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Courtesy of Mayo Clinic's Erich Heneke, below is a transcript of his speaking session on 'The impact of COVID-19 on the global healthcare supply chain' to Build a Thriving Enterprise that took place at BTOES Healthcare Live - A Virtual Conference.
The impact of COVID-19 on the global healthcare supply chain
For a three day conference, Erin Hannigan, Director of Business Integrity and Continuity at the Mayo Clinic. Eric, fantastic to have you with us. For those of you who don't know, eric is currently the Director of Business Integrity and Continuity and the Mayo Clinic Supply Chain Management Practice is financial emphasis, is in the enterprise and supply risk management, audit controls, and financial planning and analysis. He has worked in the Mayo Clinic for SCM for over 12 years, focusing his efforts on sound supply chain management controls, fraud prevention, detection, accuracy of balance sheet accounting, third party risk management, and other controls related work, including the males voluntary sox compliance. Eric, it's a real privilege to have you with us. Very much looking forward to your presentation.
Well, thanks, Jose. I appreciate the introduction, and appreciate everybody participating in the event and making it turned to me at the end of the Events conference here. So I have just a short amount of time and, and a lot of information to cover related to Mayo Clinic, the supply chain risk management function. And but more specifically, some of the mitigation strategies that we've put into place specific to supply disruption and kind of how the covered pandemic has has sort of shifting the mindset in terms of how we manage the process. So I'm going through a presentation early in a fairly rapid manner and hopefully leave some enough adequate time at the end for questions and answers.
But just to kinda kick the topic into motion here, I wanted to talk just a bit about the Mayo Clinic organization. Some of you are probably quite familiar, and perhaps some of you are less familiar with Mayo Clinic and its presence in the US and across several states in the US.
So, this, these are just some quick photographs of our in three primary campuses that exist. I'm based in the Rochester, Minnesota campus, which is, like, ship some, some facts around Mayo Clinic and who we are, and, again, this is for perhaps some of you who haven't interacted with her organization, formerly in the past, we are a charitable not for-profit.
And first and foremost, are an academic medical center. So, if you can see in the bottom right of my slides with the Mayo Clinic logo, and it's important to understand that from, from a strategy perspective, that logo is meaningful to us. Now. Some of you, if you've interacted with, male, perhaps have interacted in a patient fashion before, and that represents the forward most, or the center shield that you see in our logo.
But are two other logos, and one is representative of the education element of the organization, and the third one is representative of the research component that we function in kind of a try. I try strategic fashion, if you will, and just some stats about us. In 20 18, we were ranked number one amongst the several specialties and the overall rank for hospitals in the United States, a little bit of data about our our revenues. As well as our footprint, and then finally, the staff. So, we do have about 16,000 people that work as formal employees of Mayo Clinic.
The objectives for this session are really threefold. And I'm gonna spend really primarily all of my time talking to you today about some of the strategies that we put into place around business continuity and around catastrophe planning, and really, these were the strategies that we put into place Several years back. The, the pivot point for us in enabling some of our technologies and our processes around business continuity. And supplier resiliency actually, date back to hurricane event Hurricane Maria, that hit Puerto Rico. That was 3, 4 years passed And when we experience in the healthcare industry like periods, Really critical shortages of supplies coming out of Puerto Rico.
That, to us, was the final, kind of the final situation, that where we said, OK, it's now time for us to have a strategic approach to business continuity.
So, that's really where I'm going to spend most of my time and then talk to you a little bit about how the incident command process has worked for us and how it was slightly tweaked when Calvin impacted our operations in Q one of this year. And then, just a little bit on how we wrap analytics around the entire process itself. So this question is intended for you to think a little bit about, you know, your specific preparedness actions within your individual organizations. And there's a reason that I choose this listing as, really, the primary, or if you will, or the R three.
Because what I want, what I hope a poll for you today is that, regardless of kind of where you're at in the maturity of business continuity or supply, resiliency and that, some of my ideas hopefully will move you forward to the next step in the process. Some of you maybe have no no business continuity processes at all, And that's OK. And hopefully I can, I can convince you that they're important, and I can advance you, and some of you, maybe you have some very sophisticated processes, and, but I'm hopeful that you'll at least pick up a nugget for my presentation today.
So, you know, when I've done this poll, and I've done this presentation in the past, there are there and it's a really a smattering in terms of when I look at healthcare vertical in terms of what people are doing. But you would be inch or V V, surprise, perhaps to find out that a lot of people choose E there. There's really until very recently, a business continuity and supply resiliency was sort of a back burner issue. So just something for you to kind of kind of ponder on your own in terms of what you're doing in this space.
