Executive Summary

Northwest model hospital has experienced a tremendous challenge in material movement which
has affected the overall functionality of the value chain. The backlog of material in the receiving
area has caused tremendous problems that can jeopardize the hospitals ability to function
efficiently and also compromise the value chain activities of the hospital.

Taking into consideration best practice policies of operations management the research done on
the case study has analyzed some critical factors that are causing the problem. It has been identified
that the backlog is being mainly created as a result of the inefficiencies that is experienced in
material storage and material recording processes. This is mainly due to the hospital favoring the
use of batch oriented process that is resulting in a backlog of material movement.

The report looks at best practice policies of operations management and make the recommendation
to consider a single piece flow as an alternative option for rectification of the problem. As a result
the recommendation to move to the just in time process has been made.

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Contents
Executive Summary ........................................................................................................................ 1

List of Figures ................................................................................................................................. 3

1.0 Introduction ............................................................................................................................... 4

2.0 Analyzing NHM receiving area process. .................................................................................. 5

2.1 Reasons for bottleneck of material management .................................................................. 5

2.1.1 Unorganized stacking and storage ................................................................................. 5

2.1.2 Increasing number of temporary storage location ......................................................... 5

2.1.3 Assumed lost inventory leading to over ordering. ......................................................... 6

2.1.4 Increase in financial expenses for the hospital .............................................................. 6

2.1.5 Manual recording of inventory and material spoilage issues......................................... 7

2.2 Summary of major issues causing bottlenecks. .................................................................... 8

2.3 Benefits of moving to a 1-day process in the receiving area. ............................................... 8

3.0 Batch oriented process at NHM .............................................................................................. 11

3.1 Defining batch oriented process.......................................................................................... 11

3.2 Explaining the batch oriented process at NHM .................................................................. 11

3.3 Single piece flow method.................................................................................................... 12

4.0 Recommendations to improve value stream map of NHM .................................................... 14

5.0 Conclusion .............................................................................................................................. 16

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List of Figures

Figure 3.1 Single piece flow method ............................................................................................ 13

Figure 4.1 Recommendations to improve value stream map of NHM ......................................... 14

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1.0 Introduction

Northwest Memorial Hospital is an academic medical facility located in Chicago that has a 900
bed capacity. The hospital was awarded magnet status which is considered the gold standard of
patient care and nursing from the American nursing credential Centre. The hospital has as1 1600
on-site medical practitioners and has a partnership with Northwestern University Feinberg School
of medicine to provide teaching practices. It is one of the busiest hospitals in Chicago.

And the focus of this report is to assess and analyse the operations aspect of the business giving
special reference to the improvement of material flow through the receiving area of the hospital.
The intention to focus on this area is the identification of a problem within the company's material
management process which is a extended lead time from material dispatched to physical usage.
The identified problem is the inefficient Material Handling process at the receiving area causing
enhance delays for material requisition and dispatch to the various departments in the hospital.

The scope of the report Focuses on a critical analysis of the material receiving area using theories
and Concepts from the best practises of operations management. The intention is to take a critical
look at the major factors that cause bottlenecks in the receiving area and consider the main
problems caused by an average 3 day lead time from material received to the dispatching of the
material to the relevant departments .It is the intention of this report to also consider the methods
of reducing the 3 day lead time to 1 days lead time and how it would help to overcome some of
the main problems. In proposing this the intention is to also look at some of the processes that
might be considered in making the changes.

The report finally looks at the batch-oriented system and processing and delivery problems as well
as process variability leading to an average three daily time was created. The report looks to
consider how single piece flow can be implemented and how it would help me improve lead time.

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2.0 Analyzing NHM receiving area process.

2.1 Reasons for bottleneck of material management

Based on the case analysis it can be identified that there are several fundamental reasons that
attribute to the present bottleneck situation in the receiving area. Following is a detailed
explanation based on the case analysis.

2.1.1 Unorganized stacking and storage

The hospital material flow originated with the receiving area and continue the movement to the
Central storage and the floors or or what was known as Par locations. The hospitals 2016 dock to
stock process did not meet the typical definition of efficient material flow given the fact that there
was unorganized storage in all of these locations. The inability to properly process package
received experience led to the creation of temporary storage areas which results in a bottleneck
situation of material movement.

