Introduction
Supply chain management refers to the management of a network of interconnected businesses in a supply chain that may be involved in the provision of the packages goods or services required by the end customer (Heizer & Render 2006, p.3). It involves the management of the movement and storage of a firm’s raw materials, work–in–progress, and available for sale goods. This is a vital department for any organization particularly manufacturing companies since it determines the availability of raw materials for the production process, the safety of work–in–progress stock and the safety of the final products. Failure to handle the three stages properly may result in no final products to be delivered to the consumers. Mismanagement that may also occur may cost the organization significant resources that do not yield anything (Mahadevan 2010, p.18).
Arnold Palmer’s Hospital Background
Arnold Palmer is a hospital situated in Orlando, Florida. The hospital is located on a 676,000 square land and it has a capacity of 431 beds with over 2000 employees. The hospital is mainly dedicated to serving women and children. This makes the hospital the only one in the Southeast and one among the six that specialize in offering such services. It is renowned as one of the nation’s top hospitals and a long time member of a large buying group that serves 900 members. Additionally, it is a member of the Orlando Regional Healthcare. The Orlando Regional Healthcare is a group of healthcare providers that concentrate on offering non-profitable healthcare services in the region even though they are privately owned.
Case Study Discussion
The 900-member group was experiencing challenges in its supply chain management. For instance, the group would change suppliers per product each year based on the lowest bidder. The group could also stock some products that were not familiar to the physicians. Additionally, they did not do enough research on the prices hence bought the stocks at high prices. These challenges prompted the Arnold Palmer hospital to join with other hospitals in 2003 to form a Healthcare Purchasing Alliance (HPA). The purchasing achieved success in the first year by saving the eight members seven million dollars. The changes that led to the cost saving were based on the group’s better structures and the alliance was well staffed and the ability of the alliance to strike competitive deals such as signing 3-5 year contracts with vendors instead of the one year contracts that were previously signed by the group. The savings that were achieved due to the formation of the Healthcare Purchasing Alliance has led to the use of this company in this case study. It is a perfect example of a firm that has benefitted from excellent supply chain management structures (Mentzer 2001, p. 52).
Relationship between the Case Study and Operations and Supply Chain Management course
The case study of Arnold Palmer hospital supply chain is relevant to the operations and supply chain management course we undertook. This clearly shows relevance of the course to organizations making a difference in the community. The contents of the course gave us the essential knowledge base as well as advanced information on how supply chains operate in different industries. In addition, the coursework facilitated the basis for research. Furthermore, the case study tested our knowledge on operations and supply chain management.
Difference between the HPA’s supply chain and the manufacturing model
Supply chain management in the service industry is different from the supply chain management in the manufacturing industry. In the manufacturing industry, the model adopted by most firms is aimed at the development of new products and efficiency through buyer–vendor collaboration (Mahadevan 2010, p.30). The approach in the service industry on the other hand is different as seen from the Arnold Palmer case. Supply chain management is aimed at purchasing good products while achieving economic targets (Heizer & Render 2006, p. 43). Indirect spending matters are also factored in the supply chain management in the service industry. This is because most of the products purchased are for supportive purposes. Additionally, instead of having only the buyer-vendor collaboration, the process is overseen by the Medical Economic Outcomes Committee, which is composed of the users i.e. the nursing and other members of the medical staff.
In the service industry particularly in the case of hospitals, most of them purchase similar products since they are controlled by different legislations. This is not the case for most manufacturing firms because most of them determine their own formulas and standards and they therefore do purchase products based on individual requirements.
Constraints on making decisions based on economics alone
The Medical Economic Outcomes Committee established at the Arnold Palmer Hospital works towards achieving economic and medical benefits. Failure to look at the medical benefits will compromise the healthcare provision process at the hospital. The process should focus on the impact of the products purchased on healthcare delivery. Additionally, the committee should consider the value of the products and the impact on the price of healthcare (Heizer & Render 2006 p.460).
Furthermore, the supply chain process should focus on quality, standardization, blanket purchase orders, long-term contracts and the control of the product development process (Heizer & Render 2006, p. 460). It is therefore not possible for the committee to focus on the economic benefits of the supply chain alone since it substantially focuses on quality standards of the products and eligibility of suppliers.
Role of doctors and Nurses in the supply chain
From the study of the Arnold Palmer Hospital case, doctors and nurses are members of the Medical Economics Outcomes Committee. The committee is charged with the responsibility of evaluating the purchase options available to the hospital. The purchase options available to the company in this case refer to the suppliers with their respective quotations who are ready to offer their services to the hospital. Overall, the nurses and doctors are required to ensure that the medicines purchased are of the right quality and the hospital has the best bargain for the products purchased (Heizer & Render 2006, p. 460).
Steps to be followed by Dr. Smith in introducing the new product
The first thing is for the doctor to evaluate if the part will meet the needs of the patients. After determining this, the doctor should inform the Healthcare Purchasing Alliance of this new development. After getting the approval of the Healthcare Purchasing Alliance, Smith should then proceed with the issue to the Medical Economic Outcomes Committee. The committee will evaluate the product for quality issues and consider the pricing of the product. If the Medical Economic Outcomes Committee approves the product, the issue is then returned to the Healthcare Purchasing Alliance for it to determine the eligibility of the manufacturer. Matters to be considered also include any changes in pricing and if the manufacturer can be relied upon to supply the quantities by the hospital (Heizer & Render, 2006).
List of References
Heizer, J & Render, B 2006, Principles of operations management, Pearson Prentice Hall, New Jersey.
Mahadevan, B 2010, Operations Management: Theory and Practice, Pearson, New Delhi.
Mentzer, J 2001, Supply Chain Management, Sage Publications, California.