How One Supply Chain Leader Borrows Auto Factory Concepts for a Health System

With seven hospitals and multiple ambulatory centers, The Ohio State University Wexner Medical Center takes a standardized and data-focused approach to supply chain management.

While Hal Mueller worked briefly in healthcare before, the bulk of his corporate life was spent in purchasing at Ford Motor Company. Auto parts aren't healthcare supplies, but there are similarities. He brings that perspective to his work as chief supply chain officer at The Ohio State University Wexner Medical Center (OSUWMC). "In some ways, there are parts of the business world where healthcare gets closer and closer to a manufacturing environment," he says. "We talk about variation being the enemy of quality. We like to optimize variation; it's not about minimizing variation."

There are good clinical reasons for some variation, he notes. "That said, the manufacturing mantra is a standard bill of material, a standard bill of process." That allows the supply chain to remove unnecessary variation from the system, by connecting with clinical leaders and letting them guide the process.

Enlist the medical staff

As part of this clinical inclusion, Mueller helped hire a surgeon as the medical director of supply chain three years ago. This medical director spends 20% of his time on supply chain issues, and the remaining 80% on his clinical, research, and teaching responsibilities. "He represents the overall umbrella for all clinical specialties" in the supply chain realm, Mueller says. He oversees the associate directors of supply chain in orthopedics, cardiology, and nursing, and they all help vet potential supplies and liaise with the medical staff.

While OSUWMC is not the only medical center with that role, "it was a total win for us to decide to go down this path. I was ecstatic about the opportunity," he says. The group purchasing organization they're part of holds a regular forum of 15–20 medical directors of supply chains that meet to discuss issues.

Hal Mueller is the chief supply chain officer at The Ohio State University Wexner Medical Center. Photo courtesy of The Ohio State University Wexner Medical Center.

Commodity management and strategic consolidation

The OSUWMC includes seven hospitals with about 1,580 beds, and a number of ambulatory centers in the Columbus area. When Mueller arrived at OSUWMC in 2015, he brought commodity management and strategic consolidation of spending inside the sourcing team. Previously it was dispersed, disjointed, and inconsistent, with people approaching the market in non-standardized ways. To bring the functions together, Mueller's team divided the supplies into 210 commodity categories and divided those into three groups. The supply chain department focuses on one-third of those annually, usually renegotiating three-year contracts. This approach has enabled them to consistently go through their spend portfolio, addressing a subset of supplies yearly in a structured format in a repeatable process.

OSUWMC tries to include clinical information in sourcing. That means not just discussing vendors and pricing, but incorporating processes, component standardization, and utilization quantities. "Our mantra is typically, 'Use less, waste less.' It's a key element of what we do," he says. However, there is always an opportunity to improve upon the financials. The health system focuses on getting to industry benchmark pricing and usage levels.

Kanban inventory management

In 2017, OSUWMC began moving to the 2-bin Kanban system of inventory management. Each type of supply is placed in two bins, one in front of the other. When the first bin is empty, it's scanned for replenishment and the second bin is moved forward. As a standard manufacturing approach, Mueller says, it lets the health system see and track the product flow through the organization and provides data to use for procurement. OSUWMC can minimize the time spent ordering, not order to excess, and have almost no expired inventory. The supply chain department uses the data to determine how long each bin usually lasts. If the normal period for one supply is 10 days and the bin is depleted too quickly, there's a problem. It could indicate a larger bin is needed or it could be another issue.

The Kanban system allows OSUWMC to use a systematic, measured approach to the supplies and replenishment. "We can have a discussion based on real-time data as opposed to "it looks like we need more,' " he says. "We're trying to be a data-driven organization, which means you have to get the data."

Mueller says the Kanban inventory management process has been a huge success. "It was rewarding and surprising, the value it brought to our organization because of the visibility it gives you throughout the organization," he says. "The adoption rate from our partners and hospitals has been an interesting one." Initially the 2-bin Kanban system was not well received but now it's not only wanted but expected. It's shown the core competence of a well-trained supply team and provided value to the organization. "This has been an opportunity to look from the receiving dock to the bedside, and all the opportunities in between. It exceeded our expectations in how much it would help the organization."

Pandemic-related changes

Like other healthcare systems, OSUWMC's supply chain department had to make changes when COVID-19 hit. During the initial months of the pandemic, "one of the most important things we did was get control of the demand signal and get control of the receipt and the disbursement," Mueller says. Prior to the pandemic, any area of the organization could place orders with the distributor. If one department got its order in first, that department would beat out other departments for supplies like N95 respirators. "It prevented various groups from ordering 10 boxes," he says. Mueller changed the system so OSUWMC only placed one order per day, and the orders arrived at a central point for receipt. For scarce supplies like N95 masks, the health system scanned the masks as they handed them out to staff members for tracking purposes.

The next step was to stand up a warehouse in less than a month. OSUWMC transitioned from a large space used collectively by different departments, to a fully operational medical-surgical warehouse. Previously OSUWMC almost exclusively relied on its distributor for catastrophe-type surge supply requirements. "Like many groups, we decided we wanted a bigger buffer between ourselves from bedside to distribution," he says. The organization now maintains a 90-day inventory of certain supplies, like PPE.

OSUWMC worked closely with its own disaster preparedness team as well as others in Ohio. Daily communications with state government offices helped steer it or other organizations in need to vendors. They maintained the relationships, even with most PPE issues abated. With other supplies, though, it's like whack-a-mole. In the early stages, Mueller could look at a medical worker head to toe, to see what was needed. Now it's difficult to know each day where shortages will be. Between California port problems, national trucking issues, and aluminum shortages that affect crutches, "we're chasing a lot of product substitutions and product shortages because of freight challenges."

Priorities for 2022

As for OSUWMC's 2022 supply chain priorities, "we're trying to make sure we reassess supply resiliency," he says. The health system is in reactive mode, navigating supply assurance and disaster preparedness. Backorder management is a full-time job. "That will continue, I estimate, through 2022."

Proactively, Mueller's department is performing value-stream mapping to understand the entire value chain of what they buy, starting with raw materials. It's a team effort, as it works with the GPO to gain visibility. If a hurricane hits Malaysia, the department will know what components will be affected. While it evaluates suppliers, it's also proactively looking at diversity, to continue expanding on current programs.

Editor's note: This story was updated on December 2, 2021.