The receiving area dealt almost 500 packages a day. However the logging in of these packages for
the main inventory system as well as the physical movement of the packages from the dock into
the racking essentially was much slower than that frequency of receiving packages. This created
the need for temporary storage location. From the VSM it is evident that one of the main
contributing factors to this situation was an increasing number of cycle time minutes for the
loading up of a pallet with the packages. The movement of the palate to the receiving area would
take between 8 to 24 hours of waiting time. This is the resulting factor to cause the unorganized
storage at stacking.

2.1.2 Increasing number of temporary storage location

Temporary storage locations essentially mean that inventory is not recorded at any point of the
supply chain process by the externally or internally. From the suppliers perspective the supplies
have left they are Warehouse and I no longer part of their inventory. From NMH point of view the
goods have not arrived into the hospitals inventory as it is not recorded in the ERP system even
though they may be physically inside the premises of the hospital. The case analysis shows that
there was Inventory cluttered in all areas.

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There is another critical issue with the increasing number of temporary storage locations from a
human resource standpoint. Storing inventory in insecure locations can lead to accidents taking
place in the workplace. This is since inventory can fall onto workers or create barriers in the
movement of workers that can lead to hazardous working environments. The fact that inventory is
stored at this level clearly shows that there are either major problem in the workplace in terms of
ensuring employee safety and security.

2.1.3 Assumed lost inventory leading to over ordering.

Some of the entries slow Movement process and essentially being placed in temporary storage
locations there was situation where clinical staff have gone in for over ordering due to fear of not
receiving products on time. Hospital is also taking on a large cost Factor in terms of inventory
holding cost as there is double ordering taking place. The group of re-orders coming into the
receiving area it essentially increases the workload for the existing process.

This particular situation causes a significant increase in the working capital for the hospital and
also the write off values for the hospital. This is a significant financial impact to the hospital as
there is a considerable amount of inventory that moves daily. According to the case study, the
hospital Handel's almost 71000 different items that are in 765 Par locations (Suett, Nicholas and
Bachour, 2019). The total stock value at any time is approximately 34 million (Suett, Nicholas and
Bachour, 2019). Taking these figures into account the fact that incorrect re-ordering can take place
is a clear indication that there is either major financial loss for the hospital that is not being
recognized.

While it can be argued that certain inventory can be reusable due to it's nonperishable nature, the
case study clearly shows that there are refrigerated items that are also arriving. If refrigerated items
are not stored properly, they will perish. More importantly refrigerated items can also be duplicated
in the process especially as the required inventory hasn't been logged into the system. Persons in
the procurement process can become agitated and move towards ordering more stock especially
off perishable supplies when they notice that the original order has not been received.

2.1.4 Increase in financial expenses for the hospital

The method used to manage material in the hospital will lead to significant financial outlay in
various areas. The first which is the most notable Factor is the need to work overtime in order to

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sort out the disorganized storage system. In addition bottleneck situation creates more clutter in
the storage process which requires person to on work longer hours in order to sort out the matter.
The case study shows that irrespective of even working 220 hours per month most packages but
not delivered to the required departments on time (Suett, Nicholas and Bachour, 2019). There is
also a fundamental flaw in the number of working hours for the receiving area as they did not work
over the weekend while the hospital function during this time. This means that any packages
arriving on the dock on Wednesday or Thursday would not be received to the relevant department
for 5 days’ time (Suett, Nicholas and Bachour, 2019).

This situation caused a significant disruption in the working capability for various departments
which can compromise service standards. When the service standard is going to be compromised,
customers that are receiving the service will not be satisfied and they will begin to look for
alternative options. This can cause a significant financial loss for the hospital, and it can even cause
damages to the reputation which can compromise their partnership agreement. It is evident that
this type of situation the hospital has Direct financial loss as well as indirect financial loss.

2.1.5 Manual recording of inventory and material spoilage issues

Considering the evidence that has been provided in the case study it is clear these days a definitive
breakdown in the information exchange process. The inability to properly recognize refrigerator
required products can cause significant challenges in terms of product spoilage. This makes
perishable cargo obsolete when spoilage takes place (Suett, Nicholas and Bachour, 2019). In the
medical industry it is crucial to be able to identify and analyse products and their storage criteria’s
as they have a direct correlation with their effectiveness when it is administered to patients. In this
type of situation there is a very real medical concern that expired medicine may be in time to the
storage process as there is also a manual recording system being used.

