Lean and TPS in Healthcare: pros and cons.

Theme of the fourth week of our Supply Chain Management course is the concept of lean manufacturing, or simply Lean, and its best representation in the Toyota Production System (TPS).

Lean is, as Wikipedia defines it, “a production practice that considers the expenditure of resources for any goal other than the creation of value (action or process that a customer would be willing to pay for) for the end customer to be wasteful, and thus a target for elimination.” [1] In line with this definition are the words of Taiichi Ohno, the father of TPS: “All we are doing is looking at the timeline from the moment the customer gives us an order to the point when we collect the cash. And we are reducing that time by removing the non-value-added wastes.” [2]

This new approach has been mainly developed for manufacturing industries; nowadays, companies in different areas are trying to adopt it in order to expand their production effectively and efficiently. Healthcare is one of the sectors where the introduction of the concepts of lean production and TPS has given good results (in terms of eliminating waste, keeping inventory low, increasing efficiency, valuing people, and non-stop improving).

Eliminating non-value-added actions, such as patients’ waiting time in the ER or in a clinic, is one of the issues that could be tackled with  Lean. This problem can be analyzed both from the perspective of the patient, who is forced to wait in order to be examined, and the perspective of the doctor/physician, who knows that s/he did not add “value” to the patients – in fact, s/he caused an annoyance. Improvements in this case are not typically conducted by the hospital/clinic management, but directly by staff members, people who work “in the field” and are familiar with  the causes of such delays. The application of lean principles to staff training can reduce patients’ waiting time, both at registration and in the surgery department. For instance, Lean would suggest the elimination of excessive documents and forms to fill in, it would reduce the time needed to search for supplies, or to redirect patients to the appropriate office to schedule a new appointment. [3]

Lean and the Just-In-Time (JIT) strategy (basically consisting in avoiding over-stocking) have also inspired improvements for managing the inventory and the related operating expenses. Specifically, the utilization of technologies, such as scanner and bar code, has allowed inventory managers to be immediately informed about a scarcity of supplies, such as gloves, bandages, syringes, and it has facilitated a efficient management of medicines, avoiding that they could expire. [4]

Emphasizing the importance of people, making them aware that they are an integral part of the process, giving them the opportunity to analyze a problem and suggest a solution are fundamental aspects of the TPS. In the Virginia Mason Medical Center, for example, doctors and nurses realized that they needed to avoid the risk of catheters’ wrong installation or incorrect positioning, which would imply a double operation on the patient. Therefore, they suggested decreasing the available variety of catheters, because they had different installation processes. [5]

Does the adoption of Lean in healthcare have only positive aspects, as it seems to be the case in manufacturing? Probably not.

Some sociological aspects of Lean thinking are possibly under-valued in healthcare. Specifically, a lean process that promotes standardized work, which surely increases efficiency, may not fit perfectly an environment such as a hospital or a clinic, where very different patients come in and where the human interaction between doctor/nurse and patient is as crucial as a timely, accurate medical treatment. Since the business of healthcare providers is human health and well-being, shouldn’t human interaction be emphasized, even if it is at the expense of economic efficiency? Do all healthcare providers make sure that this important part of the service is indeed considered as a value-added action? [6]

References

1. http://en.wikipedia.org/wiki/Lean_manufacturing
2. Decoding the DNA of the Toyota Production System (Spear and Bowen Harvard Business Review, January 2006)
3. http://www.beckershospitalreview.com/news-analysis/5-key-principles-for-hospitals-from-toyotas-lean-production-system.html
4. http://medicaleconomics.modernmedicine.com/medical-economics/news/how-manufacturing-process-transformed-healthcare-delivery
5. http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2793611/
6. http://www.lancaster.ac.uk/pg/dehghans/pdf/dissertation.pdf

Related Article: "The Role of Analytics in the Race for the Supply Chain of the Future"

Week six's articles focused on the role of technology and information in supply chains, with most articles being dated by a few years. Recently, Data Informed published, "The Role of Analytics in the Race for the Supply Chain of the Future", which talks about how behind some companies still are in the fields of technology and information. It also presents information about what happened when they asked over a hundred supply chain leaders to describe the future of supply chains during the Supply Chain Insights Global Summit, which was held this past September. These insights are unique because they pair technological advancements with innovation, creating smarter and faster solutions.

