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Chapter 10: Building a Culture of Healthcare Supply Chain Excellence: Leading, Planning, Managing, Deciding, and Learning

Learning Objectives

Describe the concepts and models of planning and decision making in the context of the healthcare supply chain.

Discuss the importance of situational factors (trends, environmental issues, technology, regulatory compliance, etc…) in the planning process and how leadership principles, metrics and improvement tenets can be used to positively impact the organizational culture of healthcare supply chain operations.

Relate, discuss and provide areas of integration between planning and decision making amid continuous operations of the healthcare supply chain to include the use of metrics and improvement strategies.

Distinguish the differences between planning and contingency planning.

Merge principles of leadership, planning and decision making to develop a personal plan for operating in a fast paced healthcare supply chain environment.

Evaluate the benefits for organizational operations with a solid planning process and standing operating procedures as part of the healthcare supply chain culture to include outside sales representatives.

Introduction

Planning and decision making are essential to efficient, effective and efficacious healthcare supply chain operations and strategies.

Leaders and managers must structure and facilitate plans that integrate well with the healthcare organization’s strategic plan and must make consistent decisions in alignment with those plans.

Creating standing operating procedures for routine and consistent operations of the supply chain allows leaders and managers to spread the operational culture at all levels of the supply chain enterprise.

This chapter provides an overview of planning, improvement strategies, metrics, regulatory compliance and decision making.

These constructs should be reviewed and placed in context for integration into the supply chain’s overall operational plan for providing the ‘technology of care’ to the caregivers.

How Are You Leading and Managing the Healthcare Supply Chain?

The ‘big’ picture is a great starting point for our discussion on planning.

Healthcare spending in the United States is projected to reach $4.8 trillion by 2021 according to the Centers for Medicare and Medicaid Services.

Second only to labor costs, the healthcare supply chain is a much overlooked source of huge expense for every healthcare organization.

In addition to increased expenses, there are several areas driving change as identified by the Pain in the (Supply) Chain survey.

State of the Healthcare Industry: Trends Driving Change

Figure 10-1

Data from State of the Healthcare Industry: Cost management concerns (n.d.). Retrieved from http://thenewlogistics.ups.com/healthcare/healthcare-survey-results/UPS-PITC-Executive-Summary-North-America.pdf, p.7 (accessed 23 Mar. 2015).

Top Strategies to Manage Supply Chain Costs

Figure 10-2

Managing Regulatory Compliance

The FDA began to increase oversight after a series of high profile recalls removing items from the market that were damaged after being shipped from the manufacturer.

The result of this oversight was an in depth assessment of the distribution practices of medical devices and other items.

These assessments resulted in regulatory increases designed to increase consumer safety.

Some healthcare organizations are having success in addressing regulatory requirements through partnering with other organizations that have expertise with in regulatory compliance.

Of supply chain executives surveyed by UPS, only 12% said that they were happy with their companies performance with meeting regulatory challenges.

Metrics

Metrics are used to drive performance within an organization.

A lack of informative, unified metrics is often cited as a common pitfall of supply chain management.

Selecting appropriate metrics is a necessary for understanding the advantages, disadvantages, and limitations of the supply chain.

Metrics can be both qualitative and quantitative.

Metrics can be focused on the individual unit or the supply chain as a whole.

While there are several tools for selecting and appropriately displaying metrics, we will focus on one of the most popular: the balanced scorecard.

Metrics: The Balanced Scorecard

The concept of the balanced scorecard was introduced in the early 1990’s by Kaplan and Norton as a method for communicating strategy.

In a typical implementation, metrics are selected for the scorecard that supports the mission and vision of the organization.

These metrics are further supported by subsequent “lower level” scorecards that track subcomponents of the larger metrics on the balanced scorecard.

Healthcare Supply Chain Metrics

Table 10-1

Table 10-1 continued

Table 10-1 complete

How to Lead People and Manage Resources

The leader’s application of empirically based skill tools and abilities are applicable to small groups to all members of the entire organization.

Strategies for leaders in effecting planning and situational assessment, decision making, and training that result in positive outcomes are addressed; these strategies, in turn, result in practical leadership actions and applications based in “active” leadership.

Planning

Planning is a process that uses macro- and micro-environmental factors and internal information to engage stakeholders to create a framework, template, and outline for section, branch, or organizational success.

Planning can be strategic, operational, or a combination of both.

