Improving Supply Chain Performance Of Blood Services

Improving Supply Chain Performance Of Blood Services Blood Banking services is one of the most important operations worldwide. The blood banking service provides the resources for transfusion needed in every medical intervention, whether in peacetime or during war. This paper observes the process of blood banking supply chain, starting with the upstream suppliers of raw material (blood) and down to the downstream consumers of products (hospitals). In the first part of this paper we present an overview of the supply chain of blood banking, and review the relevant research and literature regarding supply chain management of blood banking. In the second part, we select two areas of the supply chain and select key performance indicators (KPIs) that observe the quality of the supply chain of blood banking, from an aspect of service quality and cost control. We set the current levels of these KPIs with relevant information if it is readily available or by extrapolation from historical data where the current levels are unavailable. In the third part, we propose changes to the supply chain to improve the areas of review. These improvements will be indicated by changes in the selected KPIs. Analysis of supply chain performance Corporate Overview Canadian Blood Services (CBS) is the national non-profit organization created to manage the blood supply throughout Canada outside Quebec. Canadian Blood Services operates 41 permanent collection sites and more than 20,000 donor clinics annually (Canadian Blood Services, 2009; British Columbia Ministry of Health Services, 2002). The main products of CBS are Red Blood Cells, Plasma protein products, Platelets and Plasma for transfusion. In 2008 CBS collected 915,858 units of whole blood from 425,000 donors. CBS services provides blood supply services for a population approximately 26,201,377 (Statistics Canada, 2010). Blood Banking Process Overview of CBS The overall process of blood supply is the following: a given geographic region is serviced by a regional blood center (RBC) and smaller community blood centers (CBCs). These are responsible for providing blood products to hospitals. To achieve this, the Blood Centers must plan donor collection at planned locations. Donors are invited to donate blood to donor clinics. To reach a wider donor population, mobile collection units (specialized vehicles) are sent to sites where there are no fixed donor clinics (Pierskalla, 2004.). Depending on the requirements for blood products, the whole blood are collected into appropriate bags are used when drawing blood. The collected whole blood is sent to a CBC or RBC for processing. There, it is tested for viruses and diseases, and final components are prepared from the whole blood. The components are placed into inventory for shipments to hospitals based on their blood product requirements. CBS operates only 41 permanent collection sites/RBC. The supply of blood products is then distributed to hospital blood centers, without community blood centers. The blood products are highly perishable, with shelf life from 5 to 35 days. If a particular component exceeds its maximum shelf life, it must be destroyed. This process is presented on the following figure. Current target of meeting demand is 95% of hospital demand nine months out of twelve. Literature review (Keal and Hebert, 2010) conclude that blood banks must reorganize their mindset and adopt KPIs on a daily basis. Naturally, financial, operations and executive levels may be interested in a different set of indicators. Blood banks need to perform analysis with a much greater frequency then currently performed to become more elastic to demand and changing environment. As a first step, a blood bank needs to identify which issues it needs to address when implementing KPIs. (Jennings, 1973)- Cooperation between is successful in outdate and shortage management is a good choice. Common inventory policy between blood centers reduce the numnber of outdates and shortages by 72% in a 20 blood center cluster, and by 64% for a 5 blood center cluster. Simple threshold transfer policy reduce the numnber of outdates and shortages by 61% in a 20 blood center cluster, and by 54% for a 5 blood center cluster. This operates on a Outdate / Shortage ratio of 1.0 (equal number of shortages and outdates). Simple treshold transfer is much more efficient in transport logistics and costs, as well as information support systems. (Prastacos, 1984) Blood collection is through organized collections, invited donors and walk in donors. No donor should be returned. This variance in collection environemnt dictates very careful selection of Optimal component processing policies to achieve optimal supply of proposed products. Donors react positively to positive reinforcement (rewards, altruism, health checks). The positive reinforcement is a key conclusion of the research of (Oswalt, 1977). (Hemmelmayr et al., 2009)- Discusses that a Vendor-managed inventory (VMI) control for blood products can be extremely efficient, including scenarios of multiple products. (Jones, 2003) Changes to regulation and public events can cause a significant dip in donations and cause blood product shortages. These can be localized, and impact the different regions differently, thus testing the elasticity of the system. Donors react positively to positive reinforcement (rewards, altruism, health checks).The blood donor pool needs to be further researched, since significant number of potential donors are untapped. (Katsaliaki and Brailsford, 2007) – performs a computer simulation model of the blood banking environment end-to-end and concludes that there are room for changes