employees, 22 hospitals, 185 clinics, and 26 retail pharmacies, plus a health plan. The distribution center will support
all operations for all of the hospitals, the clinics, and our
home-care service.
QWhat functional areas does the supply chain center handle, and what makes that unusual?
A The whole campus totals about 327,000 square feet of building space, but only 160,000 of that is the distribution center. The administrative building
is 60,000 square feet, and there’s a 40,000-
square-foot materials management and
logistics wing. We also have a 60,000-
square-foot ancillary services building.
There are other, similarly large DCs in
the health-care industry, but few are built
adjacent to or combined with supply chain
management functions the way ours is.
Everything that’s involved in managing our
supply chain is in this one center: purchasing, accounts payable, sourcing, analytics,
information systems, logistics—including
our courier department, which has 140
people and 80 vehicles—distribution, and
warehousing. We have a call center for supply chain functions and a medical-surgical recall management center.
Sustainability also reports to supply chain.
We also put waste stream management, publishing services, and linen services under the supply chain function. For
example, we have a central laundry that reports to me, and
linen services is co-located in the same facility so that we are
now cross-docking linens to hospitals. That’s unique in
health care, where they typically don’t manage these types
of activities as rigorously as other aspects of the business.
Generally, if health-care providers have extra money, they
spend it on clinical care. They don’t realize that having poor
technology and processes does impact clinical care.
We evaluated 12 to 15 other programs [for possible location at the supply chain campus]. We selected whichever
ones had the best business case. Some we own, and some
are outsourced but we control them.
QYou expect savings of about $200 million over the first five years the supply chain center is in operation.
Where will those savings come from?
A The savings will come from a number of areas, start- ing with managing the contracts for and distribution
of our basic medical and surgical products. This includes
over 200 contracts with 7,000 products. Some of the savings
will come from lower pricing. More will come from efficiencies—fewer touches—and even more will come from
increased service levels that will impact patient care and
remove the supply burden from the nurses. Also, from one
distribution center, we intend to reduce by
one-third the 15,000 road miles we put on
to deliver products and equipment to our
facilities. We will cross-dock many other
products from other supply chains that
make sense—clinical, pharmaceutical, lab,
IT, linen, food, MRO [maintenance, repair,
and operations], etc.
But we expect four other areas, from
our ancillary services that are co-located
at the supply chain center, to generate
more value and savings. The first is pharmacy services. We installed a 20,000-
square-foot pharmaceutical fulfillment
center and invested in $8 million to $10
million worth of robotic equipment. We buy pharmaceuticals in bulk and use the robots to break them down and
prepackage orders. That way, every hospital doesn’t have
to buy in bulk, which means they don’t have to buy more
than they need. This system helps us manage expiration
dates, too. We expect to reduce pharmaceuticals inventory for hospitals and our 26 retail pharmacies, many of
them in our clinics, by 40 percent. We have a pharmacy
call center on site, and we can take advantage of the warehouse and courier services being located together on the
same campus.
Number two is printing. Before, printing was being done
all over the place. Now, we print 800 million pieces a year
coordinated from this one location for the whole company.
The supply chain function manages it, and we see lots of
opportunities to reduce costs.
Third is IT asset management. We have centralized the
storage and shipping of equipment, and we use our own
couriers to deliver things like laptops, printers, and copiers.
We ship out about 1,200 devices a month. All of the used
