The Aga Khan University Hospital - Materials Management Division - Case Study Example

The Aga Khan University Hospital (Nairobi); Materials Management Division Name: Institution: Course: Tutor: Date: Table of Contents 1.0 Introduction 1 2.0 Purpose of the Case Study 2 3.0 Theoretical Frameworks 3 3.1 Introduction 3 3.2 Quality Management 3 3.2.1 Business Process Re-engineering (BPR) 5 3.2.2 Six Sigma (DMAIC Model) 6 3.3 Principles of Supply Chain Management 7 3.4 Waste and Lean Management 8 3.5 Inventory Management 9 3.6 Capacity Management 11 3.7 Total Quality Management (TQM) and Continuous Improvement (CI) 12 4.1 Information Management and Systems 13 4.2 Project Management 15 4.3 Role of Operations Manager 17 5.0 Conclusion 18 6.0 List of References 20 1.0 Introduction According to Chase Jacobs (2001) Operations management (OM) is defined as the devising, operation, and improvement of processes that create and deliver the firm’s primary products and services. Operations management can also be termed as the process of transforming inputs into outputs through the use of resources (physical, financial, human, knowledge, methods, and technology e.t.c) to meet the customers’ desires/needs while meeting the overall organizational objectives. This essay will focus on operations at Aga Khan University Hospital, Nairobi (AKUH, N). This is a private, non-profit making hospital that offers both secondary and tertiary level medical services. It was established in 1958. Currently, this facility has a bed capacity of 254 and with the current population growth rate in Kenya; the need for expansion is inevitable. The Aga Khan Hospital was upgraded to a tertiary level teaching hospital to increase its capacity to respond to the health care demands of the East African community. It was the pioneer hospital in the provision of ambulatory care and quality in patient services. In the 21st century, management of operations is very critical for any institution that means well for its customers and for achievement of the overall organizational goals. It is for this reason that the writer intends to analyze operations management concepts and theories as applied in this facility and evaluate the extent to which they have contributed to value addition. Operations management may include but not limited to the following functions; forecasting, capacity planning, scheduling, managing inventories, assuring quality, motivating employees, facility location decisions, supply chain management, project management, product/service design, project management, e.t.c. Of critical importance for this study will be capacity management (both fixed and flexible capacity), inventory management, quality, waste and lean management, supply chain management, risk management, and global issues that influence the operational performance of this hospital. The report will also highlight aspects of information management systems in place at the hospital, project management and the role of operations manager in the day-to-day running of the hospital. Finally, conclusions will be drawn from the analysis and recommendations made on identified areas of improvement. 2.0 Purpose of the Case Study The study aims at analyzing the various operations strategy concepts and theories in relation to operations at Aga Khan Hospital in Nairobi Kenya. This is in the realization that operations is a critical function in any institution as it determines the kind of inputs into the system, processing methods, cycle time, and eventually the quality of outputs. The operations strategy in place determines the efficiency in the transformation process, waste, defects, level of capacity utilization, lead time, quality of outputs (goods or services), customer satisfaction, e.t.c. The manner in which the operations management functions are integrated determine the overall performance of an organization in terms of customer satisfaction and profit making. The area of concern in the hospital under study is the materials management division, at Aga Khan Hospital Nairobi that deals with supply of materials to all departments in the hospital. This was the preferred department as it determines the inventory levels for all supplies in this hospital which in turn affects the speed of service delivery in all departments. Materials management comprises the acquisition, planning, control and proper use of inputs required to produce goods and/or services required to satisfy customer needs alongside fulfilling other company objectives. Material management strives to minimize material cost; purchase, receive, transport and store materials in a cost effective manner; reduce operation costs through process simplification and standardization of procedures; ensure that the re-order levels are strictly observed to avoid occasional stock outs especially for high priority and essential supplies; avoid procuring of supplies that are not required leading to stock obsolescence and ensure uninterrupted operations. Finally, the study will explore areas of information management systems, project management and the role of an operations manager in the Hospital operations. 3.0 Theoretical Frameworks 3.1 Introduction This section will analyze the case study in terms of various concepts and theories in operations management namely; models of quality, principles of supply chain management, waste and lean management, inventory management and capacity management, global and international issues as well as risk management. The writer will evaluate the extent to which they have been in application at the Aga Khan Hospital, draw conclusions and suggest areas of improvement. 