that will improve the overall system state. These changes include changes in stock planning, management of inventory Key Performance Indicators, KPIÂ ´s, are indicators showing what needs to be done in an internal operative perspective. These KPIÂ ´s focus on the parts of an organisations performance that are the most critical to success, both for present time and future. A good KPI affects a number of critical success factors. It also affects other KPIÂ ´s in a positive manner. Parmenter (2007, page 3) Due to Neely et al (2000), each company has to map their way to success through identifying a number of key factors in the process When implementing KPIs, it is of utmost importance that goal measures for every KPI are defined. Shahin and Mahbod (2007) claim that SMART goal setting is a commonly used set of criteria of how to set goals. SMART stands for Specific, Measurable, Achievable, Realistic and Time Sensitive. The service level is the ability for the company to secure delivery to its customers. When calculating the safety stock the service level is used. (Mattsson, 2004, page 160) decrease the holding stock to 4 days, the introduction of two routine deliveries in working hours to better manage orders from the NBS and grouped transport to hospitals, a more insensitive ad-hoc ordering point for RBCs to 35% of the optimal stock level, the reduction of the total crossmatch release period (before and after transfusion) to 1 day, the increase of the transfusion to crossmatch ratio to 70%, either through stricter compliance with the recommended ordering system leading to more accurate orders placed by doctors, or by applyingm ultiple-crossmatchingte chniques, strict adherence of the hospital blood bank when cross-matching units to a FIFO order for units coming from the Centre and LIFO for the unused, returned units from the other wards. In other words, compliance with a FIFO order accordingt o the collection/productiond ate of the unit Analysis of Key Performance Indicators of Procurement The main challenge in the procurement process for blood banks is the supply of the source of all blood products – donors who can vary since donors are volunteers. The supply is further impacted by the list of viruses and diseases that the donations need to be screened for before the products can be used for transfusions (Pierskalla, 2004.). All collected whole blood and blood products are stored in special containers – bags that differ depending on the product they contain. A defective batch of containers delivered from the manufacturer will cause a recall and destruction of an entire batch of collected WBC or entire batches of products. The CBS procurement KPIs that will be investigated are: Percent of RBC shipped vs whole blood collected – This KPI will measure the ratio of of red blood cells shipped to the whole blood collected. From the collected blood, there can be discards due to a variety of reasons (quality control, test results, post-donation information, equipment problems, process non-conformances). This ratio indicates the quality of blood collection and processing. CBS has an average of 79% ratio of this KPI over a 3 year period (Canadian Blood Services, 2009). Number of Blood product recalls per 10,000 collections – This KPI measures the number of blood product recalls once they have been distributed to the hospitals that need to be recalled due to errors, accidents and post-donation information, for every 10,000 blood collections. This ratio is important to since it influences the overall customer satisfaction, and causes costs for the reverse logistics. CBS had the worst recall ratio in 2008, with significant decrease in 2009 (Canadian Blood Services, 2009). Number of Whole blood donors – A very straightforward KPI, which tracks the number of persons that donated whole blood – the upstream suppliers. This KPI needs to be closely followed, since a declining number of donors indicate a very real risk of blood and product shortages since the upstream supply is reducing. CBS historical data for this KPI indicates a varying trend in the past 3 years (Canadian Blood Services, 2009). Number of Units of whole blood collected vs Number of Whole blood donors – This KPI presents the prolificacy of each donor during the year. The average waiting period between donations for a donor is 70 days. This means that at most, a single donor can make 5 donations per year. CBS has this KPI at a very constant 2.17 over the 3 year period (Canadian Blood Services, 2009). Number of blood containers defective per 10,000 units collected- Since the blood procurement process is extremely dependent on the correct and good quality containers –bags. Therefore, a KPI is needed to identify the amount of defective containers, and properly manage the supplier relationship with the suppliers of these containers. CBS has seen the most defective bags are noted in 2008, with a declining trend in 2009. Analysis of Key Performance Indicators of Inventory Management As (Jennings, 1973) concludes, three of the most important measures in inventory management in any blood bank are shortage, outdating and cost. We will review the following KPIs in the CBS model: Number of component indate discards over components produced – The discarded components from inventory within their shelf life are part of the total loss of stock. Recalls for any reasons, as well as defective containers cause indate discards. But indate discards from inventory reduces available inventory, and can impact the carefully planned balance of procurement, stock and distribution. CBS has a trend of reduction of indate discards in stock, which is consistent with the increasing percentage of delivery of products to