Material managers understand the manual tasks associated with numerous processes that occur within the internal supply chain at their facility, from the time a supply item is requisitioned until it is consumed. These processes are rife with redundant steps and affect the workload demands not just within their department, but also with clinicians, caregivers, procurement and accounting personnel. The propensity for error exists and error correction consumes additional resources.

While patient safety and accuracy are concerns shared throughout the facility or network, the materials manager typically does not have comprehensive tools to assist in the fulfillment of this objective. In short, materials managers are aware that various steps in the supply flow can be improved upon and made more efficient through the use of technology.

The ERP systems that have been adopted by healthcare organizations have focused their sales and marketing efforts primarily on the CFO. This makes sense because the CFO has, in general, been the decision maker and the CFO has more easily related to the accounting strengths of the ERP offerings. With several MMIS systems available that are older legacy systems and ERP vendors aggressively promoting their products to the healthcare industry for the past several years, executives have been inundated with exposure to ERP systems without, oftentimes, understanding the compromises this approach necessitates in thoroughly exploiting the opportunities for cost savings and efficiency improvements within materials management.

A comprehensive systems solution that concentrates on healthcare materials management and internal supply logistics, when developed using contemporary methods and more advanced technologies, will result in improvements to operational efficiency and deliver a return on investment. The costs are significantly lower and achieving the intended benefits is far more predictable. In the end, it’s about results. The healthcare industry has had a good deal of experience in the deployment of ERP and older MMIS systems. The impact these alternatives have had on materials management should be quantified in terms of expense incurred and measurable improvements, then compared to a best-of-breed MMIS approach.

While process analysis and optimization is an important step, it alone does not go far enough. An advanced solution will include a process orientation, system-directed workflows and the flexibility to adapt to the required process without modification, instead of inherent system limitations that dictate impediments for how processes and workflows are performed.

Because of the expansive project scopes associated with the implementation of an ERP system, the healthcare industry has no shortage of healthcare organizations that have experienced significant cost overruns and implementation delays which have, in some cases, been combined with executive decisions to curtail the deployment of capabilities that were initially intended to be implemented in an effort to stumble to the finish line. Oftentimes, it has been the materials functions that have been shortchanged.

The vast majority of MMIS systems were developed using outdated methods and are severely limited by their underlying design and architecture. In some cases these systems still operate in a batch-processing mode. Initially developed to satisfy inventory management needs, the more contemporary concepts like demand- or consumption-based supply chain models were unknown when these systems were designed. These systems do an adequate job of processing the basic functions such as receipt of supplies, restocking, and recording the appropriate data to feed to general ledger and accounts payable systems.

While most of these systems have undergone a series of evolutionary revisions and enhancements to expand their capabilities, they are limited in their ability to assimilate a lot of new technologies. In some cases, the MMIS systems operate on older computing platforms, rely on flat file architectures and were developed using less efficient programming languages.

Contemporary concepts such as adherence to open system standards, compliance and support for UPN bar coding standards, real-time visibility of the status, movement and consumption of supply items, wireless handheld computing devices and scanners are all examples where conventional MMIS systems are either limited or non-existent.

The adoption of technology to manage the flow of materials by other industries has produced significant efficiency improvements that have reduced workload demands, improved accuracy and reduced cost. The healthcare industry offers some additional challenges and opportunities such as improving patient care and safety, both of which are served by a robust materials management solution.

The most compelling return on investment from a new materials management system is derived by optimizing the processes involved in the overall materials work flow in a manner where the resulting new processes are not predetermined by the system, but rather are accommodated via a system that is designed to support this type of process tailoring to meet the unique needs of each facility or network. The ability to support system directed workflows that have been custom tailored for each installation is an important product differentiator.

If reductions in the supply cost at a hospital facility is the objective, it’s only the inventory or MMIS capabilities within an ERP system that are going to deliver any benefit relevant to that set of objectives. So what you have in an ERP offering essentially is a bundled set of modules that span a wide variety of different business areas – primarily in areas like accounting, such as general ledger, accounts payable, accounts receivable and human resources. Those modules essentially have no bearing on what needs to be done to provide support for the materials management function.

Integration ease?

One myth that’s propagated in the industry is that an ERP system, because it’s an integrated suite of modules, eliminates integration as a project activity, therefore reducing the risk associated with the successful deployment of the ERP system. In reality, industry experience has shown that the reverse of that is oftentimes true. The scope of an ERP system is so far-reaching with operational impact and disruption that the resources required to implement an ERP system – people, money and time – is far in excess of what we can deploy as a best of breed solution to solve these specific requirements.

There is integration necessary with an ERP system and there are significant compromises a facility must live with in terms of the functional breadth inherent in those systems. The disruptive impact on operations by having so many areas of a facility concurrently affected by the implementation activities required by an ERP system can be overwhelming.

An ERP system that will effectively meet the needs of all of the departments and functions necessary within a hospital or network does not exist. Therefore, whether the bundled suite of modules was provided by an ERP vendor or by an HIS-oriented vendor, additional systems will have to co-exist in the same environment. In addition to the vendors themselves, there are several large consulting firms that have staff dedicated to working on the integration activities as part of ERP implementations and derive considerable revenue from doing so. This illustrates that integration is required for an ERP deployment just as it is for an MMIS.

MMIS are sometimes thought of as inventory systems and likened to the legacy systems that have been widely adopted in the healthcare industry. A perception exists that the capabilities are limited to providing automated support for the manual steps that occur today. In other cases, the most predictable path to achieving the intended efficiency improvements in the materials area via the deployment of new software system is not well understood. Here I’m talking about the whole area of risk where ERP systems are sometimes viewed as a safe harbor by eliminating the need to address integration. What this fails to recognize are the functional compromises that are made and the lack of process-oriented automation that is void in those alternatives.

A demand-based supply chain model where accurate and timely visibility of supply utilization is available and how this information can be shared with trading partners upstream in the supply chain (e.g., manufacturers and distributors) as a way of reducing supply-related costs is a concept that is not widely understood. In addition to process optimization, this is another area where a best-of-breed MMIS approach can deliver dramatic reductions in supply-related expenses.