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Healthcare Supply Chain Modeling using Simulation

Healthcare Supply Chain Modeling using Simulation. Principle Investigator: Dr. Manual Rossetti, PhD, PE Graduate Assistant: Amit Bhonsle, MSIM Project Number: UA/CHMR. Research Organizations, Researchers and Project Partner. Organizations: Center for Engineering Logistics and Distribution

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Healthcare Supply Chain Modeling using Simulation

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  1. Healthcare Supply Chain Modeling using Simulation Principle Investigator: Dr. Manual Rossetti, PhD, PE Graduate Assistant: Amit Bhonsle, MSIM Project Number: UA/CHMR

  2. Research Organizations, Researchers and Project Partner Organizations: • Center for Engineering Logistics and Distribution • Center for Healthcare Management Research Researchers: • Dr. Manual Rossetti - College of Engineering, University of Arkansas, Fayetteville, AR (CELDi) • Dr. Lawton Burns - Wharton School of the University of Pennsylvania, Philadelphia, PA (CHMR) • Dr. Eugene Schneller - W.P, Carey School of Business, Arizona State University, Tempe, AZ (CHMR) Project Partner: • LLamasoft, Inc. – Ann Arbor, MI

  3. NSF Project Goals • Evaluate ways that hospital organizations manage their vertical chain of production, culminating in decisions regarding “make versus buy” and inventory stocking policies. • Provide health care managers with information that will allow them to make better strategic decisions about inventory and distribution to improve the performance of their organizations.

  4. Physical Distribution $1.1 billion $1.8 billion Transportation Order Management $5.8 billion Inventory Management $2.3 billion Total $11 billion Project Motivation • Hospital products account for roughly $75 billion per year. (Burns and Pauly, 2000) • The logistic costs may add another $75 billion in yearly expense. • Study conducted by CSC Consulting, Mayfield Heights, OH in 1995 projected a potential savings of $11 billion through Efficient Healthcare Consumer Response initiative. • A study published by the Healthcare Information and Management Systems Society (HIMSS) breaks down the $11 billion in total savings into 4 categories:

  5. Healthcare Value Chain Purchaser Fiscal Intermediaries Payers • Drug Manufacturers • Device Manufacturers • Med-Surgical Mfgrs • Wholesalers • Distributors • Group Purchasing Org • Hospitals • Physicians • Pharmacies • IDNs • Insurers • HMOs • Employers • Government • Individuals • Employer Coalitions

  6. D1 D1 D1 Dn Dn Dn D1 Dn Supply Chain Strategies in Healthcare Service Center Central Warehouse Hospital1 Hospitaln Hospital1 - Departments Hospitaln - Departments Departments Departments In-House Inventory, Supply Contract Management Outsourced Inventory, Supply Contract Management

  7. Research Methodology • Conduct case study research on the two healthcare supply chain strategies to understand the factors considered and the analysis performed before implementation of the strategy • Develop simulation models replicating the supply chain operations of both the strategies • Understand best practices from both operations • Develop a new supply chain network using the best practices from both strategies • Compare supply chain performance • Analyze results and draw conclusions • Develop a system of performance measures to assist managers in taking informed decisions

  8. Hospitals identified for Case Study Research • Mercy Health Systems – St. Louis, MO Strategy Implemented – In-house Inventory, Supply Contract Management • The Nebraska Medical Center – Omaha, NE Strategy Implemented – Outsourced Inventory, Supply Contract Management through Cardinal Health (Distributor and third-party expert)

  9. Supply Chain Analysis / Simulation Tool • CELDi’s project partner: LLamasoft, Inc. • Developer of Supply Chain Guru – Strategic Supply Chain Planning Software. Sample Supply Chain Network Model using Supply Chain Guru

  10. Supply Chain Guru Capabilities • Utilizes the power of simulation and optimization to analyze supply chain networks and configurations • Supports supply chain modeling, network optimization, and supply chain simulation • Assists in predicting inventory investment and transportation costs. • Determines the effects of changing the supply chain structure and policies. • Simulates supply chain scenarios to evaluate service/cost trade offs.

  11. Project Status & Future Plans Status: • Secured permission from Mercy Health Systems and The Nebraska Medical Center to study their supply chain operations. • Visited Mercy Health System’s Central Distribution Center in Springfield, MO for project meeting and facility tour. • Developed and verified a simulation model of the Mercy Supply Chain operation using hypothetical parameter values. Future Plans: • Visit The Nebraska Medical Center in the third week of April 2005. • Get real time data from Mercy Health Systems to build simulation models. • Develop simulation model of the supply chain operations at The Nebraska Medical Center.

  12. Expected Contributions • System of metrics with level indicators to evaluate supply chain performance and assist in taking informed decisions • Identification of the best case supply chain network that reduces total costs • Development of inventory policy parameters using system perspective, that results in the lowest average inventory levels and thus low material costs.

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