Maximizing economies of scaleEvolving to total transportation management at one of America’s leading health systems

Just as health systems are centralizing other operating expenses to lower costs, centralizing freight spend is the next major opportunity to save.

The goal is total transportation management, where all freight spend is managed under a single umbrella and data analytics drive continuous improvement.

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“Now we’re entering Phase II of our strategy roadmap, centralizing freight management and gaining full visibility into transportation spend. The goal is to see how things move everywhere.”

- Senior Director, Materials Management, a top IDN in the Great Lakes region

Taking freight management to the next levelThe key is gaining full visibility into and managing total spend across all modes of transportation. That includes not only inbound shipments of small parcels, but also large freight, same-day couriers—including internal fleets and resources — and distribution spend.

This is the path that one of America’s leading health systems is on today, moving from a traditional direct and distribution model to an advanced distribution network, with one integrated system that manages all deliveries from Point A to Point B. Cardinal Health supported the first phase of the evolution with such services as just-in-time distribution with ValueLink® Distribution Services and WaveMark™ Supply Management and Workflow Solutions, which utilize RFID technology to improve supply chain visibility and control.

“Now we’re entering Phase II of our strategy roadmap, centralizing freight management and gaining full visibility into transportation spend,” said the health system’s senior director of materials management. “The goal is to see how things move everywhere.” Other initiatives in Phase II include increasing optimization across service levels and modes of transport to save money and improve compliance on inbound, outbound same day courier, to save even more.

The advantages of centralized freight management are clear.

By gaining full visibility across its entire freight spend, a health system can calculate the total cost of fulfillment across every site of care. And that is the key to improving efficiency and lowering costs.

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Gaining full visibility into freight spendYou can’t control what you can’t see. With typical freight management, each shipment is handled independently and captured in various systems, making it nearly impossible to monitor it all. Lack of visibility to shipping practices and disparate systems across multiple sites of care create the issue. And the excess spending keeps adding up.

But once you centralize freight management and start seeing everything that moves through your system in a unified view — with the audited data to ensure integrity — you can make well-informed decisions to drive efficiencies and optimize spend across inbound, outbound, large freight and same-day couriers.

“Before OptiFreight® Logistics, we had little to no access to historical shipping data and had great difficulty obtaining it when we switched from the previous freight manager,” the senior director of materials management said. Now, the health system has full access to 100 percent of managed spend data.

“By funneling shipping data from all of our sites of care into a centralized system, we’re better able to consolidate and interpret it, which helps us make more informed decisions.” “To date, we’ve scrubbed more than three million lines of shipping data to see what’s being shipped, where it’s going and how much we’re paying. We want to know everything about anything that’s moving.” That level of visibility across inbound, outbound and courier spend is yielding actionable data that helps advance the health system’s journey toward total transportation management.

Setting the stage for multi-carrier and multi-modal shipping platforms and building multi-carrier reporting.

New opportunities to take greater control over every shipment using data analytics:

Putting centralized processes and systems in place to drive program compliance.

Using mode or channel optimization to select the best delivery option for each shipment, based on the level of urgency and cost considerations.

Streamlining delivery routes to avoid duplicating efforts and optimize the use of both time and resources.

Creating information flow so shipments are not held up due to tribal knowledge or not knowing whom to speak with.

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An essential component of centralized freight management is managing as many deliveries as possible inside the program. The more visibility you have, the more opportunities to save. Negotiating good rates from carriers alone won’t optimize savings if unmanaged gaps in your cost containment strategy remain. Centralizing freight spend can uncover and help close these gaps.

“OptiFreight® Logistics is managing a significantly higher amount of spend — 80 percent vs. 50 percent — than our previous freight management company,” the senior director of materials management said.

The health system has seen other benefits to aggregating spend data as well. For example, it wanted to ensure transactions were allocated to the appropriate cost centers. Prior to OptiFreight® Logistics, up to 35 percent of transportation transactions were not. That has been reduced to roughly 0.001 percent.

“Each transaction managed by OptiFreight® Logistics can see a 30 – 50 percent cost decrease, plus give us additional visibility to historical shipping data. So every bit matters.”

- Senior Director, Materials Management, a top IDN in the Great Lakes region

99.999%After OptiFreight® Logistics

of transactions were allocated to the appropriate cost center.

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Increasing value beyond rate savingsOne of the most significant ways that freight management has evolved is the ability to provide support beyond discounted shipping rates to save time and avoid headaches.

Realizing the knowledge required to manage full-transportation spend, the health system leveraged the expertise and labor resources of OptiFreight® Logistics. “This isn’t rocket science, but we need the resources to execute,” the senior director of materials management said. “It’s easier to outsource them than to add staff. My OptiFreight® Logistics Program Manager and Account Manager are invaluable resources to help me drive costs down.”

“This isn’t rocket science, but we need the resources to execute. My OptiFreight® [Logistics] Program Manager and Account Manager are invaluable resources to help me drive costs down.”