The author, Lora Cecere, starts the article by stating that two main problems continue to persist: 1) the effective use of data and 2) the understanding of supply chains as a complex system. Cecere states that it is extremely common for companies to still use Excel spreadsheets as their most advanced methodology in their supply chain networks. Additionally, she states that only 11% of companies have the capabilities to evaluate a "what if" analysis and only 24% of companies are able to model profitability impacts on changing conditions in their complex systems.

At the Supply Chain Insights Global Summit, supply chain managers discussed what their futures looked like. Logitech had been facing complex issues with their Ultimate Ear product, which is custom built based on a customer's ear canal images. With the advent of 3-D printing, devices can now be made locally, creating a shorter lead time and a lower cost. Another idea that was discussed was the process of fitting knee implants to customers. Currently, the implants are given to a salesperson in multiple sizes. The salesperson shows up at the hospital to do a fitting, and then orders the correct sizes and has them shipped before the surgery. However, supply chain leaders believe that analytics can change all this by redesigning the supply chain. The supply chain could include digital images of the patient's bone structure being sent to a local lab where the replacements are built. Cecere believed that after these innovative supply chains are built, they could be paired with data mining techniques to lessen supplier's risks.

In her article, Cecere never fully answers the issue of so many companies being behind in their use of analytics and technology, which makes me wonder, what will it take for these companies to perform at a higher technological and statistical level? Is it cheaper access to technology and supply chain software, as we can assume that many business are just too small to invest in such things? And if it is cheaper software and technology, what is being sacrificed for the price?

Source: http://data-informed.com/role-analytics-race-supply-chain-future/

he understanding of the supply chain as a complex system and the effective use of data. - See more at: http://data-informed.com/role-analytics-race-supply-chain-future/#sthash.R1uSDfh2.dpuf

Supply Chain Insights Global Summit in September

Supply Chain Insights Global Summit in September

Supply Chain Insights Global Summit in September

The Role of Analytics in the Race for the Supply Chain of the Future

- See more at: http://data-informed.com/role-analytics-race-supply-chain-future/#sthash.R1uSDfh2.dpuf

The Role of Analytics in the Race for the Supply Chain of the Future

- See more at: http://data-informed.com/role-analytics-race-supply-chain-future/#sthash.R1uSDfh2.dpuf

Supply Chain Segmentation

When studying the incredible success of the Toyota Production System and Dell’s fantastically tight supply chain it is easy to lose sight of the fact that we are looking at very highly evolved operations that have grown organically and dynamically. Dell himself is quoted as saying that in high tech, you either grow or you die. [1]

What are the considerations when instead we wish to optimize an environment where growth is slow or near zero, as might be the case in a stable and well managed hospital or health system? I started initially with questions about how supply chains scale and was led fairly rapidly to studies of supply chain segmentation.

Rather than looking at evolution of an entire supply chain, as one might see in a manufacturing operation with explosive growth, studies of supply chain segmentation turn their attention to where an operation would be well served to break up its supply chain for various groups of items on the basis of certain item properties such as price or size.

In his paper Differentiating the Hospital Supply Chain For Enhanced Performance [2] from the Engineering Systems Division at MIT, DeScioli submits that hospitals need to have more than one supply chain and performs simulations that support his thesis. On the basis of his results, he proposes that hospital supply chains be segmented on the following bases:

• Unit Price: Expensive inventory items requiring tight control should be kept in locked cabinets accessible only by authorized login, whereas items not requiring should be kept on open shelf systems to minimize staff overhead in retrieval of the item in question. 
• Unit Size: Large items have a larger carrying cost than smaller items of similar cost simply because they occupy more physical plant. As a result, large items require near continuous review of need for inventory on hand whereas such review is less critical for smaller items with correspondingly lower carrying costs on the ward.
• Unit Criticality: The cost of stock-outs for critical items should be evaluated in order to plan appropriately for inventory needed. DeScioli proposes a three-tiered system of measurement of criticality and corresponding storage, e.g. open storage for non-critical items and password-controlled locked storage for highly critical items.