3.2 Quality Management Quality is viewed differently by different persons, institutions, disciplines etc depending on what value they hold on particular aspects as opposed to others. Customer needs and wants, and accordingly their perception on quality, vary based on age, lifestyle, purchasing power, future prospects, culture, belief systems, religion and the immediate environment among other factors. Therefore, the definition of quality is not static but is case specific. Jim Riley (September 23, 2012), underlines the importance of quality to business but observes that quality can be quite challenging to define. The author defines quality as that which concerns meeting the needs and expectations of customers. He further asserts that customers search for quality that is commensurate to the price that they pay and the level of competition in the market. In this context, quality has a price tag and is also based on existing alternatives from other providers of a given product or service. In the case under analysis, patients would view quality in terms of the price per health care service at Aga Khan compared to other health care providers. The Business Dictionary defines quality as a measure of excellence, free from defects, deficiencies and significant variations. It results from a strict and consistent commitment to specific standards that help achieve uniformity in products/services to the satisfaction of specific customer or user requirements. This definition can be adopted for purposes of this case analysis in that health care services should be free from defects, deficiencies and significant variations in consideration that hospitals deal with life related service provision that does not allow room for trials. ISO 8402-1986 standard defines quality as the entirety of features and attributes of products or services that bear the ability to satisfy stated or implied customer needs. Contrally to manufacturing and service businesses, hospitals deal with human beings and therefore quality is a priority consideration as there is no room for trial and error. The consequences of poor diagnosis, wrong prescription, or below standard surgical operation can be fatal or at least detrimental to a patient’s health. This underpins the value of quality management for hospital operations. There exist several quality models that Aga Khan Hospital may pursue in their attempt to gain a better competitive position through quality. Some of these models include business process re-engineering (BPR), lean management, Six Sigma (DMAIC), Statistical process control, and Total quality management (TQM). Application: The Aga Khan University Hospital has ascribed and adheres to a number of international quality accreditations to ensure high quality standards of services to patients. To achieve the objective of continuous improvement; the Hospital through its university continuously trains its staff especially on emerging concepts and technologies in the medical arena. 3.2.1 Business Process Re-engineering (BPR) Hammer and Champy (1993) define business process reengineering (BPR) as the fundamental rethinking and radical redesign of a business process to realize significant improvement in the fundamental performance areas such as cost, quality, flexibility and delivery speed. A business process can be viewed as a collection of actions aimed at producing an output capable of satisfying the need(s) of a particular customer or market. It puts emphasis on how the work is done within an organization. A process is thus a specific ordering of work activities/tasks across time and place, with a beginning, and an end, and properly stated inputs and outputs: an action plan (Enterprise Architect, 2004). The materials management department at the Aga Khan Hospital can improve the quality of its operations through embracing Business Process Re-engineering to improve on its activities. For instance, they can establish standard procedures for material procurement by the various departments to improve on the speed taking into account that, in the hospital, the services are being rendered to sick people who need prompt attention. Application: Business Process Re-engineering (BPR) is applicable in areas where new technology has emerged and the old technology becomes obsolete and this requires a complete overhaul of the entire system dependent on the technology and especially in the maternal health care. 3.2.2 Six Sigma (DMAIC Model) Six sigma fronted by Edward William Deming aims at reducing variations in a business process. This concept is well explained and delivered/implemented through the DMAIC methodology. The DMAIC model aims at eliminating defects in operations processes and suggesting improvements in areas where defects have been detected. The processes in six sigma (DMAIC model) can be explained briefly as follows: Define; entails defining the process improvement goals. Process improvement goals may aim at increasing market share, departmental output, achieving improved employee satisfaction as well as customer satisfaction e.t.c. This goal has to align with the customer demands and the strategic goals of the organization. Measure; refers to the analysis of the existing system with various preset performance metrics and targets. In the measurement process, accurate metrics are used to set a baseline for improvements. Analyze; this stage reveals any deviations existing between the set goals and the actual results achieved. This process entails the use of various analytical tools like statistical process control (SPC), charts etc. A proper understanding of the real cause of the deviations is critical in this stage as it provides a highlight of areas to be improved. Improve; after the analysis, it is possible to identify areas of improvement. This may entail system upgrade, devising of new operation methods, change of existing technology, refresher training for staff, facility expansion or addition of more products/services to existing ones etc. Control; entails setting up of early warning and alert systems to detect and inform on defects before they become detrimental. Such control systems like open loop or closed loop can be used to ensure timely corrective action is taken. Controls help ensure sustained system/process improvement. 