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In the province of Quebec, healthcare establishments purchase hundreds of millions of dollars in supplies each year. With traditional paper-based methods, they manually handle all stages of procurement process from raising orders to be sent to the suppliers to internal procudures for order fulfillment. The purchasing process is carried out using telephone, fax or mail, which results in long purchase cycle time, labor intensive, higher error rate in receiving and invoicing, higher administrative overhead and especially higher costs to process purchase orders. Consequently, this causes great burden to profit of these healthcare institutions. As a leading healthcare product provider, Johnson and Johnson would like to improve customer service and satisfaction as well as become more competitive when many large Canadian suppliers already applied new technologies to gain market share. Therefore, JNJ needed to look for a solution that provides a more effective way to streamline the ordering and procurement process, which not only helps improve its own productivity, increase efficiency but also helps its customers save resouces to focus on their own business-improving patient care.
Johnson and Johnson Medical Products has implemented MediChain e-procurement platform, "an e-commerce solution that seamlessly integrates diverse healthcare and supplier Enterprise Resource Planning systems"(Heathstip, by Steven Kramer, Dec 30th, 2010). The e-procurement flatform reconstructs the way organizations purchase supplies by automating the manual process, which means allowing JNJ and healthcare insitutions to exchange all business data involved in procurement cycle from requisition to final payment electronically
The Medichain platform is comprised of various business to business and electronic data interchange applications that allow companies to effectively communicate business information through the internet. The business documents come from a variety of file formats which will be transformed by the flatform based on the established user profile and sends the documents securely to its defined destination in its required format.
Benefit of e-procurement
The e procurement platform eliminated the slow, inaccurate, costly paper based purchasing processes. As a result, it brings considerable benefits for the company. The platform improves substantially JNJ's customer service and relationship by helping healthcare institutions save a huge amount of transaction costs for processsing and managing purchase orders.
In addition, the solution simplifyies ordering and shortens the ordering cycle time since orders are sent electronically, the company can receive the order immediately and orders will not be delayed or lost in the post. Healthcare institutions do not have to make phone calls to place orders, they simply go through internet. There is no more wasted time on checking and tracking paper documents, editing to correct orders (quantity of supply, type of supply) which decreases billing discrepancies. E procurement also improves order accuracy, reduces staff workloads which creats opportunities for employees to focus on other important tasks. Automated procurement shortens the supply chain cycle, orders arrive at the warehouse faster reducing lead time to deliver allowing for supplies to be shipped on time, and invoices also paid to the company faster. Besides, the platform can alert the company to the customers' stock level. Then stock can be sent automatically which means the stock level is maintained and helps customers save inventory storing costs and not have to make frequent urgen request from the company.
E procurement creats greater exposure to new customers when the company's electronic catalog accessed by many customers. The catalog contains product information that Johnson and Johnson is offering to customers and may be used by other customers who have access to the e-procurement system. Besides, the customers can search immediately the information regarding supplies such as the price, availability, properties of products through electronic catalog which is updated through the e procurement by company without directly asking information from the company.
Disadvantages of e-procurement
E procurement though brings more customer satisfaction, it trends to raise bargaining power over suppliers, which increased competition and keener prices
It is the price that is very expensive when they want to use the e procurement , If Johnson and Johnson want to install the e procurement - software , the price is about $100.000 to 2 millions . May be it is cost for covers software license costs and getting suppliers connected . Moreover , company must pay money for IT company to save information from catalog outside the firewall So it must be protected . Moreover, the Johnson and Johnson connect all catalog of external and internal of supplier to manage it
The staff of Johnson and Johnson must learn about how to use the e procurement because it is software and set-up available . If they do not learn, they can not know how to use it .
E procurement has limited about information and style of production. For example , customers they can see pictures of production on the internet , they agree to take it . But when they received the production , they disagree . Because when they see on the internet , sometime information of production is different , pictures can be edited more beautiful .It is called Limited sensory information . Moreover when customers return productions , we might pay money for this cost. Privacy, security, payment, identity, contract are problem of e procurement . Hacker can damage e procurement of Johnson and Johnson by stealing the information of production or when customer use visa , their password can be lost .
