PRODUCTS & SERVICES
freight, and be sure your freight manage- ment provider is driving improvement in both areas.” For DiBernardi, the “best-in-class” metric is as simple as the “perfect order” — on-time, in full, right condition/quality and at the right cost combined with “total cost to serve.” Crampton emphasized the comprehensive. “We believe a logistics company should be measured for its quality, experience and ability to provide strategic value beyond just transportation itself,” he said. “We look at the logistics we handle, intra-company logistics, as a strategic asset that works as a means to help healthcare organizations achieve greater operational efficiencies, reduce risk, more ef- fectively utilize scale, eliminate redundancies and centralize services.”
Bonni Kaplan DeWoskin, MedSpeed’s Vice President, Marketing, and Crampton’s col- league, chimed in metaphorically that “freight doesn’t stop at the water’s edge — with the water’s edge being the bubble around the health system.”
Parrett urged Supply Chain pros to watch
out for “accessorials as a percent of total freight,” cleverly billed to cover up sins. “Many freight carriers will charge extra fees to help offset costs,” he said. “These can be extra fees for trailer detention/demurrage, re-delivery, fuel increases/surcharges and any other expenses or extra services. Often, these are extra costs incurred due to inefficient processes. The biggest difference between accessorials and surcharges, special service codes, and other fees that the major carriers charge is that, for the most part, they are as- sessed and applied post-shipment. You can plan and budget for surcharges to a certain degree, but accessorials, which are typically neither applied at the point of manifest nor included in regular invoices, can be extremely difficult to factor into your company’s logis- tics and supply chain budgets. For this reason and others, they can be a major thorn in your side when you have to answer for losses that are nearly impossible to pre-determine, dif-
ficult to uncover, and at the same time, very hard to ignore.”
Accessorials account for a major portion, (20 to 50 percent), of a carrier’s total annual revenue, according to Parrett. “Carriers have almost no incentive to reduce accessorials or provide detailed billing,” he noted. “As you continue to try and manage transportation costs, you’ll soon understand that most car- riers are using accessorials to make money. By performing thorough analyses of your company’s shipping history and character- istics internally or with the assistance of a qualified third-party logistics provider, it is possible, to see that your accessorials are discounted or waived entirely. By making it a priority to manage supply chain and logistics by optimizing processes, implementing cost- saving ideas, and creating solutions, you can combat the accessorials that may be causing you to go over your shipping budget or forc- ing you to cut corners that you don’t need or want to cut.”
Michelle Robbins, Vice President of Product Management, Life Sciences & Healthcare, DHL Supply Chain, advised Supply Chain pros to step back first and determine whether they have “true visibility” into their freight costs before moving forward. “Having been a consul- tant for many years, this is where I believe the true struggle lies for many health systems,” she observed. “Typically freight is being charged or allocated to different general ledgers or strictly buried in the cost of product, inconsistent across departments or facilities. Does the health system have a strategy that details how freight is captured, charged or reported? The first step to a good benchmark is having true line of site to the process and total costs. Has the hospital/ health system worked with finance and ac- counts payable to develop a process to ensure freight is captured and visible?
Michelle Robbins
Overt, covert freight and shipping costs revealed
Healthcare Purchasing News asked freight and shipping experts what they see as the most overt cost areas to watch and covert areas to find. Here’s what they shared.
Marc Mullen, Vice President and General Manager of OptiFreight Logistics, a Cardinal Health company. Overt: • Inbound rates • Outbound shipping processes • Selecting the right mode of service (mode optimization) For these methods, it’s all about making sure you’re shipping the right way. For example, with mode optimization you can determine how to ship packages fast- est at the lowest rate possible without impacting the delivery date. Why choose overnight service if a lower cost ground service will get your package there the next day as well?
52 July 2016 • HEALTHCARE PURCHASING NEWS •
hpnonline.com
Covert: • Supplier compliance • Purchase order instructions • Analytics/visibility to aggregate spend — then manage These are all strategies that need to be implemented to ensure the long term success of your program: • Make sure all your suppliers are compliant with the program, so you can attain a discounted rate on every shipment.
• Reinforce this compliance by including instructions on every purchase order, every time. To ensure suppliers use a third-party account number for every shipment, remind them on every purchase order you issue.
“There are many statistics out there that range from the best freight cost based on spend or even bed count, but more importantly I think the best benchmark is against one’s self,” she continued. “Where are you starting from? Can you account for your freight and shipping cost by type, such as shipping costs — both inbound and outbound, distribution costs for med/surg and pharmacy, lab, food, radiol- ogy, etc., and other miscellaneous distribution costs? I also like to be able to see my overnight shipping cost overuse because it can point to other supply problems. Once you have your baseline, how are you performing? Is it consis- tent? Are you saving money? How much? If you’re reviewing your metrics on a regular basis you should be able to identify spikes, deviations from process and quickly adjust to account for or fix underlying problems.” Robbins further noted that for those hospitals
with a self-distribution platform an important metric to monitor would be “the perfect order,” which includes the percent of orders with on- time delivery, the percent of orders shipped complete, the percent of orders shipped damage-free, and the percent of orders sent with the correct documentation, including bills of lading, packing lists, and an accurate freight invoice based on the freight terms. Leatherman cautioned against searching for a simple, single solution.
“I don’t believe any one single metric is most important,” he said. “They all have to work and be in line together. For example, it’s great if the health system can save money, but if the carrier is unreliable then Supply Chain gets a black eye. When looking at logistics compa- nies for freight and shipping services it is of paramount importance the depth of services and management the company provides is reviewed. A good logistics company should have an enterprise-wide view of health sys- tems logistics needs and build business plans to drive behaviors.” HPN Visit
www.hpnonline.com/inside/2016-07/1607- PS-sidebars.html for “When freight hovers behind the 8-ball.”
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