In a later paper from the same department, Cheng and Whittemore [3] take best practices gleaned from studies of supply chain segmentation in other industries and apply them to the hospital setting. They propose a “Next Generation Hospital Supply Chain” where inventory items move directly from a staging warehouse to the bedside of a specific patient on the basis of that patient’s diagnosis and clinical status. These “personalized kits” reduce overhead minimizing space for inventory on the ward and by reducing time required by clinical staff to retrieve needed items.

Question:

What is the break-point where it makes sense to consider supply chain segmentation for any given entity? For small entities, formal implementation of segmentation policy simply adds confusion and overhead. For large entities there are enormous benefits to carefully considered segmentation. How does an entity know that it is time to begin to implement segmentation policy?

References: 

[1] Breen, B., (November 1 2004). “Living in Dell Time.” Fast Company http://www.fastcompany.com/51967/living-dell-time accessed 17 September, 2012.

[2] DeScioli, D.T. (2005). Differentiating the Hospital Supply Chain For Enhanced Performance. (Masters Thesis). Retrieved from http://dspace.mit.edu/handle/1721.1/33317

[3] Cheng, S.H.; Whittemore, G.J. An engineering approach to improving hospital supply chains. (Masters Thesis). Retrieved from http://dspace.mit.edu/handle/1721.1/44928

Survey Article: Supply Chains in Health Care

In my search for resources to help me begin to gain an appreciation of how order and inventory management are addressed in health care (particularly on the level of large systems) I stumbled on a working paper by Manuel D.Rossetti, Ph.D., P.E., Professor of Industrial Engineering at The University of Arkansas. Inventory Management Issues in Health Care Supply Chains [1] is a concise and approachable article that describes the current state of the health care value chain, problems with the current model (where opportunities for streamlining to the benefit of the health system might exist) and ways in which these problems might be mitigated.

Rossetti looks briefly at the two ends of the spectrum, e.g. Mercy Health System in St. Louis, comprised of 31 hospitals across 4 states [2] which manages its warehousing and in-system shipping entirely in-house thereby cutting overhead from distributors, and the Nebraska Medical Center, a single hospital which outsources its inventory management entirely to Cardinal Health, a very large ($103 billion) healthcare supply chain company. [3] He then goes on to survey the literature from the past decade or so, and finally suggests topics for future investigation.

This paper is a nice survey of current thinking in the field of health care supply chain management and is an excellent introduction for anyone wondering what kind of infrastructure is behind their physician or nurse’s ability to reach into a cabinet for a needed item at any given time.

As an aside, it is worth taking a look at the 2011 Healthcare Supply Chain Top 25, wherein Gartner “strives to identify organizations that use their supply chains to improve the patient care experience.”[4]

Question:

Hospitals need to stock consumable items across a broad cost-range, e.g. alcohol prep pads costing pennies or less per unit to teeny-tiny drug-eluting stents for your plugged coronary arteries costing more than $1000 each. How do they optimize ordering and inventory so that the overhead for items across the cost range is optimized? Remember that a “stock-out” condition for a stent could be devastating or lethal for a patient who presents acutely with a heart attack. Delivery the next morning before 8 a.m. won’t cut it.

References:

[1] Rossetti, M.D., (June 5 2008). Inventory Management Issues in Health Care Supply Chains http://www.uark.edu/~rossetti/reports/healthcare_supply_chain_rep.pdf accessed 10 September, 2012.

[2] Mercy Health System website, http://www.mercy.net/newsroom-mercy-quick-facts accessed 10 September 2012.

[3] Cardinal Health website http://ir.cardinalhealth.com/ accessed 10 September 2012.

[4] Blake, B., O’Daffer, E., et al. 9 (30 November 2011). The Healthcare Supply Chain Top 25 for 2011 http://www.gartner.com/resources/227200/227253/the_healthcare_supply_chain__227253.pdf accessed 10 September 2011