Ascension Health Improves Efficiency through Supply Chain Transformation
Ascension Health—the product of a 1999 merger of two health systems—is the largest nonprofit health system in the U.S., serving patients across the country through a network of hospitals, clinics, and related health facilities.
Despite its success as a merged entity, the organization was unable to coordinate the purchasing of services and supplies, or aggregate purchasing information, due primarily to a patchwork of 14 different legacy IT systems in more than 55 locations. Its high operating costs adversely affected profit margin and efficiency.
The Solution:
In early 2000, the Board of the newly merged health system retained Capgemini to examine how improving supply chain processes and enabling technology could benefit Ascension Health. Capgemini identified the components necessary for the organization to achieve a successful transformation, and benchmarked its existing processes against industry leading practices. Capgemini determined that an optimized supply chain could yield savings of $67 million over five years.
The Result:
Ascension Health’s new supply chain system outperformed anticipated cost savings estimates. The transformation project, which commenced in July, 2000, began quantifying cost savings in less than two years. In 2002, cost savings were projected at $11 million; actual savings were $13 million. In 2003, the cost savings target of $31 million came in at an actual of $50 million. And the $50 million target for 2004 was realized in the first three quarters at a total of $68 million, suggesting total savings of $80 - $90 million for the year.
“Capgemini was instrumental in not only helping with design but also implementation, and I think that was really the key to success, because they knew up front that they couldn’t recommend things that weren’t “implementable,” so I think that just led to the credibility of their recommendations. The assistance that they provided in implementing each and every recommendation that we came up with was invaluable to us.”
-- Mike Langlois, Senior Vice-President, Chief Supply Chain Officer, Ascension Health
How Ascension Health and Capgemini Worked Together
Ascension Health believed that a better-coordinated supply chain could sufficiently trim costs to produce a one-percent improvement in profit margin. Capgemini and Ascension Health collaboratively developed a comprehensive transformation approach that addressed all aspects of the supply chain, including logistics, distribution, contracting, and value analysis. The scope of the project included:
- selecting a new distribution partner for medical products and developing a consistent requisitioning process
- re-negotiating terms with the Group Purchasing Organization to permit selective participation by Ascension Health
- implementing infrastructure components and associated enabling technologies to transform processes and practices
Capgemini’s solution specialists complemented Ascension Health’s in-house resources. While Ascension Health focused on developing specific recommendations, Capgemini designed process models, developed agendas, facilitated discussions, and kept implementation teams focused on defined objectives.
Capgemini helped Ascension implement advisory councils composed of material management leaders, physicians, and other constituencies to guide product utilization, vendor selection, contracting, and requisitioning. Practitioners designed a global supply catalog of medical products as well as an eProcurement “front end” interface to purchasing functions to facilitate information sharing across the 14 different legacy computer systems.
The implementation featured a data warehouse and central repository that collected details regarding product purchases and utilization. It included system-wide access to strengthen decision-making and aggressive vendor pricing initiatives. Collectively, these components gave Ascension Health the tools it needed to advance in the marketplace with speed, knowledge, and agility.
With Capgemini leading the way, the implementation was achieved on time and under budget. Ascension Health expanded the new supply chain model across newly acquired facilities, adopting it as the only way to manage supplies and expenses over the long term.