Gardner - Supply Chain Performance Management at the ...

supply.chain.org

Gardner - Supply Chain Performance Management at the ...

Supply Chain Performance

Management at the

Department of Veterans Affairs

Using a SCOR Baseline

Nelson Gonzalez

Strategic Sourcing Program Manager

Office of Acquisition & Logistics Programs & Policy

Department of Veterans Affairs

Brian K. Frank

Associate

Booz|Allen|Hamilton, Inc.

Brian L. Shaw

Associate

Booz|Allen|Hamilton, Inc.

Supply Chain World North America – April 4, 2012

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 1 | 28 March 2012


Table of Contents

VA Supply Chain Transformation

SCOR Baseline

Supply Chain Performance Metrics

Prototype Supply Chain Dashboard

Supply Chain Performance Management Framework

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 2 | 28 March 2012


We have an obligation to provide assistance for Veterans for their

entire lives. The size and complexity of the supply chain to support

this network dwarfs any other government or commercial organization

4.1 million Veterans & survivors receiving compensation & pension benefits (end of FY10)

45.8 billion in active compensation & pension benefit accounts (end of FY10)

8 million Veterans enrolled in healthcare programs

13 million bed days of care (FY10) 1

75 million outpatient visits (FY10)

111,800 interments in FY10

- - - - - -

16.3 million items consumed 4

5 major commodity groups

1.3 million contract actions 2

$17.4B in annual spend

174,722 contracts 3

27,176 suppliers 3

5000 PMs/COTRs

5500 logistics staff

3000 contracting officers

6 leaders of contracting

$12.7B value of equipment 5

366 million hours of direct labor 1

- - - - - -

56 Regional Benefit Offices, 350 Local Offices & Intake Sites

153 Medical Centers, 807 Outpatient Clinics, 288 Vet Centers

3.1 million gravesites and 131 national cemeteries in 39 states

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 3 | 28 March 2012

Sources: 1-DSS; 2-FPDS (does not include purchases


VA Supply Chain Management Transformation 2012 - 2015

Workforce Development

Supply Chain Performance Dashboard

Technology Integration

Strategic Sourcing /

Acquisition Savings

GS1 Data

Standardization

Process Improvement /

Inventory Reduction

Supply Chain

Governance Board

Supplier Relationship

Transformation

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 4 | 28 March 2012


Table of Contents

VA Supply Chain Transformation

SCOR Baseline

Supply Chain Performance Metrics

Prototype Supply Chain Dashboard

Supply Chain Performance Management Framework

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 5 | 28 March 2012


We conducted interviews and collected data from various sources to

help define the baseline, assess the supply chain and ultimately,

recommend a performance management strategy

Data Collection

SCOR Project Approach

Deliverables

SCOR

Process/Metrics

VA OA&L Functional

Interviews

Booz Allen Supply Chain/

Logistics Expertise

VA Procurement

Reform Task Force Report

Current VA

Organization Charts

VA OA&MM 2006-2010

Strategic Plan

VA 2011 Budget

PwC Supply Chain

Transformation Study

VA Handbook

7002

VA’s “13 Greatest

Challenges”

VHA CP&LO

Interviews

NCA Functional

(Logistics) Interview

OAL and VHA

Resource Libraries

Supply Chain

Baseline

Supply Chain

Maturity Assessment

Performance

Measurement

Strategy

Enable Supply Chain

VAAA

Strategy

SDC

P

EP ES

OAL

MBR

IT

VACO

Center for

Acquisition

Innovation

CFM

Med/

Surg HCS

Performance

Measurement Framework

D

R

Mission, Vision,

Goals

SCOR Framework

Performance

Measures

1. Define Scope

2. Design

ES S

ER

National Acquisition

Center

Technical Acquisition

Center

Suppliers

Pharm

Nutrition

PLANNING AND EXECUTION

Enablers

Performance

Management

IT/Data

Collection and

Management

Production

Risk

Management

Denver

Acquisition

and Logistics

Center

.

