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Manufacturing Simulation Game - "LEGO"

Resource Management
Part 3 of 5

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Blueprint for Change: What Are the Barriers to Improvement?
A lot of issues we've noted need to be overcome for integrated re­source management improvement within the health care arena. Even though commonly accepted resource integration practices have been adopted within the health care setting, they still tend to be indepen­dently implemented. Processes like EDI, auto-reorder, and vendor-man­aged inventory are managed by departmentalization, which often re­sults in duplication and wasted efforts all along the supply chain rout­ing. In a nonintegrated world, managers use survival techniques to de­fend their turfs and maintain good performance. It becomes exceed­ingly difficult to gain organizational efficiencies through an integrated, process-oriented approach when survival is paramount to performance.
Case in point: Take 55 independent nursing units, which represent over 400 departments. Do you realize how many drawers, cabinets, cubbies, and pockets there can be where supplies are stored? When defining processes and closely examining what is really going on, one quickly gains an understanding of the organization dynamics as they really are. This may not always match the perceived organizational behavior at top-management levels within the organizational hierar­chy. However, as long as the rewards and emphasis on maintaining independent departmental separateness exists, the organization will flounder with splintered goals, unaligned measurements, and medio­cre results, not to mention interdepartmental skirmishes and staff acri­mony. Even more important is the indiscrete tasks of a non-process world that fosters workarounds and shortcuts to avoid delays in the supply chain pipeline. Clearly, the emphasis needs to be on cooperat­ing and combining resources, identifying and eliminating duplication. Confidence in the supply chain resources must displace workarounds that frequently substitute for official policies. APICS guru Oliver Wight called this phenomenon the "informal system." We refer to it as "unof­ficial inventory" and we all pay the price. Repeated workarounds may help get immediate tasks done, but they almost never optimize integra­tion efforts to streamline the overall process.
ERP relational database architecture creates information-sharing that requires interdependencies of processes. For example, how do you measure vendor performance? In a nonintegrated environment you'd have to research the item usage and replenishment in inventory. Price changes and contracting information on that item would most likely be with purchasing. Product delivery on that item would be with receiv­ing and accounts payable would have vendor demographics and pay­ment terms in order. Try and match a purchase order with a product receipt and a vendor invoice. By contrast, with true interconnected ERP linkages, you can query on that item, find out usage, price history, contract compliance, and ultimate product cost and performance, all in real time. In ERP, matching is a snap and the vendor performance puzzle pieces are quickly put together. Managing the supply chain integration points becomes a process that is interactive and aligned with measur­ing shared accountabilities across interdepartmental boundaries.
Let's revisit the APICS definition of resource management: "encom­passing both the product and process life cycles, and focusing on the integration of organizational resources toward the effective realization of organizational goals." We need to address the total business system in a health care environment. Revisit the barriers. Obstacles to a total system perspective include organizational compartmentalization, and company culture such as values, beliefs, and traditions are the prob­lem. The way we go about our work is the problem. The problem is process related; the solution is process related.
Getting the Product: Health Care Supply Chain Characteristics
Take a look at some common health care supply chain traits:
• Membership in a group purchasing organization that specifies con­tractual obligations for purchases, such as price, product, and ven­dor. A GPO is a trust formed among buyers to leverage their clout in the marketplace.
• Space pressures within the facility can lead to predisposition toward
- vendor-managed inventory
- auto reorder (a purchasing agreement that includes point-of-sale reporting back to the medical/surgical distributor, which deliv­ers replenishment materials based on usage activity).
• Vendor performance that may lack supply chain disciplines:
- vendors not delivering to request date
- vendors not allowing scheduled delivery dates/standing orders
- little/no communication of back-orders from vendors
- nonstandard packaging by vendors.
• Manufacturers slow to agree to total bar coding on packaging.
• Materials manager often has diverse responsibilities such as secu­rity, housekeeping, external couriers, and laundry, rather than a sup­ply chain focus.
• Materials management controls stores/inventory, which may have insignificant value to outside auditors.
• Eighty percent of regularly used items within the organization are non-stock inventory, unofficial inventory, and/or uncontrolled in­ventory. (Unofficial medical/surgical inventory in acute care areas is 3 to 5 times larger than official inventory.)
• Little or no receiving inspection protocol for typical medical/surgi­cal supplies.
• Disparate information tracking systems that require rekeying data entry in order through to vendor payment.
Change the System?
Management must be willing and able to change the company culture to support a total integration of organizational resources. Executive sponsorship is the key for installing structure for common performance measurement and problem definition from the top down. Without chang­ing root causes, the old informal system will drive good people to do suboptimal work. It is important to change the process before trying to implement major system improvement, or else you wind up with project teams in constant conflict. Project team members will have different ideas, expectations, and measurements brought in from the unaligned organization.

To Be Continued


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