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The supply chain may indeed be the lifeblood of an organization, as many professionals like to think, but the phrase takes on new meaning when the end user is one of the many millions of uninsured Americans who depend on free healthcare clinics and the products they dispense.
Determining the precise number of Americans without medical insurance can be a bit tricky, but Aidmatrix Foundation, this year's GL&SCS and CSCMP Supply Chain Innovation Award winner, and its partner, the National Association of Free Clinics (NAFC), say it tops 45 million persons. Not all of those unfortunates are served by the estimated 1,200 free clinics in the country, nor have all of those clinics combined their individual strengths to work for those in need. But at least 310 of them have, through FreeClinic Link, an internet-based collaborative network formed by Aidmatrix and the NAFC.
The network reportedly has helped dispense more than $50m worth of donated products. In addition, the collaborative buying and real-time data integration that the network has made possible with suppliers has saved NAFC clinic members at least $500,000.
Aidmatrix, a "socially based organization" dedicated to helping the needy, was formed in 2000, according to Keith Thode, the non-profit's chief operating officer and chief technology officer. Aidmatrix began as a program of the i2 Foundation, and Dallas-based i2 Technologies donated the original supply chain software from which today's Aidmatrix solutions evolved. Aidmatrix has also received services or contributions from Accenture, RedPrairie, Agility, Alcatel, UPS, Dell, Sun Microsystems, McNeely Technology Solutions, Oracle, NPower, Microsoft, the Meadows Foundation and others.
Aidmatrix, also based in Dallas, works not only with free clinics in the U.S. but worldwide with food banks and organizations aiding the homeless and in disaster relief. Given that Aidmatrix uses supply chain management concepts and technology, its motto-"Getting the Right Aid to the Right People at the Right Time"-is an apposite paraphrase of what supply chain professionals in for-profit organizations often say their work is about.
The NAFC, based in Alexandria, Va., is a non-profit that was started in 2001 when the federal government moved to stop the use of sample drugs in free clinics, says NAFC executive director Nicole Lamoureux.
The NAFC supports and advocates for the growing number of free clinics nationwide. It soon realized that it wanted more than a continued use of sample drugs, however. Part of its mission, Lamoureux says, is to convince pharmaceutical and medical device manufacturers to donate or discount large quantities of surplus and end-of-life product to clinic members. Billions of dollars' worth of medical equipment and supplies end up each year as waste to be incinerated, according to Lamoureux, and those items often can be donated to clinics for much less than it costs to destroy them.
But while the NAFC recognized that the health safety net its clinics provided could benefit from these products, the hurdle was to find the best way to make that happen, especially given the significant challenges clinics face. In addition to the lack of sufficient funding, most are generally staffed with volunteers working irregular hours. They also may be well-intentioned but ill-trained and computer-illiterate. Suppliers willing to donate medicines and other goods are heavily regulated by the government. Tremendous volumes of paperwork accompany each transaction, much more than understaffed clinics could handle in most cases. "We realized free clinics around the country weren't getting what they needed to serve people," she says. "So we had to form a partnership to get the technology needed to streamline the donation process, including the meticulous record-keeping. Manufacturers can't just show up with a garbage bag full of drugs and hand it to someone."
Into this void stepped Aidmatrix, with its technology and knowhow to guide clinic workers through the procurement and regulatory compliance process. Thode says the system is a bit more complex than ordering something from Amazon.com, but most of the hassle and complication of B2B procurement has been done away with. The results, he says, are "synchronized efforts" among the chain of donors/suppliers, program administrators, and individual free clinics.
The technology separates things into donated and deeply discounted, and then it trees down from there, Thode says. "We're basically automating processes-that is, I have something, who wants it? And how do you get that communication back and forth?
"These are just common business processes that we've automated through the ideas of supply chain technology and supply chain visibility."
Here's a snapshot of how FreeClinic Link works. Participating clinics anywhere in the country can see in real time 24/7 what medicines and devices are available and in what quantities. For example, products such as glucometers and test strips-in huge demand given the number of diabetics the clinics treat-can be ordered and delivered, with the entire transaction keeping within the law and the requirements of the donor companies.