Inventory

Management

Supply Chain

Strategy

Distribution/

Transportation

Infrastructure

Management

S

Regional

Contract Center

S

Veterans

Procurement

Returns/ Retrograde

Customer

Relations

Management

SAO-E

SAO-C

SAO-W

VHA

Product Lifecycle

Management

P

ES EP

VBA

OAL

NCA

S

P

M

R

Administrations

Benefit Offices/

Centers

OAL

Hospitals/

Cemeteries

Clinics

D

Human Resources

Management

Service Providers

3. Develop & Test

4. Implement

OAL Performance

Measurement Dashboard

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 6 | 28 March 2012


The existing VA supply chain management construct and doctrine

were then compared to standard Supply Chain Operations

Reference-model (SCOR) processes and metrics for further analysis

Plan

Deliver

Source

Make

Deliver

Source

Make

Deliver

Source

Make

Deliver

Source

Source: SCC

Return Return

Return Return Return Return Return Return

Suppliers’

Supplier

Supplier

VA

Acquisition and Logistics

Service

Providers

Veterans

SCOR takes the segments of a supply chain, shows the players within each segment and the processes they perform,

and then shows the interrelationships of these processes.

There is a material flow, an information flow, and a cash flow associated with these processes.

SCOR provides…

Standard processes:

Plan, Source, Make, Deliver, Return, Enable

Standard metrics:

Perfect Order Delivery, Supply-Chain Cost, etc.

Best practices:

EDI, CPFR, etc.

Pre-defined relationships among processes,

metrics and practices

SCOR allows…

Common supply chain terminology that

translates across industries and organizations,

which permits:

– Meaningful benchmarking with other

organizations

– Common metrics for performance assessment

and comparison

– Incorporation of industry best practices to

improve supply chain performance

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 7 | 28 March 2012


In the baseline, we identified the customers and suppliers as well as

the products required by the customers to define the supply chains

Who are the stakeholders

What are their responsibilities

What processes are used

Service Provider Profiles

RACI Matrix

What do we procure for

our customers

Supply Chain Management Scope

Which customers require what products

Supply Chain Definition Matrix

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 8 | 28 March 2012


Understanding organizational supply chain relationships and

hierarchical process linkages are key to identifying performance

measurement dependencies

Enable Supply Chain

P = Plan

S = Source

M = Make

D = Deliver

R = Return

E = Enable

VA Acquisition

Academy

Transactions

Formal Relationships

S

R

Supply

Distribution

Center

P

EP ES

OAL

Marketing &

Business

Relationships

Pharm

IT

ES S

ER

VACO

ES S

ER

Strategic

Acquisition

Center

D

R

Center for

Acquisition

Innovation

Suppliers

Nutrition

CFM Med/

Surg HCS

National Acquisition

Center

ES S

ES S

ER

ER

Technical Acquisition

Center

ES

S

Denver ER

Acquisition

and Logistics

Center

M

SAO-E

SAO-C

SAO-W

ES S

ER

Regional

Contract Center

S

Veterans

VHA

P

ES EP

VBA

OAL

NCA

S

P

M

R

Administrations

Service Providers

Benefit Offices/

Centers

OAL

Medical Centers/ Cemeteries

Clinics

D

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 9 | 28 March 2012


The medical supply chains are enabled by prime vendor contracts,

as well as, national and local contracts

Veterans

GOODS and SERVICES

$$$/POLICY/GUIDANCE

INFORMATION and REQUIREMENTS

Oversight

Requests

Requirements

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 10 | 28 March 2012


The Supply Chain Maturity Assessment is designed to provide a

diagnostic approach to improving supply chain operations

Supply Chain Maturity Model Process

Benefits

Best practice assessment for

each supply chain capability

Aligned with SCOR framework

Booz Allen’s Supply Chain Expertise

Major findings by capability area

Improvement opportunities

mapped against organization

priorities and supply chain

capability areas

Structured Analytic Approach

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 11 | 28 March 2012


Source: VA Interviews and Surveys, Booz Allen Hamilton Analysis

Focus areas for improvement can be gleaned by comparing

organizational priorities to process maturity

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 12 | 28 March 2012


The Supply Chain Maturity Assessment results provide the foundation

for pursuing improvement initiatives; improvements in these four

focus areas will have a positive effect on the remaining areas

Improvement

Areas

Improvement Initiatives

Objectives

Supply Chain

Strategy

Organizational

awareness/alignment

Performance

Management

Quantified and

consistent business

outcomes

IT/Data Collection

and Management

Enterprise visibility of

supply chain

requirements,

resources and

performance


Risk Management

Strategically-aligned

and evidence-based

resource management

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 13 | 28 March 2012


Table of Contents

VA Supply Chain Transformation

SCOR Baseline

Supply Chain Performance Metrics

Prototype Supply Chain Dashboard

Supply Chain Performance Management Framework

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 14 | 28 March 2012


Performance metrics will capture how well the supply chain

organization supports the overall VA value stream

Plan

Currently, there is visibility to Veteran-care

outcomes, but little traceability to supply

chain drivers, effects, and impact

Deliver

Source

Make

Deliver

Source Make Deliver

Source Make Deliver

Source

Return

Return

Return Return Return

Return Return Return

Source: SCC

Suppliers’

