Supply Chain Success

June 24, 2011
Sisters of Mercy Health System (Chesterfield, Mo.) recently completed its largest-ever technology implementation. In February of this year, 19 of

Sisters of Mercy Health System (Chesterfield, Mo.) recently completed its largest-ever technology implementation. In February of this year, 19 of the organization's hospitals and outpatient facilities went live with Lawson's (St. Paul, Minn.) Supply Chain Management suite, replacing the health system's previous application from McKesson (San Francisco).

Jayson Chitwood
Prior to the Lawson implementation, Mercy had been using McKesson's Pathways Material Management (PPM) system to meet its supply chain requirements. However, when it came time for an upgrade, Jayson Chitwood, executive director of financial applications, Mercy Information Services Division, contends that the McKesson solution "didn't quite fit our business needs." According to Chitwood, the McKesson solution is still very siloed. "Although the supply chain capabilities of the solution are very good, it doesn't provide a continuous solution set for financials," he says. "We're really trying to centralize all of our business processes, so finding a fully integrated supply chain, financial, and HR system was a priority."
Mike McCurry
Until last year, McKesson didn't have any kind of payroll solution, says Adam Gale, executive vice president of operations, KLAS Enterprises. "They've only just purchased one via a third party, but it's still in the early days. So someone wanting a full financial solution might struggle with McKesson's system because their payroll module is still unproven."

According to Mike McCurry, Sisters of Mercy CIO, there was a dearth of solutions that offered a single unified ERP (enterprise resource planning) system. "Honestly, there weren't that many companies to choose from," he says. Mercy looked at the solution offered by Oracle (Redwood Shores, Calif.), "but it was viewed as too difficult to implement, and only offered a slice of what we needed."

Keeping up

Gale surmises that as the technology within the medical arena has increased, so has the complexity of the supply chain needs. "Many of the vendors are having a hard time keeping up and, more importantly, hospitals are looking towards finding a single source solution for all of their business requirements," he says.

McCurry contends that although functionality was important, it took a back seat to standardization. "We were more interested in finding a unified solution than we were with having some kind of robust capability to modify the system," McCurry says.

The way that Mercy runs its supply chain is slightly different than most healthcare organizations, explains Chitwood, and for this reason "integration and standardization across all our geographically disparate locations is paramount."

Mercy performs its own group purchasing order (GPO) function. "Most hospitals will contract a third party to supply their main inventory. However, we contract with suppliers directly. We have our own warehouse and centralized distribution center, as well as a separate warehouse management system," he says. The Lawson system handles each site, he explains, including inventory control and management, as well as monitoring the budget, updating the ledger, and managing expenditure.

Changing numbers

According to Chitwood, the major benefit of the Lawson suite is its financial capabilities. Prior to implementation of Lawson's financial module, it would take Mercy 45 days to generate financial reports, he says. Now the organization is able to generate reports in about seven to eight days.

"We were looking for the supply chain side to integrate with a full-cycle payables management solution, where we would be able to have a three-way match invoice." In other words, Mercy needed a system that could generate the purchase order for an item, make sure the item was delivered, and ensure that the an invoice for the item has been received.

Implementation of the Lawson suite was relatively smooth, "other than a few bumps along the way," Chitwood says. The original game plan was to implement some of the other modules before the full financial piece was in place. "We learned quickly that this wasn't the best methodology. What we needed to do was lay the financial foundation prior to the implementation of the other modules, so that we were sure everything would work in concert," he says.

McCurry identified the social implications of introducing a new solution as the biggest hurdle to a seamless implementation. "In many ways, you are accepting standards for an entire organization where no standards existed before. The cultural implications of this can be almost overwhelming," he explains. He also contends although none of the major applications have big holes in their suite of services, "organizations have to accept change and accept standardization — two things that healthcare have never been able to do very well."

Heart of the process

When asked what the most important part of the process was, both Chitwood and McCurry concur that having a dedicated resource team was invaluable. "Every vendor will tell you that you need to dedicate resources to a project, but so many folks don't have the luxury of doing that. We did, and it was definitely a major contributing factor to the success of the operation."

Having already implemented McKesson's PPM solution in 2001, and more recently the Lawson system, McCurry says that Mercy has learned a number of significant lessons. The most important being, "accept the standards that the product brings, don't impose your operational standards on the product. Pay a lot of attention to the process. It's all about changing the process to accept the way the application works, if you try to change the way the application works to manage your process you're doomed to fail," he says.

Overall, Mercy is happy with the way the Lawson suite is working, Chitwood says. "But of course, there are always elements that could be improved." Currently Mercy is functioning at a batch-mode with its warehouse management system. "I think it would be beneficial to have real-time data transactions with the partner systems that are out there," Chitwood says. For example, if there is an emergency case that gets scheduled, he explains, instead of waiting 30 minutes for the supplies for to get scheduled, the requisition data could come through immediately, greatly expediting the process.

Gale states that the lack of commitment from vendors post implementation is of major concern for many providers. "Software functionality is great, but the service is mediocre to poor," he says. Often vendors will only stick around to help implement half of what the system can actually do, and then they move on to the next site, he explains. "It's especially apparent in these larger integrated systems where there are so many functionalities that sometimes a number of them get forgotten about," Gale says.

Despite the challenges involved, many hospitals still want to use a unified system for their business operations. "One of the things that we've seen is a shift towards a single-source solution," Gale says. "That way, organizations don't have to write interfaces and spend buckets of money to implement a whole host of systems."

However, Gale warns providers to be weary of the idea that using a unified solution is easier to implement than installing multiple systems. "Sometimes they're even more complex because if you change one thing in one place, it impacts another system in another place." But Gale says unified solutions do allow for additional functionality. "In the Lawson system, you can drill down from your material system into the general ledger and you have some nice features that you wouldn't have in separate systems."

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