Written by Administrator Monday, 23 August 2010 21:12

Imagine this: You walk into a local bank to open an account. As you're speaking to a bank representative, you notice that there are no tellers. Instead, customers seem to be walking into the unguarded vault and helping themselves, either depositing or taking the cash. The bank rep explains: "We can't really afford to hire people to just keep track of the cash, so we operate with the honor system. When you take some cash or drop some off, you are supposed to leave us a note. Once a month we'll do a count and reconcile the balances. Most people are pretty good at following the system, but we always have some variances to write up or down. But paying tellers to just keep track of the cash is a waste we just can't afford." By this time you're running for the door.

As ridiculous as this seems, this is exactly the way that many (most) hospital OR's handle their supplies and materials. Much of the material in the OR falls under the inventory classification of A items, items with a high dollar value. Examples of A items include implants, stents, and grafts. The dollar value of this material in the OR can easily total several million dollars or more, and represent 70% of your total inventory investment.

How do we keep track of all of these dollars, in the form of supplies? Very few OR departments actually maintain a perpetual inventory system, that keeps track of material like a bank keeps track of cash. In other words, at any given point in time the OR doesn't really know what is in stock without physically looking. Complete physical inventories are done periodically, sometimes as infrequently as every six months, and there are significant accounting write-ups or write-downs whenever this is done. Needless to say, this is a source of heartburn for the hospital financial department as well.

So why is this apparently common state of affairs, something that would be unacceptable in a bank or even a manufacturing company, allowed to continue in hospitals? Here are some of the reasons we hear:

   1. Our focus is on the patient. We can't expect nurses and doctors to become "bean-counters". They're too busy.
   2. Supplies and materials are often needed urgently. We can't slow down to fill out paperwork or transact what we need, because it's too time consuming.
   3. We can't afford to hire any new FTEs to track materials, because that's just another overhead expense, and we need to control costs.
   4. That's not the way things are done in a hospital.

Before we offer some suggestions for improvement, let's take a look at the hard costs related to lax inventory management. In that way we can make a more informed decision about what we can afford, or what level of attention to supplies might be needed. Here are some of the symptoms:

   1. Shortages. If we don't know with precision what we have, then an inevitable results will be a higher level of shortages. The results can be serious for our patients, and also drive high expediting and overnight freight costs.
   2. Inaccuracies in billing. Not everything gets billed out correctly if we don't have tight reins on inventory management.
   3. Excessive supplies handling. The "par level" method used to assess inventory needs is horribly inefficient. It should be replaced with the system used by most world-class organizations, kanban. See my ezinearticle on Par and Kanban.
   4. Inaccurate financial statements. The accounting rules tell us that if we don't really know what we have, we also don't really know what our costs are for any given financial reporting period.
   5. Excess inventory. If inventory records are not accurate, we tend to compensate by overstocking. In a recent improvement project, we removed over $500,000 in excess inventory from an OR, without breathing hard.

What should you do about managing A items? There are several possibilities, ranging from the very manual to the high tech. The simplest suggestion is to do what most high performing organizations do: have a quick-response stockroom in the OR, with individuals assigned to inventory control, inventory transactions and patient service for materials. Set a goal of being able to put your hands on any item within 10 seconds, and set up the storage area to be able to accomplish this. Plan to staff the area for hours that match the schedule of OR need.

An intermediate-level solution would involve the use of bar-codes to speed up transactions and reduce errors. Nurses and techs can be trained to use the bar-code system, and reduce the workload on the materials staff. Barcoding is not a new technology, and virtually every inventory system supports it.

On the high-tech side, install RFID-based cabinets. An RFID cabinet is a locked storage container that is able to track what is inside via a Radio Frequency Identification tag attached to each high-dollar item. In order to unlock the cabinet an employee badge and a patient case number are needed. The RFID cabinet has the advantage of being able to capture billing information in addition to inventory information, and greatly reducing human error.

Regardless of the path you choose to follow, it is important to make a commitment to a high level of inventory control for A items in the OR. This effort will pay for itself many times over.

Written by Administrator Wednesday, 17 March 2010 16:36

David K. Coombs
Leonardo Group Americas, LLC

It has long been a puzzle why so many Lean and Six Sigma implementations, launched with enthusiasm, fanfare, and abundant resources, fall short of expectations or, even worse, simply fail.  Satya S. Chakravorty, professor of operations management at Kennesaw State University and a seasoned Six Sigma/Lean practitioner, addresses this question in a recent Wall Street Journal article (January 25, 2010) :  “Where Process-Improvement Projects Go Wrong”.  

