Supply chain efficiency, GTIN a package deal

Think outside the box for data standards ROI

by Allen Esses, MS, co-founder and president, DataPros for Healthcare

Good things come in small packages. This is a tried and true statement. From the enchantment of a small jewelry box, the excitement of opening boxes nested inside one another until you get to the special tiny one in the center, or the perfect box of just two chocolates to cheer you up, the small package enshrining a single item carries a mighty impact.

In the healthcare industry, that small package, also known as the "each," can have quite an impact on the overall supply chain. How do you get to the proper each? How do we know what it costs and to that end, how do we know that cost is calculated correctly through the entire packaging string and properly correlated to the contract price? Bottom line – we don’t!

Materials managers understand the daily challenges of correct product packaging and how essential the accuracy of this information is when placing orders and achieving contract price. I have heard war stories of when a unit-of-measure error wreaked havoc in a hospital by causing a product shortage. In this situation, the pain caused by that "small" package couldn’t be washed away by a sweet, albeit true, saying. When a clinical practitioner needs a product for direct patient care, and it is not available, everything stops until that error is fixed. We all know how that story goes, and it doesn’t usually bode well for the Materials Department.

As healthcare moves to the adoption of GS1 data standards and specifically the Global Trade Item Number (GTIN) Sunrise in 2012 I started thinking: Because a GTIN uniquely identifies a product at each packaging level (e.g., a blister of two aspirin tablets, a bottle of 100 aspirin tablets, etc.) will it really eliminate packaging errors in the healthcare supply chain? After some research and looking at the data, here is what we found out.

Packaging error scorecard

Table 1 (below) reveals the extent of packaging- and price-related problems reported by the Department of Defense/Veterans Administration standards pilot project in 2007. The data may be familiar, but in light of the GTIN 2012 Sunrise the information takes on a new and more urgent importance. It is apparent there are multiple types of problems that can be resolved efficiently with the use of GTINs.

William Rosenfeld and John Stelzer further quantified the problems caused by these packaging errors: "the lack of standards for unit of measure combined with the lack of distinct identifiers for different product packaging levels causes confusion and ordering errors. For example, providers may receive 20 boxes of sterile pads when they actually meant to order 20 cases, or they may order 50 arm splints and receive 500 because splints are sold in units of 10. The absence of globally accepted, standardized product identifiers has resulted in an error-prone, inefficient approach to product identification that undermines supply chain management and efficiency."

To better understand the central issue of these packaging errors, consider Illustration 1, at right. As the illustration shows, regardless of the type of item, unit-of-measure alignment is critical for managing the following supply chain functions:

• Contract Matching. Incorrect units of measure result in paying incorrect price, order-to-invoice discrepancies and manual time spent fixing the problem.

• Stock UOM. Unit-of-measure errors result in receiving the wrong amount of a product potentially causing a shortage, overstock or paying a return fee.

• Inventory Value. Once correct unit of measures are applied in the hospital IT system inventory values will update and manual time will be spent reconciling the new information.

• Internal Price Parity. Integrated delivery network unit-of-measure alignment issues cause price discrepancies when each entity uses different units of measure for the same product. Furthermore, calculation of the unit cost may not be achieved at all.

• Unit Cost. Unit-of-measure errors result in miscalculation of the unit cost for price comparisons and patient charging.

One fundamental way the GTIN corrects the inaccuracy in product packaging is by limiting product numbering (and therefore packaging) to the manufacturer, resulting in the distributor having no ability to alter a published GTIN. This is important because it alleviates one more, and potentially different, piece of catalog data from the supply chain. Secondly, the GTIN is multi-purposed, including the order number, manufacturer identifier, and packaging all in one string of information, as depicted in the illustration below:

Lastly, the GTIN comes with a "parent-child hierarchy" revealing the relationship between all packaging levels while maintaining a unique ID tied to the manufacturer, as shown in this illustration:

Where’s the ROI?

The ROI for this unique product ID is well-documented in the grocery and book industry. It is significant to note that only in the grocery industry have significant attempts been made to quantify the benefits of using GTINs because in the case of the book industry the benefits and savings of using a standard product identification numbering system were considered so obvious that a cost/benefit analysis was not done. The industry as a whole felt that spending money to quantify the savings that everyone was experiencing made no sense especially since there was clearly no ROI to be gained from the study itself!