The manual recording system is done as inventory is located in various different storage areas and
the large amount of inventory which neighbors around 71000 different SKU. With this type of a
large inventory they're can be significant complications if it is not categorized and monitored
properly (Suett, Nicholas and Bachour, 2019). There is definitely a challenging situation for the
hospital to maintain the required level of quality standards along with the given health guidelines.
This is why many hospitals will use ERP systems moving to a more digital metal of managing
inventory. They can locate the proper storage areas of the inventory and also provide proper

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records on how inventory has been stored in our investigation is necessary. The current inventory
standard being utilized shows that even manual counting of inventory is taking place given the fact
that inventory stored in multiple locations and is not properly categorized. Due to this reason not
only can there be a human error in the counting process, but they can also be documentation error
in terms of critical information that can compromise the integrity of the medicine (Suett, Nicholas
and Bachour, 2019). This can be a violation of health codes if the problem arises.

2.2 Summary of major issues causing bottlenecks.

Reasons for the bottleneck in the receiving area can be described as a cycle based process
considering the number of reasons that have been discussed above. Essentially the moment time
of material equal to the number of received packages has not been at matched process in terms
of time and resource allocation (Suett, Nicholas and Bachour, 2019). Receiving over 500 packages
it is clear that the process time For recording the inventory which is denoted as step 3 in the value
stream map of the package received at dock is the longest time frame of 8 to 24-hours (Suett,
Nicholas and Bachour, 2019).

It is evident that there was no process in place to handle multiple deliveries when truck drivers
deliver products outside the schedule (Slack, Brandon-Jones and Johnston, 2013). When multiple
are taking place it is noted that a large stock of supplies at the dock that could not be handed
efficiently through the processing method. In addition temporary storage spaces essentially
recorded supplies up in the air with no proper destination or record of being physically received
into the hospital. This has created double ordering of material due to shortage fears which is
essentially further backlog the processing of material through the arriving area (Slack, Brandon-
Jones and Johnston, 2013).

Taking into consideration the major drawbacks in the existing processed of the 3 day lead
time variability it can be speculated that there are human resource risk factors, financial risk
factors as well as compliance risk factors. All of these can jeopardise the business institutes
capability of functioning efficiently social standpoint as well as a legal standpoint.

2.3 Benefits of moving to a 1-day process in the receiving area.

The streamlining of the process for the receiving area with have a significant impact on the
company's overall performance. The movement away from a 3-day lead time to one day time is

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the desired goal for the company. The reducing the time will give the hospital a far more accuracy
in estimating required inventory. Essentially it will reduce the safety stock that is being maintained
by many of the persons in the procurement cycle. Having accuracy of inventory and being able to
rely on information will essentially motivate person to be more careful when they are ordering
new inventory. The concept of Fear ordering will be totally eradicated. They will also be confident
that their inventory updates with a place within 24-hour period which would allow them to have a
better fast reaction process (Meredith, 2011).

The hospital will only require to purchase what is needed from suppliers between essentially
improve the financial standing of the working capital. The entire working capital allocation will
become more efficient. There will be a saving to the hospitals operating expenses. In addition,
there will also be lower cost of labour in terms of reducing over time when the process is becoming
streamlined.

The inventory holding cost for the hospital will also be reduced. This means that inventory will be
turned over much quicker giving the hospital the advantage of increasing their cash turnover cycle
(Meredith, 2011). Improving sorting and organising inventory will ensure that they are stored in a
secure place and it is a forward moving motion reducing time waste for the operation. The proper
storage of inventory will also ensure that they are not a safe working environment with non
hazardous situations being created due to inventory storage (Madhani, 2019).

Enhanced space utilisation will allow for better allocation of space in the hospital which is essential
when a service capacity-oriented businesses functioning. This will allow for better range of motion
taking place within the receiving area, essentially improving time management of the process (Wei
Khong, 2005). When more efficient movement can be achieved, the need to have additional
overtime to clear bottlenecks and also waiting time for truckers to unload goods will definitely be
reduced.