Strategic planning is concerned with finding the best future for the organization and determining how the organization will evolve to realize that future.

It is a stream of organizational decisions focused in a specific direction based on organizational values, strategies, and goals.

The focus is on external considerations and how the organization can best serve the external markets’ expectations, demands, and needs.

Planning

Operational planning is about finding the best methods, processes, and systems to accomplish the mission/purpose, strategies, goals, and objectives of the organization in the most effective, efficient, and efficacious way possible.

The focus in operational planning concerns internal resources, systems, processes, methods, and considerations.

Planning includes both a process (developing and achieving goals and objectives) and an outcome (the plan itself).

This process involves moving an organization along a predetermined path based on its values.

Planning

Planning has an outcome.

This outcome paves the way to a better future state based on organizational values and the external environment.

Improving effectiveness, efficiency, efficacy, customer satisfaction, employee satisfaction, financial performance, and many other possible improvements are a part of moving the organization to reach a better future state.

Strategic Planning

For all health organizations, mergers, departmental restructuring, implementation of new technologies, and market changes may indicate a need for the organization to develop a strategic plan to support its overall plan.

Strategic planning can be described as an organizational planning process that analyzes the current situation of an organization and forecasts how the organization will change or evolve over a specified period of time.

Strategic Planning

Within the component of strategic thought exists the vision, intent, and planning affecting the path that the organization takes in moving toward its future.

If the strategic plan is a road map, then the organizational vision is the final destination, describing “where the organization is going.”

Once an organizational vision is developed, intent must be established.

Intent describes how the organization will be affected if change does not occur.

Organizational leaders must outline how these “impacts” or “crises” could potentially influence the viability of the organization.

Strategic Planning

Once the vision and intent have been established, the strategic plan needs to be developed; that is, from the road map perspective, the quickest, most efficient route must be drawn to the final destination (i.e., the vision). O

ne can assume that a good plan will lead to an effective outcome—namely, achieving the vision.

Strategic thought is followed by the component of tactical action, which includes commitment, execution, and accountability.

Strategic Planning

Without commitment on all levels, it will be impossible to achieve the strategic vision effectively and efficiently.

From a leadership perspective, a leader can foster commitment within his or her team by serving as a model and demonstrating a strong commitment to the plan and vision.

A leader cannot expect to achieve buy-in from followers if he or she has not fully committed to the vision.

It is the leader’s responsibility to enhance motivation and maintain commitment within the team, particularly when team members encounter obstacles.

The health leader must be supportive of his or her team members, supporting them by providing them with the needed skills, equipment, and materials to effectively carry out their roles in the plan.

The Leader’s Role in Planning

Health leaders provide the structure, process, macro direction, shared outcome for all stakeholders, motivation, accountability, influence, obstacle removal, resources, and persistence in the overall effort of directing, staffing, organizing, controlling, and rewarding.

The first step in planning is establishing the organizational situational assessment; the vision, mission, strategies, goals, objectives, and action steps are then developed.

Without this structure and signposts as first steps, the organization cannot move forward.

The Leader’s Role in Planning

Whatever framework you select for your organization, try to be consistent.

It is not important if goals are at a higher level than objectives, or vice versa; what matters is the process of planning—a planning and execution culture should grow and mature in your health organization.

Objectives must be SMART (specific, measurable, attainable, rewarding, and timed).

Action steps or tactics represent a fifth level of planning; they provide the most specific approach for describing the who, what, when, where, and how elements of the activities needed to accomplish an objective.

The Leader’s Role in Planning

In addition to this effort of directing, staffing, organization, and controlling, rewarding is important.

These five elements are crucial as leaders embrace the foundations and functions of planning.

Health leaders must publicly praise success and reward those who have achieved predetermined action steps, objectives, and goals.

Contingency Planning

An important aspect of planning is contingency planning.

Contingency planning is planning for unexpected or unwanted events such as natural (tornados, hurricanes, storms or floods) and man-made (terrorism, accidents, chemical spills or explosions) disasters.

In major disasters, the state government will declare a state of emergency and request federal assistance.

The federal government has plans and stockpiles of medical and surgical and pharmaceutical items to assist along with durable and semi-permanent items (such as cots, temporary buildings and modular and moveable structures).

Working with local and state healthcare and public health emergency preparedness officials will be important to develop an efficient, effective and efficacious plan for contingency operations.

Situational Assesment

All health leaders must be able to assess the situation currently facing their organization, which would incorporate an assessment of both internal and external environments.