Supplier

Supplier

VA

Acquisition and Logistics

Service

Providers

Veterans

In addition to the effects on “Outcomes”, leadership is interested in monitoring and

optimizing the Quality, Responsiveness and Cost of the Supply Chain Organization

• What is the Quality of supply chain product and service delivery

• How Responsive is the supply chain to service providers

• What is the Cost to the enterprise (relative to overall expenditures)

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 15 | 28 March 2012

15


The SCOR model includes metrics related to five performance attributes

Performance Attribute Definition KPIs

Responsiveness

The speed at which a supply chain provides

products to the customer

Order Fulfillment Cycle Time

Physical SCM

Performance KPIs

Reliability

Flexibility

Delivery of the correct product to the correct place

at the correct time in the correct condition and

packaging in the correct quantity with the correct

documentation to the correct customer

The agility of the supply chain in responding to

changes in demand

Perfect Order Fulfillment

Upside Supply Chain Flexibility

Upside Supply Chain Adaptability

Downside Supply Chain Adaptability

Financial SCM

Performance KPIs

Cost

Asset

Management

All costs associated with operating the supply

chain

Effectiveness in the management of (fixed and

working capital) assets used in the process of

satisfying demand

Total Cost to Serve

Cash-to-cash Cycle Time

Return on Supply Chain fixed assets

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 16 | 28 March 2012

Source: Supply Chain Council – SCOR model

16


Performance Management Framework: Three distinct levels of

metrics illuminate the health of the supply chain from the strategic

(top level), operational, and diagnostic perspectives

Quality: the measurement of how well the supply chain provides needed

supplies and services to fill service provider (clinician) requirements

Cost: sum of the costs associated with

acquiring, managing, and delivering

materials and services to clinicians

Responsiveness: measures how timely the goods and services

are provided to the service provider (clinician)

Order

Fulfillment

Cycle Time

SR-01

Perfect

Order

Fulfillment

SQ-01

Total

Supply

Chain Cost

SC-01

Top-level Performance:

Measures overall performance in delivering on the mission

and the strategic goals and objectives. These metrics

provide a broad end-to-end view of the supply chain.

EIL

Indices

(In/Out Patient)

Equipment

Availability Rate

OR-01

Estimated Inventory

Usage Per Patient

(In/Out Patient)

Obligation Ratio

(Labor $: Material $

: Overhead $)

OC-01

Customer

Fulfillment

TSCC as a

% of Total

Budget

OC-02

Logistics

Department Flow

SCM / Operational Effectiveness:

Measures execution of particular

aspects of supply chain operations.

These metrics provide context to supply

chain functions, often relating one set of

functions to another.

OC-03

OC-04

OQ-01

OR-02

Reutilization

DC-01

Average

Inventory

Value

DC-02

Inventory

Management --

Standard

Items: On-

Demand Items

DR-01

Inventory

Stockouts

DR-02

Inventory

Accuracy

Days of

Supply

Inventory

Turns

Value of

Inventory

(Long, and

Inactive)

Report

of Survey

(Value

and Duration)

DQ-05 DC-03 DR-03 DC-04 DC-05

Planned

Cost to

Actual Cost

Ratio

DC-07

SCM Diagnostics:

Help identify factors

affecting changes in

performance measures.

Orders

Delivered

in Full

DQ-01

Delivery Perf

To Customer

Required Date

DQ-02

Documentation

Accuracy

DQ-03

Perfect

Condition

DQ-04

Contract

Management

Lead Time

Average

Age Supply

Chain Policy

Compliance/

Standardization

Percent

Purchased on

Existing

Contracts

Percent

Purchased

Electronically

Transportation

Costs

DR-04 DQ-06 DQ-07

DR-05

DR-06

DC-06

Spend Analysis

(Method of

Purchase)

DQ-08

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 17 | 28 March 2012

17


Metric Detail (Example)

Order Fulfillment Cycle Time

SR-01

DEFINITION

REASON FOR

METRIC

CALCULATION

DATA

ELEMENTS

SOURCE

DATA GAPS

FREQUENCY

Average actual cycle time consistently achieved to fulfill customer orders. For each individual order, this cycle time starts from the

purchase request placed for an order and ends with date of customer acceptance of the order.