Radio Frequency Identification technology (RFID)
DePuy Orthopaedics, part of the Johnson & Johnson family of companies, is a provider of implants and orthopedic devices.
Depuy's main product is orthopedic implants placed in boxes which are packaged into kits called Express Care sets or kits. Each set contains a selection of varying-sized implants. Ensuring that these sets have sufficient and accurate components inside is imperative because the surgeons only know which size implants they need when the surgery is performed, so it is expected to have the exact parts of implants when they make the cut. After the surgeons use the necessary devices from the kits, the kits are sent back to Depuy to be replenished and shipped to hospitals again. Therefore, the big challenge of Depuy is accuracy in the inventory checking process since before the kits are shipped out, the company must make sure exact components that are supposed to be in the kits. The employees have to manually open each kit, scan the bar code of each component to determine which components in the kits are used and replenish the missing parts. Then they scan all the parts again before the complete kits are shipped out. This checking process is not only very labor intensive, time consuming but also prone to error whereas accuracy is critical to Depuy's business.
Depuy has a highly inventory intensive business. The company needs to ship out 675 kits per day and also receive 675 kits back per day. 55% of the kits they receive during a day have to be reprocessed and sent out that night and 65% of Depuy's customers are calling during a day expect their orders to be shipped within that day, which requires rapid replenishment and reshipment(wn.com/rennerovky). The company is always in reactive mode everyday as each day, they do not know what they need to work on to ship out at that night (wn.com/rennerovky). Consequently, the company wanted to streamline the inventory process, reduce the processing time, increase the efficiency and accuracy.
The company applied RFID technology to automate the inventory inspection process, which includes the UPM Raflatc UHF Gen2 Dogbone RFID tags combined with EasyKitâ„¢ - RFID Kit Management Software and the RFID Medical Kit Tracking Tunnel.
The employees no longer have to manually open up each kit and double check boxed implants. Using RFID technology, they put RFID tags on each of implant box and the kit which store information about the product such as unique product identification number, product size, date expiry... The tags contain chips and antennas to communicate with the tunnel reader through radio transmission. All the employees need to do is putting the whole kit with boxed implants inside through an RFID kit checking tunnel. On receiving tunnel, the kit management software integrated within existing databases shows the employees instantly report of anything missing or changed within the kit. Then they can replace the missing parts and put the kits through the tunnel again to make sure that kit is complete.
The return on investment was achieved in just a few months. With the new approach, DePuy dramatically made accuracy level through the checking inventory process to one hundred percent, which results in generating accurate invoices for its customers, reducing disputes with hospitals to improve reliability in customer relationship.
Another great benefit of the solution is time efficient. With the bar-code scanning method, it takes about ten to thirty minutes to check, replenish a kit. The new technology cuts the processing process for each kit down to within one minute. This shortens the kit checking supply chain, save labor costs. Automating RFID also improves security, reduces inventory shrinkage, prevents fraud and counterfeiting. Consequently, inventory management, efficiency were improved.
In addtion, unlike bar- code, RFID technology does not need line of sight to identify items; thus it can read through packaged components inside the kits, as well as simultaneously read multiple items that are RFID tagged from different directions. Moreover the solution is scalable and simple to use, which requires little formal training for workers; easy to implement, occupies less space and requires no additional hardwares.
Besides, the Dogbone RFID tags have the ability to be read even when being placed on metal materials; hence though the implants made of titanium and cobalt chrome, the tags can still be read well. (rfidjournal.com)
There are potential security issues since RFID technology does not require line of sight for identification, competitors may set up high-gain directional antenna being able to read tags to steal information during delivery process. By this way, the competitors could use the data received to determine flow rates of various products. (idautomation.com)
RFID is one of the newest technologies so its cost is quite high. The components and tags are more expensive than barcodes by many times. However, the considerable benefits could offset against the high cost within a year.
Moreover, it is likely that RFID tags may be spoiled- Water, static discharge or high-powered magnetic surges (such as lightning strike) could ruin the tags. (idautomation.com)