Part 2: Strategic sourcing and Innovation in Healthcare Supply Chains

Transcript

Introduction to Automation in Supply Chains

Speaker 1 0:03

This is Joe with St Onge Company , welcoming you back to Taking the Supply Chain Pulse for part two of our discussion with George Godfrey . George is the Chief Supply Chain Officer and the Corporate Vice President of Financial Shared Services at Baptist Health of South Florida . Last week , george discussed contingency planning as well as the integration of technology and automation to address supply chain disruptions . As we continue the conversation , he'll share with us the impact these techniques have had . Let's listen .

Speaker 2 0:34

Please tell us what CRM stands for . Let me tell you why I say that because I was a supply chain leader for 30-some years and I didn't ever hear the term CRM until I went into sales , and so I would guess that there may be folks out there listening to this that don't know what CRM stands for . So tell us about it .

Speaker 3 0:56

Well , unfortunately , salesforce messed this up . So Salesforce came out with customer relationship management and their name Salesforce . It should have been supply force and it should have been supplier relationship management , and their name Salesforce . It should have been supply force and it should have been supplier relationship management . So what we're doing is taking a technology that was designed for people in sales and we're applying it the opposite way for people that are in supply chain , and basically the technology allows for automated communication and deployment of communication . And so let me walk through the match exception application . We now have a match exception .

Speaker 3 1:35

Every day the ERP system runs . If we have any match exceptions , it says create a case . When it creates the case , it also runs it through a special diagnosis and we use ERP data to understand why did this match exception occur ? There was a missing delivery ? Did they short ship ? Did they use the wrong PO ? Is it duplicate PO ? And what we do ? We put it in 15 different reason codes based upon data that's available to us in the ERP . Upon those reason codes , we now have a call to action for each reason code , who needs to do what ? And so the computer puts it in reason code number six and says oh , fred , you messed up . You sent us a duplicate invoice and it sends you an email , fred , that gives you all the data associated with the invoice . That's a match exception . It tells you how we diagnose it . It gives you what action buttons in that email it says would you like to issue a credit memo ? Would you like us to remove the invoice ? Would you like to dispute it ? It gives you different action buttons that you select and you send it back to us . The beauty of this is a resource that Baptist has never touched it . So we have a match exception .

Speaker 3 2:45

The computer auto generates a case , auto diagnosis , auto sends you the call to action . It monitors the call to action . So if you don't respond , it escalates . It sends you in the follow up . Then we get the call to action back and the match exceptions are resolved . Now we did it in a bidirectional communication platform , meaning that we're not using robots to do this . Just in case , fred , you need to communicate and say , george , no , I need further information , or no , it wasn't a duplicate invoice , I shipped you two shipments or something to that effect . So we wanted the ability to do bi-directional communication .

Speaker 3 3:23

But the important part is now we have clarity on what I call a working process .

Speaker 3 3:28

If you're managing this invoice match exception application task outside of a system , you really don't have visibility of who's sending emails to whom , how long they've been pending , you know , are you using templates for the call to actions ? You don't have the visibility to understand what suppliers are not being responsive , what departments are not being responsive , and so you're unable to take action . And I find , in all cases , management is really good at taking action when they have knowledge . You know , you give me knowledge . It's easy for me to make the right decisions .

Speaker 3 4:03

When you don't have that knowledge , you really can't make a corrective action . It's been a game changer for us . Our invoice match exception resolution time is now under nine days for the whole system . Industry average is probably about 65 days , and so being able to resolve these issues in an automated process and having our resources now instead of chasing down invoice issues , these resources have now pivoted and they're now working on the 75 back orders that I have for surgical cases much more strategic , much more important to our organization than handling match exceptions . It's just . It's just been a game changer than handling match exceptions .

Speaker 2 4:46

It's just been a game changer . So you said you had like 1,200 back orders on a given day . How many unresolved invoices would you generally have ?

Speaker 3 4:57

Prior to this technology , we would have 7,000 to 12,000 . It would vary . It would vary If we were good at it and get down to seven thousand . Then we take our eye off the ball and get up to twelve thousand , get some credit holds . Now we we never are above 900 , um , you know , and we're running about 45 to 50 000000 POs a month , and so it's just , it's night and day different . And then the age of the eight or 900 that we have are , you know , by average they're all being resolved within nine days .

Speaker 2 5:40

George , I didn't ask you how many physician preference cards you had in your system . I asked you how many .