3.3 Principles of Supply Chain Management A supply chain can be defined as a set of inter-related elements (people, institutions, departments, suppliers etc) that have to work in coordination to achieve a common goal. In an organizational set up like a hospital, a supply chain can be defined in terms of suppliers of suppliers-direct suppliers-producer-distributor-final customer. For instance, Aga Khan Hospital makes use of supplies like drugs, surgical equipments, bed facilities, furniture, vehicles, food, water, and labor. The drugs may be supplied through Kenya Medical Supplies Agency (KEMSA) which sources them from other suppliers. In addition, water is supplied by the City Council of Nairobi (CCN), food from identified supplier and so on. These supplies once obtained have to be received through the materials management department that handles all supplies into and out of the hospital which then channels them to the respective departments for patients to be served. In this context, a supply chain is defined as a series of value adding activities aimed at fulfilling the ultimate goal of meeting the customer (patients’) needs. The chain of supplies is very critical especially in a hospital as any delays in part of the supply chain would mean delay in service delivery. Delays in supplies at Aga Khan Hospital would translate into lost business as most patients would be referred to alternative hospitals resulting into loss of customer loyalty arising from inconsistency and unreliable services. Many customers including patients at hospitals are continuously becoming sophisticated and demand for prompt services. Such clients prefer to visit facilities that guarantee one-stop-shop services; patients would prefer a hospital where after diagnosis, there is a chemist where they can get their prescription within the facility as opposed to buying them elsewhere. Application: The chain of supplies to the Aga Khan Hospital is important to its operation as any delays along the chain would mean delayed services to the customer (patient). Delay in some instances can be fatal bearing in mind that some patient cases require emergency attention. The Hospital maintains a well integrated network of its suppliers in the realization that they contribute to the overall customer satisfaction. 3.4 Waste and Lean Management According to Manufacturing Works (2012), Waste is any activity that does not add value to the product or service. An action does not lead to value addition if customers are not ready to give extra money for the activity. This reality applies to all types of companies either manufacturing or service-based. In addition, Manufacturing Works (2012) classifies waste into eight categories: producing, waiting, overproduction, non-value-added processing, transportation, inventory, defects, under utilizing people, and motion. On the other hand, lean management means more value addition for clients using fewer raw materials. The concept of lean thinking was developed by Toyota in the 1950s. It puts emphasis in streamlining processes that provide what the internal and/or external customer wants while minimizing waste. Lean thinking has been applied in health care with some success in waste reduction. The approach, however, appears to be more specifically applicable in streamlining processes in support departments as opposed to mainstream clinical services. The materials department of Aga Khan University Hospital can adopt this concept to ensure that the cost of materials supplied is reduced and that only necessary supplies are procured. All hospital operations require particular inputs to conduct their daily duties. The kind of materials stocked should be in line with the nature of medical services offered at the hospital to avoid unnecessary stocking. For instance, through trend analysis of the commonly cured diseases, the hospital can ensure stocks are procured based on need analysis and demand forecasting. In cases where technology can be applied to reduce on the number of attendants or material requirements, such a technology should be given priority. Application of waste and lean management concepts at the hospital The Aga Khan University Hospital has made tremendous efforts in embracing lean management and elimination of waste through adopting technology in most of its operations. Mostly, automation is evident in their patients’ medical records, billing system, diagnostics, patients’ preliminary tests etc; this has enabled elimination of unnecessary paper work and has reduced on the number of employees required to perform a particular task. 3.5 Inventory Management According to Margaret Rose (2008), management of inventory is concerned with the administration of stock and supplies in an organization. The author further states that inventory management administer the flow of goods through the supply chain from the manufacturers to warehouses and eventually to the point of sale. The main function of inventory management is to keep a detailed record of the product movement to aid in making decisions on when to replenish stock or not.. Inventory decisions are very important for any