Performance Failure: Contingency Planning - Essay Example

Running Head: Performance Failure: Contingency Planning Performance Failure: Contingency Planning of the of the Performance Failure: Contingency Planning "The only thing we have to fear is fear itself." So said Franklin D. Roosevelt in an earlier time οf national crisis. Those words ring true for the Year 2000 crisis: The greatest thing we have to fear may not be Y2K itself, but the fear and panic caused by it. If automatic teller machines fail on January 1, 2000, will it be because οf software problems? Or because 100 million Americans in the Eastern time zone try to use their ATM cards at exactly 12:05 a.m. to check on their savings? Likewise, will hospitals run short οf critical supplies because οf computer bugs in the supply chain? Or will they face disruptions caused by stockpiling medical supplies? (Fisher 2007) The challenge lies in crafting balanced contingency plans. On one hand, such plans must ensure that the hospital will have the critical supplies necessary to function. On the other, they must accomplish their purposes without disrupting the delicate balance and rhythm οf the supply chain. As an alternative to potentially dangerous stockpiling, many industry executives (as well as the AHA and AHRMM) advocate performing needs assessments, making contingency plans and devising safety net agreements with other providers. (See "Hoarding: the real Y2K bugaboo" in our June issue.) Everybody on board Since the design and implementation οf a supply chain solution is paramount, it requires strong commitment from management. But unlike some Year 2000 readiness projects, it also needs the cooperation οf many people and organizations outside the hospitals control. For example, manufacturers and distributors are inundated with customer requests for Y2K information. One hospitals request may be lost in the shuffle. But this information is necessary to effectively craft a Y2K supply chain solution. Likewise, an effective contingency plan requires cooperation among hospitals within a community or region. People from different facilities must commit time and effort to meet and forge safety net agreements. Whatever the obstacles, a well-crafted supply chain methodology is a critical part οf the overall Y2K contingency planning process. Spotting risks: a first step Contingency planning means identifying risks and developing plans and operating procedures to avert those risks. The first step is to identify supplies and suppliers that, if suddenly unavailable, would pose risks to the enterprise. Here are three methods for doing that: • Top-down identification: a quantitative analysis This approach takes an overview perspective on supplies and can quickly establish a quantitative reference οf supply numbers. Use materials management reports to identify those items purchased most frequently. The assumption is simple: If the hospital uses a great deal οf product X, then that product is critical for day-to-day operation. But this information does not necessarily imply a relationship between product X and the criticality οf the function or task actually performed by or with it. (Zolkos 2002) Identify critical suppliers using finance data on actual dollars paid to them in one month, quarter or year. The danger here is that a high-dollar payout may represent only a small quantity οf expensive items. Again, there may be no relationship between cost and criticality οf function. • Bottom-up identification οf risks The "bottom-up" method, which gathers information from end users who are experts on those supplies deemed critical in practice, requires more effort from the investigator. The first step is to create sets οf departments based on commonality οf interests. For example, group all departments that provide ambulatory care. Or focus on operative services, inpatient nursing care or other areas. Then meet with each group to create a list οf critical supplies, their respective suppliers, and alternatives to current supplies. • A combination approach To identify true critical needs, compare the end users list with the "top-down" list. Remove common supplies and suppliers from the "top-down" list and add them to a master list. The group should then review the remainder οf the "top-down" list to ensure that no critical supplies or suppliers have been excluded from the final list. The goal is to create a manageable list οf critical supplies and suppliers, 10 to 25, upon which contingency planning can be based. Next, organize the master list by relevant categories, such as medical-surgical, radiology, laboratory, pharmacy