Cycle time improvements have been linked to reduced costs, reduced inventories, and increased capacity. Having to compensate for a

long cycle time drives a need for increased inventory. An increased inventory increases the days of supply; increased days of supply lowers

inventory turns. Obviously, an increased inventory raises materiel costs in the supply chain. Order Fulfillment Cycle Time is a top level

measure of the strategic responsiveness of the supply chain; it is also a point of comparison to work towards cycle time reduction.

Order Fulfillment Cycle Time = [Sum Actual Cycle Times For All Orders Delivered] / [Total Number Of Orders Delivered] Expressed in days.

As shown in the example, the sum includes the elapsed time between the date the purchase order is assigned and the date the item is

received.

Currently, OFCT is measured as the time from the release of the purchase order to the time the order is received at facility inbound

logistics. However, OFCT is commonly defined as the sum of the source cycle time and the delivery cycle time. That is, from purchase

request until it is delivered to the end user, excluding non-value add time. In our case, Source Cycle Time to Primary Inventory is the time

from purchase request to the time the purchase order is released + time until the order is received at facility inbound logistics; and Delivery

Cycle Time is the time from order receipt at the VA facility until it is delivered to user, currently only measured to the primary inventory.

IFCAP

• Item receipt time-stamp is not regularly recorded

• Initial requirement date is not regularly recorded

Monthly

PurchaseOrderNum SupplyStatus DatePoAssigned PoDate OriginalDeliveryDate DateReceived LineItemIDNum QtyReceived

XXX-0U8570 Transaction Complete (Amended) 7/8/2010 7/8/2010 7/13/2010 7/14/2010 1 1

XXX-0U8570 Transaction Complete (Amended) 7/8/2010 7/8/2010 7/13/2010 7/14/2010 2 2

XXX-0U8570 Transaction Complete (Amended) 7/8/2010 7/8/2010 7/13/2010 7/14/2010 3 1

XXX-A02051 Partial Order Received (Amended) 7/14/2010 7/14/2010 8/14/2010 8/18/2010 3 1

XXX-A02051 Partial Order Received (Amended) 7/14/2010 7/14/2010 8/14/2010 8/18/2010 4 1

XXX-A02051 Partial Order Received (Amended) 7/14/2010 7/14/2010 8/14/2010 9/7/2010 4 1

XXX-P02854 Transaction Complete 8/30/2010 8/30/2010 9/9/2010 9/15/2010 1 6

XXX-P02854 Transaction Complete 8/30/2010 8/30/2010 9/9/2010 9/15/2010 2 4

XXX-P02854 Transaction Complete 8/30/2010 8/30/2010 9/9/2010 9/21/2010 2 2

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 18 | 28 March 2012


Table of Contents

VA Supply Chain Transformation

SCOR Baseline

Supply Chain Performance Metrics

Prototype Supply Chain Dashboard

Supply Chain Performance Management Framework

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 19 | 28 March 2012


The “Manage Performance of Supply Chain” process has been

visualized in a Prototype Supply Chain Dashboard

1. Supply Chain

Health

2. Opportunities for

Savings

3. Progress of

Improvement

Initiatives

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 20 | 28 March 2012


Prototype Dashboard Data Processing

Data Sources:

– Procurement Records

– Inventory Records

– Asset Management Records

– Labor History

– Customer Volume Records

– Policy Records

FY2010 data – illustrative only

– Future implementation requires access to source authoritative databases

Received approximately 12GB of data from legacy systems

– Limited granularity (e.g., PO numbers do not reveal the items ordered)

– Many blank fields and records

Data required some preparatory work

– Select primary inventories analyzed

– Excluded some administrative categories, research, training, grounds upkeep, etc.

