Operations
Karthikeyan T IIM Lucknow Supply Chain Management in Health Care
Introduction In India, healthcare is estimated to be around a whopping 80000 crores. There are millions of products moving along the supply chain every day through manufacturers, distributors, group purchase organizations and health care providers to patients making supplies a critical factor in health care. Supplies are the second leading cost to hospitals after labor in providing patient care. Revenue can be generated by concentrating on the area which accounts for nearly one third of all hospital operating budgets – the Health care supply chain. Limitation Of Existing Supply Chain In Heath Care Lack of data standards and paperwork make it error prone, and thus it results in redundancy. Cycle time increase and lack of data accuracy result in increased supply chain costs which ultimately affect patients. Hospitals which implemented SCM successfully have recorded a 50% inventory reduction, 40% increase in on-time delivery, doubling of inventory returns coupled with ninefold reduction in out of stock rates. Critical Components of a Supply Chain
Purchase Activity Since a huge portion of revenue is devoted to purchasing, procurement is one of the vital factors in purchasing activity. The purchase department should concentrate on the source, quantity, quality, price and right time for continuous supply of all types of materials. Vendor Management At this stage that the hospitals undertake vendor analysis. Important factors such as quality, quantity, pricing, reliability, speed, financial position, production capacity, process capacity, and transport facilities available with the vendors ought to be given precedence. Hence Vendor relations are critical.
Stores Stores involve acquisition, receiving, evaluation, warehousing, and maintenance of supplies to the entire hospital. Core competency should be accounting. A good interaction with other departments of the hospital ensures efficiency. Logistics Medicines should be categorized bases on their shelf life and issued on a FIFO basis. An early warning report should automatically be generated to alert doctors on the anticipated expiry. There should be contractual arrangement with the vendors for drugs supplied to the hospitals without the loss of shelf life. Gain sharing Hospitals reward doctors for efficiency by sharing some of the money saved. Improving health sector supply chains require physicians, hospitals, and others in the healthcare field to reassess the roles and collaborative efforts. ERP Implementation In Health Care Supply Chain ERP Implementation in health targets the following areas of improvement namely data standardization, integration of supply chain and revenue cycle, integration with core clinical systems, billing, demand forecasting, inventory hoarding, material handling time by medical staff and disaster recovery in supply chain. Data Standardization One of the major problems that health care industry is facing today is the difference in the costs of medicine across suppliers and countries. To make it uniform, a global data standard method can be used. It uniquely identifies products and locations to streamline processes and improve operation inefficiency. Named as GS1, it has been created by health care
Figure 1: Supply chain components
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