collected blood units. Number of outdated components to total components in inventory – Since blood products are extremely perishable, there is no opportunity to keep a stock of blood products for any long period of time unless they are cryofrozen (out of scope of this paper). The outdated components are the stock of products that have not been used before their shelf life has passed. This KPI is crucial in tracking the expiry of products (and conversely money) due to poor planning. CBS is reducing the outdated products and bringing it to 2.5% at an annual level. Cost per blood product unit shipped – Since everything is about cost reduction or customer support, this ratio is crucial for cost management. Every step in the blood banking process is very expensive, and the tracking of this KPI is important for top management, as well as the logistics manager. As can be seen in the diagram, this KPI for CBS is showing increasing costs (Canadian Blood Services, 2009; British Columbia Ministry of Health Services, 2002) Percent of Order fill rate, by blood product type – This KPI directly tracks the downstream supply chain service quality. The percent of order fill rate is in essence the achieved service level for each type of product. total blood requests, by type of blood product (red blood cells, platelets etc.). CBS sees a reduction of the service level for order fulfillment in the 3 year period (Canadian Blood Services, 2009). Proposed Changes for Improving Performance After reviewing the KPIs of the two processes of interest, certain trends are identified that need to be analyzed and remedial action be taken. Each of these KPIs will require a logistic effort. Procurement The procurement process of Blood Banking supply chain was observed through 5 KPIs and it was identified that 3 are indicating positive trend. The other 2 KPIs are indicating negative trends that need to be treat: Increasing units of whole blood collected per donor, which indicates reduced motivation of the supply sources. The positive donor motivation should be returned only through positive reinforcement. (Prastacos, 1984; Oswalt, 1977). In logistics terms this would mean more equipment, human resources, marketing material and constant communication with donor relationship teams to provide necessary resources. Number of blood containers defective is widely varying. Most organisations monitor their suppliers to make sure that they continue to give satisfactory service. This is called supplier rating or vendor rating (Waters, 2003) Multiple suppliers and very frequent tracking of this KPI (weekly level) (Keal and Hebert, 2010) so proper remedial action can be taken . FIFO/LIFO Inventory Management The inventory management process of Blood Banking supply chain was observed through 4 KPIs. While 2 KPIs indicate good trends and successful operation, the other 2 indicate serious issues that need to be remedied. The main actions that need to be taken from the investigated KPIs are: Increasing order fill rate. The following diagram presents the overall service level of CBS for order fill rate. It can be concluded that the overall service level (product of service levels of the three products) is steadily declining. The safety stock needs to be increased on all three products to include (Ballou, 2004; Waters, 2003) Trans-Shipment for grouped Stock Centers (Jennings, 1973) and re-use of returned indate products (Katsaliaki and Brailsford, 2007) Vendor Managed Inventory for hospitals (Hemmelmayr et al., 2009) Controlling cost per blood product unit. There is a consistent trend of increasing cost of blood product unit. The cost breakdown in Appendix C shows that the major cost elements are the blood collections and distribution, consisting of 50% of all costs (excluding administration). Since the best positions for cost reduction are at the point of contact between supply chain partners (Waters, 2003), these exact points should be investigated for cost reduction. Conclusion Blood Banking is operating the supply of a key component of life – blood and bood products. It is considered a crucial service for any country, and is even treated as a big business in some countries. The logistical issues of blood banking are many on every level, since blood banking must achieve very fast delivery of products, and any stock-outs may mean loss of human life. This is further Through adoption of KPI tracking throughout the processes of blood banking, a blood service like Canadian Blood Services (CBS) can achieve a very quick reaction time to adverse indications of deficiencies in the process. The procurement process has logistical issues that need to be followed by the logistician in the area of donor treatment, which is an activity that will be performed in coordination with Marketing. A more pressing issue is the management and tracking of quality of blood containers and their suppliers, since a faulty series of containers will cause product recalls, stock-outs and financial losses. The inventory management process as a first priority must focus on achieving an much better overall service level of order fill rate than the current one. The service level needs to be increased by a higher safety stock, but since only increasing the safety stock is costly, a trans-shipment of products between centers need to be performed. Also, this service level can be improved by agreeing on a Vendor Managed Inventory with the hospitals. The other issue is cost of blood product management, through optimizing the process which requires most logistics – blood collections. An optimized process of blood collections which can reduce costs of that process by 10% will show significant improvement of the cost of blood product.