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.
THE TOTAL BUSINESS
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
- 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
• 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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