The Materials Management Team:

January 1, 2005

The Materials Management Team:
Uniting the Key Players in IC, OR, and Purchasing

By John Roark

Building relationships. Creating alliances. Opening the lines of
communication. A strong materials management team makes a significant

In too many facilities, materials management (MM) gets a bum rap. Its a
matter of ignorance. Perceived as a gray area, many simply may not realize the
vital role that materials management plays. The departments dramatic effect on
bottom line, physician happiness and patient safety and satisfaction cannot be
overlooked. Todays MM managers are taking an active role in educating facility
hierarchy and raising awareness.

In some facilities, when MM looks to put processes in place to help control
spending and standardization, the department is looked at as a roadblock, says
Jean Sargent, CMRP, director of central service for UCLA Healthcare, Los
Angeles. That can create animosity between the departments. The support really
needs to come from upper management, to say, In order to control our costs and
have standard patient care, these policies are in place, and they are enforced
by administration. Administration expects that people are going to work together
to meet these goals.

Its a constant educational process, says Mike Schiller, director of
purchasing and supply chain systems at Childrens Memorial Hospital in Chicago.
One of my personal goals here is to educate. You may not have the respect that
you should in the materials arena, only because you havent really taken the
time to educate senior management as to what it is you do as a materials
manager. Ive held a number of meetings with senior management and laid out my
supply chain agenda and direction for the organization for the next 12 to 24
months. I send out a monthly letter on behalf of materials Weve signed this
contract saving us $9,000; weve converted these four products for a savings of
$70,000 a year I focus on the savings potential, and what we bring to the
organization. A lot of people dont understand the concept of a group purchasing
organization (GPO), administrative fees, and the rebate checks that we get at
the end of the year.

For years, purchasing here was at the back end of the process, continues
Schiller. By conducting an internal audit, I showed senior management that in
six purchase orders we left almost $600,000 on the table, because we didnt get
involved in the beginning when we could negotiate price, terms and conditions,
based on industry standards of what other organizations have paid for equipment.
They ask how were going to fi x it, and I tell them we need to redesign this
whole process so that purchasing is plugged in, and materials is plugged in at
the front end.

Redesigning the whole process is often exactly what is needed to get a
facility back on track. Bringing all the different factions into the loop and
giving them a voice ultimately gives power to MM.

Without really effective communication between everyone on the team, it all
falls apart, says Susan B. Kreiss, FAHRMM, an independent consultant, supply
chain specialist, and president-elect of the Association for Healthcare Resource
and Materials Management (AHRMM). I personally always make it a point to seek
out the key players in the operating room (OR), infection control and key
clinicians elsewhere, and make it known that I am available to them, that I am
there to help to solve their problems not give them additional ones, and
literally open the door to communication. Without it, were all lost.

Establishing a system of information exchange puts everyone on the same page,
says Michael Lortie, CMRP, corporate director of materials management for
Carondelet Health Network in Tucson, Ariz., who cochairs a value analysis team
(VAT) that includes the OR director, OR materials coordinator and
representatives from physicians, nursing units, intensive care unit (ICU),
emergency room (ER) and other facility departments.

The VAT meets monthly to discuss standardization of products, questions on
contracts available through the facilitys GPO affiliation, new products and
other materials management issues and concerns. The facilitys OR materials
coordinator, Diane Rodriguez, RN, BSN, serves as a bridge between the clinical
staff and MM. One of the strengths that Diane brings to the team is that she
has such a foundation from working in the OR, coupled with her nursing
background, says Lortie. She has a great understanding of how these products
work in the surgeons hands and how they affect the patient. That makes a
significant difference, because theres so much new technology thats coming
out, and so many new products. Its really important to understand how its
going to function as youre making purchasing decisions. Thats what the role of
the nurse offers in conjunction with materials management on a fi scal end.

Clinical resource management (CRM) should always be filled by an RN, says
Kreiss. An RN brings to the table her clinical knowledge as well as some
materials knowledge. This can very often sway the clinicians the way materials
management cannot, because clinicians respect each other. We have more
credibility when we have a clinical person on our team.

The most progressive facilities are now hiring CRMs, says Kreiss. In the
places I have gone, people I have talked to, when they really want the job done,
they use the CRM as part of their team.

Schiller utilizes a multi-disciplinary product standardization committee
comprised of two co-chairs the director of purchasing and the director of the
pediatric intensive care unit. The committee consists primarily of clinical
educators throughout the hospital, infection control, central sterile, and our
primary vendor distribution rep. Weve got OR anesthesia representation as well
as a few other clinicians, some from our off-site areas. Its a real good mix
a very diverse group that represents a good cross section of the hospital.

