Working with You for a Better Supply Chain
As part of the Massachusetts Institute of Technology’s Leaders for Global Operations (LGO) program and Boston Scientific’s Supply Chain Optimization Services, M.B.A. recipient Suman Machinani, M.D. led a supply chain process-improvement pilot program at a hospital endoscopy department — revealing opportunities that can be reproduced at other Boston Scientific customers’ facilities.
With patient lives at stake every day, healthcare as an industry must exercise caution when implementing new ideas that other industries would readily adopt with a spirit of innovation. This restraint, though, can be turned into an advantage as healthcare – following in the footsteps of other industries – can observe best practices while avoiding pitfalls that early adopters experience.
In other industries such as consumer packaged goods (CPG) , suppliers and customers collaborate to reduce excess cost. Suppliers and customers can work together in a number of other ways to better utilize storage space, inform staff about what inventory is on hand and how reordering processes work, and prevent stock-outs while reducing expired or open-and-unused inventory.
For the endoscopy department at one of Boston Scientific's large Northeast U.S. hospital customers, Massachusetts Institute of Technology student Suman Machinani, M.D. – who has since earned his M.B.A. and a Master of Science in Engineering Systems – embarked on a thesis project to improve inventory and care workflow based on best practices of the CPG industry while working as an MIT LGO Fellow for Boston Scientific's Supply Chain team. He chose that sector because it, in many ways, resembles the typical hospital's relationship with its consumables suppliers. His theory: Practices that have proven to optimize inventory, improve service levels, and bring down costs in CPG will translate to healthcare.
Such process improvement takes both human interaction as well as automated data systems into account. "Either one, in and of itself, is necessary but not sufficient," said Machinani, who started his career as a physician and got into management because he wanted to improve healthcare as a whole, in addition to treating individual patients. "When those two entities are communicating and aligning with each other, that’s where you can create more synergies and more harmony."
Diagnosing Inventory’s Ills
The hospital endoscopy department wanted to solve several problems: Running out of some items, overstocking others, and letting even more go unused. Arbitrary storage, varying levels of staff awareness of what inventory was stored where, and nonstandard ordering procedures all contributed to these problems.
A three-and-a-half month survey using a new barcode-reading system, across four different endoscopy suppliers, revealed that the hospital possessed about $145,000 worth of unused inventory and an additional $29,000 worth of expired supplies. “The data we collected were like patient vital signs – and they weren’t great,” Machinani said. “With that, we could come up with a therapeutic plan. And that is collaboration that may work – now it needs to be validated and tested.”
With Machinani’s detailed analysis and recommended collaboration between hospital staff and Boston Scientific, the endoscopy department began to reconfigure storage and standardize its processes for ordering and Boston Scientific inventory handling, as well as training employees on the new procedures.
A portion of the cure to this hospital's issues involved purely internal housecleaning, such as ensuring that staff unpack supplies soon after they are received to prevent accidental reorders because clinicians were unaware they had arrived. This wasn't just about handling physical material. It was about taking a physical action that created information in a timelier, more accurate fashion.
Yet it was more than just an internal project; other process improvements involved working with Boston Scientific to optimize the supply chain. Upon the request of the hospital, Boston Scientific representatives:
- Helped educate physicians and nurses on strategies to reduce situations in which product was opened but unused;
- Shared with clinical staff effective inventory-management practices observed across the industry;
- Worked together with hospital staff to understand when patient volumes were greater to design standardized reordering processes to accommodate increased traffic; and
- Established a system with the hospital to communicate lead times for the acquisition of high-volume and high-value items, as well as alerts for changes in supplier inventory levels on critical supplies.
To keep improvements happening, the hospital needs to continue to gather data and provide feedback to Boston Scientific. While the benchmarking process is still underway and the returns haven't yet been quantified, Machinani and his collaborators feel improvements will come with this process-improvement exercise. In the future, the hospital and its vendors will conduct periodic check-ins to review results and adjust supply flows as needed.
Boston Scientific’s Approach to Services
Collaboration with Boston Scientific begins with sharing information. Learning a hospital's pain points in daily operations helps Boston Scientific, along with the staff, diagnose and solve problems that lead to cost variances, such as expired inventory or frequent daily orders, some of them redundant.
Machinani says that many healthcare providers struggle with the same space limitations that the endoscopy department example in his thesis experienced. While inventory volume might vary from one provider to another, he added, inventory management is a universal process all healthcare providers must perform – and most likely, there's room for improvement. The busier the hospital, the more critical inventory management becomes and the more likely costs will snowball when they're not managed well.
As a company, Boston Scientific is committed to helping customers achieve process improvements with such customized collaborations, said Bryan Gilpin, director of Global Solutions Delivery at Boston Scientific. "While some organizations have already undertaken complex – and successful – supply-chain improvement projects, many more are just starting to assess their own opportunities for reducing costs and improving patient care through workflow optimization."
"We learned a lot about how our customers operate, what's important to them, and their expectations of a supplier like Boston Scientific," Gilpin said. "We're operationally focused as well, but we got that way by focusing on what's going on inside Boston Scientific's operations. Suman's work helped us focus outside of Boston Scientific and understand how what we do influences our customers – and vice versa."
For more information on customized collaborations to improve your supply chain processes, contact email@example.com or visitwww.bostonscientific.com/gastroservices. Dr. Machinani can be contacted at firstname.lastname@example.org.
Synchronizing materials management for better patient care
By Steven Spear
Healthcare has to coordinate increasingly complex supply networks to bring the best possible care to the bedside, office or home. It needs to cover most people, at the fairest cost. Static planning and scheduling, no matter how precise, will never be robust. Establishment of a better dynamic—timely informational triggers lead to timely behavioral responses—can be the differentiator. Suman Machinani, M.D.'s research is a particular example of what can prove to be a general approach of great utility.
On the supply-chain side, there are opportunities for improvement. Ideally, clinicians should have exactly the materials they need, when and where they need them, presented in exactly the right way. Were this true all the time, quality of care would be the best possible, and staff would have maximum ease and convenience in performing their mission to improve patient care.
When this ideal of flawless material synchronization is not met and items are lacking, then there is risk of compromising patient and staff experience, and potentially outcomes. The natural reaction, overstocking on materials, is sub-optimal: it raises carrying costs, causes inconvenience by requiring storage and tracking of inventory, and creates the real possibility that the materials on hand will not be the ones needed. Even if they are, they'll likely not be the most current. Returns against overstock are costly to customers and vendors.
Machinani's work focused on bringing greater synchronization between those at the point of care and those providing the materials. To do so, he drew on examples in other business sectors that place a high premium on synchronization and by drawing on fundamental theory as to what makes dynamic systems both resilient and also agile.
The lesson is that synchronization depends on effective two-way flow of information: headed upstream from users in terms of what has been consumed and what is needed, and downstream to users in terms of what is coming and when. The particular impact of the hospital’s relationship with Boston Scientific is win-win for all. This approach of better managing information to keep elements of a larger system in harmony is not constrained to a hospital restocking consumable materials in a particular service line, but has much broader application.
Steven Spear, DBA MS is senior lecturer at the MIT Sloan School of Management and was a thesis advisor to Dr. Machinani. His book, The High Velocity Edge: How Market Leaders Leverage Operational Excellence to Beat the Competition (McGraw Hill, 2010), has won numerous awards. He is a nationally regarded expert on Lean and is a frequent interviewee in print and broadcast media.