So, as you can imagine, for really everyone in health care and that's no surprise. but in particular, you know, myself and my seat at Mayo Clinic.
Know the covert 19 pandemic really impacted our supply chain in a variety of ways. Now most of you know if you pay any attention to the media, heard stories about, you know, shortages of PPE and I've had people ask me before, you know, the media does tend to sort of blow things up sometimes is are the stories that we've heard true about PPE shortages and I'll say that, you know, having lived in the trenches during the early part of this year, most of what you heard in the media was in fact pretty accurate.
Now, there were some glorification of uncertain events and places that took place, of course, in the media, but by enlarge what the media was, the reporting around PPE shortages, was, in fact, what was happening ground level. So not, certainly, we saw the impacts and we saw them really heavily. But the good news is, for us, we were ready for you know, we were ready for an event. Not a culvert event, but we're ready for a large scale event like this. We had early indicators, a startup and we were very early in the party and in terms of mitigation and identification. And so, what I want to talk to you about really is how, you know, how was male in a position of really pretty favorable position to deal with the supply shortages that we saw in the healthcare vertical.
So, what I'm going to step through the next, you know, few slides and really this will be, this is the meat of my presentation in terms of what we did, why we did it and how we did it. I'm going to step you through really a three part process that we've been working on the better part of three years.
And after that, after I kind of stepped through, well, you know, what we did in prep. Then I'll kind of step through. Well, how did well, how did we actually implement and how did we execute during the pandemic itself and that's that's really where I want to take us.
So, we believe that the, that you do business continuity correctly, and you do supply resiliency correctly by, instead of acting and and posturing in a reactive position that you, you, you, you switch your position into a proactive position. What that means is that you really have to think preparedness well, before an event presents itself. When I mentioned earlier, when you know the hurricane hit Puerto Rico several years ago, we acted at that stage in a very reactive manner. We went, goodness. You know, a lot of our IV fluids, solutions suppliers happened to be sitting on that island and the islands dark do. You suppose we may have a problem. It was way too late by that stage to react and respond appropriately.
So instead, what we've establishes and preparedness model, and you can see, I've got it broken into four functions. There are several more beneath this, but these are some of the main ones. So, the first one is really understanding your supplier base.
And what that means is that, from a healthcare perspective, from hospital perspective, we really require of our suppliers, some level of transparency around where their physical footprint is. So that when something happens like a hurricane, we can quickly zoom in on that Small area of the globe and say, this is the potential impact we may have to our supplier base, when and if they'll let the lights go dark, you know, on an island, just like Puerto Rico is dark.
So, that requires that we gather Intel from our supplier base and, and understand that. We also require our key suppliers to have ..., or business continuity plans, and what this tells us is, if, you know, a facility, if a critical suppliers facility goes dark today, once their backup plan, how do they stole supply critical supplies into the market?
And the, you know, stepping through business continuity plans with suppliers for us is important. Number one, understanding their readiness, number to understanding the probability that we as a health care system will experience an outage, and then layering some mitigating types of controls around that. So, if there's a critical supply that's only manufactured in one facility, in one location, in one little corner of the country, you know, we may ask or require a supplier to stand up. Even a darn facility that might be in a different part of the globe. So that, if that primary slowly go, start, they can stand up, entire facility, turn the lights on, and start manufacturing there.
So, understating, the kind of where the suppliers risk tolerances are, is really helpful in working through a business continuity plan.
The other thing that is important in healthcare is identifying your critical items in, this has been a particularly challenging challenge for us to identify critical items, because as a supply chain practitioner, you know, I'm not a physician and another nurse. And so, it's it would be a rational for me to select critical items on behalf of someone else that is a physician or nurse. The problem, though, is if if I as a supply chain practitioner, go to someone in my practice, and I say, You know, tell me what your critical items are.
The answer, I get nine times out of 10 as well, All of our supplies are critical, and so that isn't helpful either, so what we've done here is to identify a scientific methodology, that actually assigns a scoring system based on some criteria.
We stem through that with our practice and we say things like, What's the substitute ability of the product? You know, are there are there are dozens of options in, maybe not preferential options, but are there dozens of different options? If the supply goes, goes away, we don't have it. And if the answer is no, there's only one supplier, one supply around the globe, OK, Well then that's going to achieve a higher risk score than something where we may have 25 or 50 different options. So, that's just one criteria that we work off of, and then we will score. You will be able to score and actually put alongside products alongside each other to say, this one is a really, really, high, high risk, critical item. This one, while we all agree we need it, we've got other alternatives, for example.