Tax compliance is one of those requirements. Donation can maximize tax benefits for many companies, but precise record-keeping is required. FreeClinic Link is designed to provide all the data that donors and suppliers need to stay in compliance with government regulations.
In fact, Thode and Lamoureux say one of the first steps taken whenever a new donor is signed up is to ascertain what kind of "paper trail" that supplier's legal department requires for tax purposes. "We took it upon ourselves to find out what legal departments at donors need, what questions are they going to ask a clinic," she says.
That information, including a clinic's medical license number, is kept in a database, and accompanies any request or order submitted to a donor or supplier. "Clinics love it because they don't have to spend time on paperwork," she says. "Instead, they can help people.
"Having a system that's easy to use is critical because someone may come and volunteer for five hours a week and that's all they have," she says. "So we need a system that gets the product right to the clinics as they need it."
The line-item data captured by the FreeClinic Link platform is important to donors, says Thode. "Being able to show a product's history to donors in such detail is very compelling," he says.
Thode believes the reports generated by FreeClinic Link are as good as any that donors might receive in the for-profit world. "They are in good shape with their legal department and with the IRS. You know what was sent, in what quantity, and when. You know what actually got receipted. So when you go back into your tax write-off, the report has an integrity that's as good as as any sales system report that's out there."
The irony is that inefficiencies in production or imprecise forecasting are good for non-profits like Aidmatrix, however. "We like it when the supply chain is bumpy," Thode says, "because it means that they then have more stuff to donate."
But manufacturers may refrain from that if they don't know how to "smooth" out the supply chain. "We're doing that for them," Thode says. "We try to make it better business to donate than it is to throw away. When we do that, we become these donors' supply chain partners."
At the other end, the challenge is to deploy technologies that are easy to use and intuitive for people running free clinics and, possibly, homeless shelters. "These folks don't have their master's degrees in industrial distribution or supply chain management. How do you make those systems work for them?"
In creating tools for clinic employees, Aidmatrix had to be mindful of a typical user. A 62-year-old volunteer, who can only work a few hours a week and who is uncomfortable with computers is not uncommon, Lamoureux notes.
From the standpoint of a potential donor/supplier, such volunteers can be problematic, however. Typically, "They fill out a paper order and fax it in, and it comes back for a missing medical license number, but, oh, nobody can find the number and that volunteer won't be back until next Wednesday," Thode says. "There's a legitimate and significant cost for the supplier, and it's all order processing costs. In fact, the greatest source of cost reduction is the order application process."
Pre-set forms built into the Aidmatrix platform have removed that cost from the equation, he says. "Now, the suppliers are still making their margin, but we've taken the costs out and passed the savings on to the clinics."
The NAFC often is able to procure medicines and devices at deeply discounted prices, particularly if buying in bulk. FreeClinic Link allows the NAFC to aggregate clinics' needs and negotiate better pricing on behalf of its members. Lamoureux says that NAFC has determined the 10 to 15 most commonly purchased items and negotiated the best prices.
The cost of diabetic strips vividly illustrates the benefits of bulk purchasing, she says. Clinics formerly paid over $45 for a vial of 50 diabetic strips. Now the cost has been lowered to $11.70, and is still dropping. This has the potential to save clinics in the aggregate $14m a year, she says.
Lamoureux says she often finds that directors of clinics outside the FreeClinic Link network either don't feel comfortable negotiating with suppliers or feel that they already have the best price they can get. She says she walks them through the process and tries to convince them that the more members NAFC has, the stronger its buying power becomes. "When they see that, they become believers and tell others.
"Then we go to the companies, and say, 'You are serving 10 or 15 clinics, but we can get you 300 or 350 by the end of the year,'" she says. Soon, company sales staff realize there's money to be made. "It starts a nice conversation."