company’s success for it determines the availability or non-availability of products on demand. In order to win customer loyalty to any institution, it is always advisable to ensure adequate stock is in place. The operations manager is charged with the responsibility of determining the Economic Order Quantity (EOQ) to maintain at any one time to ensure consistency in supply of products. This will enable the company attain its best operating level and meet the customer demands at an economic level of inventory. Application of inventory management at the hospital The materials management division at the Aga Khan Hospital Nairobi deals with an enormous task of dispatching materials, medical equipments, drugs, and foodstuff as required by all the departments. This calls for a very elaborate and properly coordinated inventory management system. Proper inventory management ensures that procurement of essential supplies is done in good time to avoid stock outs; especially for drugs and injecting needles, surgical knife, gloves and other necessities required on a more frequent basis. The Hospital’s materials management department can procure their supplies using the ABC classification; to ensure that top priority items are strictly controlled, medium priority items are moderately controlled, and low priority items are accorded lesser stringent control. In ABC inventory control system, class “A” supplies also known as vital few form 20% of total supplies but consume about 80% of the total budget allocated to inventory; class “B” supplies comprise 15% of the total supplies and consume about 15% of the total money allocated to inventory; class “C” supplies also known as’ trivial many’ constitute 65% of total supplies but consume only 5% of the total budget allocated to inventory. This categorization will enable the materials management division to procure wisely and in a cost effective manner further reducing chances of occasional stock outs for class “A” items or overstocking of the trivial many (class C) items. 3.6 Capacity Management Capacity entails the analysis of resource availability and the way in which these resources are put into productive use by organizations in pursuit of their set goals and objectives in a sustainable manner (World Bank Institute). The capacity of a production unit is the ability of that particular unit to produce an output that conforms to customers’ specified requirements. Capacity can be viewed from different perspectives; potential capacity (that for senior management long-term planning), immediate capacity (production capacity that can be made available in the short-run), and effective capacity (that which is actually achievable). In terms of capacity, health care facilities are mostly classified based on bed capacity; but this is not all about capacity. Capacity should be analyzed in terms of the internal resources including hospital bed capacity, medical equipments, human resource skill sets, and the various services rendered to patients. At the Aga Khan Hospital, the following services are available; dental, accident & emergency, dietetic services, pathology (laboratory), family medicine, Pediatrics, medicine, pharmacy, physiotherapy & rehabilitation services, radiology, surgery, Women’s Services (Obstetrics & Gynecology). These should form part of capacity planning to match the customer needs with the company internal capabilities. Application of the concept Capacity being the ability of a facility to serve its intended purpose over a given time period is paramount to any institution. The fixed capacity at the hospital can only serve a fixed number of patients e.g. bed capacity in maternity wards, equipments in the laboratories, and ambulances. The Hospital makes use of flexible capacity (employees, operating hours) mostly when there is an outbreak or during peak seasons through extending the working hours for employees, deployment of employees in lesser labor intensive departments to other areas where they can serve, and making use of medical students as interns. Recommendation to the hospital is to adopt a holistic view of capacity; instead of gauging its capacity based on the number of beds, the management should take into account the financial capability, human resource capacity, supplies, supply chains, and trends in customer demands. 3.7 Total Quality Management (TQM) and Continuous Improvement (CI) The two approaches are often used interchangeably. They trace their origin in Japan in the 1950s, but their presence in health care became more prevalent in the 1990s. These approaches put more emphasis on quality improvement as an ongoing practice that particularly focus on the needs of both internal and external customers (AE Powell, RK Rushmer, HTO Davies, 2008). For quality improvement to succeed it needs a participatory approach where managers provide the necessary leadership and facilitate the cross-functional teams to take part. Through the adoption of TQM/CQI principles and practices, the Aga Khan Hospital can improve further on its quality of health services provided. The materials management department can ensure adherence to the TQM/QCI principles through continued training research and development e.t.c. to enable them procure quality materials that will meet the standards stipulated by the TQM principles and practices. The quality of raw materials, status of equipments (x-ray, surgical equipments, gloves, sterilizers, drugs and other supplies) will dictate the service rendered to the patients to a great extent. Proper diagnostic equipments will lead to accurate results and eventually correct prescription and satisfied customers. Application of the concepts at the Hospital Through its training facility, Aga Khan University Hospital, conducts continued training on the medical staff to enable them embed TQM/CQI principles in their operations. Continuous improvement calls for team work among the employees with the section managers playing the coordination role. This has enabled medics serving at the hospital to operate at par with the current trends in the medical circles. State of the art medical equipments and supplies cannot achieve the quality improvement targets in isolation; whenever there is new installed equipment there follows a requisite training to enhance the staff skills in operating it. In addition, the hospital has also subscribed and ensured adherence to various international quality accreditations enabling it to offer world class medical services. 