A situational assessment must be an objective and honest look at the diverse factors that could affect the health organization’s success in achieving its vision, mission, strategies, and goals.

One tool commonly used for the internal assessment is SWOT analysis, which investigates internal strengths and weaknesses and external opportunities and threats.

Environmental Scanning

A focused environmental scan is one that concentrates on specific information, such as how many consumers bought this particular product or that service in the last year.

External scanning, whether focused or more general, is essential for planning and forecasting the organization’s performance into the future.

Rakich, Longest, and Darr in 1992 outlined a series of categories that leaders can scan (environmental scanning) to keep current and relevant in the industry:

Macro-Environmental Forces:

Legal, and Ethical forces; Political (including government policy) forces; Cultural and Sociological (including values [beliefs and attitudes]) forces; Public Expectations (including community, interest groups, and media);Economic forces; and Ecological forces.

Health Care Environmental Forces [also called Micro-Environmental Forces]:

Planning and Public Policy (regulation, licensure, and accreditation) forces; Competitive forces; Health Care Financing (third-party payers, public and private, and financial risk); Technology (equipment, material, and supply entities) forces; Health Research and Education; Health Status and Health Promotion (wellness and disease); and [Integration with other health disciplines and organizations] Public Health (sanitation, environmental protection, etc…) forces.

Kotter’s 8 Steps of Organizational Transformation

Kotter’s eight steps are a sequence of leader actions and are cybernetic; that is, a feedback loop goes from the last step back to the first step.

Leaders of health organizations should consider the changes in the macro and micro environments by assessing them against the cost, quality, and access health assessment constructs for those community members whom they serve.

Establish a Sense of Urgency

Form a Powerful Guiding Coalition

Create a Vision

Communicate the Vision

Empower Others to Act on the Vision

Plan for and Create Short-Term Wins

Consolidate Improvements and Produce Still More Change

Institutionalize New Approaches

Decision Making and Decision Alignment

The decision-making process begins with identifying a question or problem—that is, an area needing improvement or an operational issue.

Problems, issues, questions, and operational challenges come to leaders and managers from many different people, both within and outside the health organization.

Thus there are three major domains of decision making:

Willful choice or rational models

Reality-based or garbage can models

Combinations of willful choice and reality-based models

Likewise, three types of decision-making methods are used:

Quantitative methods

Qualitative methods

Triangulation methods

Bounded Rationality In Decision Making

Decision making must occur within the bounded rationality of the environmental context in which the problem must be solved.

The bounded rationality for any problem spans the parameters in which the rational resources are available to the decision maker to accomplish positive outcomes.

Complicating this feature of human decision making is the fact that, although much more information is available today, decision makers may not have access to all the proper information regardless of tools available to them.

Decision Making

The tools of decision making are the methods by which technology and processes are managed within the organization.

Early careerists need to be aware of the various tools of decision making for future leadership study and practice.

Study (e.g., taking a course) and practice of both quantitative and qualitative decision-making tools are highly recommended.

This section highlights both methods as well as triangulation, which represents a combination of both quantitative and qualitative methods.

Facilitating the decision-making process in a group or organization is an essential skill of leaders and managers, and a working familiarity with decision-making tools is a prerequisite to such a skill.

Quantitative Methods

Quantitative methods include mathematical and computational analytical models to help leaders understand the decision-making situation (data turned into information, which is then turned into knowledge) and produce mathematical outcomes of solutions.

Models include multiple-attribute value and multiple-utility methods, linear programming, probability, and decision trees based on Bayes’ Theorem, and can be as complex as discrete and dynamic simulation.

Quantitative models take time and understanding of the important elements (also known as factors or variables) associated with the decision that needs to be made.

In most health organizations, quantitative models are gaining momentum, though qualified (highly trained and well-practiced) analysts who understand health processes and can perform a range of quantitative analyses remain difficult to find and hire.

Quantitative methods are critical to Six Sigma, which is growing in prominence in the health industry.

Qualitative Methods

Qualitative methods include a variety of tools, ranging from personal intuition, discussions with team members, informal interviews, formal interviews, focus groups, nominal group techniques, and even voting.

These methods are very useful in the decision-making process, because experience, intuition, and common sense can all be used by individuals as well as by groups.

Study and practice of qualitative methods are essential for leaders to facilitate decision making for themselves, groups, and organizations.

