XPO Logistics to work with Trinity Health on building a ‘transformational’ supply chain network
March 09, 2016
Non asset-based 3PL XPO Logistics and Trinity Health, an Indiana-based, multi-institutional Catholic healthcare system with hospitals in 21 states, said today they have rolled out plans to build a $26 million, state-of-the-art Trinity Health supply distribution center in Fort Wayne Indiana.
This will be the first of four of these centers XPO and Trinity will collaborate on, with construction expected to take a year and initial site preparation expected to kick off in the first quarter and will take roughly one year to complete. Trinity’s Fort Wayne, Indiana facility will serve as a single entry point for its national DC, which will service a large portion of its national footprint, coupled with adding regional hubs that will maintain inventories for certain products relevant to the business it is in and demand cycles, too. Trinity could not disclose where those additional hubs will be located at this time.
Trinity officials said that this effort will significantly change how it stages and moves supplies to its 88 hospitals, adding that the modern world-class facility and distribution process it is creating with XPO will expand its Lean/Kanban approach to supply chain management, as well as collaborate with suppliers in a deeper and productive way through the elimination of non-value-added work for all supply chain participants, including stakeholders.
Lou Fierens, senior vice president, Supply Chain and Fixed Asset Management, Trinity Health, said there were multiple drivers for making this move.
“If you look at the current state for nearly all of healthcare, supplies come through an indirect pipeline, with manufacturers producing gauze, IV bags, and medications and all kinds of things that are purchased by distributors,” he said. “Those distributors ship those products to hospitals throughout the country, which is typical and presents a number of efficiency challenges.”
Fierens explained that earlier in his career he was in the automotive industry, where 3PL relationships are very common, with a strong partnership between 3PLs and their customers focused on driving waste out and creating efficiencies in the supply chain. He said this is something he felt was missing in healthcare with the setup through distributors.
“We started on this journey several years ago by creating clinical best practices, standards of care and trying to drive variation in how healthcare was delivered,” he said. “As we have done that on a ‘how we do it side,’ it has led to a ton of supply chain benefits to reduce variation, reduce SKUs, and create more efficient inventory methods. We really started to push on traditional distribution systems to create efficiencies that, frankly, distributors are just not capable of delivering, because of the amount of variation they have to serve in serving multitudes of hospitals.”
As Trinity started down this path of best clinical practices and standardizing how it does its work, it engaged from a supply chain standpoint to begin aggressively reducing SKUs and at the same time having conversations with multiple 3PLs, which he called an extensive process, before partnering with XPO to handle its direct-to-hospitals vision, where Trinity is working directly with manufacturers to take get the right products, efficient warehouse space utilization, as well as look back through the supply chain to port of origin with a global logistics forwarder.
As for XPO’s role in helping Trinity, Ashfaque Chowdhury, president of supply chain for the Americas and Asia-Pacific, XPO Logistics, explained what Trinity is doing with this effort is “transformational” and an exciting opportunity for XPO to be part of a story in which a customer is looking to invent its supply chain.
“We have had a lot of experience doing that for very large brands, which is [something] we bring to the table,” he said. “We have a large healthcare practice that will help bolster things at Trinity as well. One of the reasons XPO was selected is that everything Trinity is trying to do is taking best practices from other industries and bringing them into the healthcare industry. We are extremely proficient in and very familiar with those practices with multiple customers….and have demonstrated things we can help bring over and work with Trinity to make that a reality. Our national and global presence allows us to be effective and to accelerate the pace of this because of our size and presence in almost every market.”
Brian Murphy, XPO senior director of business development, said XPO’s primary role in its relationship with Trinity is to support Trinity’s strategy of access of moving materials from the manufacturer to the hospital bedside, which he called a true order to delivery impact.
“Our role is to really fit in with all components of that at the manufacturing side, where we bring logistics expertise, as well as the distribution and supply chain sides, and it will also be inside the hospital walls, where we will bring Lean concepts to affect change within the process of those core locations for central supply in a hospital environment,” he explained. “Our role is really to augment the partner wherever we can bring value, mitigate risk, bring supply chain expertise, and then provide a commercial structure that allows Trinity to continue to win.”
On the operational side, Murphy said XPO is engaged in a more of a phased rollout with a specific schedule for different hospitals within the network through various services XPO will offer, beginning with the Fort Wayne location.
And from a transportation perspective, XPO will evaluate requirements as they come, starting with more of a commercial, or common carrier, model, before eventually hitting a tipping point and shifting to more of a dedicated environment.
“It is an exciting path for us, and we are going to grow with Trinity throughout this engagement, and we have the pace and schedule set by both parties that will help us grow together,” he said.
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