Speaker 3 5:47

I mean that's amazing , it's staggering , it's amazing . Yeah , we've now partnered with Salesforce . We partnered with Salesforce five years ago when we started developing this and they quickly they're in the sales organization . They quickly said , hey , the way that Baptist is managing invoice match exceptions is probably the same way . You know anyone's doing it in Texas or California or wherever . You know how do we partner with you , baptist , to be able to bring these applications to market ?

Speaker 3 6:17

So we started having their programmers fortify the system , knowing that they wanted to take it and commercialize it , and so we did that , and then we certainly have debugged the system , then the beta test , and now they're out on a national basis promoting it under the product name Health Chain , and what we're seeing is there's systems that have twenty five thousand match exceptions and you know , staggering numbers and and there's not not an automated way of dealing with it , in that this technology gives those systems the the ability to automate it and to have it under control the ability to automate it and to have it under control and , more importantly , that visibility standpoint of truly understanding what's going on , because there's hundreds of millions of dollars happening within that match exception and there's high potential for leakage .

Speaker 3 7:16

And when you ask me about financial pressures , we can't afford to be paying the wrong price for something . We can't afford to be paying less price just because we're slow on updating our item master in some cases and things like that . We have to move quickly and if we are paying a list price , don't do it twice and attack those problems . Very , very rapidly .

Speaker 2 7:37

Yeah , and one of the things that you know occurs to me , as you're saying , all this is one of the problems we've always had in health care is matching expenses to activity , and if you have 12,000 unresolved invoices out there , then they haven't been expensed correctly because they haven't been resolved . So you can't say , well , I did 300 procedures last year or last month and my expenses were X . Then the cost per procedure is easy . You can't , because you never have relevant and timely data . And if you're down to nine days now which is really amazing , which is really amazing then that's giving you information that you can use to run your enterprise much better . Is that fair to say ?

Speaker 3 8:29

That is . And what's also interesting and we've learned this during this multi-year journey is a lot of providers were trying to fix the problem on the front end , which makes sense hey , if I don't have the match exceptions , then I don't have to deal with it . And this concept of the perfect order or concept of GHX acknowledgements being able to manage them in a timely fashion to prevent match exceptions . I can tell you it doesn't work . Last year year we're on the lowest match percent of match exceptions . We still have thirty four thousand match exceptions .

Speaker 3 9:04

And what we find is suppliers they get , they get out of whack , it doesn't matter . You could have a contract and all of a sudden , and they're billing properly and all of a sudden something happens in their system and you start generating match exceptions that that was caused by some human updating some file and things like that . So match exceptions occur regardless of what you do on the front end , Putting an automated system on the back end to address it versus trying to fight the problem at the front end and the back end . We found it to be far more efficient just to put it back in and resolve it in a very fast manner Because , by definition , a match exception , someone's right , someone's wrong and driving to a decision of who's right , who's wrong in a rapid time frame equates to less problems . It equates to just a much more efficient way of dealing with it , just a much more efficient way of dealing with it ?

Speaker 2 9:58

Yeah , and what job description is the person in your supply chain that deals with these ? Is it a ?

Speaker 3 10:09

buyer we don't have any ?

Speaker 3 10:10

Yeah , we don't have . It's neat , we don't have anyone dedicated to match exceptions at all . We used to be heavily influenced by the buyers . We now all price exceptions now go to contract administrators because it's hey , is your contract right , yes or no ? And if it's right , we want the contract administrator to know that the supplier is charging the wrong price and so that's part of supplier management and that has not been a burden at all , shifting that away from the buyer because the buyer is really not responsible for that contract price at . The buyers touch if there's questions and things like that , they're touching those . But their jobs have really pivoted . They probably 99 percent invoice match exceptions five years ago and they might be 2 percent match exceptions now and we're focused on negotiating better pricing and expediting items that are hard to get hard to get .

Speaker 2 11:11

So , in effect , you've accomplished the same things via software as in other areas , such as moving product , can be accomplished by robotics , and that is , you have lifted the load off folks who have a task so that they can become more effective and efficient . As something else , that is at least equally and maybe when you're down to do I need something for surgery tomorrow more important than resolving the issue whether it was $1.89 and they charged me $1.92 for something .