Our goal is to standardize on the products that we have, continues
Schiller. Well review any product issues, entertain new product requests, and
with our goal as product standardization, we look at our GPO contracts, and
infection control review products specific to infection control issues. Well
also look at capital and other equipment purchases; well evaluate new product
requests, and also discuss any product issues with some of our current products.
Well discuss product evaluation as part of our standardization on items, and
well have sales reps come in. Well give them about 15 minutes to discuss just
that product its not a dog and pony show its very specific. They talk
about it, they answer any questions, and they leave samples. Before they leave,
well determine if we want to go with a small-scale evaluation or not.

This open, honest dialogue helps the process, says Schiller. Were getting
very good attendance, and a lot of people really feel that they are a part of
the process now. In the past there was a lack of ownership, and therefore the
meetings were not as well attended.

Often times, manufacturers sales reps will go directly to the surgeons, to
dazzle them with bells and whistles, in an attempt to get an edge on purchasing.
To get the upper hand, Kreiss arms her clinicians with knowledge.

I created an entire course of study under the umbrella of educating the
clinical staff, Kreiss reports. One of my courses was on negotiation for
clinicians. We realized that there was no way we were going to keep the sales
reps away from the clinicians and the physicians. If you accept that, what you
need to do is educate them on how to deal with the sales reps. The three most
important tenets that I would stress are: keep preferences a secret; keep the
spirit of competition alive until the deal is done; and work with MM as a team.
Were not here to get you the product you dont want, or to force you into the
product you dont want. Were here to get you the product you want for the price
of the product you dont want.

If MM works hand-in-hand with clinicians, where we can sit on the same side
of the table with each other and face the sales reps and look them in the eye
and say, Were not going to use your product unless you meet our price, we can
do anything.

The Up Side vs. the Down Side

If you dont have a well-run MM process, even with the GPOs, your institution
can suffer financially, says Kreiss. Its the MM department thats aware of
what contracts are out there, and actually can act as a champion for the
products that are on contract, and can ease the way for conversion to a quality
product, but at a lower price. A well-run MM department also gets the product to
the right people at the right time -- what good is a good price for a product if
its not there when the patient needs it?

Conversely, a weak MM department makes a facility a house of cards. They pay
too much, says Kreiss. They run out of product, and eventually the whole
process breaks down. It has happened in many places, and those are usually the
places that are recruiting for new materials managers. Sometimes the job can be
overwhelming because there is so much to be done, and MM departments very often
are understaffed. Through nobodys fault, except that the volume of work is so
big, things just dont get done. Institutions think they are saving money by not
hiring personnel. But in many cases they are losing money because they dont
have the professionals in place that they need.

Schiller agrees. Materials spent is usually the second largest expenditure
in an organization, second to payroll. If you dont manage it, you could have
millions of dollars in money tied up in inventory. You may have $4 million in
inventory sitting in your OR thats doing nothing for you. Maybe you can lower
that down to $3 million thats a $1 million one-time reduction. That million
dollars can go to a capital purchase the following year, to get you
revenue-generating equipment. It can get you equipment that allows you to
provide cutting-edge medical services to your patient population. With a poorly
run organization, you shoot yourself in the foot. You spend a lot more on a
materials standpoint. Youve got stock-outs in inpatient areas, which leads to
low morale among the nursing staff. Your patients arent going to be happy if
cases have to be canceled or rescheduled, or if they dont experience the level
of care that theyve come to expect.

Rage Against the Machine

Numerous software systems exist to make the supply chain system run smoothly.
Timesaving tools have a facility-wide effect, automating processes, eliminating
paperwork, and freeing up workers time. Schiller is passionate about
automation, but he stresses that you have to be cautious with technology.

Todays systems are integrated, meaning that youve got a materials and a
financial system that usually are all one application, he says. If you dont
understand your current processes, and you just try to automate them, mistakes
travel at the speed of light through your system. What would most likely be
caught in a paper process because people are looking at it along the way does
not occur any longer.

He offers a sobering example. Youve got a nurse who puts the requisition in
on the floor, the system takes it and converts it to a purchasing order (PO).
The PO gets released electronically to a vendor and you never see it. If you
dont have your item file, if you dont have your processes properly defined,
youre going to find out that youve got an electronic mess, and its going to
become a huge mess in just a matter of days. When you start looking at the
matching software functionality in some of these systems, youre matching your
invoice price to your receiver to your purchase order. Youre going to get so
locked up that youre not going to be able to pay your vendors because the
system is not going to release an invoice for payment.

You have to understand your processes, understand the technology youre
looking to implement, and figure out how it will compliment and augment your
processes, says Schiller. You cant just say, Were going to go ahead and
automate this and well be done, because youll have a mess that will take you
months and resources to unravel. Now, instead of looking forward, youre looking
in the rearview mirror, because youre constantly in a clean-up mode. Instead
of, how do we take it to the next level?