4.0 Recommendations 4.1 Information Management and Systems Information management is very critical to any institution. Historical data is critical as it helps organizations in demand forecasting, financial management, capacity planning, human resource planning, materials and equipment planning and other policy related issues. Health information may include data concerning common ailments, the trends of diseases within the market being served, mortality and morbidity rates, patient’s arrival rates, patient demographic characteristics, statistics of major surgeries conducted, major milestones in service improvement e.t.c. Health Management Information Systems (HMISs) act as significant support apparatus in health care services delivery (Odhiambo 2005). Health information systems are required to enable hospitals to keep records on its day-to-day operations and occurrences. A health information system can be defined as a set of elements and procedures organized with the aim of generating information that will improve decision making in health care at all levels. (Lippeveld, Sauerborn, and Bodart 2000). Most hospitals in Kenya are yet to realize the importance of establishing information systems an issue that has made forecasting and planning a challenge. Recently, many health facilities have realized the need to keep essential data and establish information management systems. Several research works has been done both in Kenya and other countries have indicated clearly on the benefits of having established health information systems. Professionals in the medical field and health workers that deal with serious health issues every day need to have critical information that is useful in the short term as well as long-term planning. An integrated HIS links central resources with peripheral health facilities, providing health workers with the knowledge needed to make timely, accurate decisions (WHO). Application of MIS at the Hospital The importance of information management systems in health care and in this case at Aga Khan Hospital cannot be overemphasized. The Aga Khan Hospital uses information systems in a number of ways and especially in diagnostic section. It has a very elaborate system of collecting patient data in that once a patient visits the facility, any repeat visits would not require the patient to provide basic information about them. For those patients who are on insurance medical schemes, the hospital has a repository of their health status history and can be able to understand the patients better. Such information like blood group, age, occupation, place of residence, frequency of visit to the hospital for a particular patient are just at the click of the button. The hospital has also embraced technology in its billing systems through the use of transaction processing systems (TPS) to ensure that daily transactions are pooled into the hospital database. The hospital manages to track its material movement, capacity utilization, stock movements and this enable the planning section to know when to order for more stock or not. Information systems have also been used and helpful in the dispensing chemist to especially in monitoring the drug levels to avoid stock shortages. It is recommended that the hospital establishes an information system that can be used to collect patient information on areas that need improvement. Through such a forum, essential customer feedback concerning much needed services, customer satisfaction levels, desired service improvement and so on can be obtained to help in transforming the facility to a world class status of operation. 4.2 Project Management A project is a unique undertaking that has a definite starting and ending and cosumes resources of time, money and labour. Project management was established as a popular discipline in the late 1960s and 1970s, through the creation and activity of the US and European project management societies and, crucially, through the widespread adoption in business, government and the military of the matrix form of organization. Suddenly, thousands of professionals were pitched into task focused, project-type situations. (Morris, 1994). Project management aims at ensuring the effective utilization of resources and delivery of project objectives in good time and within cost constraints. Managing an operation in the form of a project enables the project manager to have a logical sequence of activity flow, control the cost involved, schedule for materials, plan for workforce, establish specific timelines, and monitor and evaluate progress. Any deviations from the planned execution process are visible and corrective action can be taken early enough as opposed to other routine operations. In hospitals, types of projects can be installation of new operating system, installation of wards, installation of new x-ray facility, expansion of the bed