Speaker 2 11:39

So it's a unique understanding of the value that technology can bring . When you also understand and I think the key issue here , george and I'm not , you know , trying to butter you up here , but the key issue is understanding of the process , and you know it's people , process and technology and also being able to think . What was your undergraduate degree in Supply chain materials management ? You're not an industrial engineer .

Speaker 2 12:11

Okay , I get in trouble for telling these guys that they think in a linear fashion and I didn't think you could have been an industrial engineer because I don't think they would have been able to get abstract enough to go , hey , although we do it , I will say at St Onge , we use our CRM to totally manage every project that's out there . Why ? The same thing you did . You know all the elements of the process and you plug them in and everybody knows their responsibilities , they know the next step , they know what they're supposed to do . That was great . That was great thinking on your part . But it really took three sort of disparate things people , process and technology with a common understanding of how you could bring them together . And I wanted to bring this conversation out because I'm sure there are a lot of supply chain leaders out there that may be struggling with similar issues , and if they can think , hey , we already have these components here , how can we integrate them to get something done ? Is that fair ?

Speaker 3 13:19

Yeah , it is . You know , we took the same approach after we did that first application and applied it to contract renewals , and this is exactly the same thing . Okay , I need a call to action . I have a contract that's expiring 90 days from now . I create a case . I manage the communication of that contract renewal within the case .

Speaker 3 13:38

To your point , fred , so I have complete visibility . I have , last time I touched it , who didn't respond , who did respond ? All the pricing , all the attachments , all the attachments all in one place and it becomes a system of truth for communication . You know , erp is a system of truth for transactions and then once you , once you leave , leave ERP and you go to Outlook , you lose any system of communications within Outlook . It's just emails that are not tied to something . So , yeah , it's very much . You can build upon it , you can leverage it . And when you're saying people , process and technology , now what Salesforce is trying to accomplish is making it easy with a plug-and-play application . That's saying you don't need to recreate the wheel . Here it is , if you want to automate your invoice match exceptions , to plug this system in and turn it on and it will start to deliver results . So pretty cool .

Speaker 2 14:36

Yeah , and another thing , george , and you know , this healthcare supply chain is falls in love with terms . They use them . They use them without understanding what they mean . Resiliency is , it is the big . The big term that everybody uses is , though , without understanding what they mean . Resiliency is the big term that everybody uses as though they know what it means .

Speaker 3 14:53

How do you define that ?

Speaker 2 14:56

That's a whole other episode . I used to tell people if I had five people in a room defining it . We've had 12 definitions , but people , process and technology is a common . It just falls out of people's mouths . And what I wanted , what I'm so happy that you came on to talk about , is you . You use people , process and technology , and I would say that the key element to all that is an understanding of the process . That is an understanding of the process , uh , you know , I think that is that is , uh , the real thing . But you have actually brought that concept to life and I am I'm I'm thankful for you taking the time to talk with us .

Speaker 2 15:37

Um , I always have a uh , not even a soft spot . I find it hard to talk about baptist without , um , you know , getting emotional . You , you guys , are the best . The first place I worked after I got out of the military is Baptist Hospital in Miami . The place I work now , st Ange . You both share things . We both are among the best places to work in the country and that's not by accident , and I am so proud to have been associated from the start with an excellent company and also , where I am so proud to have been associated from the start with an excellent company and also where I am now . And you know , although , although you went to Florida State and I have to , I have to accept that they might have some good people too .

Speaker 3 16:20

You are . You are the best buddy . Building upon the culture and the foundation that you laid in the late 60s at Baptist has been fun . You know it didn't take us long to fix all the things he broke , but anyways , from a UM graduate , it's been a pleasure being part of your show and thanks for having me .

Speaker 2 16:41

Yeah , well , hey , we'll probably get back together , because there are some other topics I want to talk about and I'll just sort of put a teaser in here . One of the things is the role that you interact with what used to be called group purchasing organizations and now are , I guess , service organizations , how you interact with different folks and how you collaborate with suppliers in an integrated fashion as opposed to an adversarial fashion . I mean , these are things that I know you can bring some good insights to , and , george , you know , it's really been great to meet you . It makes me proud of my beginnings to know that that same level of excellence continues today , and we appreciate having you on the show . Thank you .

Speaker 1 17:32

If you missed Part 1 with George Gottfried , be sure to connect with us online , where you can find all of our episodes . While you're there , don't forget to like and subscribe to stay up to date with Fred as he guides us through the evolving healthcare industry . See you next time .