Using Metrics and Best Practices to Inform Supply Chain Operational Assessments
By Charles “Chuck” Taylor
Operational assessments unearth solutions to improve elements of supply chains. However, very few assessments include all elements and best practices with workable metrics on labor and inventory.
It is common for a company to use an inventory turn goal of 10.5 for a hospital to maintain on-target inventory cost levels. This metric equals total hospital spend divided by total hospital count. However, if the hospital in this example performs a higher number of elective surgeries compared to another hospital that isn't, the spend for supplies in the higher-performing hospital will result in a falsely high inventory turn score above the 10.5 goal. Once a hospital sees a score of more than 10.5, supply managers turn a blind eye to over- and understock quality issues happening.
The metric in most cases does not tell you what you need to know, that is, what departments are overstocked and why and what to do about it. Another large problem today is that usually a hospital does not look at labor for the supply chain; it gets passed over because it is considered essential to meet the hospital's demand.
At a large U.S. integrated delivery network (IDN) an actual purchase order (PO) lines per buyer metric was used and was conversely found to be usable for a supply receiver. This metric tells you where you are over- or understaffed for a hospital. When interviewing tenured materials directors, we found a best-practice strategy with distribution techniques and staffing levels because most hospital supply chain staff are in distribution, and most strategic insights surround distribution.
In one interview, a materials director Don Gierman stated that in his career, when getting a new hospital, he looks at incoming phone calls. In his estimation, if phones are ringing off the hook, then he knows there are problems that need to be addressed. If phones are quiet, there are processes in place good enough to meet the departments need for products.
We evaluated call-down activity within our IDN assessment data, extracting a two-week sample of call-down data at one large facility. In this analysis, we found the equivalent of four full-time staff in time wasted associated with problem-solving where hospital staff were calling to Material Supplies to fix issues. While issues would be fixed temporarily that day, the problem persisted.
