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Is there Value in Stat Stops?

Apr 27, 2015

LTC pharmacies have embraced automation technology and information and can visualize each step during the pharmacy preparation workflow.  However, when the prescription is transferred to the courier, the LTC Pharmacy loses its ability to visualize the prescription.  Same-day couriers may use UPS style POD devices, but most courier data lacks quality and the ability to share.

Supply Chain Finance has audited countless courier invoices and the most difficult LTC Pharmacy onboarding task is the struggle to obtain courier data.  I am sure courier management has more pressing issues than providing an auditor data; especially when the data is going to an organization that will short-pay incorrect delivery costs.

Our audit service directly impacts and reduces the LTC Pharmacy’s cost per stop (our average cost per stop reduction is -18%), but I feel that our real value is giving visibility to same-day delivery records and providing quality data to the LTC Pharmacy.  The pharmacy manager is able to impact his/her preparation activities, but the courier convers the Scheduled and Stat Deliveries and the manager relies upon the courier to generate stop counts.

LTC Pharmacy managers fly blind when they create route or try to solve delivery complaints.  They use delivery assumptions and paper manifests to analyze delivery activity.  Which is the pharmacy’s most common face to the Long Term Care facility.

Supply Chain Finance scrubs courier data and enables access to the hidden gold mine in delivery data.  Same-day delivery costs are often targeted for cost reduction because it ranks as the LTC Pharmacies 3rd largest expense.  The following are the six ways Supply Chain Finance promotes data visibility and quality.

  1. Promotes Invoice Accuracy 
    Supply Chain Finance audit processes uncovered inaccurate delivery charges: Duplicate Delivery Charges, Overstated Stat Mileage, Route versus Stop Pricing, Addons Charged at Stat Rate, Stats Delivered by Route Driver, Old Deliveries Posted on Current Invoice, Delayed Deliveries, and Billing at Wrong Rates.  These inaccurate invoices impact early pay discounts and the staff time A/P assigns to resolving billing issues.  In addition, many financial systems that have automated payment dates and resolving billing issues impacts payments.

    These errors impact the LTC Pharmacy financials and incorrect same-day delivery costs distort the pharmacy’s Income Statement. 
     
  2. Centralized Spend and Delivery Information
    Most couriers claim to have accessible data, but data requests are often ignored.  It is rare when the courier is able to provide comprehensive billing data file that can be integrated into the LTC Pharmacy systems.  Data that is accessible enables the pharmacy manager to make better Routing decisions.

    Connecting the delivery data to LTC Pharmacy systems enables better deliver decisions.  For example, our data has been used to scope RFPs and have prevented the courier from re-rate their contract.

    Data analysis has also flagged routed stops where 3,000 bed facilities received 3 and 4 scheduled stops per day. 
     
  3. Measures Supplier Service Level Agreements
    Financial studies clearly show that contracting 3rd party courier service is economical; but courier management claim that they cannot control their independent drivers.  This may be true, but courier contracts also have Service Level Agreements (SLAs) which can be used to manage routes and delivery execution. For example, Stat delivery time not to exceed 2 hours from pickup time.

    We examine SLA performance and deduct non-compliant shipments; For example, missing the 10 AM delivery time causes Fedex to credit your charges.  Incomplete POD signatures is another common issue which is part of the courier contract which need to be flagged for nonpayment.

  4. Improves Supplier Relationships
    A frequent question about our auditing service is:

    “How do couriers react to their invoices being audited?”

    At first, couriers resent Supply Chain Finance auditing their invoices; but once the courier see that our audit is systematic and predictable, they become fans.  Couriers appreciate our systematic Dispute Management process and being paid on time. 
     
  5. Provides Documentation and Compliance with Internal Accounting Procedures
    Sarbanes-Oxley enabled Supply Chain Finance to enter the courier auditing process. Our initial client had a Board of Directors that was uncomfortable accepting non-auditing expenses for their 3rd largest expense.  The board did not believe that their process and procedures adequately tracked courier expenses.

    Supply Chain Finance is certified and our auditing process helped the client meet its regulatory reporting requirements.

  6. Predictable Workflows Improves Cash Flow
    Visibility to delivery data allows the client to reduce shipping costs and to improve cash flow.  Our delivery data is used to identify overbilled deliveries (as described above), to optimize stops, to capture early pay discounts and to obtain lower contract rates.  

    A centralized system that connects courier invoices to business payment systems creates an opportunity to improve cash flow.  Consistent invoice processing give couriers the opportunity to improve their cash flow by offering better terms to receive payment faster.  Our transparent invoicing system mitigates the risk of delayed payments and allows the courier to focus on service versus funding.
     

Once a LTC Pharmacy decides to reduce and manage its courier expenses, the business should take these steps to leverage the lost knowledge:

  • Courier Data Collection.  Courier data such as Invoices, Manifests, PODs, and Rate Sheets are collected and deposited in a centralized database.
  • Audit: Data is electronically matched against contract rates and payment files are created.  Short payments are documented and disputes are resolved.
  • Allocation: Courier charges are allocated to LTC Pharmacy accounting rules.
  • Payment: A/P processes electronic payment files and early pay discounts are captured.
  • Analysis: The database is integrated to the LTC Pharmacy systems or business intelligence tools are used to provide same-day delivery activity.  Customized reports can be created to track delivery type activity, spending reports, service level agreements, and courier reliability.