- Senior Director, Materials Management, a top IDN in the Great Lakes region

Uncover and resolve issues

• Analyze data to identify and address inefficiencies

• Document and report on shipping errors and resolutions

of the health system’s employees are satisfied with the services received from OptiFreight® Logistics.*

Driving value through supportSingle point of contact

• Go-to resource for transportation needs across the system

• Liaison with carrier and courier providers

Build and implement projects

• Audit performance vs. contracts and best practices utilization

• Work with employees, carriers, and suppliers to improve performance

“Let’s say a site’s courier STAT or ‘call-in’ spend has risen. They need to be able uncover the root cause. Can they see when and why these calls are occurring? With the OptiFreight® Logistics team, they have been able to.”

- Sr. Director, Materials Management

“The freight managers were able to discover that the vendor would pay the return freight, instead of it coming from my cost center.”

- Health system employee

“My [OptiFreight® Logistics] contacts have been very responsive, professional, and extremely helpful through every interaction.”

- Health system employee

9 out of 10

*Based on internal OptiFreight® Logistics survey data.

In a recent survey —

Services included: reporting, shipping assistance, information sharing, courier route adjustments, researching shipping issues (delayed or lost packages), recording service problems and assisting with the contract process.

The value of managing courier spendCourier services are a mode of transportation that often goes unmanaged and are arguably the most complex transportation challenge. For the health system, adding courier spend to its centralized freight management is core to completing Phase II of its strategy roadmap.

How can you achieve full visibility inside so much complexity? Even a well-designed system can quickly become littered with new couriers that create duplication and waste. Also, many of their activities aren’t captured inside the system — so there’s no way to manage them. Typically, courier services are also one of the highest average cost-per-shipment areas, which makes compliance and optimization even more important.

Decreasing STAT transactions from 30 – 35% to nearly 15%.

Eliminating multiple courier runs per year without impacting service levels.

The power of data analytics to decrease courier spend

Two real-world examples:

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One area that the courier strategy focuses on is improving the ratio of route vs. STAT transactions, which are costlier due to the faster delivery time. “When OptiFreight® Logistics came on board, STAT transactions generally accounted for 30 – 35 percent of deliveries,” he said. “There was definite room for improvement. By converting regular STAT runs into routes, we’ve decreased the STAT ratio to nearly 15 percent.”

In another example, OptiFreight® Logistics helped increase courier efficiency and patient safety by optimizing linen transportation. The courier transported linen to four different facilities from a single drop-off site, interfering with what the courier was truly tasked to do: transfer small items in a timely manner.

Root cause analysis revealed that the original linen contract called for delivery to each site, but the new contract term had not been implemented. “OptiFreight® Logistics worked with our contracting department to amend the vendor contract and re-establish point-to-point delivery, freeing up the courier and getting more value from our freight terms with the linen provider,” he said. The result: multiple unnecessary courier runs were eliminated, and patient safety was improved by removing stacks of linens from hospital hallways.

Collaboration yields resultsOptiFreight® Logistics and the health system have collaborated to build and implement a courier strategy that yields:

Dedicated support from industry experts

Data-driven insights into transportation costs

Better visibility into spend and routes

Greater efficiency of services and processes

Reduced costs through scale and optimization

© 2019 Cardinal Health. All Rights Reserved. CARDINAL HEALTH, the Cardinal Health LOGO, ESSENTIAL TO CARE, OPTIFREIGHT, VALUELINK and WAVEMARK are trademarks of Cardinal Health and may be registered in the US and/or in other countries. All other marks are the property of their respective owners. Lit. No. 2SRV19-950596 (8/2019)

For more information, visit: cardinalhealth.com/optifreight

1 Based on shipments through OptiFreight® Logistics during January 1 – December 31, 2018 compared to carrier list rate. Individual savings may vary.

The OptiFreight® Logistics Advantage1

19+ shipments managed per year

$475+ saved annually

30 – 50% average savings per shipment

Into the future: total transportation managementNow that the health system has added courier services, “we’re evolving even closer toward total transportation management, where all freight spend is managed under a single umbrella,” the senior director of materials management said. That will include not only inbound, outbound, large freight and same-day shipments, but also distribution spend. Actionable data sets will ‘connect the dots’ and create the full visibility that will lead to better decisions. “We’re also in the process of fully integrating our ERP with the OptiFreight® Logistics IT system.”

As healthcare systems seek to maximize economies of scale as they continue to grow, centralizing freight spend on the way toward total transportation management is a proven strategy. “When we integrate new sites, our first step is to maximize economies of scale to save money,” he said. “To accomplish that, we look at contract standardization, logistics management and aggregating freight spend.”

By creating full visibility across all shipping modes, health systems can reveal the total cost of fulfillment, which may lead to new efficiencies and cost savings. Data analytics are the key, and OptiFreight® Logistics is the way.

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