and food service. Identify supply chain risks The next part οf risk analysis is to determine the chances that the hospital will not receive a particular supply because οf a suppliers Y2K problem. There are two goals: Identify suppliers that still have significant Y2K issues as they enter the fourth quarter οf 1999. Provide a method to compare suppliers so contingency plans can be developed for the most mission-critical supplies from the greatest at-risk suppliers. (Russell 2003; Hannon 2005) Audit critical suppliers, either by telephone interviews or onsite visits. Which is better? It depends. Many factors weigh against onsite visits: Theyre time-consuming, its a challenge to find mutually convenient dates with the vendors, and transportation logistics must be worked out. In general, audits should be performed by telephone, provided two rules are followed absolutely: Audits should be performed by a project team member, not by an administrative assistant or clerical help. These are much more than "fill-in-the-blank" interviews and require careful listening, analysis and probing follow-up questions. If any special circumstances or red flags are raised during the phone audit, follow up with a site visit. Hospitals can modify the supply chain audit worksheet on page 28 to fit their particular needs. Record and tabulate the scores for each supplier. A score οf 50 means there should be "smooth sailing," but any score under 10 indicates a potential "Titanic" scenario. To prioritize contingency planning, combine the criticality οf the supply item and the at-risk level οf its supplier. Its also extremely important to know whether there are alternative suppliers for any given need. Obviously the risk is greater if there is only one manufacturer and one distributor οf the product. Alternatives to stockpiling The purpose οf contingency planning is to ensure that critical supplies will be available regardless οf what happens in the year 2000. If a hospital does not stockpile, then what is the answer? Here are some alternatives. • Supply sharing agreements This requires leadership. A hospital in each community or geographical region must take the initiative to sponsor or coordinate some type οf supply chain forum. A likely format might feature a morning information session with key suppliers, manufacturers, pharmaceutical companies, food service companies and industry organizations. Each participant would give a 20-or 30-minute overview οf his or her companys Y2K efforts, recommendations for supply chain policies, position on hoarding and other relevant issues. (Lambert 2007) The afternoon session would consist οf provider meetings to discuss the practical workings οf the safety net agreements advocated by the AHA and AHRMM. In these discussions, the representatives should: - Share mission-critical supply and supplier lists - Determine the logistics for handling and transferring supplies - Address how to handle supply costs in terms οf accounting - Decide the events that would trigger the sharing agreements - Devise methods οf communication among hospitals - Field other issues that might affect successfully implementing a supply sharing contingency plan • Work toward alternative supplies The contingency planning process must seek out supplies that can be substituted in the event οf a supply chain disruption. This requires more than just listing alternatives, however. For example, payment or reimbursement may be an issue. Given managed care agreements today, is there any guarantee that costs for substituted supplies will be reimbursed? People with expertise in managed care, Health Care Financing Administration and Medicare and Medicaid reimbursements should review the list οf alternative supplies to ensure that the hospital can collect revenue for those items. Medical practice committees should also review the list and identify all necessary policies for implementation οf a substituted item. Policies would include processes for staff, specific indications and/or contraindications, and any special training. (Selva 2003) • Standing orders Even if supplies are available, distribution may be interrupted. For example, Y2K-compliant EDI interfaces will be useless if theres a telecommunication or electrical outage. So its important to negotiate agreements for standing orders with critical suppliers. Then if the ordering process is interrupted the supplier will revert to standing orders that provide for the regular and usual delivery οf supplies. (Gonzalez 2007) Dont overlook contingency plans for warehousing and logistics. Where will supplies be stored? Which warehousing, shipping