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Plexxus – Achieving supply chain excellence

In a fast-moving, fast-changing business landscape, Plexxus has carved out a reputation as an organisation that can generate efficiencies for its members and customers. Jason Rude, Director of Distribution & Logistics at Plexxus, told us more about how this shared services organisation and its operations in the Canadian healthcare sector

 

 

Thanks to the effective combination of superior standards of patient care, cutting-edge tech, and an impressive capacity for achieving cost and operational efficiencies, the Canadian healthcare system is first-rank by any international measure – something which is no-small point of national pride in the country, it should be added.

Naturally, the provision of a comprehensive publicly-funded healthcare service to 36 million people, of a standard matching what’s on offer in the UK, Sweden, and Switzerland, doesn’t come cheap. As in other advanced economies in the western world, Canada is facing the dual-challenges posed by its ageing population, and the growing strain on resources that it is placing on a healthcare system that is becoming increasingly costly with each passing year.

Bearing in mind that Canada outspends nearly every other country in the world in terms of healthcare spending, equivalent to 11.5% of national GDP, employing effective strategies to manage costs without compromising on quality of patient care is a foremost objective of both the government and third-party healthcare sector operators. In the province of Ontario in particular, achieving operational excellence and cost-effectiveness is of the utmost importance. And as the region’s leading shared services organisation, Plexxus is at the vanguard of such efforts.

Plexxus is a shared service organisation and we are owned by our members, which are hospitals in the greater Toronto area. We are a not for profit organisation – we are owned by our members, and we work to create strategies that are in clear alignment with the strategic objectives of our members. We provide the services that will ultimately benefit them.

These include procurement and sourcing, transactional purchasing, accounts payable and, the piece that I’m responsible for, distribution and logistics,” explained Jason Rude, Director of Distribution & Logistics for Plexxus.

He continued: “The distribution services we provide are daily deliveries of medicines, drugs, and other products and equipment to our hospitals, members as well as customers. We’ve now expanded our distribution network to include non-members.

To put it simply, we run a ‘just-in-time’ type of program where the hospital supplies that are distributed from our warehouse are delivered directly to the unit where they will be used on patients. The hospital doesn’t need to receive them into any kind of central stores or central distribution point within the hospital as they traditionally once were, they are already in packaged and ready to go the unit where they are needed.”

Catering to nearly 50 hospitals in the Toronto area, Plexxus is the largest shared service organisation of its type in the province, but it would be incorrect to say that the company sets itself apart by size and scale alone. In addition to having the facilities, staff numbers, equipment and reach, Plexxus possesses other strengths that are less tangible, perhaps, but no less important.

Innovation, expertise, and the adoption of technologies to generate supply chain efficiencies are, in Jason’s eyes, at the heart of the organisation’s success with the implementation of end-to-end supply chain accountability being one such example. On this, Jason elaborated:

As well as our staff here at Plexxus, the in-hospital logistics folks actually report in to me as well. In addition to having responsibility for the warehouse, I and my department have responsibility for the entire supply chain, from the warehouse up to the point where it’s actually put away on the shelf in the hospital and is available for the nurse or physician to use on their patient.

Having that end-to-end supply chain accountability, which is quite unique among any of the other SSO’s, does indeed set us apart. It also gives us an advantage because it’s so important for the in-hospital logistics teams to work collaboratively with the distribution centre, whether its finding efficiencies or scanning orders at a more opportune time, whether it’s an advantage for the hospital or whether it’s an advantage for the distribution centre, we can take a more holistic and strategic view of those types of supply chain challenges.”

The business of managing distribution and logistics can be challenging indeed, as insiders know all-too-well – running 20,000 order lines daily means that there are a lot of plates for Plexxus to spin, to say the least. To ensure the smooth running of its supply chain operations, in a field where there is no margin for error, the organisation is all too aware that having the right team to-hand is critical.

