St. Michael’s Hospital Supply Chain Improvements Recommendation

St. Michael’s Hospital is a Catholic teaching and research hospital founded by the Sisters of St. Joseph in 1892 to care for the sick and poor of Toronto’s inner city. Affectionately known as the Urban Angel, St. Michael’s is renowned for providing exceptional patient care. As downtown Toronto’s adult trauma centre, the hospital is a hub for neurosurgery, complex cardiac and cardiovascular care, diabetes and osteoporosis care, minimally invasive surgery and care of the homeless and disadvantaged. St. Michael’s is also one of Ontario’s major sites of care for critically ill patients. While one thinks of purchasing for a hospital, items such as medical supplies or large medical devices come into mind. However, one thing that is critical to hospital operation that most don’t think about is the purchasing of the food & nutrition commodity needs of the hospital.

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After all, the patients all have to eat at one point or another. Unfortunately as the spend for the food & nutrition commodity is considerably less than other commodities that the hospital spends their money on, it is one commodity that is often overlooked for a hospital’s overall supply chain process. The Food & Nutrition purchasing team of St. Michael’s Hospital, located in the heart of downtown Toronto is one of the hospitals that faces the challenges from its segregation away from the rest of the purchasing teams. An independent purchasing software, membership in a separate purchasing group, limited storage space, and constraint delivery times are some of the obstacles that limits the efficiency of the Food & Nutrition purchasing team.

There are steps that can be taken which will help improve the proficiency of the Food & Nutrition purchasing team at St. Michael’s Hospital. Ways to integrate as much as possible with the rest of the purchasing teams of the hospital as well as leaning out the supply chain process should aid these deficiencies in strides.

Issue(s) Identification:
The Procurement Services/Vendor Administration team at St. Michael’s Hospital is responsible for the procurement of all services and supplies for the Hospital. The department structure of Vendor Administration is one of teams, and each team is responsible for specific commodities within the hospital, reporting to the Manager of Vendor Administration. The teams breakdown are: Periop/Heart & Vascular/Medical Imaging Programs; Medical Programs; Pharmacy/Nuclear Medicine/Diagnostic Imaging/Labs/Research; Purchased Services; Facility Management-Environmental Services, Engineering, Housekeeping and Administrative Commodities; Food/Nutrition Services; Capital Equipment; and Data Management.

St. Michael’s Hospital is a member of the Group Purchasing Organization – Medbuy. While most of the purchasing teams for the various commodities at St. Michael’s do leverage this relationship, the Food & Nutrition purchasing team actually belongs to a different Group Purchasing Organization – St. Joseph’s Health System Group Purchasing Organization. The hospital’s main Enterprise Resource Planning System (ERPs) is Geac SmartStream. Geac is used throughout the hospital for their finance and purchasing needs, however due to the unique nature in which St. Michael’s handles its Food & Nutrition purchases, the Food & Nutrition team uses a separate purchasing system – CBORD. The separation of the purchasing group and purchasing systems has led to gaps in the overall efficiency of the hospital’s supply chain process. This separation means the hospital is not maximizing its purchasing power by splitting its spending with multiple group purchasing organizations.

The use of different ERP systems costs the hospital more money to maintain and makes data capture and reporting more troublesome. Both of which affects the business side of the hospital’s operation. Being a Toronto hospital located in the downtown core means that space is a premium. This is a challenge for St. Michael’s Food & Nutrition purchasing team as this equates to limited storage space for their inventory. Working with a just-in-time inventory methodology leaves the team very little room for error when it comes to order placing, and the added pressure to ensure that the vendors picks and delivers the goods accurately and on time. The hospital further complicates this issue by accepting deliveries only until noon. Environmental and Root Cause Analysis

Part of the reasons why the way the purchasing teams at St. Michael’s is structured the way it is was simply due to organizational structure caused by limited funding. There used to be a single purchaser that source Food & Nutrition products for the hospital and the purchaser used to report into the Food Services department. Due to cost cutting initiatives directed by the government awhile back, St. Michael’s went through a restructure where Accounts Payable and Purchasing got merged to a single department – Vendor Administration. The Food & Nutrition commodity got rolled into this restructure and reported into Vendor Administration instead of Food Services. The challenge was that the Food & Nutrition buying was already well established with their association with the St. Joseph’s GPO where a majority of the purchases were already done through contracts.

Other commodities were playing catch-up in regards to cost savings through contracts buying and decided that Medbuy was the way to go. With so much dependencies and history already with the St. Joseph’s GPO, it was thought to be a smoother transition for the Food & Nutrition team to carry on status quo while the rest of the commodities leverage their newly found Medbuy relationships. The Food & Nutrition purchasing team is responsible for all Food & Nutrition product needs of the hospital, serving mainly the Alternative Revenue Channels department and Patient Food Services. The requirements of the Patient Food Services Department is particularly unique as it has to concern itself with the various dietary restrictions of the patients that St. Michael’s serves. This is done through a special system that the Diet Office of the hospital uses called CBORD. This system allows the hospital to keep track of the various patient diets, various recipes and menus, and in turn generates requisitions for the purchasing team to place their orders with. While the Geac SmartStream system that the rest of the hospital uses for purchasing and finance serves the need for the rest of the team, The CBORD systems is designed for Food Service industries and the linkage with the Diet Office made it an essential tool that the Food & Nutrition purchasing team have to employ as their purchasing system over SmartStream which does not have this capability.

