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Case Study


Shining New Light on Inventory Management

October 1, 2008

Kingston General Hospital in Ontario, Canada, recently turned to SAP to modernize its inventory processes and replace outdated mobile technology. Read about the hospital’s unique experience: a full reimplementation of its core SAP ERP system — all while implementing a new mobile data capture system.
Kingston General Hospital
Headquarters: Kingston, Ontario, Canada
Industry: Health Care
KGH functions as:
  • A teaching and research hospital
  • A trauma center
  • The host hospital for the Cancer Centre of Southeastern Ontario
Employees: 4,283 including:
  • Staff: 3,737
  • Medical Staff: 546
Patients: Serving more than 500,000
Company details:
  • 456 hospital beds
  • 1,900 health care students annually
  • 50,000 square feet of research space
SAP systems:
  • SAP ERP 6.0
  • SAP NetWeaver
  • SAP SRM, SAP HR, SAP MM, Financial Accounting
  • Web Dynpro

A doctor hunches over a patient in an operating room and calls out for a scalpel. A nurse picks up a scalpel from a nearby metal tray and hands it to the doctor. Thousands of television programs and movies have made this common exchange familiar in homes across the globe.

Real doctors working in hospitals around the world reenact this scene repeatedly while they perform operations on actual patients. However, when doctors ask for the scalpels, clamps, or sterilized gauze necessary for surgery, it’s not often considered how that medical equipment ended up on the tray in the first place.

Kingston General Hospital (KGH) is an academic health sciences center in Kingston, Ontario that provides a full spectrum of medical care &m dash; from specialized surgery to supporting the region’s only trauma center capable of handling large disasters. At KGH, getting medical supplies to the operating room from the loading dock was primarily a manual process based on paper transfers and 15-year-old technology. The time had come to modernize its inventory process, and the hospital turned to SAP to make that happen.

There were just a few hurdles to overcome first—namely a complete reimplementation of the SAP infrastructure that KGH already had in place. The hospital had so many different systems and modules in its environment that an upgrade from the 10-year-old SAP R/3 4.6C ERP system, which ran its SAP Materials Management (MM) capabilities, would’ve been too time consuming and potentially problematic.

Instead, KGH opted to do a full reimplementation of its core SAP system and to move to the SAP NetWeaver platform with SAP ERP 6.0.

As if its SAP reimplementation weren’t interesting enough, KGH simultaneously decided to implement a new mobile data capture system powered by SAP NetWeaver as part of its inventory process. This endeavor was a completely new implementation — KGH had no previously existing SAP functionality in that space.

Outdated Mobile Devices and Paper-Based Processes

In addition to the emergency and specialized surgery services that KGH provides, it also operates as a research center. The hospital wanted to apply the same kind of forward-thinking mentality it adopted for its research, surgical, and medical practices to the processes that surround its SAP MM system. For example, to inventory the medical supplies on-hand, the hospital had been using an antiquated bar code and mobile device system; these needed replacing to meet the demands of real-time inventory management.

KGH has a central warehouse that manages approximately 3,500 different types of medical items, as well as 140 storage locations around the hospital that are responsible for over 22,000 total stock keeping units.

Before the reimplementation of its SAP systems, supply technicians had been using 15-year-old mobile devices to read bar codes in order to take daily inventory of these storage locations. They then uploaded that data via a single docking cradle located in the warehouse into the SAP ERP system that managed all the requirements planning. After analyzing the supply data, the SAP system would process orders as paper “pick notes” to the central warehouse, where pickers loaded carts with supplies. Then, supply technicians would distribute those medical supplies to the respective storage locations around the hospital.

“Our legacy bar-coding technology, which was based on simple handheld devices and text file exchanges between the handheld device and the system, just really didn’t meet our needs,” explains Derrick Morey, business technologies manager for material management at KGH.

Across the rest of the supply chain, KGH processes were also paper-based. “When goods receipts would come in, we would print out a sheet of paper — often with one line item on it — telling our warehouse assistants where to put products away; our pickers were also using paper-based pick notes,” says Morey.