and receiving processes need to be implemented? If theres no electricity, how will certain pharmaceuticals, lab and other supplies be stored? Miscellaneous things such as these can impede the successful design and implementation οf a workable supply chain contingency plan. Supply chain audit worksheet This worksheet consists οf 10 questions in four categories. For each question, responses are listed from least favourable (a score οf 0) to most favourable (a score οf 5). Record and tabulate each suppliers responses to get a total score. This number not only estimates the "risk" level οf a given supplier, but also permits comparison among suppliers. Look for scores near 50. These indicate a high level οf readiness. This form covers some basic issues οf interest when auditing suppliers. Hospitals may wish to modify it to suit their particular needs. Company name GENERAL YEAR 2000 PLANNING 1. Does your company have a Year 2000 readiness program? If so, when was it established? [] 0 -- No program [] 1 -- 1999 [] 2 -- 1998 [] 3 -- 1997 [] 4 -- 1996 [] 5 -- Before 1996 2. When were resources and budget committed to Y2K readiness? [] 0 -- No program [] 1 -- 1999 [] 2 -- 1998 [] 3 -- 1997 [] 4 -- 1996 [] 5 -- Before 1996 3. Are you confident you will be able to supply to our hospital the goods and services that you now supply to us? [] 0 -- No answer [] 1 -- No [] 2 -- Unlikely [] 3 -- Maybe [] 4 -- Probably [] 5 -- Definitely COMPUTER SYSTEMS (hardware, operating systems, application programs) Applicable if your company uses computers to manage the following areas οf business: customer orders, general ledger, accounts payable/receivable, billings, EDI interface, product planning, material and resource planning, procurement, project management, production process, material receiving and transfer, storage, quality management, distribution planning, distribution operations, shipping. 4. What percentage οf the hardware, operating systems and application software is certified Y2K-compliant as οf today? [] 0 -- Less than 60% [] 1 -- 60% [] 2 -- 70% [] 3 -- 80% [] 4 -- 90% [] 5 -- 100% 5. What percentage οf the hardware, operating systems and application software did you test for Y2K readiness? [] 0 -- Less than 60% [] 0 -- 60% [] 0 -- 70% [] 0 -- 80% [] 0 -- 90% [] 0 -- 100% 6. When was testing completed or scheduled to be completed? [] 0 -- Not scheduled [] 1 -- 4Q99 [] 2 -- 3Q99 [] 3 -- 2Q99 [] 4 -- 1Q99 [] 5 -- Before 1Q99 Your suppliers 7. What percentage οf your suppliers have you evaluated for Y2K readiness? [] 0 -- Less than 60% [] 0 -- 60% [] 0 -- 70% [] 0 -- 80% [] 0 -- 90% [] 0 -- 100% 8. Οf those suppliers evaluated for Y2K readiness, what percentage is ready? [] 0 -- Less than 60% [] 2 -- 60% [] 3 -- 70% [] 4 -- 80% [] 5 -- 90% [] 6 -- 100% 9. Based on all οf the information you have about your companys Y2K readiness and the Y2K readiness οf your suppliers, what is your estimate οf the chance that we will have some interruption οf our regular supplies from you? [] 0 -- Less than 60% [] 2 -- 60% [] 3 -- 70% [] 4 -- 80% [] 5 -- 90% [] 6 -- 100% Your contingency plans 10. What percentage οf your supply chain contingency planning is finished? [] 0 -- Less than 60% [] 1 -- 60% [] 2 -- 70% [] 3 -- 80% [] 4 -- 90% [] 5 -- 100% References Dean, Joshua., The Supply Chains Demands. Government Executive, May2002, Vol. 34 Issue 5, p54 Fisher, Marchall L. “What is the Right Supply Chain for Your Product? ” Harvard business Review. http://pages.stern.nyu.edu/~djuran/fisher01.doc (accessed Jul 18 ,2007) Gonzalez, Gloria., Assessments, response plans crucial for global supply chain exposures. Business Insurance, 10/1/2007, Vol. 41 Issue 40, p4-36 Hannon, David., Battered, not broken, supply chain copes. Purchasing, 10/6/2005 Metals Edition, Vol. 134 Issue 16, p43-47 Lambert, Douglas M. and Martha C.Cooper. “Issues in Supply Chain Management.” Industrial Marketing Management26, (2000):65-83 Elsevier Science Inc. (accessed Jul 16 ,2007) Roberts, Sally., Insurers tighten grip on supply chain risks. Business Insurance, 1/22/2007, Vol. 41 Issue 4, p11-12 Russell, Dawn M.; Saldanha, John P., Five Tenets οf Security-Aware Logistics and Supply Chain Operation. Transportation Journal, Summer2003, Vol. 42 Issue 4, p44-54 Selva, Meera.,Wal-Mart Wants All Suppliers to Switch to New Supply Chain Technology Sunday Business (United Kingdom), 06/15/2003 Zolkos, Rodd., Attention to supply-chain risks grows. Business Insurance, 7/28/2003, Vol. 37 Issue 30, p4 Zolkos, Rodd., Supply chain management calls for close look at risks. Business Insurance, 4/29/2002, Vol. 36 Issue 17, p30 Read More