<div style="display:inline;"> <img height="1" width="1" style="border-style:none;" alt="" src="www.googleadservices.com/pagead/conversion/1070739777/?label=GvnACN6gx3IQweLI_gM&amp;guid=ON&amp;script=0">

[Customer Case Study] Documented Savings on a Direct-to-Site Delivery

By CME on Apr 4, 2014 10:40:00 AM

ID-100203404Direct-to-Site delivery (DTS) is a critical and often overlooked service that saves time and money.  Most supply chain executives view the total cost of a product to the IDN or healthcare facility to include all of the costs that are incurred from product selection to when the product is placed in the correct room and received. DTS saves the customer money all along this supply chain journey.  It can be a great benefit to a hospital, clinic or large IDN involved in new construction or extensive remodeling projects.  Basically, it consists of making one entity (in this case it was an equipment focused distributor) responsible for not only securing the products from many manufacturers but also responsible for timely delivery directly to the rooms, assembled and ready for use.

Here is a summary of one such direct-to-site delivery to a new large IDN multi-specialty medical clinic in California with 54 different exam rooms:

      Purchase orders issued - 54
      Number of different manufacturers - 50
      Total spent - $376,050
      Number of products ordered - 1,264
      Number of rooms - 178 (54 were patient exam rooms)
      Numbers of floors delivered to - 4
      Number of deliveries - 9
 
Quantifiable savings were determined in the following five areas:
      Warehouse handling
      Storage
      Assembly
      Deployment
      Disposal fees
 
Intangible savings were recognized in 10 other areas, including:
      Reduced number of purchase orders
      One point of contact vs. 50
      Assistance in product selection and best pricing
      Product review
      Product liability
      Product misplacement
      Deployment coordination
      One receiver per delivery (9 vs. 54)
      On-time delivery
      Capitalization of all of the logistics and equipment costs over 10 years vs. expensing all of the costs in the current year.

Following is the analysis that shows the costs that would have been incurred had the customer performed these tasks themselves or if they contracted a third party warehouse:

Warehouse Handling ($6/Pallet)*

 

# Pallets

Ext. $

Direct-to-Site (DTS) Fee from CME

Pallets/Cartons Received

172

$1,032.00

 

Pallets staged for deployment

133

$798.00

 
 
 


Storage Fees ($15/pallet/month)*

 
 

# Pallets

Ext. $

DTS Fee from CME

Pallets Month 1

86

$1,290.00

 

Pallets Month 2

172

$2,580.00

 

Pallets Month 3

172

$2,580.00

 
 
 


Assembly ($35/Hr.)*

 
 

# Hours

Ext. $

 DTS Fee from CME

Assembly of all products

43

$1,505.00

 


Deployment ($2,280/delivery)*

 

# Deliveries

Ext. $

DTS Fee from CME

Deliveries

9

$20,520.00

 


Disposal Fee ($125/delivery)*

 

# Deliveries

Ext. $

DTS Fee from CME

Disposals

9

$1,125.00

 
 


Total Warehouse and Deployment Cost
  

 
  Ext. $

DTS Fee from CME

Total cost

$31,430.00

$17,675.00

% of Total Product Cost

8.40%

4.70%

 
 
*Fees used in this study are an average derived from several public warehouses in the area.

The overall savings realized in these areas based on public warehouse costs totaled $13,755.00 or 3.7% of the total product cost.  Another customer indicated that, according to their analysis, using their own warehouse and people cost the organization between 7-9% of the product costs per project.  The direct-to-site delivery program was able to reduce that amount down to 4-5%.

While the intangible cost savings could also be sizeable; they are difficult to quantify.

Following are estimates of the intangible cost savings:

      Reduced number of purchase orders - Any item, no matter whom the manufacturer might be, can be included on one PO with the direct-to-site program. (PO’s traditionally cost an organization between $75 and $125 per PO.)
      One point of contact - In the case above, if the customer had sent the PO’s directly to the manufacturers, at least 50 different calls would have had to be made to follow-up on PO’s and to schedule deliveries.  These 50 PO’s have to be coordinated, received, staged, assembled and delivered. (Likely represents at least $4200.00 @ $35.00/hr. x 120 hours)
      Capitalization vs. expense - In the case indicated above, the customer was able to capitalize all of the product costs, logistics (includes warehousing, staging, labeling and assembly) fees and direct-to-site delivery fees over a 10-year period.  Had they used their own warehouse and people, those costs would have been expensed as incurred.

CME (formerly Hospital Associates) specializes in Direct-to-Site deliveries of capital medical equipment to hospitals, health systems and IDNs.  In addition to the identifiable actual cost savings indicated above, we focus on providing value-added services to our customers, such as:

      Product review/assistance - We review all product requests to make sure all of the numbers are current that the accessories are correct, and that best pricing is quoted.
      Product liability/misplacement - We remain liable for the product until it is placed in the facility in the right room and the trash is removed.
      Deployment coordination - We manage all vendor PO’s to arrive at the right time.
      One receiver per delivery - We provide one consolidated receiver per delivery.
      Timeliness - We deliver the right product when you need it so that the facility opens on time.

Your turn: What has your experience been with your organization performing the tasks we’ve mentioned in this post?  Have you experienced Direct-to-Site Delivery services?  We’d love to hear from you, in the comments below.

Ultimate Cheat Sheet

Click here to subscribe to our blog!

 Image courtesy of: suphakit73/ Freedigitalphotos.net

Topics: Direct-To-Site Deliveries, supply chain

Subscribe to Email Updates

Recent Posts

Posts by Topic

see all