capacity, establishment of a new maternity wing, establishment of a new department to introduce a new service/department in the hospital e.t.c. Such initiatives require huge capital outlays, proper planning, consultation, resource mobilization, funding, time, negotiations, coordination and commitment in order to succeed. Project managers have put into use such project management tools like PERT and CPM analysis to estimate on completion times and sequence the various activities into logical order. To manage the employees participating in these projects such tools like work breakdown structure, and responsibility matrix; that articulates the specific tasks and activities with the respective employees. Application of the concept The project management concept has been in application in so many ways beginning with the establishment of the hospital facility itself, setting up of the laboratory facilities, equipment installation, building of the wards, establishment of a cancer centre and in many other projects within the hospital precincts. The writer recommends that major projects like expansion of some departments that are experiencing capacity challenge to be installed using project management as its advantages far outstretch the costs. Managing functions in form of a project will ensure delivery in specified timelines since preceding activities within a project have to be complete for the next phase of activities to commence. 4.3 Role of Operations Manager Operations managers are charged with the actual execution of day-to-day functioning of organizations. They deal with task scheduling, scheduling of machines, production systems, determining the amount of resource requirement for any production system, amount of labor hours and machine hours required for a single operation function etc. The functions of the operations managers can therefore be viewed as the heartbeat of any single institution as in the absence of this function the short term goals and objectives cannot be achieved. A company’s long term goals can only be realized with the achievement of the short term and tactical goals. This argument underlines the importance of the operations manager in an institution. Successful institutions have attained world class status due to their excellence in the operations function. Operational efficiency is key towards cutting down on cost of inputs, increased productivity, attaining profitability and eventually industrial competitiveness. Most successful companies in the world have emerged as low cost leaders as a result of investing in professional operations managers and investing in the operations functional area as a priority consideration. Operations managers are charged with the mandate of ensuring that the daily functions are in line with the company’s overall goals and strategy. They define roles for the subordinates and ensuring that the daily work targets are met. The operations manager has to ensure that the operations section anchors itself with the other functional areas of finance, marketing, human resource and the top management as they serve as sources of input into the operations function. The operations manager has to ensure that operations department delivers on the promises offered to the market by the marketing department. In addition, their input requirements require a budget which has to be provided and approved by the finance department. Also, the human resource department needs to know the required amount of human labor to perform an operation to ensure adequate human resource. Therefore the role of an operations manager can be viewed as that of organizing, coordinating, controlling, and mobilizing the necessary resources that a company requires to perform its day-to-day activities towards meeting its goals. 5.0 Conclusion The case analysis has revealed that operations management concepts form a critical ingredient of successful in achievement of the hospital’s long term and short term goals. Through proper inventory management, the hospital is able to control its supplies levels to ensure procurement is adequate and within the economic quantities at all times. By conducting proper capacity management, the hospital is able to adjust its flexible capacity to match with patient needs and demands. The Aga Khan Hospital has ascribed and adheres to a number of international quality accreditations alongside total quality management and continuous improvement to render high quality of services to its customers. In its attempt to adhere to lean and waste management concepts, the Aga Khan Hospital has embraced technology in most sections including patient records, and billing system among others. This has enabled the hospital operate on a lean staff and avoid unnecessary paper work; fastened patient medical records retrieval. The analysis also indicates that the hospital values the role of operations manager, recognizes the application of project management concept in major installations and makes use of Business Process re-engineering especially when a need arises to overhaul an operating unit whose technology has served its useful life and become obsolete. Arising from this case analysis, suffice is to say that operations management concepts are the melting pot for any institution, and in this case Aga Khan University Hospital, that aims at meeting the twin objective of customer satisfaction and competitiveness. In addition, operations management is an indispensable function in organizations as the overall company strategy; goals and objectives are executed and realized through operations. 6.0 List of References Aga Khan University Hospital 2012. 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