Triangulation

The combination of quantitative and qualitative methods results in triangulation, a more thorough (albeit more time-consuming) method with which to make decisions.

For example, a group may use nominal group techniques to develop a small set of possible solutions, then analyze each solution quantitatively.

From there the leader can make a decision.

Training the group or organization to use triangulation is a good practice for resolving (“resolution” in reality-based models) decisions.

Triangulation can also be used to develop standing operating procedures (“oversight” in reality-based models).

Lastly, triangulation can be used to make improvements to processes within the organization.

Kaizen theory utilizes triangulation in the context of continuous quality improvement.

Decision Making In Quality Improvement

Quality improvement is a distinct system characterized by seven phases:

(1) decision making (identification of improvement areas

(2) situational assessment

(3) information gathering

(4) decision making (what to do with assessment and information to improve)

(5) planning

(6) implementation

(7) Feedback

Where quality improvement systems exist, decision-making systems are embedded throughout the system of continuous quality improvement.

Total quality management (TQM), Kaizen theory, and the Shewhart cycle are all quality improvement strategies

Total Quality Management (TQM): Process (14 Steps)

Constantly strive to improve products and services.

Adopt a total quality philosophy.

Correct defects as they happen, rather than relying on inspection of end products.

Award business on factors other than price.

Continually improve the systems of production and service.

Institute training.

Drive out fear.

Break down barriers among staff areas.

Eliminate superficial slogans and goals.

Eliminate standard quotas.

Remove barriers to pride of workmanship.

Institute vigorous education and retraining.

Require that management take action to achieve the transformation.

Engage in proactive management.

Kaizen Theory

Kaizen theory is another Japanese-originated philosophy that focuses on continuous improvement throughout a system.

Kaizen theory is as much of an organizational culture (how things are done here) as a system that can be taught.

Kaizen, or continuous improvement, is a method that intensively focuses on improving every small detail of a process, recognizing that lots of small improvements, when executed continuously and embedded in the culture of an organization, can yield much more benefit than a few “big” programs.

Kaizen events are usually short-term projects, sometimes long only one week.

Benchmarks in Qualitative Decision Making for Leaders

1920: Dr. Walter Shewhart of Bell Telephone developed one of the first true control charts.

1950: Kaizen theory resulted in the increase in productivity in Japan after World War II.

1950–2010: W. Edwards Deming applied Shewhart’s principles of quality control in his role as a consultant to several organizations while visiting Japan after World War II.

Shewhart Cycle

The Shewhart cycle is also referred to as the Deming model and the plan–do–check–act (PDCA) cycle.

This continuous quality improvement model consists of a logical sequence of these four repetitive steps for CI and learning.

The Shewhart cycle is a continuous feedback loop that seeks to identify and change process elements so as to reduce variation.

The objective of this process is to plan to do something, do it, check for met requirements, and correct the process to achieve acceptable output performance.

Performance improvement teams (PIT) are often developed in health organizations to address specific issues and work on problem solving by implementing the Shewhart cycle.

Continuing Health Education: Competency Attainment

For the purpose of this summary, we suggest that:

Knowledge is recalling information with familiarity gained through education, experience, or association.

Comprehension is the understanding of the meaning of the information.

A Skill is the effective and timely utilization of knowledge, and finally, an Ability is the physical, cognitive or legal power to competently perform and achieve positive outcomes.

Many of the competencies an early careerist needs to start off a career may be learned in degree programs.

However, once an individual moves away from traditional education and enters into professional practice, most, if not all, of these capabilities are learned through CHE (Continuing Health Education).

What is Continuing Health Education?

Continuing Education (CE) involves activities, learning events, or individual efforts that result in a combination of recognized (and/or credentialed) and unrecognized (un credentialed) knowledge.

Formal CE are those activities that are sponsored through professional organizations or organizations of higher education that award credit towards certification, licensure, accreditation or apply to annual requirements for practice.

Informal CE are those activities, events and efforts individuals engage in to maintain proficiency or fill personal gaps in knowledge in personal practice.

The following charts briefly provide a snapshot of the advantages and disadvantages of each.

Healthcare Supply Chain Integration with Geographical Informational Systems

Key Concepts:

Widely used in urban and regional planning for decades, today geographic information systems (GIS) provide a ubiquitous backbone to many of the daily services contemporary residents in industrialized nations take for granted.

