CASE STUDIES IN CLINICAL PRACTICE MANAGEMENT
Reliable and Efficient Supply Chain Management in Radiology: Implementation of a Two-Bin Demand-Flow System Griffin T. Donnelly, Lerry T. Forester, MBA, Lane F. Donnelly, MD SITUATION Medical supplies typically account for approximately 20% to 40% of hospital costs, second in expense only to labor [1-3]. Typical hospital supply-chain systems are often costly, with large inventories and labor expense related to associates searching for needed items. Yet there is very little medical literature concerning the importance of a reliable and efficient supply chain, and we could find nothing in the literature regarding the supply chain in radiology [1-7]. We describe and evaluate the performance of a demand-flow supply-chain replenishment system implemented in a new children’s hospital, as it pertains to radiology. WHAT WAS DONE A two-bin kanban supply delivery system (Blue Bin, Seattle, Washington) was implemented throughout a newly built children’s hospital. This continuous process improvement initiative, modeled on the lean Toyota Production System, is designed to remove end users from the supply management business, allows clinical hours to be focused on patients, promotes efficient workflow, captures visibility of consumption and dollars spent, and optimizes supply availability. The system uses
the kanban approach, in which there are visual cues establishing the need for more product. In the system, there are peripheral supply nodes in the front-line areas of care, including in radiology. In those supply nodes, each particular supply item has two bins, in racks in parallel, with predetermined periodic automatic replenishment (PAR) levels and barcoded labels. Supply users remove needed supplies from the front bin. When associates have consumed all the product from the front bin, they place the empty bin on the top shelf, signaling the need for refill. The second rear bin is then pulled forward for continued use. The empty bin placed on the top shelf serves as a kanban or signal to the supply-chain runners that a particular supply needs to be reordered. The supplychain runners visit each front-line supply node on a daily basis. The empty bins are collected, brought to materials management, and scanned, and supplies are ordered. Deliveries from the supplier are received daily to replenish empty bins. When the supplies arrive from the suppliers during daily deliveries, the bins are refilled. The refilled bins are then delivered back to the nodes and placed behind the remaining bins, ensuring first-in, first-out use.
ª 2015 American College of Radiology 1546-1440/15/$36.00 n http://dx.doi.org/10.1016/j.jacr.2015.09.006
Contracts with suppliers have been set up so needed supplies are broken down and issued by the lowest unit of measure (eaches), eliminating the need to stock and store excess supplies in bulk although increasing the number of product stock-keeping units. There is a relatively small supply staging area in materials management where the daily ordered supplies are received and the empty bins refilled. The PAR level is defined as the minimum quantity of a supply needed to maintain operations until the next delivery. In this system, the PAR level for a particular bin is determined to be the minimum amount necessary to supply operations until the first used bin can be replenished. The supply-chain software program uses barcoding technology. When an empty bin is scanned, this automatically triggers ordering of that particular supply in the predetermined PAR amount. Depending on any fluctuation in demand, the PAR level can be adjusted accordingly. In addition, the incorporated analytics enable the creation of a dashboard that depicts the performance of the supply-chain system. This can be viewed at the hospital level, at the particular supply-chain node level, or as data about a particular supply item.
1
A dashboard is used to capture metrics to evaluate the movement and performance of supplies, to include the number of stock outs and the fill rate. These serve as key performance indicators regarding the efficiency of the system. A stock out is defined as an event in which both bins become empty, and that particular supply is unavailable to front-line users in that particular area. System reliability was measured by the fill rate (100% minus the stock-out rate). In addition, supply bins are classified on the basis of use: “hot” when the rate of use of the particular supply is challenging the current determined PAR level and “stale” when an item is rarely used and the PAR level is perhaps too large for the need. PAR levels can then be adjusted on the basis of this analysis on an ongoing basis. Two supply rooms (nodes) were established for radiology: one in the main diagnostic imaging department and one in interventional radiology (IR), which is in the perioperative area on a separate floor from the main portion of radiology. The general acceptance of the system by radiology physicians and associates, the number of supplies per node, and fill rates will be discussed.
