Baystate Health Automates Freight Cost Allocation

Increases Efficiency, Streamlines Billing and Implements Process Improvements

SITUATION

In 2011, TRIOSE partnered with Baystate Health, a not-for-profit healthcare system headquartered in Springfield, MA. The system has 80 locations systemwide and includes three hospitals with more than 800 beds.

The healthcare system employed a Manager of Warehousing and Transportation who was working to reduce shipping costs and manage freight strategy. After six months of working independently, it became evident that Baystate should consider a third party to facilitate a freight management solution.

CHALLENGE

As Baystate Health management began looking for methods to reduce its shipping costs, it realized it needed more accountability regarding where and how its shipping dollars were being spent. Overall, there was not a solid understanding of the process. There was, however, a desire to minimize “add-on” shipping and handling fees imposed by some suppliers, which had steadily been increasing.

Additionally, with more than 1,450 separate departments and locations to attach charges, Baystate experienced special challenges in setting up an improved billing system.

THE TRIOSE SOLUTION

Baystate management conducted an audit to identify how much it was spending on shipping, and learned its freight spend was almost $1 million. These costs needed to be evaluated for potential savings and improved efficiencies.

To address the lack of understanding around its shipping process, Baystate decided
to engage a partner who could help manage freight costs, as well as educate its team about the process. Baystate began working with TRIOSE, who implemented an inbound freight management program and customized a billing method that met the needs of
the accounting department. These initiatives resulted in reduced costs and improved vendor compliance. Most importantly, TRIOSE customized an integrated billing solution that worked directly with the hospitals’ Materials Management Information System. This automated solution allowed for accurate allocation of freight costs to departments at multiple levels, saving not just dollars, but hours of manual processing.

THE TRIOSE DIFFERENCE

TRIOSE estimated that it would be able to save Baystate up to $220,000 per year in shipping costs. During the first year of the relationship, TRIOSE helped Baystate save between $260,000 and $265,000, cutting more than 20% of its shipping costs. Much of that savings is attributed to a reduction in “add-on” fees for shipping and handling. To date, TRIOSE has saved Baystate $650,000.

Additionally, Baystate achieved 70% vendor compliance after one year, and TRIOSE continues to work to get the remaining vendors on board. The integrated billing solution
is a TRIOSE best practice that not only meets the requirements of the hospital’s finance department but streamlines the entire billing process. Baystate’s finance department has accurate visibility of all freight expense and continues to work with TRIOSE on further cost savings initiatives to improve efficiencies and negotiate more favorable contracted freight terms. Implementing the TRIOSE program has also brought a new and more comprehensive understanding of freight costs through the extensive reports TRIOSE issues weekly.