So, identification of critical items is key. And then adding the response playbook that is ready to go. That is sitting on the shelf that we can pull off the shelf at any moment. For example when I called the pandemic ... and we can actually open the booklet and say, OK, this is the standard product protocols for how we manage the situation today. Instead of, instead of trying to sort of make it up as you go in the midst of a crisis and figure out who needs to be communicated to, how do we communicate all these things, we've got a pre established in a booklet, we can just open it and go just, like a football playbook or sport type of playbook.
So, once we have the preparedness steps in place, then are we we sort of converter we flip to a monitoring protocol. And this is something that we're doing 24 by 7 within our supply chain organization. So what this means is that we are surveying the globe in a variety of different ways in trying to assess where the next big thing is that is going to happen.
Now, again, no one could have predicted Calvin was coming. But there are some historical types of things that we know that sometimes lead us to to identify in an early fashion, that something is coming at, something big is coming. And so there's a variety of ways to do that. The first one is event monitoring. So we do have a 24 by 7 web crawl service, actually. A couple that.
We, we'll get news feeds from. And all you know, a lot of these things are, as listed there around natural disasters, geopolitical, FDA, and FDA actions or governmental types of actions. And a lot of them, frankly, are not that interesting. You know, they're just, they're things that are sort of mundane daily types of things. But once in awhile, you happen to have something that does become kind of interesting. And they do sort of morph into these larger scale events. So that's one way that we do sort of surveying constant surveillance of the globe.
There are also things that we can do internally, that helps us to predict that the things, there may be some, there may be some event coming at us in some fashion, so, a couple of them are listed here around procurement, inventory, status, and supplier performance.
So, if we start to get a sense, either right this minute, or over a longer historical period, that there is a disruption of a supply or a supplier and that's creating constant consistent disruptions, whether that is, a supplier putting us, an allocation supplier, that is constantly continuously back, ordering products, things of that nature. That. To us signal, you know, again, either near term or long term that where we may have an issue. And so we work through those types of data analytics to give us some, some early hopefully, early indicators of problems that are forthcoming in the industry, and then specifically how they may impact the clinic.
We do also monitor critical items on a dashboard. This is a daily exercise for us. And this was particularly important to us during the pandemic because because of P P shortages, we just had to be very aware of, where things were at, you know, in the transportation pipeline and within our own walls. You know, where product was at, where it was at, and transit, if it was going campus to campus, all of those things. And I'll show you kinda toward the end, just a quick visual of what that looks like to us.
Then finally, response so response is the, the third element, after we've done our preparedness and our monitoring. So the response is really at the point at which we are now aware of an event, OK? So there's, there's something that we are pretty sure are darn sure, that is about to hit us or hazardous, and, well, how do we respond to that?
So there are a number of ways that we go about, you know, both. both assessing the risk, as well as, you know, once we decide, Yes, this is a big event. This is a red, you know, bright red on the on the stoplight event. What do you know? How do we now have we now move forward from here? So, the risk assessment process is really important for us to figure out, OK, just because there might be a hurricane in the Gulf of Mexico right now, that could it be really a bad thing for us? Or it maybe it's a non event. You know, it's a tragic event, perhaps, for the local people in industry, but for us, it doesn't have an impact to our hospital.
And so, we really have to be able to take both external and internal data and bring it together to say, what's the likelihood or probability of an event? What's the severity if something bad does happen? So, that's a, that's an internal process that we're stepping through constantly.
Then we really have to understand the impact of our clinical operations.
So, talked about the three shield logo. You know, first and foremost for us is that is that Center Shield, which is is the practice, which is our patients research, can wait and education, can wait a second patient can.
And so, we really have to understand, from a clinical perspective, the impact and the probability and severity of a particular event impacting does that shield of our organization.
Then if we determine that there is, in fact, legitimate risk, if in fact, that risk is likely to impact our clinics, our clinicians, and our nurses in some fashion, then, we have to escalate that. And we have to be very precise. You have to be very accurate. We'd be very timely around how we do that. The last thing we want to do is create a false disruption, or cry wolf type of scenario. In our practice, although that does this hurt us the next time, something happens that we need them to react to, and they say, Well, you know, supply chain pulled. This last time, something was going to happen. And never that. It's meant to be very precise about how we do that. And again, having that playbook, like I talked about with the preparedness piece is really crucial because it gives us yes slash no criteria or if then criteria that is very precise very, very accurate very on points. So that's important.
Then spinning up an incident command and I'll talk a little bit about this regarding how we did this during the pandemic.
But the concept or the premise of an Incident Command Center is really that you have a pre-established protocol around communications, around who's doing what, when, why, and how.
