Healthcare Systems Reducing Courier Operations Cost A Case Example

1
Healthcare SystemsReducing Courier Operations
CostA Case Example
2
Contents (page number)

• Introduction
• Clients current courier network
• Project objective and tasks overview
• Network modeling results
• Conclusions
• Courier operations insights from other healthcare
  networks
• About Pollock Logistics Consulting, LLC

3
Introduction
Pollock Logistics Consulting, LLC (PLC) has
recently completed a study of a major healthcare
providers courier network in which we surfaced
significant - and real - cost savings. On
the following slides, we present, at a high
level, selected findings and conclusions that
should be of interest to other heathcare
providers seeking means to reduce costs without
sacrificing service provided to patients and
internal clients. Wed be pleased to discuss
how we might be of assistance.
4
The Clients Courier Network
The courier network was large, complex, and
fragmented.

• Over 14 classes of materials transported
• E.g., specimens, X-ray film, medical records,
  accounting records, mail, reports,
  pharmaceuticals, surgical trays, stat supplies,
  physician supplies, dialysis machines, bank
  deposits, inter-office correspondence.
• Serviced over 1,000 pickup or delivery accounts,
  and 250,000 stops/year within a 60 mile radius
• hospitals, clinics, life-care facilities,
  physician practices, veterinary facilities,
  personal residences, others.
• 3 distinct internal groups ran approximately 40
  routes
• 35 vehicles of various makes/models were fueled,
  serviced and domiciled separately
• Extensive use of multiple outside courier
  companies represented over 30 of total courier
  costs

5
Project Objective and Tasks Overview

• Objective determine the opportunity to maximize
  the couriers operational efficiency and
  meaningfully reduce costs, while maintaining or
  service.
• Tasks Overview
• Interviewed users of courier services and those
  that manage, schedule and conduct such
  operations. These included seven user sites,
  internal fleets, and major outside vendors
• Collected, analyzed and summarized current
  courier cost and route information.
• Performed selected, detailed route-re-engineering
  analysis.
• Developed model of current routes and
  alternatives using UPS Logistic Technologies
  RoadNet route scheduling and management software.
  
• Synthesized findings and developed conclusions
  and recommendations.

6
Courier Route-Modeling Results
Modeling predicted significant savings for the
main courier.

• A 25 reduction of an estimated 810,000 annual
  miles, calculated at the fully loaded rate of
  1.25 per mile, translates into savings of over
  245,000 per year just for this one group. Also
  of importance is the significant improvement in
  service and accountability vis a vis the client
  as measured by on time delivery.

7
The Bottom Line
We concluded the following based upon our
interviews, cost analysis, engineering work and
survey

• Courier operations are highly fragmented.
• Transportation best practices include, as a
  minimum, central visibility and control of
  product movement in a network.
• There is significant redundancy in the network.
• Couriers crossing paths, making the same stops.
• Use of outside couriers is excessive and well
  beyond that of other healthcare systems
  interviewed.
• There is nothing to suggest that couriers, given
  proper training, cannot handle multiple classes
  of products.

8
The Bottom Line (contd)
We concluded the following

• Gross savings of over 500,000, including an
  approximate 8-10 driver-FTE headcount reduction,
  should be achieved through
• central management of all courier operations,
• use of dynamic route scheduling
• a driver and vehicle management technology
  platform for communications, tracking and
  performance measurement.
• Such change would explicitly consider client
  service needs, a reasonable return on investment
  in any technology, and a smooth transition to the
  future state.

9
Survey of other healthcare providers
10
Survey Insights
Areas probed

• Scope of locations
• Courier infrastructure and management
• Outside/outsourced courier services
• Equipment and technology
• Recent changes to the operations
• Desired/contemplated future changes.

11
Survey Insights
Nine participants ranged in size and courier
strategies (Respondents names masked for
confidentiality)
-----Healthcare provider survey participants-----
12
Survey Conclusions
We concluded the following based upon these
interviews.

• There is mounting concern over the inefficiency
  and high costs of courier services.
• Mergers, in some cases, have tended to lead to
  fragmented operations.
• There seems to be a trend toward central dispatch
  for improved efficiency, service and control.
• Use of outside couriers is typically less than
  10 of total courier activity.
• Where outside couriers are used, one to two, at
  most, are under contract.
• The trend to electronic transmission reports,
  film, coding - of information is reducing courier
  volumes, if not sites visited.
• Outsourcing courier management to a third-party
  provider is of interest.

13
Overview of Pollock Logistics Consulting, LLC
14
PLC

• Formed by Ted Pollock in 1998
• Foundation of the firm
• 26 years of logistics consulting and 6 years of
  directing logistics planning for two major
  companies.
• Network of independent consultants and
  special-purpose firms formed over the years.
• No one on staff resources are tailored to the
  needs of each project
• Client industries include food and beverage,
  health care, industrial goods, retailers,
  chemicals, containers, electronics.
• Typical project objectives
• Reduce costs (network, distribution,
  transportation, inventory carrying costs)
• Support profitable growth
• Improve service (set goals, enhance network,
  warehousing, transportation, inventory policies,
  performance reporting)
• Integrate acquisitions.
• Tools
• Diagnostics (interviews, cause-effect
  diagramming, force-fields, etc.)
• Modeling
• Process mapping
• Benchmarking.