Case Study - Just in time in Arnold Palmer Hospital
Could lean production and just-in-time inventory philosophies be applied in a service environment such as a hospital? Are there opportunities for waste and variation reduction there? And what production processes with such a system affect? Let's take a look at how it all works using the Arnold Palmer Hospital in Orlando, Florida as our example.
Here, the pharmacy relies on the pull of patient drug orders to dispense medications on each floor. A machine at every nursing station called Pyxis is stocked with medications needed for each patient. When drugs are taken, the machine tracks what was removed and posts the charge to the patient's bill. The stations are then refilled each evening based on patient demand and prescriptions written by doctors.
Another pull solution can be found in the surgical department of the hospital. The hospital performs dozens of surgeries daily. Consider each surgery as a customer order requiring specific materials so the surgery can take place. One of the required items is a custom surgical pack consisting of all the key sterile dressings gowns and linens that will be used during the patient's surgery.
The hospital requires a different custom pack for each of the 45 different types of surgical procedures it performs, so the components in the pack and the order in which they're packed are critical to successful and timely completion of the surgery. A missing component means a critical delay - with someone phoning from the operating room for a replacement item and valuable time is spent waiting.
If the packs are not assembled in the correct order, time is wasted reorganizing them so they can be positioned before the surgical procedure begins. With extremely limited storage near its operating rooms, the hospital recognized the opportunity to implement a just-in-time pull system for its custom surgical packs if the supplier could prepackaged the specific items needed in the sterile packs and deliver them daily for the procedures scheduled.
The hospital could realize significant benefits both in storage and money. In fact, the hospital central supply function has realized a drop in average daily inventory from US$400,000 to US$114,000 since implementing JIT techniques.
Anne Bradner, Administrator for Surgical Services and Women's Services, said "In any of our setting, we usually try and make sure that the space that we have allocated is for an hour suite where we actually do the surgical procedure. When we look at the amount of space that we have to put our supplies. It's typically very small, very limited."
APH keeps necessary PRN packs on the shelves for patients who come in as emergencies (such as fractured hips) as these cases are not on an elective surgical schedule. Other Just-in-time (JIT) packs are ordered by looking at the next day's surgical schedule, ordering just those needed items.
George DeLong, VP Support Services said that the JIT system was created because APH wanted to reduce inventories, keeping the levels low. Similar to the automotive manufacturing industry, parts arrive exactly as they needed them. Through JIT, significant inventory carrying costs are saved and the hospital enjoys the ability to adjust the contents of those packs rather rapidly.
The design of the packs starts with the physicians group called the Medical Economics Outcome Committee which chooses each and every item with a preferred supplier of that item. The hospital's purchasing organization then procures contracts for the items in the pack along with assembly in the correct order. An outside first-tier supplier for the hospital buys the custom packs on behalf of the hospital from an independent packing company and stores them in its distribution warehouse.
The packing company has the responsibility to obtain the required pack items from Arnold Palmer Hospital's approved vendors such as paper goods providers. Each day the hospital prepares a count of each type of surgical procedure and the type of pack needed for each one. The totals by pack are electronically sent to the hospital's Central Supply Department each afternoon and then conveyed electronically to the distributors' local clinical supply warehouse.
At the warehouse, the pack orders are pulled and placed into totes then trucked by 4:00 a.m. to the hospital and sorted for delivery by central supply staff to the surgical suites just in time for use. With this integrated system, pack safety stock inventory has been cut to 1 day.
"If we didn't have the custom pack service in place, we would probably have to resort to having our hallways filled with these boxes of JIT packs. We have real literally no extra space to provide storage for anything of this nature. They are bulky, they are big and I would hate to use an operating room suite for storage but that might be what it we'd have to do if we did not have this luxury," Bradner.
Note: You are advised to watch the video that accompanies this case before answering the questions.
YouTube Video: Capi´tulo 16 JIT at Arnold Palmer Hospital