JIT at Arnold Palmer Hospital Orlando’s Arnold Palmer Hospital, founded in 1989,
ID: 330006 • Letter: J
Question
JIT at Arnold Palmer Hospital
Orlando’s Arnold Palmer Hospital, founded in 1989, specializes in treatment of women and children and is renowned for its high- quality rankings (top 10% of 2000 benchmarked hospitals), its labor and delivery volume (more than 14,000 births per year), and its neonatal intensive care unit (one of the highest survival rates in the nation). But quality medical practices and high patient sat- isfaction require costly inventory—some $30 million per year and thousands of SKUs.* With pressure on medical care to manage and reduce costs, Arnold Palmer Hospital has turned toward con- trolling its inventory with just-in-time (JIT) techniques.
Within the hospital, for example, drugs are now distributed at the nursing stations via dispensing machines (almost like vending machines) that electronically track patient usage and post the related charge to each patient. Each night, based on patient demand and prescriptions written by doctors, the dispensing stations are refilled.
To address JIT issues externally, Arnold Palmer Hospital turned to a major distribution partner, McKesson General Medical, which as a first-tier supplier provides the hospital with about one-quarter of all its medical/surgical inventory. McKesson supplies sponges, basins, towels, Mayo stand covers, syringes, and hundreds of other medical/surgical items. To ensure coordinated daily delivery of inventory purchased from McKesson, an account executive has been assigned to the hospital on a full-time basis, as well as two other individuals who address customer service and product issues. The result has been a drop in Central Supply average daily inventory from $400,000 to $114,000 since JIT.
JIT success has also been achieved in the area of custom surgical packs. Custom surgical packs are the sterile coverings, dispos- able plastic trays, gauze, and the like, specialized to each type of surgical procedure. Arnold Palmer Hospital uses 10 different cus- tom packs for various surgical procedures. “Over 50,000 packs are used each year, for a total cost of about $1.5 million,” says George DeLong, head of Supply-Chain Management.
The packs are not only delivered in a JIT manner, but packed that way as well. That is, they are packed in the reverse order they are used so each item comes out of the pack in the sequence it is
*SKU 5 stock keeping unit needed. The packs are bulky, are expensive, and must remain sterile. Reducing the inventory and handling while maintaining an ensured sterile supply for scheduled surgeries presents a challenge to hospitals.
Here is how the supply chain works: Custom packs are assem- bled by a packing company with components supplied primar- ily from manufacturers selected by the hospital, and delivered by McKesson from its local warehouse. Arnold Palmer Hospital works with its own surgical staff (through the Medical Economics Outcome Committee) to identify and standardize the custom packs to reduce the number of custom pack SKUs. With this inte- grated system, pack safety stock inventory has been cut to one day.
The procedure to drive the custom surgical pack JIT system begins with a “pull” from the doctors’ daily surgical schedule. Then, Arnold Palmer Hospital initiates an electronic order to McKesson between 1:00 and 2:00 p.m. daily. At 4:00 a.m. the next day, McKesson delivers the packs. Hospital personnel arrive at 7:00 a.m. and stock the shelves for scheduled surgeries. McKesson then reor- ders from the packing company, which in turn “pulls” necessary inventory for the quantity of packs needed from the manufacturers.
Arnold Palmer Hospital’s JIT system reduces inventory investment, expensive traditional ordering, and bulky storage and supports quality with a sterile delivery.
Discussion Questions** (pls provide different answers from the textbook solutions and from online).
1. When discussing JIT in services, the text notes that suppliers, layout, inventory, and scheduling are all used. Provide an example of each of these at Arnold Palmer Hospital.
Explanation / Answer
Just in Time inventory method is advantageous because it greatly reduces amount of capital blocked in inventory, inventory storage costs, wastages due to inventories becoming out-dated or obsolete. In case of hospitals another advantage gets added in the form of quality for usables which need to be sterile. Storage and excess handling impacts the sterility of these products. Hence, Arnold Palmer Hospital made an excellent management decision when it introduced the Just in time inventory system. The success of this system depends mostly on highly accurate demand forecasting, especially in a hospital this can even be more important as quality of service is a very sensitive isuue.
Arnold Palmer Hospital turned to a major distributor and appointed McKesson General Medical as a first tier supplier to provide supplies on a daily basis. The supplier to ensure absolute co-ordination has deputed a personnel each for accounts, customer service and product complaints.
Arnold Palmer Hospital has used layout techniques by placing dispensing machines at nurses stations. The other use of layout is in the packaging used for custom surgical packs, where each item is arranged in the pack in the reverse order of usage so it is available in the exact order of usage required during surgery.
Inventory and forecast of demand are important so Arnold Palmer Hospital has designed excellent feedback and reporting systems as safety stock inventory for few items maybe as low as one day. In the dispensing machines refilling takes place on the basis of doctors prescriptions and patient usages. It is an automated system. Externally the JIT system works by placing the order for the next days demand a day before. All the requirements for scheduled surgeries and other procedures are drawn out from doctors schedules and informed to the supplier by noon to be supplied the next day.
Scheduling is very important and needs absolute co-ordination and controls to exist on both the suppliers as well as the Arnold Palmer Hospital's side. This has been stream-lined by following a strict procedure and schedule with no room for errors. This is the exact scheduling for a sample item custom surgical packs as mentioned in the above text. After arriving at the demand figures on basis of doctors schedule Arnold Palmer Hospital initiates an electronic order to McKesson between 1:00 and 2:00 p.m. daily. At 4:00 a.m. the next day, McKesson delivers the packs. Hospital personnel arrive at 7:00 a.m. and stock the shelves for scheduled surgeries. McKesson then re-orders from the packing company, which in turn “pulls” necessary inventory for the quantity of packs needed from the manufacturers.
The entire process is well-planned and implemented with no scope for loopholes whatsoever. At the same time quality assurance is high due to minimal handling and storage of the surgical packs. The constant monitoring and control of the entire process by the supplier also provides a double check to ensure no lapses can cause major crisis situations. It is an example of perfect use and implementation of the JIT system with control of its disadvantages through careful planning and accurate demand forecast, as also an extra responsive supply chain.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.