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Tracking your 'inbound': supply chain visibility yields savings, says one of the nation's leading shipping companies.

For years, the nursing home field has faced ongoing pressures to simultaneously improve care and reduce costs. Operating nursing homes is a tough business, with slim margins and top-line revenues largely controlled by Medicare and Medicaid. Both patient care and profitability depend on efficiency.

Over the past decade, as costs and administrative burdens have increased, nursing homes have taken many steps to reduce expenses. However, while many facilities have made great strides in cost control, the obvious targets for savings may already have been exploited. The focus is now turning to less obvious but potentially more lucrative efficiency opportunities, such as those buried in the organization's supply chain.

Supplies as a Cost Item

While labor costs are typically a nursing home's largest expense, supply costs rank close behind. Consider these healthcare provider statistics from various recent publications:

* Approximately 35 to 40% of supply-related costs are devoted to handling, moving, and processing material and supplies, compared with less than 10% for other industries.

* Purchasers spend approximately 40% of their time on manual processing of transactions.

* A single paper-based purchase order may cost anywhere from $75 to $140 to process. In comparison, transactions processed online--less common in long-term care facilities--can cost as little as $6 to $10.

Other industries--retailers, automotive suppliers, and consumer products manufacturers, for example--have already streamlined their inbound shipping and inventory management costs. It's time for healthcare to do the same. Nursing homes should reap the rewards of a more efficient supply chain.

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A Clear View Into the Pipeline

What facilities need is a win dow into the inbound supply pipeline to make it easier to identify true costs and get goods to the right place at the right time. Several notable institutions have found that one fairly easy way to substantially reduce costs is by getting a better handle on inbound transportation spending.

When organizations buy goods--from cleaning supplies to paper products--they're typically buying under a purchasing agreement with negotiated prices. In a significant number of these agreements, shipping and handling charges are bundled with the cost of goods, making it difficult for the organization to see what it's actually paying for the goods versus shipping charges. Many organizations are now asking suppliers to break out these charges, and the trend seems to be shifting in the "unbundled" direction. Many more procurement agreements include line-item charges for shipping and handling.

This makes it easy to see exactly what is being paid for inbound shipments--a necessary first step in analyzing and managing these costs. Armed with concrete knowledge about inbound shipping dollar volume, the organization can tackle the issue head on.

Technology Provides Visibility Tools

Innovative technology can improve supply chain visibility so that inbound shipments can be easily tracked and efficiently delivered. The key to visibility is the purchase order number that is shared between shipper, carrier, and receiver, and tracked electronically using a visibility tool.

What are "visibility tools"? An example: At UPS, we offer a free Web-based tool called Quantum View, which tracks the purchase order number to deliver a complete picture of shipping activity. Via Quantum View, an organization can access, download, and query shipping status information, and see when a package is processed, when it is in transit, when it will arrive, or why delivery might be interrupted.

Once the package is delivered to the facility's receiving area, another UPS technology called Trackpad integrates with an organization's internal system to process receipt of inbound shipments faster and more efficiently. When the delivery is received, package data are automatically transferred from the driver's electronic clipboard into the Trackpad software. An optional handheld unit allows receiving and delivery personnel to capture and store proof of delivery information as individual packages are delivered inside the facility. Both Quantum View and Trackpad can also be customized to trigger e-mails alerting users that a specific package has arrived.

Using pipeline visibility technology such as this, all of the captured information can be used proactively to help organizations make informed business decisions. Benefits include:

* Better cost management. Using a contracted shipping rate, the organization is already saving hard costs. With increased visibility, staff can quickly identify and analyze precise shipping costs for every package handled by the contracted carrier. Armed with these data, it's easy to identify overall trends and revise ordering strategies accordingly.

* Improved accuracy. By eliminating manual data entry and interfacing directly with an organization's internal systems, visibility technology significantly reduces human error. Electronically captured proof of delivery also minimizes misplacement and improves accountability.

* Increased productivity. Visibility technology eliminates a large amount of administrative hassle and paperwork. There's no need to manually record purchase order numbers on clipboards, no need to find and file shipping documents, and no need to call or e-mail to find out when shipments will arrive or where they are internally.

Better visibility is the way of the future in healthcare, and the technology for it is growing steadily. Radio frequency ID technology is already being used in some large institutions for supply tracking and inventory control. Advanced systems are even capable of detecting low supply levels and automatically triggering a reorder.

Defining Your Plan

Regardless of its size or sophistication, every organization can take several steps to begin getting a handle on inbound shipping and its costs:

1. Know your costs. Study your inbound transportation costs and figure out exactly what you're spending. What can you control? What can you manage under an inbound shipping contract appropriately "visible"? The potential savings may surprise you.

2. Talk to supply chain experts. More and more third-party carriers are offering healthcare-specific solutions. Meet with them to discuss how your organization might benefit. Smaller institutions may benefit from volume package delivery arrangements and Web-based visibility tools. Larger organizations, however, may want to investigate more elaborate visibility systems or even an outsourced traffic function.

3. Network with colleagues. Work with local and national associations to find out what the most progressive institutions are doing and what best practices and benchmarking research could shed light on opportunities to increase efficiencies for your institution. Sharing ideas and success stories advances the state of everyone's business.

With the increasing intensity of services, reimbursement uncertainties, and unceasing regulatory challenges, nursing homes know that finding new approaches to cost savings is imperative. As it turns out, the supply chain is full of opportunities for savings. Clear visibility into the supply chain and specifically managing its costs will yield rich rewards.

Kurt Kuehn is Senior Vice-President, Worldwide Sales & Marketing, UPS. For further information, visit www.ups.com. To send your comments to the author and editors, e-mailkuehn1006@nursinghomesmagazine.com.
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Title Annotation:featurearticle
Author:Kuehn, Kurt
Publication:Nursing Homes
Date:Oct 1, 2006
Words:1097
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