OUTCOMES AND DISCUSSION The roll-out of the demand supplychain system at hospital opening and the first two years of operation have been well accepted by associates and physicians in radiology. For radiology, 696 total unique supply types are managed by the system (261 in diagnostic imaging, 435 in IR). The fill rate is 98.08% for the imaging node and 98.7% for IR. The two-bin kanban system with the empty first bin as the signal that 2
more supply is needed is such a simple concept it seems that it could not be revolutionary. However, in medicine, such a concept is revolutionary. It is estimated that at most hospitals and medical centers, supplies account for 20% to 40% of expenses [1-3]. This is second only to labor costs [1-3]. With the on-demand two-bin system, supplies are ordered to be delivered to the hospital on a daily basis. There is no large central supply room full of a large amount of supplies. The lack of this large central inventory will reduce its inventory-carrying cost and can save hospitals large amounts of money. One hospital that implemented a similar on-demand supply system realized savings of more than $1 million a year in wasted and excessive supplies [1]. In addition, the amount of space needed for a staging area to refill the bins is typically half the space needed for a large central supply storage area, also leading to savings [1]. Another costly consequence of traditional and often unreliable hospital supply-chain systems is waste related both to wasted time that clinical staff members spend searching for supplies and to the cost related to employees hoarding or stashing supplies for fear of not having access to them when needed. One system estimated that 28,000 hours of clinical staff time were saved by switching to a demand two-bin system [1]. Another hospital system realized estimated savings of 14,000 clinical hours and 7,000 supportservice hours per year related to a lean supply-chain system being implemented [3]. Our experience has been that as supplies are reliably ready with a fill rate of nearly 100%, we have realized significant savings related to our radiology
staff members not needing to waste time finding supplies or hoarding supplies. Another area of waste and a quality and safety issue often seen in traditional hospital supply-chain systems is expired supplies. Use of expired supplies or placement of expired catheters and other indwelling materials in a patient can be a serious safety issue in clinical care. Also, wasted expired supplies, when identified and not used, are an added expense for hospitals. Expired supplies are avoided by the first-in, first-out approach created by having the new replacement bin placed in the rear of the currently used supply bin, as well as by not having large central supply areas with excess quantities of supply. Daily deliveries of supplies from vendors avoid aged and expired products. Another advantage of the two-bin supply system is easy visibility of problems. All of the supply nodes have the same basic construction. Anyone can walk into any of the nodes and immediately know whether there is or is not a supply problem by looking at the number of empty bins placed in the return area as well as by identifying any stock outs (both bins missing for a particular supply). Such visual cues help front-line staff members as well as managers quickly realize when they do or do not have a supply issue. In addition, the supply-chain software program is also able to show data related to performance indicators for the supply-chain system hospitalwide or for any given area. One requirement to have an on-demand supply system is a supply distribution center that can sell or issue supplies at the lowest unit of measure, to minimize the footprint necessary to accommodate bulk supplies in inventory or within
Journal of the American College of Radiology Volume - n Number - n - 2015
departments. This is becoming more common as more hospitals begin to implement lean supply-chain systems. In conclusion, a two-bin demandflow system offers a lean, reliable, and cost-effective means of managing radiology supplies. In our experience, such a system has led to reliable availability of supplies in both diagnostic radiology and IR areas. This can have positive results, both reducing risk to patients by reducing employee distraction related to
searching for supplies and reducing the risk for the use of expired products. Cost savings are also realized in terms of reduced waste related to large central supply inventories, wasted clinical employee time spent searching for supplies and hoarding, and reduced expiration of supplies.
REFERENCES 1. Hodge C. Supply chain strategies and solutions. 2014;2:15-6. 2. Knutsen RM. Supply chain needs a seat at the table. Executive Insight 2014;4:15-7.
3. Hodge C, Cuevas K. Transforming materials management strategies to meet the needs of healthcare reform. Executive Insight 2014;4: 17-9. 4. Coustasse A, Tomblin S, Slack C. Impact of radio-frequency identification (RFID) technologies on the hospital supply chain: a literature review. Perspect Health Inf Manag 2013;10:1d. 5. Jarousse LA. Strategic supply chain management. Hosp Health Netw 2011;85:6-38. 6. McHugh TM. Supply chain management in the clinical laboratory. Clin Leadersh Manag Rev 2006;20:E4. 7. Dacosta Claro I. Supply services at health facilities: measuring performance [article in Spanish]. Rev Esp Salud Publica 2001;75:321-35.
Griffin T. Donnelly is from the Raymond J. Harbert College of Business, Auburn University, Auburn, Alabama. Lerry T. Forester, MBA, is from Materials Management, Nemours Children’s Hospital, Orlando, Florida. Lane F. Donnelly, MD, is from the Department of Radiology, Texas Children’s Hospital, Houston, Texas. The authors have no conflicts of interest related to the material discussed in this article. Lane F. Donnelly, MD: Texas Children’s Hospital, 6701 Fannin Street, Suite 470, Houston, TX 77030; e-mail: lfdonnel@ texaschildrens.org.