And because what happens often in a crisis, even something well below coburn level type of crisis, is that there are a lot of heroic efforts that take place, people want to do the right thing. But unfortunately, they usually end up stepping on one another, and doing duplicate work, or doing work that creates more issues than it does solutions. And so having that incident command structure formalized is really, really important from a response perspective.
So in terms of, you know, how do you, how do you deal with a coven or the you know, the large scale event.
A lot of the points that I've outlined here, or are similar or replicated from previous slides when I was really talking more about a global strategy. But in terms of, specifically, how we would use coven, as an example of the sort of sort of bring all these points together. I'll tell you.
I remember very clearly, You know, speaking to the first point on monitoring, I remember really clearly, when my team in supply chain at Mayo identified, the virus is a legitimate threat to our practice and our supplies, And I remember because I was out of country, it was it was a bound the 20th of January. And it was when most of us we're still kind of sitting back and admiring this virus thing that was happening in China.
There really wasn't a lot of spread or a lot of, you know, publicity other than that little area of China that was shut down.
But, because of the protocols that we put in place on our side, my team was able to, sort of cut through that, that phenomenon that most of us were watching in January. And say, you know, if I take this virus 10 steps further, we have a legitimate threat to our supplies. Particularly from mainland China.
And, as we started to hear about shutdowns of airline shutdowns of shipping ports, all of these things, my team was able to very quickly, and very early in the process, identify the risk, escalate it within our division, and eventually escalate it within our practice.
And we were able to react and respond favorably more favorably than most because we were so early to the party. And that was a case in point.
And so why we establish all these protocols in advance, I talked about mapping earlier. And again, and, you know, similar to the monitoring point, we knew very quickly, the types of suppliers that we had that were producing products and mainland China.
Now, we didn't necessarily know that understand the severity of it at that time, but we knew that we had some risk in that area and we could, again, assess what that was. We can also map it to a critical items list and did so PPE very quickly became, you know, the, the, the, the bottleneck, the shortage in the process and what that allowed us to do.
Not only was to strategically source for PPE, but very early in the game, set forward conservation recommendations to our physicians and nurses, those that were wearing PPE to say, yes. Right now, our supply is pretty stable. But if we go three months without, you know, getting new inventory, and we're going to be in a lot of trouble. So, might that suggest that we want to start conserving now? And although I would have preferred that we conserved a little bit earlier than we did, we did eventually get there and that that ended up saving us a lot of heartache and pain in the longer term. So again, we were able to wrap that through a dashboard and process as well.
And again, I'll show you kind of a quick example of what that looks like.
And then in terms of escalation, as I, as I said, because we had that pre established playbook that was already ready to go, the the process of escalation was simpler, albeit not easy when, when covert ahead.
The reason that we, the reason I would say it wasn't easy, was because this was such an outlier event in terms of severity that we had to stand up groups that aren't usually stood up within a hospital.
So, we stood up our own Command Center, and I'll talk about that, briefly here in a moment, that was just supply chain driven, but we also have the larger Enterprise Hospital Incident Command that stood up, and they were dealing with all elements of the organization, and, you know, how we would go about, you know, bringing the, seeing patients, safety of, of employees, all kinds of stuff.
So, we had to work really closely with the escalation process with a lot of other groups, and that just adds a bit more complexity to the communication process and escalation process.
Then in terms of communications, we did do some learning as we went along on how we would establish communications both within the supply chain division. But then also how we would communicate our related to the organization. And you know the goal was to communicate timely and accurate information without creating panic in the organization. There's plenty of panic to go around, you know, just with the pandemic all by itself. The last thing that we wanted to do was sort of pour gasoline on the fire. And so we had to be very precise and very thoughtful about how those communications were worded, how they were distributed, who they went to, all of those things we sort of had to figure out on the fly.
I talked a little bit earlier about our Incident Command Center and what that, what that means.
So, as part of our business continuity process, we have, we have an incident Command Center that activates at a certain risk level. Now, this was again, such an outlier, in terms of the situation scenario we actually had to do to kind of a higher level incident Command Center. Typically, our business continuity Command Center would be fairly narrow refocused.
This one had to be much larger, and that was because the scale of the problem wasn't just a certain campus or a certain couple of products, but it was a suite of products, all campuses, entire healthcare industry, and so it was, it was a much larger group, and that is typical with our incident command process.
That being said, what we did was, we had, we put up an exact supply chain exactly, or in charge of the Command Center, and we really gave the staff within that.
That small command center group empowered them to make decisions on behalf of mail. And, and that was, I think, helpful to remove some of that red tape that you typically see in a crisis situation where everybody feels they need to get permission to do things. We sort of we denote as best we could.