During value engineering, when KGH started to look at what technology was available, it identified a number of pain points and areas where they could cut costs. The hospital made it a goal to radically cut back on costs for paper-based processes. “We were going through thousands and thousands of sheets of paper every week,” says Morey. “We quickly realized that we could reduce the amount of paper we produced by using handheld mobile devices in a number of spots within the supply chain.”

While the mobile devices they had been using were state-of-the-art in the 1990s, today they’d be considered about as useful as carrying around a clipboard, according to Morey. “They weren’t in real time, and they didn’t allow two-way interaction between the system and the users. Basically, all we were doing was dumping information into the system without any real feedback to our users as to what happened to that information.”

The mobile devices also ran off proprietary software that was difficult to manage and maintain. “There were a number of background jobs that would have to be triggered to complete a download, and many touch points for the systems where there were failure opportunities,” says Morey. “The failures were extremely difficult to trace. Often, we simply would not be able to trace an issue, and we’d just have to go back and start over again.”

From a human resources standpoint, KGH wanted to expand the role and responsibilities of a supply technician from a person who simply counts and puts away stock to being more of a member of the clinical team. With this expanded role, Morey says, “They can provide a wide range of MM services to the team, such as offering product knowledge and managing stock levels appropriately.”

Why an SAP Reimplementation?

In 2005, KGH seized the opportunity to update its SAP MM solution. The first step was to put a business case in place to get the funds for the infrastructure change. Often, publicly funded agencies in the services sector don’t have much money to work with; the chance to upgrade a back-office system comes along only rarely. “Any time we’re able to secure funds to do anything like this, we take that opportunity and run with it at full tilt,” says Morey, “because an opportunity like that might not come along again for quite some time.”

The next step was to decide what kind of infrastructure change was the right fit. Rather than upgrading the current SAP R/3 4.6C system, they decided to start from scratch and reimplement SAP ERP on the latest SAP ERP 6.0 release. With the opportunity for a reimplementation, KGH could have opted to replace the SAP system with another ERP system, but that discussion was never on the table.

“We are one of the very few hospitals in Canada that run SAP technology — and I believe the only hospital in Ontario,” says Morey. “SAP, in conjunction with our provincial government and KGH, wanted to make us a pilot site for healthcare business systems in Canada.” For that reason, they named the implementation effort the “Lighthouse Project.”

After opting for the reimplementation, the hospital needed to decide what to do with its current mobile solution. Morey saw two options: KGH could either bring forward the old mobile technology to use in the new SAP MM system or take the opportunity to rebuild from scratch.

Despite the fact that many consultants would advise against trying to do too much at one time when implementing or upgrading, KGH decided to go for it. “The decision was made fairly quickly that it just wasn’t viable to bring forward the antiquated technology that we were currently using,” says Morey.

The Mobile Data Capture Project

KGH already had a wireless backbone in place that could service the MM team. Two years earlier, the hospital installed a Cisco wireless network to help with the monitoring and management of patient care devices, such as infusion pumps. Leveraging the investment that KGH made in its radio frequency (RF) technology was one of the major factors in getting the business case for the system approved. “Showing that we could tap into that technology and improve our processes based on an investment we had already made was definitely key to getting approval,” says Morey. “We really didn’t have to do a lot of work on the RF network to have coverage because the equipment was already in place in the patient areas. It covered most of our storage location areas, too.”

Capacity was not a problem because KGH had a strong RF infrastructure, and it had built the RF network for scalability in anticipation of increased future workload. “We already knew that there were good mobile devices available that were wireless-enabled. We quickly realized that we needed to work with a consulting partner to identify what we could do and how much effort would be involved to get these processes built and in place.”

The MM team went in search of a partner and came up with a list of consultants quickly. “What we found was that most of them provided the hardware aspect of what we needed, but not the consulting or programming portions of it,” Morey says. “That just wasn’t one of the things we were looking for. We’ve had experiences with that type of structure before, and we felt that really wasn’t a good fit.”

