Question

Please answer all 4 questions under the case study JIT at Arnold Palmer Hospital on page 656 in the Operations Management, 12th edition by Haizer, Jay, Render and Barry. I have pasted the case study and the questions here. please answer them. They are under Lean Operations. Thank you.

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

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**

1. What do you recommend be done when an error is found in a pack as it is opened for an operation?

2. How might the procedure for custom surgical packs described here be improved?

3. 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.

4. When a doctor proposes a new surgical procedure, how do you recommend the SKU for a new custom pack be entered into the hospital’s supply-chain system?

Answer 1

(1): When an error is found in a pack as it is opened for an operation then the immediate solution will be to get another pack. Arnold Palmer Hospital (APH) is using a just in time (JIT) system and there are spares available in the form of a one day buffer. One of the key advantages of JIT is that the error comes to the knowledge immediately i.e. within a day of delivery at the hospital. The next step will be to take the appropriate corrective action after tracking back through the system and determining the cause of the error.

(2): The procedure for custom surgical packs described here can be improved by the hospital reducing the number of pack in the buffer from the current level of one day to less than one day.

(3): Suppliers, layout, inventory and scheduling are all used. Examples of these at APH are provided below:

(a): Suppliers – The suppliers are on board with deliveries that are high in quality and are frequent in nature.

(b): Layout – Layout is modified in a manner so that it is near as well as adjacent to the work area.

(c): Inventory – Inventory at the hospital is at a minimum to ensure that no bad product is produced, shipped, and stored at APH.

(d): Scheduling – Scheduling at APH meets JIT demands and it ensures that items that are needed are available when it is needed.

(4): When a doctor proposes a new surgical procedure my recommendation is that the request for all new products should go to the Medical Economics Outcomes Committee. This will enable reduction of proliferation of SKUs and this is important as it is a continuing issue at APH.