In grocery, the net benefits (after implementation costs) were initially estimated at approximately 1 percent of sales, but more recently revised to 2.8 percent of sales primarily due to increased process efficiencies and productivity gains. This translates to approximately $8 billion. The same studies also estimate that an additional $15 billion of benefits could potentially be realized through improved industry collaboration.

"To examine the effectiveness of the GTIN on improving packaging consistency within the healthcare supply chain consider the experience of the DoD as it went about trying to outfit the hospital ship, USS Comfort, as it prepared to depart in support of Operation Iraqi Freedom. The Medical Directorate, Defense Supply Center Philadelphia (DSCP), was tasked with outfitting the ship with all pharmaceutical, medical/surgical, and capital equipment items required for war within 7 calendar (3 ½ business) days. This timeline presented a formidable challenge, even for DSCP. DSCP’s Pharmaceutical Business Unit was able to quickly identify and match the Pharmaceutical items requested with sources of supply for purchase by using the National Drug Code (NDC). The pharmaceutical industry must use this federally mandated standard number which identifies every drug and the different packaging quantities with a unique number.

"Unfortunately, this same ’standard‘ does not apply to the Medical/Surgical product line. As a result, the Medical/Surgical Business Unit struggled simply to determine what exactly was required for the ship — a task that involved extensive manual research and continuous discussion and feedback from Navy customers. Of the 995 medical/surgical items ordered, 224 had unidentifiable product identifiers and 205 had obsolete product identifiers. Because of a lack of a universal product number, the DoD was unable to electronically cross-reference for equivalents. It took 15 people two days to manually resolve the issues and order the needed items. A [Universal Product Number] would have enabled electronic processing in seconds." (Source: Data Synchronization in Healthcare: A Solvable Problem. By William L. Rosenfeld & John L. Stelzer)

The group purchasing organization Premier Inc. expressed similar satisfaction with the GTIN as a contract alignment tool and cited it as a competitive advantage when they participated in the 2007 DoD Pilot. A key study finding stated, "The availability of the GTIN on product information improves Premier’s ability to recruit new members. The GTIN will enable the market basket team to rapidly bounce a prospective client’s product and price information against Premier’s contracts to determine if we can in fact provide a competitive offering. The presence of the GTIN in a market basket analysis would reduce the turnaround from one week to one day."

To deliver on the promise of ROI related to GS1 standards and GTINs in particular, results like those reported by the grocery and book industry and DoD in healthcare, must be scalable and repeatable in health systems across the country.

To that end, DataPros for Healthcare performed an extensive manual assessment of price discrepancies of one hospital of a large system when compared to the GPO portfolio for the IDN. This was done without the use of GTINs. The results were astonishing.

Hard dollars based on an analysis of unit-of-measure discrepancies alone resulted in real-dollar discrepancies of approximately $900,000. The results indicated a net gain to the hospital system of approximately $300,000 solely by aligning the item and contract unit of measure.

Initially, we compared the contract portfolio to the item master based on manufacturer and catalog number; however, upon adding the packaging match to get an apples-to-apples comparison, there was a large reduction of the matches. Further review indicated that the gap was a result of subjective packaging where the client was calling items by the each (EA) when the vendor only distributed them by the box (BX). Once these were corrected, the additional matches could be analyzed for opportunity. The meaningful results were there for this time-consuming and tedious reporting exercise. It could have been easily accomplished in a fraction of the time by building a one-to-one relationship using GTINs as the key field. Better yet, the discrepancies would have never occurred if the use of standards had been in place.

As supply chain professionals we know better than anyone that solving the elusive business of product packaging is a major undertaking (e.g., the Holy Grail comes in an each). With the GTIN 2012 Sunrise approaching, those of us in healthcare moving forward with GTINs can fittingly update that phrase to proclaim "good things come in the correct package."

Allen Esses, MS, co-founder and president of DataPros for Healthcare. For more information, visit DataPros for Healthcare at www.dphinc.com.