Centralized Distribution for AboutHealth

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Centralized Distribution Network for AboutHealth

AboutHealth is a Clinically Integrated Network (CIN) made up of six of Wisconsin’s major healthcare systems that are dedicated to being the best at delivering quality, efficient healthcare in the state. Members include Aspirus, Bellin, Gundersen, ProHealth, ThedaCare and Holy Family. AboutHealth serves approximately 73% of the patient population in WI.

Project Objectives/Challenges

AboutHealth engaged Sedlak to identify potential opportunities for the AboutHealth owners to consolidate the distribution of their medical supplies. A centralized distribution network would potentially result in shared purchasing power increase, reduced operational cost, enhanced safety-ergonomics, improved service-levels (reduce cycle-time), and reduce supply chain disruption (part of risk mitigation plan).

Current Just-In-Time inventory strategy that is supported by their current wholesale partners (e.g. Medline and Cardinal Health) optimizes inventory costs, but:

Increases supply chain cost for 3rd party to process Lowest Unit of Measure (LUM)
Increases risk in the event of a supply chain disruption
Service-level in terms of cycle-time to hospital is increased

What Sedlak Did

Evaluated a centralized distribution network strategy that would potentially result in…

Shared purchasing power increase
Reduced operational cost
Enhanced safety-ergonomics
Improved service-levels (reduce cycle-time)
Reduced risk of supply chain disruption (part of risk mitigation plan)

Identified potential opportunities for the AboutHealth owners to improve their supply chain operations including the feasibility of consolidating the distribution of their medical supplies.

Results

Sedlak recommended a consolidation strategy for the AboutHealth owners that would be to combine the distribution function in as few facilities as possible to leverage operations, transportation, and buying power/mark-up savings:

One (1) consolidation services center (CSC) option conservatively pays for itself in 2 to 5 years, based on a capital investment of $6.0 to $18M.
Two (2) consolidated services centers (CSCs) would be the next best option if one (1) CSC could not be achieved, based on previous plans for the Gundersen organization CSC in West Salem, WI. This option is similar to the first option and conservatively pays for itself in 2 to 5 years, based on a capital investment of $5.6 to $10M.

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