Then they found Catalyst. “When we spoke to Catalyst, we realized that its strength was in the system design, system build, and implementation phases,” Morey says. “They were also able to provide the hardware that we needed,” which was the Motorola (Symbol) MC9090 handheld mobile computer.

Catalyst specializes in the design and implementation of SAP Supply Chain Management (SAP SCM) components and has a reputation for navigating RF enablement of SAP systems with SAP Console, Web Dynpro, and mobile data collection technologies.

The project began with Catalyst coming on site to review the hospital’s operations and processes. “We then underwent a value engineering exercise to pinpoint areas that we could gain efficiencies and functionality in,” explains Morey. After blueprinting was complete, Catalyst provided a review of the various technologies that KGH could use to implement a mobile solution and weighed the pros and cons of each. In the end, the group recommended Web Dynpro for its flexibility and longevity.

“We certainly had our challenges, but overall, I think that the expertise that was on the table, both in-house and from Catalyst, really helped us solve a lot of issues,” he says.

Building the Beast

A major challenge KGH faced was that the SAP development environment was new to the hospital’s in-house technical team. “Our biggest issue was the initial setup and configuration of the development environment,” says Morey. Having Catalyst folks on board helped ease the transition significantly, though. The team peaked at around ten members when the project was in high gear. In addition to Morey, this team included three to four developers from Catalyst, a technical lead from KGH’s MM team, a lead from inventory operations, as well as support from the hospital’s operations for data cleanup and frontline user testing as needed.

The blueprint process took several months, during which the team laid out the business perspective for the project. What evolved from this blueprint phase were these custom tools to automate seven specific business transactions:

  • Business processes that would be affected by the new transactions

  • Interfaces built from these transactions into SAP ERP 6.0 MM to tap into as much functionality as possible

  • An add-on to SAP Supplier Relationship Management (SAP SRM) and Accounts Payable

  • An automated invoice upload application to integrate into KGH’s invoicing process

7 Business Transactions Gone Mobile

1. Goods receipts (at the loading dock): The MM team developed two types of automated goods receipts. This first receipt tells the supply technicians performing inventory that goods have arrived on the loading dock but are not yet ready for distribution.

2. Goods receipts (available for distribution): This second-stage receipt allows the MM team to identify products available for distribution, having moved either to a storage location in the hospital or in the central warehouse. “We can now see where goods are in the process and in real time on the system,” Morey says. “We know where supplies are and how long they have been there.”

3. Storage location and transfer: In the past, stock would move between the hospital’s units without any location recognition in the system. With this new transaction, when stock moves from one location to another, it is updated in real time.

4. Stock overview: This transaction enables the MM team to see the inventory of supplies by location and quantity on hand.

5. Department inventory: This transaction replaced the count process. “We are starting to expand that service in that we’re not just managing products from a central inventory, but now we’re beginning to manage items on units that are direct purchase and bring them in through the inventory process,” Morey says. In the past, individual departments could order their own supplies, and the MM team did not track these orders. With this transaction, supply technicians can now count and inventory those items.

6. Good issued reservation: Formerly, KGH operated in a paper-based manner. “When we transferred a product, we would create a paper transfer that would later be entered into an SAP system manually,” Morey says. Because the transfer was not being recorded in real time, the MM team was always forced to make manual adjustments to correct differences between the inventory counts that the system saw and the actual counts at the location. “Now we use the mobile transactions for the pick-pack function, but the back-end systems processes were also rebuilt from scratch based on a reservation picking process,” he adds. “So basically, the product’s reserved, but it hasn’t depleted any quantities on hand yet.”

7. Enter count results: “We would do a count in our central warehouse every day based on what the SAP system is telling us we had for a count,” Morey says. With the new system, the mobile device reports from SAP ERP what the count is for a particular lot, and for high priority items, it will direct the warehouse assistant to a specific warehouse location and bin where they can find the item to confirm that quantity.”

