Objective:
To increase the scope of goods and services purchased by the supply chain department to include new products and suppliers
Calculation:
| Total number of items activated | 20 days | |||||||
| x | x 100% | |||||||
| Total number of active items at start | Number of workdays in the month |
Target:
To be set by individual organizations depending on their size, circumstances, priorities and initiatives
Background Details
Rationale
A comprehensive, up-to-date item master file is critical to manage frequently ordered products and track and report usage statistics. Leading practices suggest that efficiencies and savings can be maximized by ensuring the item master contains all frequently ordered items. Centralizing this information supports better contract management and increases ease of use for customers, leading to greater contract compliance.
Benefits
Customer Service
Maintaining an accurate item master with clear consistent nomenclature and all frequently ordered items will lead to a comprehensive database that allows customers to order products more efficiently and with fewer mistakes. This will lead to greater customer satisfaction and contract compliance.
Employee Productivity/Satisfaction
A comprehensive database and more efficient item master management will reduce the time required by supply chain staff to place orders by providing access to centralized and accurate product and contract information.
Underlying Leading Practices
RFP Development and Compliance Management
Establishing policies for RFP development and limiting the use of non contract suppliers leads to better product ordering information and enhanced contract compliance.
Contract Centre of Excellence
Centralized contract management activities facilitate the development of contracts for new additions to the item master, providing a source for comprehensive pricing and contract information.
Target Considerations
Establishment
Targets will be unique to individual organizations as the appropriate percentage of new items to be added are dependent on a number of factors. These include:
- Size and scope of the organization;
- Stage of existing centralization, standardization and strategic sourcing initiatives;
- Criteria for adding items; and
- IT-system functionality.
This metric is useful to help individual hospitals meet their internal targets but has little comparability across organizations. Before implementing this metric, organizations should collect data for six to twelve months and then establish appropriate goals based on current improvement initiatives.
Adjustment Factor
Due to the different lengths of months and the presence of holidays, the number of working days per month varies from 19 to 23. This could have an impact of over 20 per cent difference from month to month, making comparisons difficult. To avoid the issue, the calculation includes an adjustment factor (20 divided by the number of working days in the month) to normalize each month’s data to a 20-day month (four full work weeks).
Related Metrics and Standards
| Related Metrics: | Related Standards: |
|---|---|
| 1.1 Percentage of Active Items under Contract 2.1 Average Cost to Issue a Purchase Order 3.6 Percentage of Invoices with Purchase Orders |
1.1 Purchasing Policies and Procedures 2.2 Inventory Policy 3.1 Contracts Database 4.2 Item Master Management Policy and Processes |
Implementation
Calculation Parameters
Calculation:
| Total number of items activated | 20 days | |||||||
| x | x 100% | |||||||
| Total number of active items at start | Number of workdays in the month |
| Variable | Include | Exclude |
|---|---|---|
| Total number of items activated | Include number of new items added in master file for:
|
Do not include number of new items added in master file for:
|
| Total number of active items at start | Include number of active items in master file at the beginning of the month for the categories above | Do not include inactive items
OR |
| Number of workdays in the month | Include all regularly scheduled working days in the month | Exclude:
|
| 20 days | Days in month adjustment factor |
Data Accessibility Rating
EASY – Data are available for computation
Possible Data Sources
Electronic
Procurement and Inventory Modules:
Many supply chain information systems generate new sequential numbers when items are added. Total number of items activated can be calculated from the ID number for last item in the master file at the end of the month less the ID number for last item in the master file at the beginning of the month. A custom report may be required to identify the number of deactivated items at the beginning of the month to determine the Total number of active items at start.
A number of hospitals follow the practice of reusing numbers; the Working Group strongly discourages this practice as it not only results in lost history for the older items, but also inhibits measurement of this metric.
Manual
If custom reporting is not possible, the organization could conduct a manual comparison of the item master at the beginning and the end of the month to calculate this metric.
The calculation for the Number of workdays in the month should be based only on standard workdays — exclude statutory holidays and other organization-wide acknowledged days off.
Implementation Challenges
Challenges:
- Organizations often lack processes and defined responsibilities associated with the item master. Inadequate controls on item additions could result in duplicate and obsolete items, causing contract compliance to suffer. It is important to ensure a comprehensive item master management policy and process are in place, including a standard nomenclature for items and assigned responsibilities for restricting access to the item master before making improvements to this metric.
- Some organizations may have challenges excluding food and pharmacy items if they are maintained within the same system. If possible, the numbers should be manually adjusted; otherwise, the organizations should document the resulting inconsistencies.
- Many hospitals reuse product numbers, resulting in lost history for older items. This procedure should be discontinued to ensure the item master file is accurate and contains all product usage data.