We really stripped away that requirement and said if you can buy in 95 masks by ... masks and, you know, do it within a certain price range, we're not going to pay 100 times more than what we normally wouldn't know. Here's here's some ways that you can just go, do your job, and we have that staff to daily. for several weeks. We had daily phone calls that were, you know, update sorts of calls from the Command Center. I'll tell you again, in the trenches, there were some really dark days that we had Where, you know, we were critically low, uncertain supplies and had No, really, no, no hope there were. There were really no sources to purchase from, And. So, there were some, I remember, some very, very difficult, one hour update calls from that command center that place. And, eventually, we came out of it. But, there were some very difficult taste that we all experience now, secondarily.
We also stood up a sourcing command center, and this was really looking at the long term. So the Incident Command Center was saying, what do we need right now, where one of inventories levels suggest to us problems hotspots, you, know, sources of light, cetera?
But as we were thinking more about this, we realized, well, gosh, there's the here and the now. And then there's the 12 to 18 month forecast. That suggests, you know, this thing just keeps repeating itself, coven. The virus keeps repeating itself, over and over and over. And we open to borrow them, because of better than we often have more, et cetera.
And How might that impact our supplies in the next 6 to 12 to 18 months? And further to that, you know, a lot of really, really, all of our lunch and procedures are male or completely shut down for a period of 8 to 10 weeks. And what that meant was that we weren't using a lot of suppliers, But we also weren't We also weren't seeing patients, When we opened backup. We expected, and we did see a flood of demand from patients, And so, we quickly completed those supplies that we hadn't really needed to buy for 2 or 3 months, and how do we manage that process.
We stood up a command sourcing command center that addressed more in the long term needs, working closely with the Incident Command Center, which was the here and now, and also our logistics, inventory management, a lot of pieces to this. So, the Court and Sourcing Command Center was really looking kinda that longer term.
I did promise you a quick view of an inventory status dashboard, and this is probably a bit hard to read, but, really, the key here is just to understand, this is an output of, of data that goes, sort of line by line, or item by item, and it tells us K, we can drill at campus by campus, That's exactly the, the inventory level of certain supplies. And, again, I'll drill more functionality.
and, as a just a quick, No way to sort of eyeball it, you can see that there's a red yellow, green system that that indicates to us, no health.
And it was the way we go about this, as we say, just set up really high level our usage for this particular product historically. And we had to define Where historically men, whether that was just the last couple of weeks, and the last several months or years, Our usage is X, And we have this much inventory. why, in, in, you know, in our existing inventory on this campus? And so, we have, you know, X number of days, on hand, inventory remaining.
Now, if we scanned this report, and we see that first read, you know, square, we can then make some decisions. Does that mean that it, maybe, that maybe there's no real risk, Maybe in some product, that, yes, it's low inventory, we're probably not gonna use a lot of it in the next few days or weeks. Maybe we, it is a critical item that we're using a lot of, and this report maybe is for Phoenix, Arizona campus. But, if we look in, Rochester Boy. They've got, you know, 365 days of inventory on hand, OK. Well, maybe we can then load some of that inventory campus, the campus, and we can fulfill the demand for the Arizona campus from the Rochester campus.
So, again, just a quick kind of visual, that gives us an idea of where we need to focus our efforts, instead of trying to focus on, 10, 20, 30, 50,000 individual items.
We also discussed, and did do some forward by strategies, and, again, this was thinking, this was really working through the Sourcing Command Center to say, once we open backup our doors to elective procedures, once that flood of patients going to look like, and on top of that, what's the likelihood that we're going to experience some supply shortage? Because, everybody is, you know, all hospitals are now opening the doors back to lunch and procedures, and everybody's looking for the same supplies the exact same time. And what kind of a flood back into the market from a demand perspective, might we see?
And so, we did, we didn't do some limited forward bias, where we identified, you know, really, the top of the top, so, the most critical of the critical items list. and we focus our efforts primarily on the medical surgical products because, for us, surgeries are a high volume and high criticality type of function. If we have to shut down a surgery surgery suite. That's a big deal that hits the newspaper that has severe implications to patients. And so, we really said, let's slice off the top 5% of the top 20%, and let's focus on those, and then began some of those contract negotiations with the target of halving 60 days of safety stock on hand.
And, again, that was vary based on products, and we may have preferred more like 9120 days. Maybe some we refined the 30. So, so that was a strategy and then, you know, you can acquire products without contemplating the entire supply chain.
So, it's great to have, like semi loads of stuff show up, but if you don't have a place to put it, you don't have people to manage it. If you don't have a way to move it, that's problem. And so again, all in co-ordination with our logistics and inventory management and colleagues to make sure that we have additional warehousing space, which we didn't acquire and understanding how we're going to, you know, manage those skews once they're in the door.