Journal of the American College of Radiology Donnelly, Forester, Donnelly n Case Studies in Clinical Practice Management
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Reliable and Efficient Supply Chain Management in Radiology: Implementation of a Two-Bin Demand-Flow System Griffin T. Donnelly, Lerry T. Forester, MBA, Lane F. Donnelly, MD SITUATION Medical supplies typically account for approximately 20% to 40% of hospital costs, second in expense only to labor [1-3]. Typical hospital supply-chain systems are often costly, with large inventories and labor expense related to associates searching for needed items. Yet there is very little medical literature concerning the importance of a reliable and efficient supply chain, and we could find nothing in the literature regarding the supply chain in radiology [1-7]. We describe and evaluate the performance of a demand-flow supply-chain replenishment system implemented in a new children’s hospital, as it pertains to radiology. WHAT WAS DONE A two-bin kanban supply delivery system (Blue Bin, Seattle, Washington) was implemented throughout a newly built children’s hospital. This continuous process improvement initiative, modeled on the lean Toyota Production System, is designed to remove end users from the supply management business, allows clinical hours to be focused on patients, promotes efficient workflow, captures visibility of consumption and dollars spent, and optimizes supply availability. The system uses
the kanban approach, in which there are visual cues establishing the need for more product. In the system, there are peripheral supply nodes in the front-line areas of care, including in radiology. In those supply nodes, each particular supply item has two bins, in racks in parallel, with predetermined periodic automatic replenishment (PAR) levels and barcoded labels. Supply users remove needed supplies from the front bin. When associates have consumed all the product from the front bin, they place the empty bin on the top shelf, signaling the need for refill. The second rear bin is then pulled forward for continued use. The empty bin placed on the top shelf serves as a kanban or signal to the supply-chain runners that a particular supply needs to be reordered. The supplychain runners visit each front-line supply node on a daily basis. The empty bins are collected, brought to materials management, and scanned, and supplies are ordered. Deliveries from the supplier are received daily to replenish empty bins. When the supplies arrive from the suppliers during daily deliveries, the bins are refilled. The refilled bins are then delivered back to the nodes and placed behind the remaining bins, ensuring first-in, first-out use.
ª 2015 American College of Radiology 1546-1440/15/$36.00 n http://dx.doi.org/10.1016/j.jacr.2015.09.006
Contracts with suppliers have been set up so needed supplies are broken down and issued by the lowest unit of measure (eaches), eliminating the need to stock and store excess supplies in bulk although increasing the number of product stock-keeping units. There is a relatively small supply staging area in materials management where the daily ordered supplies are received and the empty bins refilled. The PAR level is defined as the minimum quantity of a supply needed to maintain operations until the next delivery. In this system, the PAR level for a particular bin is determined to be the minimum amount necessary to supply operations until the first used bin can be replenished. The supply-chain software program uses barcoding technology. When an empty bin is scanned, this automatically triggers ordering of that particular supply in the predetermined PAR amount. Depending on any fluctuation in demand, the PAR level can be adjusted accordingly. In addition, the incorporated analytics enable the creation of a dashboard that depicts the performance of the supply-chain system. This can be viewed at the hospital level, at the particular supply-chain node level, or as data about a particular supply item.
1
A dashboard is used to capture metrics to evaluate the movement and performance of supplies, to include the number of stock outs and the fill rate. These serve as key performance indicators regarding the efficiency of the system. A stock out is defined as an event in which both bins become empty, and that particular supply is unavailable to front-line users in that particular area. System reliability was measured by the fill rate (100% minus the stock-out rate). In addition, supply bins are classified on the basis of use: “hot” when the rate of use of the particular supply is challenging the current determined PAR level and “stale” when an item is rarely used and the PAR level is perhaps too large for the need. PAR levels can then be adjusted on the basis of this analysis on an ongoing basis. Two supply rooms (nodes) were established for radiology: one in the main diagnostic imaging department and one in interventional radiology (IR), which is in the perioperative area on a separate floor from the main portion of radiology. The general acceptance of the system by radiology physicians and associates, the number of supplies per node, and fill rates will be discussed.