Moving to the one-day process will also eliminate one of the most important aspect of reducing
inspection time and quality concerns for the supply that is being received. The hospital will be able
to report back to the suppliers any quality concerns within a realistic time frame allowing for
replacements to take place much faster (Xue et al., 2013). In the event that the quality failure on

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the supplier side they will be able to provide the product in correct quality much sooner which will
have a lower impact on the material requirement to the hospital.

This means that any of the departments that are waiting for the materials would be able to still
function given the available inventory as a replacement will be received within a few days
(Madhani, 2019). The supplies for the hospital by arrived only at the required time with a
reasonable timeline for quality replacement also taken into consideration. For example the hospital
can work on receiving materials a minimum of 1-week before the requisition date stipulated by
the relevant procurement department (Xue et al., 2013). However when it comes to longer lead
time manufacturing supplies this can be changed based on the lead time (Mofokeng and
Chinomona, 2019). The fundamental requirement is that any type of quality concern can be
reported quickly so that suppliers and other parties concerned can get behind the replacement
process faster. This can only be done if there isn't much more efficient material movement in the
arriving area.

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3.0 Batch oriented process at NHM

3.1 Defining batch oriented process.

The batch oriented process is defined as the grouping of materials into volumes of batches before
they move down the supply chain of the internal process of the company (Jira and Toffel, 2012).
The batch oriented process was originally designed to ensure the dedicated resources in the supply
chain can be utilized in a maximum fashion so that there is no waste of Motion (Gligor, Esmark
and Holcomb, 2014). Essentially the grouping of materials into predetermined volumes of batches
ensure that the human resources that provide the labor is able to maximize the movement of
supplies in a single motion. For example the time it takes for a person or a machine to move cargo
from the dock into the warehouse would always remain the same (Koot, Mes and Iacob, 2020).
However the ability to move multiple pieces of cargo within the timeline would essentially
increase the efficiency of the movement time (Jira and Toffel, 2012).

3.2 Explaining the batch oriented process at NHM

The batch oriented process that is practiced in the hospital is generally seen at every single level
of the value stream mapping excluding the step 4. Even truck drivers are given stipulated time
frame for them to deliver their goods so that they can be grouped together in batches before they
are moved into the warehouse in complex. The use of pallets is done in order to group the
individual packages into batches (Jira and Toffel, 2012). The fundamental flaw at this stage is that
until the palate reaches the predetermined size with the number of packages it will not be relocated
to the next stage of the receiving process (Gligor, Esmark and Holcomb, 2014).

There are areas that are also seen to be consistent with batch oriented operations. For example in
the value stream mapping it was noticed that package deliveries to the storage locations would also

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be palletized and not been stored into the location and the number of units which was 8 pieces
pellet is been formulated. The entire process is designed not to be time-sensitive but to consider
resource utilization efficiency (Madhani, 2019a). The drawback with this process is that at each
and every stage there can be considerable idle time leading to the creation of the bottlenecks. As
the process is not time sensitive but more focused on volume sensitivity it essentially creates
challenges of prioritizing materials based on the urgency. The batch oriented process considers
all materials with the same degree of urgency. The extent of urgency is derived by the need to
complete the number of units required to fulfil the predetermined best value before it moves to the
next stage. As a result of this factor that either major compromising situation in terms of efficient
time management and material movement.

3.3 Single piece flow method

The single piece flow method makes reference to the movement of a single piece throughout the
process of material movement. It is in total opposite to the batch oriented approach. The batch
oriented approach considers volume movement of material while the single-piece flow considers
the movement of material based on time (Ferreira, Moreira and Zimmermann, 2019). It is
essentially one of the most efficient methods for the movement of material in terms of time saving.

A single piece of material will move along the process to the various different locations
irrespective of the number of units that make up the package. The main benefit with the single
piece flow method is that no area that deals with material movement is ever left idling unlike the
batch oriented method (Ferreira, Moreira and Zimmermann, 2019). The ability to reduce idle time
in the various different activity locations of the receiving area will essentially booster the time
efficiency in handling packages to weld the entire process (Flynn, Koufteros and Lu, 2016). The
following illustration has been attached demonstrate the difference between the batch oriented
process and the single piece flow process.