Measurement Equals Savings

The MM team believed that the Lighthouse Project provided an opportunity to really build a leading-edge, top-notch supply chain process and eliminate pain points they had been experiencing — and they haven’t been disappointed. The new mobile SAP MM system launched January 1, 2008, and the results have been dramatic. The new system has been getting rave reviews from the user community.

The most important benefit of the new system is that since KGH replaced the old way of managing its materials and medical supplies, the hospital can now measure the effectiveness of the internal supply chain more precisely.

“The problem is that we had a paper-based process, so there really wasn’t a whole lot of measurement taking place,” says Morey.

The bottom line is that its former processes didn’t allow KGH an easy way to accurately measure inventory KPIs. One of the biggest issues was the transfer of items before actual picking. This caused system stock levels to be inaccurate and created a great deal of manual reconciliation.

To establish benchmarks would have been almost more work than the project itself. “Even just to get a pick-per-hour rate, we would have had to manually add up reams and reams of paper per picker,” he says, “so it just wasn’t possible.”

KGH can now monitor inventory turn-rates and values on-hand and make adjustments to improve those rates. “Every dollar we save in inventory is a direct savings off the books for the hospital,” Morey says.

One of the biggest cost-saving objectives of the project was to eliminate the need for nurses and other clinical staff to be involved in the inventory process, and KGH has succeeded in meeting this goal.

In the past, individual departments managed certain products. “The MM team is now taking over and managing those products,” Morey says. “Every group of products we take over means time savings for them, which we can reinvest back into patient care.”

6 Lessons Learned

Be prepared for just about anything. “Things can look great in a QA environment,” warns Morey. If you go into production and the system doesn’t work the way you expected, you have to be prepared to throttle back the users. In the case of KGH, issues arose on go-live that were the result of not having a full user load on the test system. It took 2-3 weeks of tuning before the system was performing satisfactorily, but because the MM team was prepared for that, no one panicked on that first day.

Get customer feedback. “At KGH, we’re customer-focused, and a lot of our plans for the upgrade and for moving forward were based on customer feedback,” says Morey. Had the MM team not sought out that feedback during system design, the system wouldn’t have been as successful as it was. “We probably wouldn’t have designed anywhere close to the number of things we did to support the business moving forward.”

Phase in process change. While it may be technically possible on go-live day to roll out all the functionality simultaneously, KGH chose to implement only what it needed. The MM team worked through the stabilization of that particular group of changes first. “Then you can begin to look at all of the processes you can implement in a phased-in approach and stabilize each one of those as you implement it,” says Morey. By employing a phased-in approach, if there’s a critical point of failure that affects the entire system, its impact is limited to a select group of users versus the entire user community.

Don’t get locked into your blueprint. KGH’s blueprint was a high-level look at goals for improving business processes. “What it actually takes technically to achieve those goals could be substantially different from what you’d initially expect,” says Morey. At the time of blueprinting, the MM team didn’t understand yet what it meant to develop a Web-based transaction system on a handheld device. “We focused on what we needed from the business perspective; then we let the experts on the technical side figure out what it was going to take to get that done.”

Take one for the team. KGH learned a lot, not only about the new system, but also about working as a team and getting things done together under the right timeline. “Sometimes you just have to make a sacrifice to get it done,” Morey says. “Certainly our entire team, not just the MM team but the entire team here at the hospital and our consulting partners, all stepped up and got it done.” Morey joked that the team worked so tirelessly together that the only way they could tell that it was a weekday was if other people were in the office.

Don’t skimp on unit and cycle testing. KGH did a lot of testing that involved frontline users and business owners to assure that the transactions worked really well. “Our unit tests and our cycle-one tests were the two keys for us in ensuring that the technology did what it was supposed to do and that we didn’t end up with any surprises,” Morey says. By the time they got to cycle-two testing, the MM team was quite confident that they’d really captured what they’d expected.

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A O'Loughlin

1/31/2019 2:12:05 PM

Great article!

A O'Loughlin

1/30/2019 6:43:32 AM

Great article!