ue 3 $1,804.78 ($5,420.66)

What MHS Found in Inventory

What MHS Suggests for PAR Levels

Savings if inventory is dropped to suggested level



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



• 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



• 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

2 ea

Item Number:1 bx

Item Description:

Cost Each: Main Storage Location: $ 360.06 OR Storage RoomPAR Level

6Barcode:

Reorder Quantity:

HARMONIC WAVE18S 6/BOX

When restocking, please place

in a Rubber Band with this card.

Time to Reorder!

600949



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



• 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



• 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



• 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



• 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.


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 Sustainability’s website got a response that same day – they came in to present 3 days later

• The client’s materials manager (who was the one looking into it), magically, was able to get an appointment with SterileMed the next week


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


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 client’s 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


Put It All Together

Opportunity Savings

PAR Reductions $402,000

Reprocessing $148,000

Trocar Consolidation $21,000

Total: $671,000

how to find $650,000 in materials savings

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