From a logistical standpoint, the Food & Nutrition purchasing team faces two challenges – space & time. Initially a housing complex for the Sisters of St. Joseph in the late 1800’s, St. Michael’s has gone over numerous facelifts and constructions to get to its current state. As such, space planning for certain areas of the hospital is not always optimal especially compared to newer hospitals which were designed specifically as a healthcare facility from the get go. The lack of storage space has forced the team to employ a just-in-time inventory methodology. With the delicate balance of food & nutrition commodities being perishable and as well as little to no substitution of products due to specific patient dietary requirements, this makes the accuracy of every order and delivery critical to the operations of the hospital. The team is further challenged by the constraint of the delivery times. To keep operation costs low, the hospital currently only accept deliveries until noon. Alternatives and/or Options

As many challenges as the Food & Nutrition purchasing team at St. Michael’s faces, there are possible alternatives that may help alleviate some of these obstacles. Though Food & Nutrition purchases are currently tied to the St. Joseph’s GPO, consolidating all the hospital’s purchases through Medbuy makes sense. The hospital will be dealing with a single GPO, where all spend and usages can be tracked by a single entity. While changing over all the contracts as well as making sure all the products will be the same or compliant for patient use is a huge endeavor, the endeavor should pay itself off in the long run as Medbuy is a larger GPO than St. Joseph’s and therefore should have greater purchasing power and lower price leverage than St. Joseph’s.

While the requirements for the Food Services department is indeed unique, having to run two separate procurement systems is a waste of resources. This should not be a unique situation that St. Michael’s faces only and other ERPs employed by other healthcare institutions should serve as alternatives to be looked at. System changeovers are huge undertakings no doubt, but it maybe worthwhile for the hospital to look at other more widely used ERP systems in the industry so that it can streamline itself with other leading healthcare facilities. Being bound by the limit of space and resources is a reality that many organizations face. However if the hospital wants to continue to provide top of the line patient care, it needs to find ways to modernize itself. Space planning specialists and new storage solutions should increase current storage capacity. Longer shifts with less staff per shift should keep costs relatively the same while providing a longer window for deliveries. Recommendation and Implementation

Adding the Food & Nutrition purchases into the Medbuy umbrella means more spend with Medbuy overall and gives the hospital more leverage over all the available Medbuy contracts. Medbuy will also be able to give a more holistic view of the hospital’s true spend. As the St. Joseph’s GPO currently serves healthcare facilities in the Hamilton/Niagara region mostly, moving to Medbuy allows St. Michael’s to share requirements with healthcare institutions that are closer in geographic location as well as similar clientele. While changing over all the contracts is a huge undertaking, this can be achieved by moving new contracts to Medbuy as individual St. Joseph’s ones come up to terms. Moving to a single ERP system will help improve the overall efficiency of the hospital’s supply chain. Currently Geac & CBOARD does not link to each other, and as such purchasing data are stored in separate databases. This costs the hospital extra resources to maintain two different systems and two separate databases.

CBORD also does not have a financial stream, and accounting information has to be uploaded to Geac through a separate process, causing redundancy in the purchasing process. While a system changeover is a huge undertaking, switching to an ERP system that is Oracle or SAP base like Ariba should pay itself off in the long run by lessening resources and redundancy. As much as St. Michael’s has been a landmark in Toronto’s downtown core, a face-lift to the building would certainly help better prepare it to serve more patients in years to come. St. Michael’s has already begun taking steps with the introduction of the Li Ka Shing Knowledge Institute back in 2011, and a rebrand of the hospital took place in 2010 to better reflect its focus into medical research as well as patient care. Current plans are already in the works to expand the hospital in 2014 that will help see the hospital gain 250,000 square feet of space. Monitor and Control

Some of the recommendations made can be easily measurable, while some may take longer time to come into fruition. Savings from switching all purchases to Medbuy can easily be captured by comparing spend reports or pricing differences for various products between the two GPO’s. The return of implementing a new ERP system will take longer to capture, as one will need to factor in the resources saved versus the overall cost of the implementation both for software/licensing as well as labour hours. Whether or not an increase in storage space will truly improve the overall efficiency of the overall supply chain process maybe something that is more intangible to measure. Conclusion

While there are several obstacles that are currently impeding St. Michael’s purchasing operations from running at peak efficiency, it appears the hospital is on the right path in correcting some of the issues. The expansion project in 2014 should help modernize the hospital and will lead to the hospital in providing excellence in healthcare for the city core for years to come.

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