Video: A Required Step Change for Service Chain Operations

Presented by James Allt-Graham and Shanaka Jayasinghe

GRA's James Allt-Graham and Shanaka Jayasinghe presented ‘A Required Step Change for Service Chain Operations’ at the largest Healthcare conference in the Southern Hemisphere - Australian Healthcare Week.

Applying Supply Chain Principles (from Retail & FMCG), their presentation reviewed how Service Chains (particularly Hospitals and Aged Care Home Services) are likely to mature over the next decade.

The session covered:

  • GRA’s Service Chain Excellence Framework
  • Demand-driven / Forecast-led Recruitment Practices
  • Schedule & Route Optimisation Processes & Technologies
  • Effective KPIs & Performance Management

The session provided the audience with (a) immediate and tangible takeaways to drive operational efficiencies (service performance, overtime, KMs travelled, staff costs, etc.), as well as, (b) prompt a review of organisational preparedness to more strategic and structural requirements over the next decade.

Further information:


James Allt-Graham: It's fantastic to be here today. It's been a wonderful morning actually, being able to go around the exhibition and hear some of the topics. And we're delighted to have the opportunity to present to you today on some of the key things that we're seeing around supply chain.

Just by way of background, GRA has been in business for over 22 years. We've worked with a whole range of clients in the sort of physical supply chain, as you can see on the slide. But in particular, we've also done a lot of work in the healthcare sector. In particular pharmaceuticals, medical devices, and also work within some of the shared service areas, such as those that Carmen was talking about in her business this morning.

And what we feel is that that experience gives us a whole variety of insights into some of the challenges that are being faced by the healthcare sector as we're going through a period of a very significant change. And so, what we'd like to do today is to try and share with you some of those insights and experience given the challenges that are being faced in the healthcare sector. In terms of the way we approach the industry, really what we see is is a whole series of opportunities to improve national productivity and reduce waste.

And from a supply chain perspective, again, as we heard from some of the earlier speakers, we have a lot of the levers within the supply chain to achieve those objectives. So one of the speakers earlier mentioned that about 73% of their carbon footprint is from procurement and supply chain.

Well, that's obviously, a key lever for us to address. And so, in terms of being able to drive thought leadership and ideas into the market, we're quite prolific around producing whitepapers. So if you are interested in some of this content today, please visit our website, and there are a couple of whitepapers that are very relevant to these topics.

Today across the conference, we've heard really around the significant change facing the healthcare sector. One which is clear, but it's going to continue is obviously increasing choice, and in particular, those increasing choices that the patients have. Whether that be around the type of care they may receive. Whether it be who's the provider who's actually providing that care to them, or other pathways that they may wish to choose.

That choice is creating some complexity and fragmentation, but it's certainly not going away, it's a reality we need to deal with. The ageing population's has been talked to extensively, but also the move towards new delivery models, and in particular, given our focuses on logistics, the move towards home care is a significant shift. If you think historically, you know we've provided a lot of services through hospitals and major facilities.

We're now again fragmenting that activity and we actually need to deliver it to individuals' homes, so there's now a strong logistical element to that service delivery.

And I'll talk in a second about some of the complexities that gives rise to. Obviously, the industry is under constant focus from regulatory change and a need to be able to substantiate what we've done and why we've done it.

And finally, the fragmenting workforce and really the challenge that most of us have within healthcare of getting a appropriately skilled workforce that's engaged and working constantly with our patients, and just the challenge in getting those people in place.

So there's a range of issues that are affecting the healthcare sector, which we think create opportunity for improvement and change. You might have seen on the earlier slide, we do a lot of work in physical supply chains.

A lot of that therefore focuses on moving a product. And so, if you think about just a simple one like Amazon, you're really most focused on getting the parcel or the box. You want that to be reliable, et cetera.

The service component, whilst important, is far less important than in a healthcare supply chain. When we look at a healthcare supply chain, we have two really important interdependencies.

One is around the service delivery itself, and therefore the people involved and the training and experience that they have, as well as often the product or the physical movement.

So that adds, again, a number of complexities which we need to manage. The slide in front of you just tries to depict some of those challenges around people. So the recruitment, increased focus on what skills and experience they have to undertake different tasks and roles.

In a product sense, when we're looking to deliver our overall service, we may have to have medical devices, we might need medicines, we might need specialised equipment to be provided, as well.

So those physical dimensions are still a key requirement within healthcare, and working with the raw material providers or suppliers. And again, Carmen mentioned the importance around food in engaging with their suppliers to drive efficiency within their supply chain.

So those elements, as I mentioned earlier, coupled with often delivering that into a home, or into a much more expanded distribution network creates some complexity. And one way to deal with that complexity is obviously to have lots and lots of people, lots and lots of equipment trying to deliver that service.

But that's highly inefficient. And so, what we see is the opportunity to focus further on planning, on defining those customer requirements, and then really delivering those services with the products in a very efficient way.

And so, what I'd like to do is I'll pass over to Shanaka who's just going to take you through some of the frameworks and some of our experience.