OUTCOMES AND DISCUSSION The roll-out of the demand supplychain system at hospital opening and the first two years of operation have been well accepted by associates and physicians in radiology. For radiology, 696 total unique supply types are managed by the system (261 in diagnostic imaging, 435 in IR). The fill rate is 98.08% for the imaging node and 98.7% for IR. The two-bin kanban system with the empty first bin as the signal that 2
more supply is needed is such a simple concept it seems that it could not be revolutionary. However, in medicine, such a concept is revolutionary. It is estimated that at most hospitals and medical centers, supplies account for 20% to 40% of expenses [1-3]. This is second only to labor costs [1-3]. With the on-demand two-bin system, supplies are ordered to be delivered to the hospital on a daily basis. There is no large central supply room full of a large amount of supplies. The lack of this large central inventory will reduce its inventory-carrying cost and can save hospitals large amounts of money. One hospital that implemented a similar on-demand supply system realized savings of more than $1 million a year in wasted and excessive supplies [1]. In addition, the amount of space needed for a staging area to refill the bins is typically half the space needed for a large central supply storage area, also leading to savings [1]. Another costly consequence of traditional and often unreliable hospital supply-chain systems is waste related both to wasted time that clinical staff members spend searching for supplies and to the cost related to employees hoarding or stashing supplies for fear of not having access to them when needed. One system estimated that 28,000 hours of clinical staff time were saved by switching to a demand two-bin system [1]. Another hospital system realized estimated savings of 14,000 clinical hours and 7,000 supportservice hours per year related to a lean supply-chain system being implemented [3]. Our experience has been that as supplies are reliably ready with a fill rate of nearly 100%, we have realized significant savings related to our radiology
staff members not needing to waste time finding supplies or hoarding supplies. Another area of waste and a quality and safety issue often seen in traditional hospital supply-chain systems is expired supplies. Use of expired supplies or placement of expired catheters and other indwelling materials in a patient can be a serious safety issue in clinical care. Also, wasted expired supplies, when identified and not used, are an added expense for hospitals. Expired supplies are avoided by the first-in, first-out approach created by having the new replacement bin placed in the rear of the currently used supply bin, as well as by not having large central supply areas with excess quantities of supply. Daily deliveries of supplies from vendors avoid aged and expired products. Another advantage of the two-bin supply system is easy visibility of problems. All of the supply nodes have the same basic construction. Anyone can walk into any of the nodes and immediately know whether there is or is not a supply problem by looking at the number of empty bins placed in the return area as well as by identifying any stock outs (both bins missing for a particular supply). Such visual cues help front-line staff members as well as managers quickly realize when they do or do not have a supply issue. In addition, the supply-chain software program is also able to show data related to performance indicators for the supply-chain system hospitalwide or for any given area. One requirement to have an on-demand supply system is a supply distribution center that can sell or issue supplies at the lowest unit of measure, to minimize the footprint necessary to accommodate bulk supplies in inventory or within
Journal of the American College of Radiology Volume - n Number - n - 2015
departments. This is becoming more common as more hospitals begin to implement lean supply-chain systems. In conclusion, a two-bin demandflow system offers a lean, reliable, and cost-effective means of managing radiology supplies. In our experience, such a system has led to reliable availability of supplies in both diagnostic radiology and IR areas. This can have positive results, both reducing risk to patients by reducing employee distraction related to
searching for supplies and reducing the risk for the use of expired products. Cost savings are also realized in terms of reduced waste related to large central supply inventories, wasted clinical employee time spent searching for supplies and hoarding, and reduced expiration of supplies.
REFERENCES 1. Hodge C. Supply chain strategies and solutions. 2014;2:15-6. 2. Knutsen RM. Supply chain needs a seat at the table. Executive Insight 2014;4:15-7.
3. Hodge C, Cuevas K. Transforming materials management strategies to meet the needs of healthcare reform. Executive Insight 2014;4: 17-9. 4. Coustasse A, Tomblin S, Slack C. Impact of radio-frequency identification (RFID) technologies on the hospital supply chain: a literature review. Perspect Health Inf Manag 2013;10:1d. 5. Jarousse LA. Strategic supply chain management. Hosp Health Netw 2011;85:6-38. 6. McHugh TM. Supply chain management in the clinical laboratory. Clin Leadersh Manag Rev 2006;20:E4. 7. Dacosta Claro I. Supply services at health facilities: measuring performance [article in Spanish]. Rev Esp Salud Publica 2001;75:321-35.
Griffin T. Donnelly is from the Raymond J. Harbert College of Business, Auburn University, Auburn, Alabama. Lerry T. Forester, MBA, is from Materials Management, Nemours Children’s Hospital, Orlando, Florida. Lane F. Donnelly, MD, is from the Department of Radiology, Texas Children’s Hospital, Houston, Texas. The authors have no conflicts of interest related to the material discussed in this article. Lane F. Donnelly, MD: Texas Children’s Hospital, 6701 Fannin Street, Suite 470, Houston, TX 77030; e-mail: lfdonnel@ texaschildrens.org.
Journal of the American College of Radiology Donnelly, Forester, Donnelly n Case Studies in Clinical Practice Management
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