Chakravorty and his colleagues studied process improvement efforts in large companies over five years, and found that they tend to go through three stages:  first, a “stretching” phase, led by an expert or consultant, in which substantial gains are made and goals reached, with management offering support and encouragement;  second, a “yielding” period, in which management’s attention moves elsewhere and the enthusiasm wanes; and third, a “failing” stage, with the expert long gone and the training forgotten, in which the organization regresses to its old habits and performance levels.

In his article, Chakravorty refers both to “Lean” and to “Six Sigma”, but it appears that most of his focus and attention is on Six Sigma projects.  Speaking of one case study, he writes:  “With the departure of the Six Sigma expert, the teams at the aerospace company lost their objective voice and the person who performed the sophisticated statistical analysis that allowed them to prioritize the tasks that most affected performance.”  

Without opening a debate on the relative scope, content and merits of Lean vs. Six Sigma, we would offer a few observations.  The failed improvement programs all appeared to be heavily dependent on outside (Six Sigma) experts, who, of course, eventually left or moved on.  Unable to use the Six Sigma methodologies on their own, the teams bogged down and lost their sense of ownership for the project.  Worse, they came under pressure to keep up their normal production quotas – a clear signal of management’s divided priorities.  The programs added work (the statistical analysis) to the daily schedule, rather than emphasizing how to eliminate waste and improve work methods.  Finally, there was no mention of building the Kaizen or Continuous Improvement culture so crucial to a successful Lean transformation.
 
Chakravorty offers four lessons learned from his team’s research.  First, teams, especially in Six Sigma projects, need long-term support from the outside expert or consultant.  (We urge that training and certification of in-house resources take place much earlier on the time line.)  Second, performance appraisals and incentives must be tied to successful outcomes of the improvement projects.  Third, implementation teams should be relatively small – no more than six to nine members – and their timelines brisk and short.  And finally, executives must leave their observation posts and actually participate in the projects.

We at Leonardo Group Americas are often asked for our own top strategies for sustaining long-term Lean improvements.  Based on experience in hundreds of engagements, and coming more from a Lean rather than Six Sigma perspective, we emphasize the following five for optimizing the work, eliminating waste, building buy-in, and moving continuously towards perfection:

1)  Start with a bold vision for the enterprise – a vision articulated from the top and led forward by management’s example.

2)  Follow a reliable Lean Roadmap so that your implementation completes all the key work steps in the most effective sequence.

3)  Since Lean is all about creating Value as defined by the customer, focus your thinking and planning on the Value Streams – optimizing their flow, quality and responsiveness.

4)  Train your internal resources, and encourage your top managers to know Lean well enough to teach and implement it themselves.

5)  Sustain your Lean gains with robust Continuous Improvement and Kaizen activities, backed up by systematic reviews and audits.
     
Changing behaviors, habits and attitudes in the workplace is challenging at best.  But it can be done – the journey is exciting – and the long-term rewards are great for everyone involved.



 References:

“Where Process Improvement Projects Go Wrong”, Satya S. Chakravorty, The Wall Street Journal, January 25, 2010.
http://online.wsj.com/article/SB20001424052748703298004574457471313938130.html

“An Implementation Model for Lean Programmes”, Satya S. Chakravorty, European Journal of Industrial Engineering, Vol. 4, No. 2, 2010.
http://www.inderscience.com/search/index.php?action=record&rec_id=31079&prevQuery=&ps=10&m=or

How to Prevent Lean Implementation Failures:  10 Reasons Why Failures Occur, Larry Rubrich, WCM Associates, 2004.

 Leonardo Group Americas LLC is a member of the Lean Factory Group, along with Bosch Rexroth, Bosch Production Tools and Orgatex. Over the coming year, Lean training and simulation events will be conducted across the US. These road shows highlight the importance of a data-driven approach to lean implementation, the need to create an environment that supports lean with the right tools and equipment, and methods and tools for the creation of a visual factory. You can visit the Lean Factory Group website by clicking here.

Since 1999  Leonardo Group Americas has worked on lean projects within hospitals and the healthcare industry.  Maintaining a  knowledge of  the differences in the healthcare industry while remaining faithful to core lean principles has resulted in outstanding improvement to patient service and reductions in delivery costs. Click here to view our Lean Hospital Brochure.