From its distribution centre, Plexxus has close to 120 professionals on-hand to ensure that the organisation’s ability to provide essential services and products to its members, 24-hours a day, 6 days a week. With the exception of Saturdays, just-in-time delivery of the essential medical supplies and services that patients need is on hand around the clock.

To support his staff in their endeavours and guarantee accuracy and efficiency, Jason and his team rely heavily on Plexxus’ SAP ERP – Enterprise Resource Planning software, which is tailored to streamline processes across procurement, manufacturing, services, sales and finance. On this, Jason said:

Plexxus uses the ECC version of SAP for our ERP – our enterprise resource planning software, and we use EWM as our warehouse management system, which is also an SAP product. This stands for ‘extended warehouse management’.

Our members all have SAP, and SAP is a very, very robust ERP system. It’s very good at managing large amounts of data, and with over 10% of all Canadian healthcare spending flowing through our network, it’s a significant amount of volume. We’re very glad we have an ERP system that is robust enough to handle that. It also allows us to manage our data in innovative ways.

As an example of this innovation, we created a metric that we thought would mirror the nurse’s experience when they go to a supply cart. We capture stock outs – when the bin is empty of the medical device that’s supposed to be there, we know, and we’re able to act from there. We share those metrics with the hospital, so that they can hold us accountable for improving upon that metric.”

Whilst Plexxus has faced its share of ups and downs since it first opened its doors for business, its collaboration with Mohawk Medbuy, a fellow shared services industry operator, along with the election of the first new provincial government in 15-years means that the organisation is sailing in unpredictable and unchartered territory. The impact of these two factors on Plexxus and the industry in which it operates will in Jason’s view be transformational.

The business case for the Plexxus-Mohawk Medbuy collaboration is strong, and will ultimately provide significant financial benefit to both Mohawk Medbuy and Plexxus members by making the distribution network stronger and more sustainable.

However, beyond just the savings that can be gained through pooling resources, staff and infrastructure and operating under one warehouse roof, the sourcing collaboration that Mohawk Medbuy and Plexxus are working on will also be strengthened.

Our sourcing leaders at both Plexxus and Mohawk Medbuy have met and are strengthening their partnership, and having a single warehouse allows them to approach the vendor community with a lot more buying-power.

So that, those two elements are at the heart of the business case that we use to support going forward with the integration. We’re almost done with the integration, we only have four more hospitals to ‘onboard’, two of these are going to be onboarded next week. Any while the integration hasn’t necessarily been painless, I would describe the fact that our operations are still very effective, delivering a level of service that our members and customers expect. We hope that by the middle of October we will be completely done with the onboarding and be ready to move onto more of a stabilisation phase.”

In terms of what the near to medium future holds for the company, these are exciting times for Plexxus and the distribution business at large. In-line with the organisation’s Strategic plan 2017-19, which was developed in partnership with Price Waterhouse Cooper, efforts to improve ‘functional excellence’ will continue.

Improving distribution functional excellence, for example, is a key objective of Jason’s over the coming 18 months – one which will see Plexxus create a more streamlined, simplified delivery model that will help the organisation lower its cost-base. Additionally, Plexxus is set to introduce new metrics that will enable it to measure different parts of the business.

We’ve always measured our fill-rate and accuracy, but we’re now also trying to get more precise in measuring on-time delivery among other things that are important to customers. We’re halfway through that strategic plan and we feel that we are progressing quite well on defining functional excellence, and introducing new measures to show our progress toward functional excellence. All-in-all we’re doing well.”

Jason concluded, saying: “It’s an exciting time to be in the distribution business because there’s a lot of innovation that is exciting as a supply chain leader. For me, I believe strongly in supply chain collaboration and so it’s an exciting time to utilise the different data tools that are now out there – collaboration portals and tools, to enable us to remove uncertainty from the supply chain. I believe that part of our success is to collaborate both upstream with suppliers and downstream with customers to remove uncertainty out of the supply chain.”

 

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