Consolidated Services Centers: A Big Decision – Do It Right

The COVID pandemic of the past nearly two years has acted as an accelerator for things that were already in motion. Among those things that it brought new attention to was the way healthcare organizations approached their supply chains.

For well over a half century, most healthcare supply chain operations were extremely rudimentary when compared to those of other industries. Key components such as contracting and distribution were outsourced to Group Purchasing Organizations and Supply Distributors.

Healthcare supply chains were considered to be transactional “departments” as opposed to being strategic components that were essential to the success of the enterprise. This arrangement worked well enough as long as hospitals remained single entities, but with the development of healthcare systems and Integrated Delivery Networks (IDNs), more was demanded of the Supply Chain.

It was during the early stages of IDN development that visionary leaders such as Bob Simpson of Consolidated Services of Florida (LeeSar) and Brent Johnson of Intermountain Health saw the value of combining the supply chain operations of their component members into a single site from which all locations could be served better and at a lower cost. At first, warehousing and distribution would be at the single location. Then, as years went by and opportunities presented themselves, other functions such as record retention and management, equipment storage, printing, biomedical services, laundry and linen operations, food services, pharmacy dosing preparation and central sterile supply would be added. Ultimately, a true Consolidated Services Center (CSC) had been constructed.

While sites like LeeSar and Intermountain and others were very successful and garnered national attention, most individual hospitals and smaller IDNs remained reluctant. By 2020, the number of true CSCs in existence was somewhere around seventy-five.

Then, in early 2020, the COVID pandemic began to decimate healthcare supply chains across the country. A new, harsh reality hit many IDNs squarely in the nose: You have to take responsibility for your supply chain. You cannot continue to outsource key components to third parties. You must be prepared when unexpected things happen.

Only you are ultimately responsible for your supply chain.

During the pandemic, most organizations did what they had to do to survive. The demands of the short term trumped long term planning, as organizations did what they needed to do to keep the doors open and continue to treat patients. But, as the heat of the nearly two yearlong moment began to subside, many IDNs began thinking about building their own CSC.

An old song has a line- “Fools rush in…” and by far the biggest mistakes an IDN can make when it comes to considering a CSC is to go too far too soon with the wrong partners. Choosing the right partner to help you make the decision to build or not to build and then implementing the right process are the two key elements of the process.

Choosing the Right Partner.

CSCs represent giant opportunities for others to make money. GPOs see them as a way to keep key customers or gain new ones, as do Supply Distributors and other service providers. They will often offer their services at a steep discount or even “for free” to help you make the decisions on what to do and how to do it. Caveat Emptor! Keep these things in mind before you choose a partner:

1. Don’t do things on the cheap. Real expertise is often more expensive than that provided by a one-off organizations. True expertise is not cheap, but in the long run it pays for itself several times over.
2. No hidden agendas. If the main area of expertise from a partner is something other than helping you discover the best solutions for your organization, you probably should look for another partner.
3. Check References. Demand a list of former clients and check the references of all would-be partners. Go a step further and find jobs they worked on that were not provided as references and check those jobs out as well. Remember: you are going to be making decisions that are extremely impactful and you cannot possibly do too much vetting.
4. Choose someone who is not afraid to say “no”. So many people are drawn to folks who agree with them. The job of a responsible partner is to use his/her expertise to tell you the truth and guide you toward decisions that are best for your organization.
5. Pick your partner for the long run- before, during and after the project. The project does not end when the building(s) is built, the shelving is in and stocked and the trucks are on their way to the various delivery sites. Things change- frequently and forever. Make sure your partner is there for you.

The Process.

We at St. Onge have designed and started up over 500  distribution facilities for organizations from all industries, many fortune 100 companies,   since our inception in 1983. The following steps are what we recommend.

1. Feasibility and Readiness Study. Before you can do anything else, you need to answer two questions- Is a CSC right for us and are we ready to proceed? If you have chosen the right partner, this will probably be the first step that partner recommends. It is the part of the process that will open your eyes to the real opportunities and risks of such a course of action. At its completion, you will meet with your partner and your internal team to decide whether to move to the next step or back off.
2. Business Case Assessment. If, at the end of the Feasibility Study, you decide there is enough data to support going further with the concept, the next step is the Business Case Assessment. This is where the partner you have chosen becomes of paramount value. The one thing that a partner that has been involved in the planning, designing, building and activation of scores of CSCs is all the costs involved. This cannot be over-emphasized. You need to know the total projected costs of your proposed venture in exquisite detail before you can make the proper “Go, No Go” decision, and even then some situations change so frequently (e.g. how much inventory to keep on hand, as witnessed in the COVID pandemic) that figures need to be re-calculated and altered on the fly. You need to work with your partner to keep all figures and costs current.
3. Facility Design. So you have made it to Step #3. You are going to go forward. You need a partner to design the facility with you. Here, subject matter expertise is of utmost importance. This is where you need to give your design partner the free reign to use their expertise to its best benefit to your organization. In Steps 1 and 2, your partner has been working with you. In Step 3, you are working with the partner.
4. Operation Planning and Activation. In this step, you are collaborating with your partner to put in place the elements that will lead to the activation of your facility. This stage requires great collaboration and work on even the smallest of details to ready the organization for the switchover from its previous model to the new one. You must consider every possible scenario in order to get things right at the opening. And, try as you might, you will fall short- although the harder you work to consider every scenario, the fewer mistakes you will make.
5. Post Go-Live Optimization. Everything will not work perfectly at Go-Live. You and your partner will have to work closely with the staff to discover things that need to be fixed and fix them. This is a key point in the process, as folks are used to the previous system will demand the same or better level of service from the new one. Failures in fulfillment must be kept at a minimum and corrected as quickly as possible when they occur.
6. Continued Surveillance and Correction. Systems are always changing. New members join the IDN. New delivery sites come onboard. Better technologies emerge. The CSC and its operation will always be morphing into something new, and you will need to work with your partner to make certain your CSC keeps up with the changing demands it will face.

Let us help

Over the last 38 years, we at St. Onge have helped countless organizations both within and outside healthcare plan the future of their supply chain operations. Through our design process, we perform an intensive level of due diligence to learn our clients’ needs. Site tours, detailed interviews and data drive the models and simulations we use to develop a thorough understanding of our client’s day-to-day activity from an efficiency perspective. This process validates our understanding of the client’s issues and provides the foundation for developing the relationships required to create innovative solutions.

St. Onge Company has grown steadily and developed a client list that includes many Fortune 500 companies and several world-renowned institutions. We have completed approximately 5,000 assignments for over 1,000 clients located through- out the United States, Canada, Mexico, the United Kingdom, Europe, the Middle East, the Far East, China and South America.

Our past projects cover a wide variety of Institutional, Commercial and Industrial applications for clients such as Johns Hopkins Hospital, Dana Farber Cancer Institute, MD Anderson Cancer Center, Rush University Medical Center, Duke University Medical Center, St. Jude Children’s Research Hospital and King Saud Abdul Aziz Hospital, as well as with their architecture firms. For these clients, we have developed a strong familiarity with the challenging logistics and related real-time issues associated with hospital operations, including campus supply chain strategies, materials management master plans, departmental optimization, facility designs and information systems to plan, direct and coordinate the movement of materials. Some of these solutions are highly automated; all are highly effective.

If you find yourself interested in developing a resilient supply chain operations strategy that will lead you into the post-COVID future, please contact St. Onge. Our experts stand ready to take a look at your operation and find the opportunities you may have overlooked. You can reach me at tredding@stonge.com or call me at 717-818-0791.
 
 

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