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 Figure 3.1 Single piece flow method

Source- Adopted from Ferreira, Moreira and Zimmermann (2019)

According to the aforementioned diagram the batch process will effectively require the completion
of the batch before it moves on to the next station. In this type of situation the individual at station
three may become idle until the movement of material takes place between station 1 and station 2
for the completion of the number of units to make up the batch. This has the recipe of creating the
bottleneck situation. If there is an inefficient movement of material in station 1 and station 2 they
will be idling time at Station 3. It is possible that there could be a sudden creation of a backlog at
Station 3 will both station one and station to be able to overcome efficiency issues (Flynn,
Koufteros and Lu, 2016).

However in the single piece flow of material none of the stations remain idle as a single piece is
consistently moved down the line. Each of the stations are always occupied which means that there
is no ideal time affecting the process. This is the difference between a scheduled process and a
time-sensitive process.

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4.0 Recommendations to improve value stream map of NHM

The benefits of moving to a single piece flow can be clearly identified. It is this type of benefit that
would essentially reduce the backlog being created in the material receiving area. The capability
of improving the functionality of the department would essentially make all the necessary changes
for the betterment of the material flow which has been discussed in the report.

In order to ensure that there is a concrete method that is implemented the following diagram has
been created to demonstrate how material flow can be improved to increase efficiency and
overcome the backlog (Anthara and Damayanti, 2018). The purpose is to bring down the 3-day
lead-time variability to her one day lead time (Bevilacqua, Ciarapica and Marcucci, 2019). This
will be done through the use of the single piece flow mechanism. The recommended process is to
move to a just in time operation.

Figure 4.1 Recommendations to improve value stream map of NHM

Source- Theory adopted from Bevilacqua, Ciarapica and Marcucci (2019)

The proposed method to maintain just-in-time requires the pallet loading of all three courier
deliveries in a single time frame (Bevilacqua, Ciarapica and Marcucci, 2019). This means that the
collective goods that are delivered at a single time will be palletized and move into the packet

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segregation area without the need for batch orientation. Essentially the pallets will be of different
sizes however the intention will be to reduce the backlog created at the dock area (Anthara and
Damayanti, 2018).

The pallets will be broken down and then segregated for the packages which will then move to the
single piece flow processing method (Ferreira, Moreira and Zimmermann, 2019). Data will be
entered, and the products will be quickly moved to the package racking area. This means that there
is going to be a concrete method of storing all of the packages in designated locations (Anthara
and Damayanti, 2018). The process is possible as all of the packages have been initially entered
into the ERP system with a single piece flow method so that they can be demarcated the various
storage locations that have been set up. Packages will no longer be stored in ad-hoc locations
(Bevilacqua, Ciarapica and Marcucci, 2019).

When the requisition is received multiple packages that are designated to be dispatched to a single
location inside the hospital will be re palletized and the products will be prepared to be dispatched.
Package scanning will take place and the packages will be dispatched with the pallet itself and the
pallets will be Reloaded. This will ensure that inventory does not become duplicated and that the
proper flow of data is maintained at every terminal of process (Bettley, Mayle and Tantoush, 2005).

The using of RFID is the recommended method in this case. The ability to scan all of the material
movements will definitely improve accuracy of the various different points of storage and dispatch.
This feel totally eradicate the over ordering method as all persons within the value chain will be
able to clearly view the package position at the receiving area. The proper traceability using the
RFID technique and also maintaining the single piece flow mechanism will totally eradicate the
concept of Fear ordering and duplicating orders (Anthara and Damayanti, 2018).

The hospital will be able to save on finances improving their working capital performance as a
result of this process. Inventory accuracy and stockholding quantities will also become more
prominent all persons in the procurement department. Better planning of inventory can also take
place. All of these will create the need to only purchase generally required inventory values which
place is much less button on the receiving area to process on unnecessary inventory requirements
(Bettley, Mayle and Tantoush, 2005).

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5.0 Conclusion

The analysis of this report has revealed that the highest contributing Factor to the inefficient
operation of the receiving area is the hospital intention to use batch oriented process. By nature
these processes focused on resource utilization rather than time sensitivity. The grouping of large
volumes of raw materials at a single time line puts continuous are strain on the existing human,
infrastructure and technological resources, it is this ever affecting strenuous situation that leads
to the creation of the backlog and the bottle situation. To achieve smooth material floor in the
hospital the single piece flow method has to be maintained and the just in time material
management process should be followed.

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