So again, I've got a really a widespread, orchestrated type of effort that we had to think about.
And then I talked a little bit about data analytics, and how data really drove decision making. There was, there would be that we can do a full session just on data analytics and how we went about that and what really are now what we'd like to do going forward.
But at the simplest level, you know, monitoring purchase orders and status of purchase orders was a big task for us in making sure that we understood what was coming, what wasn't coming, allocations if, and, last, players, put aside, you know, allocation, which means you can't just sort of freely by whatever quantity you want, you have. You're limited in terms of how much you are allowed to purchase. And so, a lot of analytics is a lot of improvements, I think, required and necessary for the next big event.
But I think we were in pretty good position from an analytics perspective.
Then, just, one of the thing I wanted to mention, and this is a little bit of a sidebar, but I think it's important when supply, resiliency, and business continuity, when male identified, this is a critical strategic function.
You know, we started speaking to some of our other industry, healthcare industry peers, and what we recognized was that there really wasn't an organization out there to support not just the healthcare, the hospital industry, but also the vendor community.
And so, Mayo Clinic, along with Spectrum Health Out of Michigan, are co-founders of a not for-profit collaborative, it's called the Healthcare Industry, Resiliency, Collaborative, or Hurt as an acronym. And we have been actively recruiting both board, as well as non board, standard members into the organization.
And the, I've provided a little bit of data. You can Google us, we've got a website, and we've also, there's also a link on my presentation, I can send it to you in terms of what we're after. But really, a summary level. And the intent is to bring together like minded healthcare organizations and suppliers, really figure out how we fix this problem of supply resiliency. And we've had a fantastic response, especially in the last six months. As you can imagine, Everybody's talking about this. And so we're up to, I believe, a couple of dozen members, health care, hospital wise. And, I think we're at 10, or maybe slightly less than 10 vendor members who are coming together at a common, singular table to discuss these topics. But I just wanted to throw that out there. For those of you that are in, you know, the healthcare vertical, we would love to have you involved in Kirk and, and learning from you. And, hopefully, you learning some from us, as well.
So, with that, I think I can open it up now to any questions and answers that might be existing out there, so, I'll turn it back over to Jose, and go ahead.
Eric, Fantastic. Thank you so much. I'm going to ask you to bring your camera back on and stop sharing your presentation. Sure.
And I am, we have been scanning for questions, and the please. Everyone in the audience continue to ask questions, and I'll try to get through as many as we have in the yellow, as many as we can in the allotted time. So, Eric, 1 of 1 of the first few questions here, as a little bit more about setting the context for the audience who may or may not be familiar with the Mayo Clinic or the Mayor Organization. And the first question is that do you have mostly centralized or decentralized sourcing across your three main campuses? Yeah, great question the sourcing function is primary primarily centralized. In fact, it is centralized. What's not centralized is the logistics and inventory management functions. So, we don't have a common hub where we inventory and, and, and supply, particularly our southern campuses.
And so, the southern campus is really work and operate on a just in time, and they really are supplied primarily from our distributor, whereas the upper mid-west, Rochester, and surrounding communities. We do have a large inventory management or large inventory center, I should say, and we, and we supply products into those, and what happened during Calvin was that our distributor a lot. A lot of the products we get from distributors simply dried up, and we couldn't rely on, just in time much less, you know, the distributor to provide those supplies. And so, we actually had to convert very quickly to displaying all campuses out of our primary register hub. And so, that was really, really challenging. But to specifically address your question, sourcing is done through a shared service centralized manner.
Farewell following up on that, you know, it's a front seat heart ache or who is based in Hong Kong. He asks: How do you co-ordinate and distributed supply of ..., For example, between the three Mayo campuses who may experience very different levels of intensity, and urgency of the coffee spread, this winter side of your A, B, C D? So how do you do that co-ordination distribution of supplies?
Yeah, it's, it's a very difficult and tricky balance, because if you, if you choose to manage it through emotion, in other words, if you choose to manage it through, whoever scream the loudest that they're short and they needed, you always, almost always end up with excess supply, and those who know y'all loudest and shortages elsewhere. And so, the way that we managed it was through the data.
If we had, if we had someone who, for example, if somebody said in our Florida Canvas, you know, were critically low on the 95, and we're gonna run out next next hour, we would go back to the data. And we would say, well, wait a minute.
You know, we actually see that you have 75,000 masks and here's where they're at. And we also see that you only use about $3000 a day, so that doesn't suggest to us that you actually have a, you know, a situation or an issue. Now, if, in fact, we look at it and it is a critical shortage, and they are utilizing.
