Medline Launches Activity-based Program
Edition: May 2003 - Vol 11 Number 05
Medline Industries has launched an activity-based supply management program for its hospital customers, which breaks down supply and distribution costs and guarantees quantifiable cost-savings.
Called TrueCost, the program begins with Medline’s logistics and operations team visiting the customer and determining its actual supply and distribution costs broken down line by line, distinguishing between what the manufacturer charges for products and what the distributor charges to distribute them. Once that information is obtained, Medline works with the facility to identify areas to improve efficiency and reduce cost. The company guarantees savings of at least 10 percent from the healthcare facility’s current distribution expenditures.
“TrueCost was designed to address the flaws in the cost-plus distribution program, a widely used system which combines the cost of the product with an overall mark-up,” says Tim Jacobson, senior vice president of corporate programs for Mundelein, Ill.-based Medline. “By doing this, the health system cannot identify its actual costs and, as a result, is unable to clearly analyze where it can achieve real cost savings and other logistical efficiencies.”
According to Medline, saving elements in the TrueCost program include:
• Ten percent reduction from the healthcare system’s current distribution services.
• Standardization and utilization programs for further cost saving and efficiency.
• Inventory cost reduction through Medline’s ACCESS 90 program. Medline will buy back up to 30 days of inventory and issue a credit or a check to the facility for that inventory.
• Lower supply acquisition costs for those supplies converted to the Medline brand.
The facility is billed monthly through an activity fee determined by the services provided. The bill is broken out by the activities performed, so the facility can identify the cost drivers for the predetermined services being provided.
Medline will provide logistical support and consulting services at no additional fee, including par level area review and redesign, warehouse redesign and setup, old equipment cleanup plan, materials management review, inventory review, reordering and purchasing review and other services.