Reducing the Cost-to-Serve –The benefits of an Integrated Logistics Platform

Healthcare Matters - Thomas Finn

The direct supply model for healthcare providers has its roots in the advanced supply models adopted by other industries. There’s no big secret here. By lowering manufacturer, distributor and internal cost-to-serve structures, supply costs are reduced and internal service levels are improved. Although once reserved for the largest of IDNs, it’s now clear that the benefits of self-fulfillment are available to a much wider and growing audience.

A Case for Self-fulfillment

When providers commit their purchase volumes and install systems that drive compliance, they are rewarded with better contracts. And when a system’s inbound flow of products are consolidated for centralized receipt, stocking or cross docking, those same principles can be more fully realized and even further rewarded.

A recent article in Forbes referenced a highly successful technology-driven approach to self-distribution. It cited a self-fulfillment model called the Dedicated Integrated Service Center (DISC) developed by a supply chain focused systems integrator named RiseNow. And while I was pleased to hear that RiseNow’s approach also incorporates the advantage of committed purchase volumes and contract compliance, its model goes beyond traditional suppliers to include more strategic use of distributors and wholesalers.

In an interview with Mr. Lou Fierens, SVP of Supply Chain and Fixed Asset Management at Trinity Health, he spoke passionately about the benefits of self-distribution, mixing common sense anecdotes derived from his implementation experience with some unexpected benefits.

“Hospitals are tough to deal with. We need to look at ourselves through the eyes of distributors (and other third party logistics services providers) and recognize that because no two of us are the same, serving our varied, myriad needs is an expensive undertaking. So when we investigated the feasibility of a self-distribution model, the cost-to-serve savings opportunities and service improvements were glaring.”... More