Financial ROI Model – Blood Centers
This model is structured around the following components:
- Blood Center profile
- Benefits (Financial impact over time)
- Costs (Financial impact over time)
In order to create a tool flexible enough to permit the analysis of diverse type of blood center operations and sizes, the team developed a Microsoft Excel-based tool to calculate the various cost and benefit elements and allow for “what if” quantitative analysis. The structure of the model starts with the definition of general parameters for describing the key attributes of Blood Center:
(1) Operating volumes describing the product flow in units and the headcount involved.
(2) Facility Configuration parameters allow for scaling the operations based on the number of facilities or areas involved in the blood transfusion supply chain network. Each one of these site types is associated with a pre-defined configuration of RFID equipment, allowing a more accurate estimate of the investment in technology needed by the entity under analysis.
(3) Financial Parameters convert activity units (hours or blood products) into monetary values. The value of a blood product is estimated using a weighted average of the blood product mix used by the individual institution. Labor cost is always estimated including the full payroll benefits on top of basic salaries.
In addition, the internal rate of return, a benchmark annual rate commonly used by financial analyst in health care to evaluate capital investments, is used by the model to translate monetary values occurring at different periods of time into a common equivalent present value. The model uses a scheme of five years horizon by allocating cost and benefits in each year during the ramping up of the technology and adoption of the new processes within a particular organization. In general, it is expected that new technologies will pay off within this period of time.
|Number of donations collected at fixed collection sites per year||150,000|
|Number of donations collected in mobile units per year||75,000|
|Total number of donations collected per year||225,000|
|Number of bags labeled per year||400,000|
|Number of bags shipped to customers per year||
|Number of bags returned per year||2,500|
|Number of bags sent to disposal per year||20,000|
|Average number of bags in stock||7,000|
Site Configuration- Blood Centers(225,000 collections/year example)
|Number of fixed collection sites enabled||8|
|Number of mobile collection enabled||12|
|Number of manufacturing centers enabled||1|
|Number of distribution centers enabled||1|
Financial / Wage Parameters
|Average Value of one bag of product||$ 223|
|Technical hourly wage (fully loaded)||$ 18|
|Supervisor hourly wage (fully loaded)||$ 25|
|Annual internal rate of return(IRR) used for decision- making||7%|
To determine how RFID could potentially benefit blood centers, a team of process owners from the participating blood centers was assembled. Over the course of 14 months the team analyzed current Transfusion Medicine processes in the upper end of the supply chain and redesigned these processes to take advantage of capabilities made possible by RFID technology.
These redesigned processes were termed “RFID-enabled” processes. The team concluded that these RFID-enabled processes would, if fully implemented, result in tangible financial gain in two categories: reduced labor costs and reduced discarded product. The model incorporates a step-by-step estimate of the current vs the improved effort requirements for each major process as well of the current product loss levels vs the potential product loss avoidance.
The model assumes that the blood center implementing RFID lacks the necessary infrastructure to support the RFID-enabled processes and therefore must purchase and install the required hardware and software.
- The costs are divided into two categories:
- One-time start-up costs. Recurring operating costs associated with RFID-enablement.
One time costs include the cost of RFID readers, required IT infrastructure, software purchase and integration, system implementation and training, and a temporary decline in productivity.
Recurring operating costs include the cost of purchasing and applying RFID tags to product bags, annual software licensing fees, and system support and maintenance. All recurring costs, with the exception of RFID tags, are assumed to be constant over the five year period.
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