Applied Solutions: Hospital Materials Management Moves Off Critical List

Baptist Health Systems revives an ailing materials management system with the Global Software product suite

When you consider the myriad supplies a hospital uses daily, accurate materials management seems an almost impossible task. In fact, a few years ago at Knoxville-based Baptist Health Systems of East Tennessee (BHS)-an organization that oversees the operations of two owned hospitals, two managed hospitals and seven senior health centers- the materials management system was placed on the critical list.

"In 1997, we were on a mainframe purchasing system that wasn't meeting our needs," says Neil Hartwig, corporate director of materials management. "We couldn't get to essential information. We were trying to standardize contracts across our facilities and it was virtually impossible. We ultimately decided that what we needed was a completely new system-one that that could offer greater flexibility and provide better information."

Following a search of available solutions, the choice narrowed to two; Lawson Software (Minneapolis, Minn.) and Global Software (Duxbury, Mass.). BHS selected the Global Materials Management System because of two key capabilities, according to Hartwig.

First was Global's ability to track non-stock purchases, or those that do not stay in inventory, but are delivered directly to various departments. Non-stock purchases account for about 60 percent of BHS's $22 million annual supplies budget. "With the old system we had no way of tracking these supplies," Hartwig says. "Now we have full usage data to help us manage the dollars we're spending."

Second was the product's ability to track purchases against contracts. "We're able to load contract information with beginning and ending dates, and track dollars spent on items against the contract, based on receipts," he says.

BHS also acquired an AS/400 Model 720, recently upgraded to V4R3. "We brought in the AS/400 as a result of our decision to go with the Global system," Hartwig says. "We moved all our financial systems off the mainframe and onto the AS/400. Our materials management, accounts payable and general ledger are all part of the Global suite." Using a frame relay connection over leased lines, both of BHS's two owned hospitals share the system and database.

Previously, the hospitals relied on manual counting to track supply inventory on the hospital floors then faxed their orders to vendors. Now, nurses can access automated supply stations located on each floor by entering their own and their patient's identification.

As a nurse removes an item, it's keyed into the supply station system, which reduces the floor inventory and charges the patient. The supply station system then generates a pick list of what supplies need to be restocked on each floor every morning and sends this information to the Global system, which prompts the purchasing staff to reorder.

"We use a primary distributor for most of our general medical supplies purchases," Hartwig says. "We order daily through the system via EDI. We receive a confirmation from the vendor for pricing and availability and deliveries are on the same day. We haven't gotten to the point where we receive electronic invoices, but we're moving in that direction."

Looking ahead, Hartwig's plans include expanding the Global system by adding an automated requisitioning module, which Global Software expects to have available by the end of the year. "We're already doing some electronic requisitioning in some departments but we've held back rolling it out in all areas because the new product will be easier to use. Why go through the whole learning curve twice?" asks Hartwig.

With electronic requisitioning, a request from a department will go directly from a workstation into a purchase order. "There is no rekeying," Hartwig says. "We can see the P.O.s waiting to be approved, and a suggested order list by vendor. We can still go in and edit, change a quantity or delete an item. But to approve a P.O., all it takes is a keystroke and it's gone."

In addition, the new requisitioning system will be Web-deployable, Hartwig says, so the seven senior centers will be able to order directly to the system via the Web, rather than by fax as they do now.

While staff size has not been affected as a result of the Global system, Hartwig has seen definite productivity gains. "My staff is not just doing order processing now," he says. "Before, all they had time to do was key orders. Now they can spend more time researching products and doing cost analysis. Everybody has been asked to do more anyway, and we're doing more without adding to the head count."

Relationships with suppliers have improved substantially, Hartwig says. Now BHS is able to verify purchasing histories and is less reliant on vendors to supply figures. If BHS wants them to stock a new product, for instance, it's able to give suppliers usage history to indicate what stocking levels to provide. Or, if BHS is putting a contract out for bid, the system can generate bid sheets that include what products are included and their usage histories.

Hartwig can only guess at the hard dollar savings BHS has realized since the system was implemented, but points out that saving dollars was only a part of the objective. "Since we've gotten rid of the manual systems, I think it's safe to say that we've saved over a half-million dollars," he says.

"But the bigger goals we've achieved have been the standardization of products across entities and contract compliance and tracking," he adds. "We didn't go into this in order to say, 'See how many dollars we saved?' We had a greater goal in view-the ability to comply with contracts and to know what we're buying."