Shanaka Jayasinghe: In terms of how we look at this service chain excellence framework, it starts with the strategic element, so things like your customer value proposition or patient value proposition, the service chain strategy or supply chain strategy that then supports that, the org design, cross-functional frameworks, KPIs and policies.

But then at the operational level, looking at how do we execute on that strategic element. So when we look at things like demand planning and forecasting, service and talent optimisation, service scheduling, but then also the people, processes, systems and data that support that, as well.

Three areas that we'll cover today. Customer value propositions, the KPIs, and performance management, as well as the forecasting and scheduling technology that exists. What we'll try and do is draw off some examples from the supply chain world and see how they're applicable in the service chain environment. So, obviously, when we start with the customer value proposition, the key message here is we can't be everything for everyone.

So in terms of when we're starting with, I think Carmen mentioned around the food services, we can't offer a limitless choice in terms of what is available for lunch, available for dinner, the meal times, et cetera, because that impacts quality, responsiveness, flexibility.

So what we're trying to do here is manage what do we stand for as an organisation, but then let that inform the trade-offs that we're willing to make, both at the strategic level, but then also at the operational level.

So in terms of our staff, if we're trying to grow very quickly, we might choose to go to an external broker. But if we are contrasted against that as a premium brand that's very focused on reliability, quality, consistency, we might choose to not outsource the workforce, but instead look to build that in-house capability.

Likewise our presence, we're a national provider, we're a Metro provider, regional, rural. All of these obviously add complexity depending on the type of organisation, and then also the products and services. So complexity can creep in to the organisation very quickly.

Aldi is a fantastic example of a very clear and simple decision-making philosophy or customer value proposition. And what I would like to highlight with Aldi is not that we should all drive towards the lowest costs, but how a simple customer value proposition is able to then translate through not only the strategic layer of an organisation, but the operational layer, as well.

So if we take Aldi, compared to Woollies, Aldi has about 2,500 products. Woollies has about 44,000. Now Woollies is going to beat Aldi in terms of its distribution centre, it's far more automated. The primary freight arrangements, as well.

They're able to be leveraged a lot harder, but Aldi, given that at the strategic lens, have consolidated their product range, are able to make more I guess simple decisions, but then also translate that all the way to the store operation where everyone who works at Aldi also knows that they stand for lowest costs.

Now contrast that against an aged care home services provider. So when we try and unpack a customer value proposition for a aged care home services provider, we want to make sure that there is consistency of care. So know me as a customer, as a patient.

We also want to ensure that they service excellence, so ensuring that we have service level targets that are able to be met. So when we set out to be a care provider, we want to make sure that that service level is met and our customers feel like we are reliable.

There's also service delivery, so there's an element of responsiveness and flexibility that we need to provide to our customers, as well. So what are the trade-offs that we are making there? Now, that's all very interesting at the strategic level, but then how do we operationalize that? So if I just take the basic process from recruitment to service planning, building up that workforce, all the way through to service execution, when we're starting to look at scheduling and rostering optimisation.

So service planning is all around, understanding where we want to go as an organisation, but then building a forecast at the right level. So if that's by service, by region, by time, building up that forecast of that level of granularity and then applying the targets and constraints upon that.

What we're trying to do here is understand the demand requirements for what we're offering to the market. We then translate that forecast into a recruitment plan because what's important to us from a workforce perspective is having the availability, so people who are available, affable and have the right ability in the right areas to then provide that care to our patients.

We then look to top up a supply pool where it makes sense. So to give you an example, in the home care industry today, there is a significant shortage of home care workers in the particularly affluent areas of the Northern Beaches, understandably. So what we're looking to do is what incentives and strategies can we do to try and close some of those gaps to build up that reliability in our supply pool?

From there, when we look at the operational elements, how do we then match the demand requirement to what we have available in supply? So here's where we do a bit of capacity reporting, logging in the rostering optimisation and then publishing that from a scheduling perspective.

So James mentioned, from aged care perspective, there's a real push to the home. Now this is introducing a real logistical challenge to make sure that we can right optimise and enable the sequence that's most efficient to our staff and also from a cost perspective.

Taking that further, so how can we link in that customer value proposition to each steps along this operational process?

So to give you an example, if we consider the 'know me' principle, so the consistency of care, number one, we might want to prioritise for paid visits in the rostering and scheduling context.

So making sure that our customers or our patients see a familiar face in terms of who's giving care to them.

Now, systems exist that automate that, so if think about Qantas and how they look at scheduling their flight paths and routes, a lot of this is done based on preferences from the employer and also where they're willing to travel, et cetera.

So similarly, if we are able to introduce similar principles into the technology we have available. Number two is around creating service briefs. So where that is not always possible for when we take leave into consideration, or there's attrition rates that we have, creating service briefs that despite not having the right individual, being able to provide the same level of consistent care.

And then also when we look at service excellence, making sure that we can start to focus on what matters to us and our customers.

So typically if you look at an organisation that's dealing with products, they'll look to segment their customers in terms of A, B, C, depending on what's most important to them as an organisation.

