In years past, the University of Pittsburgh Medical Center was content to just order its supplies using good old-fashioned forms. That required quite a bit of paper for a $10 billion integrated health system with 55,000 employees and more than 20 hospitals.

Stacks of paper kept piling up. Forms got lost and it was difficult to measure the cycle time from request to receiving an item, says James Szilagy, chief supply chain officer for UPMC. So, the organization shifted to an procurement system for employees to order supplies without paper, drastically changing the process.

"It's hard to measure the cycle time from a request to the point in time in which you place that order, so you've got a lot of service issues," he says. "The best we could measure is [that] it took us more than 20 days to process that piece of paper, where today, electronically, it's instantaneous."

For its virtual marketplace, and a bevy of other initiatives, UPMC recently was named the 2012 winner of the Association for Healthcare Resource & Materials Management's Award for Healthcare Supply Chain Innovation. The award is sponsored by Cardinal Health.

UPMC stood out above the other 10 award applicants for its "innovative" way of integrating accounts payable and purchasing data, rather than keeping them in their silos, says Rosalind Parkinson, head of the committee that picked the winner. UPMC has elevated the supply chain function to the executive level, so that it is part of cost-containment efforts led by the C-suite. The health system now is looking to integrate the supply chain with electronic health records and the clinical side of the hospital.

The Ohio State University Wexner Medical Center, where Parkinson is the chief supply chain officer, has mirrored some of UPMC's efforts. "In hospitals, we're mostly using technology for clinical systems, which is what we need it for, there's no question about it," she says. "But we've learned from implementing these clinical products that we need to think about how that can help our business processes as well, because we waste a lot of resources in hospitals on outdated processes, and we spend a lot of money on people doing redundant work."

Since UPMC began its migration from paper nearly five years ago, employees are spending 40 percent less time on item master management, and have reduced electronic data interchange costs by 40 percent. All told, the organization has sliced about $3.5 million in costs per year from its supply chain initiatives.

The work isn't done yet, says Szilagy. UPMC is working on logistics and is getting close to full "self-distribution," so it will deliver all products to its chain of hospitals without using outside help. Leaders also want to increase sharing of resources among the system, to help draw down inventory.