– Classified costs as labor, material, overhead, or not applicable

– Required normalizing

Did not try to cleanse the data of mistakes or other anomalies

– Graphics reflect data peculiarities (e.g., negative inventory values)

– Prototype not connected to live databases

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 21 | 28 March 2012


Dashboard effort focused on metrics that already had available data;

Where VA does not collect data at the national-level, metrics are “Pending”

On Display

● Perfect Order Fulfillment (Notional*) (SQ-01)

● Order Fulfillment Cycle Time (SR-01)

● Total Supply Chain Cost (SC-01)

● Customer Fulfillment (Notional*)(OQ-01)

● Logistics Department Flow (OR-02)

● Obligation Ratio (OC-01)

● TSCC as Percent of Total Cost (OC-02)

● SC EIL Index (OC-03)

● Estimated Inventory Cost per Patient Day (OC-04)

Pending*

● Equipment Availability Rate (OR-01)

● Documentation Accuracy (Notional*) (DQ-03)

● Perfect Condition (Notional*) (DQ-04)

● Inventory Accuracy (DQ-05)

● Inventory Stockouts (DR-02)

● Contract Management Lead Time (DR-04)

● Percent Purchased Electronically (DR-05)

● Planned Cost to Actual Cost (DC-07)

● Orders Delivered in Full (DQ-01)

● Delivered by Required Date (DQ-02)

● Average Age Supply Chain Policy (DQ-06)

● Method of Purchase (DQ-08)

● Compliance and Standardization (DQ-07)

● Inventory Management – STD:ODI Ratio (DR-01)

● Inventory Turnover Rate (DR-03)

● Percent Purchased on Existing Contracts (DR-05)

● Reutilization (DC-01)

● Average Inventory Value (DC-02)

● Days of Supply (DC-03)

● Value Long and Inactive Supply (DC-04)

● Report of Survey Value and Duration (DC-05)

● Transportation Costs (DC-06)

* Complete data not yet available

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 22 | 28 March 2012


Reports will be transmitted using various styles of visualization to

help clarify trends, patterns, and outliers.

Combination Charts are used to display such metrics as Reports of Survey and

Perfect Order Fulfillment

Bubble Charts are used to display Average Policy Age

Line Charts are used for metrics such as Days of

Supply, Inventory Turns, and Value of Long and Inactive

Inventory

Stacked Column Charts are used to display

metrics such Standard to On Demand

Inventory and Average Inventory Value

Pie Charts are used to display Reutilization

Bar Charts are used to display comparisons such as

comparisons of Total Supply Chain Costs and comparisons of

EIL Indices

Multi-Series Column Charts are used to display

metrics such as Obligation Ratio as well as

aggregate reports.

Column Charts are used to display comparisons

such as Percent Purchasing on Existing Contracts

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 23 | 28 March 2012


The dashboard gives the analyst the opportunity to perform

causative research

Average Inventory Value (DC-02)

Long and Inactive Supply (DC-04)

Days of Supply (DC-03)

Standard to On Demand (DR-01a)

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 24 | 28 March 2012


The dashboard gives managers at all levels the ability to drill down

and conduct causative research into data outliers and anomalies

Data “rolls up” and allows for

“drill down” transparency

Identifies inconsistent or

incomplete data

Conduct comparative analysis

between like facilities or

contrasting metrics

Highlights data outliers

Facilitates trend and

root cause analyses

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 25 | 28 March 2012


Table of Contents

VA Supply Chain Transformation

SCOR Baseline

Supply Chain Performance Metrics

Prototype Supply Chain Dashboard

Supply Chain Performance Management Framework

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 26 | 28 March 2012


We have the metrics; we have the data; we have the dashboard …

…so what is next and how does it all fit together

High data

confidence,

integration,

and accessibility

lead to accurate

reports;

it is the backbone

of performance

management

Data

Metrics

Linked to

strategic goals

and objectives;

will provide an

assessment of

supply chain

health

Establishes the

processes

required for

effective

performance

management of

metrics

sEP.2.1

Define

sEP.2

Manage Performance

of Supply Chain

sEP.2.2

Monitor

Process

sEP.2.3

Evaluate

Organization

Establishes the roles,

responsibilities, and

team structure

sEP.2.4

Leverage

Technology

Provides

visualization of

metrics and

potential

methods of

implementation

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 27 | 28 March 2012


Contact us at

• Nelson Gonzalez

VA Strategic Sourcing Program Manager

Office of Acquisition & Logistics Programs & Policy

U.S. Department of Veterans Affairs

Nelson.Gonzalez2@va.gov

(202) 429-8439

• Brian K. Frank

Booz|Allen|Hamilton, Inc.

frank_brian@bah.com

(202) 429-2090

• Brian L. Shaw

Booz|Allen|Hamilton, Inc.

shaw_brian@bah.com

(202) 429-2074

http://www.va.gov/

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Supply Chain Perf. Mgmt. at VA | Slide 28 | 28 March 2012

More magazines by this user
Similar magazines