Is there and their utilization is high? Then, absolutely, and we would work through a process to overnight ship to, you know, from, maybe from Rochester and Jacksonville. And, in some cases, it was, you know, Jacksonville, Arizona where they aren't really have large facilities, the whole product. So, we just kind of coming back to the data, and not reacting to that the emotion of the situation, because the data doesn't lie to us, and not that people lied to us, but sometimes they were just kinda overreact or to respond to it.
Very good. Very good. Thanks for that insight. We have Fuller has a question about the predictability of the supply chain disruptions. And I think you talked that this is definitely a unique event, but may not necessarily be unpredictable. Right? I think that there is a predictability to that.
So I recall, I think in Orlando, a few years back, where you're talking about what has happened in Puerto Rico and the syringes or whatever was the equipment back then, and I know that you are very aware, of course, self of those potential disruptions and working on them. This scale is so different. But how much of that previous experience has prepared you for this and what if you can summarize for us the next level that you had to take the supply chain structure as a result of this pandemic.
Yeah. Yeah, you know the the the incident in Puerto Rico few years ago was just a microcosm of what this event turned out to be. But, it wasn't any less painful. It, just so happened that we were dealing with more supplies during the pandemic, but the amount of experience, in, most situations, felt very similar to us. And so, we could really could take a fair amount of our learnings from Hurricane Maria, and that whole situation with IV fluids and frankly with pharmaceuticals. As well, and we can overlay it with this particular situation. And because of that, even though the scale and scope are much wider and were harsh winter pandemic, a lot of, a lot of the things that we learned, a lot of the protocols that we put in place did work in this situation now.
I would say, in order to know, how did we, how did we go from, sort of what we were prepared for, and then when kinda where we had to end up to address the supply shortages with, with Calvin.
I would tell you that there was a fair amount of on the fly training as it related to number one communication across the enterprise, because unlike most of these other events that have taken place, You know, people were very, very smitten with what they were reading in the media. And that just made it worse, you know, because people would hear or read something or hear something.
Then they would extrapolate that data to their physician in the hospital. And it was, you know, certain magnify it. And so we had to be very, very careful about how we communicated. And what we said, the words we chose, are very important. The other part that was different. And that required us to be more thoughtful, and I think I mentioned, this was how we co-ordinated with some of the other crisis groups that were stood up at the same time.
And, are we, we, I think, I mentioned, we have a hospital incident command infrastructure that addresses all sorts of clinical types of issues that arise from things like this. And supply chain is just one little sliver of that large pie. And so but we had to we had to be sure we were co-ordinated with that group.
So if that group, for example, was making decisions about PPE realization, you know, wouldn't it be nice if some place you knew that so that, you know, we can source appropriately? And that one, both directions, I don't mean to imply that communication one direction was poor and the other was perfect, not at all, but we haven't really had to be involved in all of those discussions. Because all of those discussions there were decisions being made that impact and how we source product. And that was we weren't used to such a large scale event that required us to talk to so many people simultaneously. That was a takeaway that we that we learned.
Farewell. And Eric, some of the questions that have come up as well regarding preparations for for the winter here in the United States although it is a global audience, they're aware that we're moving to the winter in the United States. And the question: Is there a few scenarios and the previous speaker talk about a potential scenario is actually, you know, it's a double down effect, because you have, you know, the flow and covert act. And the same time, or a more optimistic view is that because of social distancing and masks and never fails to or trachea precautions. He could be that. the fluid itself is not as severe as normal. And the effect is about the same. We don't know right hotels, how are you preparing for this potential scenarios. And how how prepared are we for the winter season here in the US? Yeah, yeah.
I think I have sort of two answers, and they're somewhat in conflict with each other. Here's what I'll tell you for months.
I've Mayo specifically, but I think the healthcare industry has been thoughtful about how we, how we coexist with this virus in the hospital setting. So, you know, if he's kinda just step back away from the flu and all of that winter stuff for a moment, you know, We still have to be able to operate a hospital with this virus walking around in there that we've taken. I can't tell you how many countless steps to make sure that staff is safe, patients are safe, visitors are safe, everyone is safe. And so that's just to open the hospital doors. Now, when we get to winter, that's a totally different scenario, because, you know, hypothetically in the summer the flu goes down, virus goes down all those things, and we've seen that's just normal seasonality.
So, now, when you enter into the winter season, where you know, that, you know, kids are going to be closer to each other, adults in Upper mid-west is called, we stay inside. We don't go outside. And all those things are going to take place. I think that our preparedness plans, just to be operate in a safe environment in a hospital, will go a long, long ways and making sure we can remain open. Now, the next question I am really, really, This is, what you're getting at, is, you know, how healthy is our supply chain? And I'll tell you, at this moment, it looks pretty healthy. But if we go back to January, and we started to see some of the border shutdowns, and the manufacturing shutdowns and the employees not going to work or not being allowed to go to work, we see that repeat itself.