From the geographic positioning system (GPS) on a smartphone to the 911 emergency routing systems used by ambulances, these systems all build upon a GIS foundation to:

Identify two or more locations by spatial coordinates.

Measure the distance between these locations.

Offer routes between these locations.

Layer new strata of data such as traffic, road conditions, tolls, elevations, etc.

Analyze information for better decision-making

Healthcare Supply Chain Integration with Geographical Informational Systems

Standardization and Interoperability:

The informatics field in fact began as a branch of linguistics focusing on standardizing data terminology so that data could be better compared and used.

This central foundation of standardization applies to GIS as well: a common spatial coordinate system indexes data elements, which allows for the comparison of different locations and numerical data.

Within the healthcare branch of informatics, a single hospital may use a variety of health information technologies (HITs) such as stand-alone payroll, human resources, and electronic medical record systems divided into silos by department, software incompatibilities, and different staff workflows.

These divisions present a problem where these silos cannot communicate with one another.

Interoperability, the bridging of these divisions and the connection of these silos, represents why GIS can be an asset.

Healthcare Supply Chain Integration with Geographical Informational Systems

Bringing Tools and People Together in Transformed Workflows:

Employees, tools, and workflows must be matched to work efficiently.

Evidence from both clinics’ successful and failed adoptions of electronic medical records (EMRs) points to the critical need to adapt employee workflow to using new digital tools when replacing paper records.

Simply adopting a new health information technology and expecting it to work with a system designed around paper charts is likely to lead to delays if not outright chaos.

Instead, it is critical to transform the work environment to incorporate new data technologies with new workflow procedures.

Look for this same critical element in this chapter’s case study.

Healthcare Supply Chain Integration with Geographical Informational Systems

Lean Supply Chains:

This critical workflow adaptation component to supply chain management is also found in Toyota’s kanban (also called the Just-In-Time (JIT) system) manufacturing approach and subsequent expansions to service industries such as Lean Sigma Six Plus.

Toyota engineer Taiichi Ohno developed the kanban (signboard in Japanese) system.

In subsequent years, the kanban method and other concepts have coalesced around the lean approach to supply chains, which focuses on reducing waste in terms of costs, time, and efficiencies.

While these concepts originated in the manufacturing sector, the transportation and logistics industries have incorporated many of them into their business models.

In turn, logistics companies are using GIS as a critical tool in managing their lean supply chains.

In fact, GIS is so regularly used now by major shipping firms that an entire subfield of GIS has developed around GIS-T (Geographic Information Systems –Transportation).

Healthcare Supply Chain Integration with Geographical Informational Systems

GIS and Healthcare:

While GIS remains relatively little-used in healthcare outside of its integration into 911 systems, innovative use of this tool is growing among healthcare systems and health-related research.

Coupling:

Another goal of supply chain management focuses on improving coordination between suppliers outside an organization and workers within an organization.

Barut, Faisst, and Kanet call this relationship coupling and research ways to measure how well organizations couple through increasingly inexpensive management technologies such as GIS.

Agility:

The ability of a supply chain to express flexibility when one or more component organizations or workflows run into problems.

Summary

Planning and decision making are essential to efficient, effective and efficacious healthcare supply chain operations and strategies.

Leaders and managers must structure and facilitate plans that integrate well with the healthcare organization’s strategic plan and must make consistent decisions in alignment with those plans.

This chapter provides an overview of planning, improvement strategies, metrics, regulatory compliance and decision making.

These constructs should be reviewed and placed in context for integration into the supply chain’s overall operational plan for providing the ‘technology of care’ to the caregivers.

Discussion Questions

Describe the concepts and models of planning and decision making in the context of the healthcare supply chain.

Distinguish the differences between planning and contingency planning.

Merge principles of leadership, planning and decision making to develop a personal plan for operating in a fast paced healthcare supply chain environment.

Exercises

Describe the concepts and models of planning and decision making in the context of the healthcare supply chain in ½ page.

Distinguish the differences between planning and contingency planning and what are the most important contingency planning elements and why?.

Merge principles of leadership, planning and decision making to develop a personal plan for operating in a fast paced healthcare supply chain environment; what metrics and improvement tenets would you utilize?

Journal

Answer the following:

Describe the planning process in one page or less.

What metrics would you use and why, to lead, manage and plan within the context of the healthcare supply chain?

Considering chapters 9 and 10, what did you find most helpful in your thinking about leading, managing and planning within the healthcare supply chain?