Clinics are assessed a $25 charge for each transaction, and under the bulk purchase program's financial model, they pay approximately two percent above the already reduced rate for the products. NAFC and Aidmatrix share the two percent to contribute towards ongoing program maintenance.
Free clinics play a critical role in healthcare, Aidmatrix and the NAFC contend. In communities with a free clinic, emergency room visits were reduced by 63 percent and in-patient care was reduced by 41 percent, they say. Funding, of course, is always a problem for these clinics, but they've received an enormously valuable tool in FreeClinic Link.
So, having given free clinics a window onto available medications and supplies, what's left for Aidmatrix to do? There are three areas where there are interesting possibilities, in Thode's estimation: forecasting, manufacturing for donation, and transportation.
For the most part, there is no real forecasting or demand planning. Clinics know the items they most need, but given the erratic attendance of many of their patients, clinics often don't know what kind of quantities to order and keep on hand. Three hundred cases of an item can go up on the portal, for example, but since there's no way to precisely forecast what the demand will be over a period to time, the question for any clinic is how many to order.
Fortunately, medicines made available are well within their expiration dates and can be stored. Lamoureux notes that many drugs can't be shipped to pharmacies if they are within a certain number of months from their sell-by dates; these usually can be shipped to free clinics since they will move quickly.
In addition, she says, most clinic directors are quite conscientious about how much they order; anything they request means less for other clinics.
"I think the demand is unpredictable, and I think supply is unpredictable as well," says Thode. "Unlike a pull-driven situation, it's very push-driven. What's available often is based on random acts of bad forecasting and inventory management."
Consequently, until a pharmaceutical company or device manufacturer contacts Aidmatrix, it's in the dark about surplus product. "We get no signal ahead of the actual intent to donate."
That leads to manufacturing for donation. "This is where it's actually more profitable in the process manufacturing cycle for producers running the line to know that they're going to donate the product because of their net operating profit after taxes," says Thode. The concept notes that when manufacturers have idle or open capacity, it may make more financial sense to use this capacity to make product for donation, or other nonprofit discount markets, than to leave production lines idle.
"We are starting to work with private sector partners to explore that potential, taking that concept and turning it into technology-driven tools to maximize the profit going to the supplier and maximizing the amount of supply that's going to the clinics."
As for distribution and transportation, the NAFC doesn't take possession of donated or discounted product. It quite simply has no warehouses or distribution centers. Thode says most manufacturers are willing to keep the supplies in their own warehouse, ship it, then capture the costs for the distribution and give that data to their legal departments. Nevertheless, Aidmatrix is piloting a transportation network now that's a combination of donated transportation and some discounted shipping. This Aidmatrix Foundation project is largely separate from what it's doing with the NAFC, but Thode says there may be some future application. "Cracking the transportation nut has been my dream for a very long time."
Who and What Is Aidmatrix?
Deploying supply chain technology, Aidmatrix leverages public and private sector resources with charitable organizations in relief services-creating opportunity and orchestrating what it calls "the Right Aid to the Right People at the Right Time."
Aidmatrix, headquartered in Dallas, began in October 2000 as a program of the i2 Foundation. In February 2004, Aidmatrix achieved status as an independent 501(c)(3) non-profit organization as The Aidmatrix Foundation Inc.
Aidmatrix Foundation Inc.; 11701 Luna Road; Dallas, TX 75234
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Thanks from Aidmatrix
The Aidmatrix Foundation would not be where it is today without the tremendous support from our community of supporters and users. Accenture, UPS Foundation, i2 Technologies, the Meadows Foundation and our other social investors have provided world-class assets and financial resources to make these solutions, so prevalent in leading corporations, affordable and effective in the relief community. At the same time, the National Association of Free Clinics, hunger relief organizations, ranging from the North Texas Food Bank to the Global Foodbanking Network, as well as our local and national government partners, have put in the sweat equity to take these solutions from theory to actually providing billions in aid to millions of people around the globe. We're honored to walk along side them in our efforts to change the world through supply chain technologies.
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