I think that we could be in trouble again. And we'll have to figure that out as we go and we put plans in place for if that does happen, but I think that's a possible reality that comes. This comes out as this fall. And it could be a very long, dark winter for us but I'm optimistic that we at least here, have put together the right plans. And we can see patients. You can do it safely And then we'll have supplies.
They got one final question here. What do you see as the long term implications of this pandemic on healthcare supply chains? Yeah. I've what I've heard in industry and I've talked to a lot of peers primarily through the herc organization. I hear a lot of my peers saying, you know, we thought, we have the right inventory management and distribution models in place. And this pandemic exposed us to the fact that, you know, just in time, inventory types of processes are very smart from a financial perspective. But when something like this happens, are a tragedy, you know, because you have such an inventory available on hand, because it's just in time is coming when you need it, that it gives you zero offer, or, or insurance that you're going to have enough supply.
And so what I'm hearing and industry is, kind of a thoughtful process, where people are saying, is the way that we've established our sourcing and our inventory management. Our relationships with direct with manufacturers, our relationships with distributors, are those still relevant, and do we want to continue in the fashion that we have? Or do we want to consider a different model that, that, while it might cost a bit more, it actually might be a lot less risky as well?
And so, I think there are a lot of TBD's coming in, terms of whether hospitals, you know, quickly forget this, and just kinda go back to our business as usual, or if we see large shifts in inventory management, logistics types of processes going forward.
Do you see more of the manufacturing piece of it should be done in country? As opposed to having global supply chains, or you don't see that as a, as a reasonable path?
I think that is, that's unknown to me at this stage, and to me that that question comes down to economics. Will we know that the thing that's being produced within the US. Borders of the North American voters are going to cost more. And the question will be our hospitals, and not just hospitals, consumers, are we willing to pay more money for something to ensure will get it? I don't have the answer to that. You know, for my risk Cat, I say, Gosh, pay more, because then we'll get it. But, you know, as an accountant, I say Well, but that's going to impact the P&L. And that's going to drag down profitability. And so, you can kind of put yourself on either side of that debate. And we know you, and I can sort of debate that topic. You can take the ... approach, and I can take the risk manager approach, and we started to Beta. I think that's the debate and is forthcoming in terms of whether we move. We bring all those Usher functions and bring them back in House.
Eric, thank you so much for taking the time. Know how busy you are so much planning and action to take place. Thanks for sharing from Rochester, Minnesota, to the world. You know, great insights, relevant insights for supply chain globally. We really appreciate you doing that.
Absolutely, thanks, Jose. I appreciate your intro and the questions. Thanks, everybody.
Ladies and Gentlemen. That was Eric ..., Supply Chain Leader at the for Global Supply Chains and the at the Mayo organization, and it, it wraps up our conversations for the time being. And the it's been a real honor for me to be your host during the Beatles healthcare life. A few reminders. You can provide feedback on this segment, or any other segments by when you close the when you close the webinar, there is an option there actual, to fill out a survey, so if you'd like to provide feedback, feel free to do that. You can talk to us directly on LinkedIn. Just go by LinkedIn on the page. Put your comments there, Put your feedback there. Ask questions, and we will have myself and the speakers will come in and answer your questions directly.
And we look forward to seeing you are next events, our flagship event beetles, from home, which is a cross industry Dillard across industry event, the largest gathering of senior executive leaders and business transformation, operational excellence will take place in November. I'm sure that you have seen several of the announcements in the chat as part of our distribution lists to you also. And that's the registered participants. You will receive updates related to that.
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Director of Business Integrity and Continuity,
Erich Heneke is currently Director of Business Integrity and Continuity in Mayo Clinic’sSupply Chain Management (SCM). His financial emphasis is in Enterprise & Supplier Risk Management, Audit/Controls and Financial Planning & Analysis. Erich has workedin Mayo SCM for 11 years, focusing his efforts on sound SCM controls, fraudprevention/detection, accuracy of balance sheet accounting and other controls relatedwork, including Mayo’s voluntary Sox compliance.
During his time at Mayo, Erich and his team have completed several projects addressingproper controls with Supply Chain, including: development of an award-winning creditcard risk scoring platform, completion of a segregation of duties project mappingemployees’ accesses across multiple applications, detection of several types ofoverpayments to vendors – including detection, collection and prevention of futureleakage, automated management of pharmaceutical pricing and several other initiatives.
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