In my last blog posting I
discussed why I thought it was imperative to use an integrated Lean, Six Sigma
and Constraint’s Management approach in healthcare. In this posting, and for the next several
postings, I want to continue my healthcare discussion and how the tools of the
Theory of Constraints can help healthcare organizations improve their performance.
One of the problems facing
all healthcare facilities is in the area of inventory of medicines, supplies,
etc. It seems that hospitals are many times
running out of an important SKU when it’s needed most. So to guard against these SKU stock-outs,
many times the size of the inventory is increased and even though there’s more
inventory in the hospital stock room, there are still shortages that occur. It’s frustrating to say the least! In fact, one of the primary drivers of the
constantly increasing cost of healthcare is the cost of materials
management. There have been some studies
that have estimated this cost could go as high as 50% of a typical
hospital’s budget. Because of this,
there is ever-increasing pressure from the hospital’s accountants to limit the
inventory of SKUs.
One of the Theory of Constraints
Thinking Process tools is the Conflict Resolution Diagram (CRD) the purpose of
which is to visualize and resolve conflicts.
In the figure below we see such a diagram which demonstrates the
opposing points of view or the conflict in material's management. Both sides have the same objective and want to improve financial results
(labeled Objective A). But on the one hand,
one side wants to protect the available supply of SKUs by increasing the amount
of inventory while the other side wants to reduce the cost of inventory by reducing
the amount of on-hand inventory and therein lies the conflict or opposing
points of view.
One of the teachings of TOC
is that compromise solutions should never be considered because one side
typically gets what they want while the other side loses or both sides get some of what they want. What we should be striving for always is a
win-win solution!! An optimum solution,
if you will. The way we do this is to
surface the assumptions behind each side’s assertions. The assumptions are the because statements that explain each point of view. For example, one side is saying “In order to
improve financial results, I must reduce the cost of inventory” because excess inventory hurts our
cash flow position. Maybe the other side
is saying, “In order to improve financial results, I must protect the supply of
SKUs” because if I run out of an SKU
it could decrease throughput.” If we can
insert an injection or solution that
counters both sets of becauses, then
we have resolved the conflict. So with
this said, the solution must both reduce inventory while protecting
throughput. Sound like fun?
In my next blog posting, I’ll
lay out that solution and demonstrate how it is possible to both reduce
inventory and protect throughput at the same time.
Bob Sproull
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