The following is an excerpt from Repertoire May’s cover story, Under One Roof. To read the full article, click here

As hospital systems acquire physician practices, IDN supply chain executives should take the opportunity to step back and evaluate their distribution options, says Jamie Kowalski, a Milwaukee, Wis.-based supply chain consultant. And they have several. They can maintain a dual distribution system, with one primary acute-care supplier and one primary non-acute-care supplier. They can try to use one supplier for all sites. Or they can do it themselves. All options require work and thought.

For example, if the IDN decides to maintain two distributors, the supply chain executive, along with his or her distributor partners, need to rationalize the workload, says Kowalski. “The small hospital in the IDN might be consuming no more than a large clinic. Because of the volume and frequency of delivery, it might make sense for the hospital distributor to distribute to some of the clinics and ambulatory surgery centers.

“They need to ask, ‘Here’s what we have, now what makes the most sense? Who should be doing the delivery — given the distances, variety and frequency — that will get me, the customer, to lowest cost?’”

The lowest-cost option might be self-distribution, says Kowalski. “I defy anyone to convince me that the most cost-effective model” is to rely on a multiplicity of distributors, express companies, courier services, etc., to drop off products to multiple locations in the IDN. “You see there are hundreds of players, and you have to ask yourself, ‘Isn’t there a better way?’”

Self-distribution can work, says Kowalski, provided:

  • The supply chain leader has the skill to pull it off.
  • The organization isn’t afraid to take a risk.
  • The geography of all facilities lends itself to self-distribution.
  • Clinicians are willing to standardize on products across sites and hence, reduce SKUs in the central distribution center.
  • The organization is willing to invest in technology, such as a warehouse management system.

 

“IDNs are already going to physicians offices for lots of reasons,” says Kowalski, who has consulted independently and on behalf of distributors. They’re delivering specimens, mail, records and film. “Intersite transportation is huge. If they could add a toteful of supplies, they’re delivering it for nothing. That’s something a distributor can’t do.”

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