Similarly, we can apply these principles for critical care or personal care. That's very important to us and ensuring that we get someone to the patient.

We might want to pay extra attention to making sure that we get that information right. So how can we do that?

When we're looking at a forecasting process, we will be able to prioritise that activity before we look to do some of the B or C class classifications. In terms of service delivery, defining the appointment windows and the time slots is critical because, again, we can't be everything for everyone, so making sure that the expectation management is clear.

Also it will help influence the way that we have discussions with our customers and patients, as well. So a good example is, instead of asking a patient, when are you available for your domestic care or personal care? Instead of asking that question, asking when are you not available gives us more flexibility from a decision-making perspective in rostering.

KPIs also help us make decisions, and they help us also assess the decisions that we have made.

So again, using that framework from service planning all the way through to execution, there's different KPIs that we'd look to in terms of forecast accuracy at the forecast level, service and workforce optimisation, we might want to look at our part-time casual mix. Recruitment planning, we might want to see where the gaps are, do a bit of gap analysis and then what is supplied in full on time to the scheduling team.

Capacity reporting is, we can do this by geography, ability, where the unders and overs rostering optimisation. Obviously, there's utilisation, idle time, how much we add source, et cetera.

And then, from a daily scheduling perspective, looking at conformance to when we lock in the schedule, what did that look like when the D-day came and that schedule had to be executed from an operational perspective?

It's important that KPIs are accessible and interpretable amongst the organisation, as well. So this is not just at the management level, but at the operational level, making sure that we have the right tools to support the staff every day.

Visual reports always help and relative indicators give us a really good sense of where we're under or over. So heat maps, et cetera, when we're looking at scheduling, a very effective tool.

Also what we see typically, and this happens not just in the service chain, but supply chains, as well, is KPIs tend to be very lagging and outcome focused. So how did we do last month in terms of our delivery, performance, utilisation, overtime levels, et cetera?

Increasingly, as a service chain matures, there's a push naturally towards more process indicators. So how are we going with things like the back orders recruitment, providers DIFOT to us, the master data, part-time versus casual mix target, et cetera, but then also leading indicators as we overlay more forecast driven processes, as well. So where are we projected to be next month, rather than looking at this month in isolation? Where are we projected to be in six months? Where are the gaps? Et cetera.

So I thought it was interesting to look at technology, and how supply chain technology and service chain technology, you can see a direct convergence there.

So I'll start with supply chain. Supply chain, if we take traditionally, it's been pretty inwardly focused.

So from Taylorism back in the 1900s and the industrial revolution being focused on driving down unit costs through standardising process and then looking to automate that process. That's now come all the way through to what does the customer experience look like from a technology perspective? How do we support that?

We need to know what the customer wants. So then forecasting and creating that demand-driven supply chain has been a real focus. So we have seen the transition from aggregate forecasting, maybe at a national level, all the way through to a product by location forecasting.

But then, now with the introduction of things like Alexa, Google Home, et cetera, more and more companies and organisations are trying to get data on individuals, so they can make better forecasting decisions to pre-position inventory along their supply chain, as well.

So it's sort of gone from a very executionally focused environment towards more of a planning focus. And the transition's really been in that service execution space. That activity has come down, but the forecasting space and the planning element has dramatically increased.

Now, contrasting that against the service chain, so when we look at where we are, from a demand planning and forecasting lens, it is not as sophisticated that's fair to say today.

However, we are seeing with new technology providers in rostering and workforce management an increasing focus on things like forecasting, route optimisation that go beyond just scheduling and rostering.

Why that's interesting is you can see the demand and supply principles are exactly the same to supply chain. However, they're being used in a different context. And arguably, there could be an added level of complexity with we don't only want the right ability in the right area at the right time, but that person has to be affable and approachable to the customer needs, as well.

Data maturity is an interesting one and a key step change that the service change will have to undergo to enable some of this activity. If you take the supply chain having been at this for many decades, there are still data challenges there. But what's important is making sure that we are aware of what data requirements are critical to enabling this capability in the future, and really designing a pathway to build that data maturity into our organisation, so we're ready when we need to look to forecasting and route optimisation in the future.

From a customer value proposition perspective, we really wanted to focus on how do we operationalize that customer value proposition from a KPI perspective? The key messages to move beyond lagging indicators to more leading and outcome and process indicators. And then from a forecasting and scheduling perspective, build the data capability today to make sure that we can leverage the technology for tomorrow.

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"GRA provided us with the vision on what an advanced inventory management system could deliver for us, along with the benefits. To date the benefits are being delivered in line with the business case and the user experience is excellent. GRA, throughout the project, acted in an very professional manner and delivered on our expectations."

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Typical results

  • 20-40% inventory investment reduction
  • increased service levels ranging up to 99.9%
  • 10%-15% reduction in supply chain operating costs
  • 5%-20% spend management savings
  • the ability to fund business initiatives from operating cash flow (OCF) improvements
  • improved return on capital employed (ROCE)
  • a minimum 3:1 ROI (10:1 to 30:1 typical)