Bullwhip Effect In Healthcare Sector

Bullwhip Effect In Healthc ar benaIn Supply Chain management, Bullwhip pith has attracted some considerable importance in the FMCG sector in the last 20 years. The phenomenon Bullwhip Effect shows how clear changes at the customers end contain tremendous impact on the operations back there in the ambit. The cause behind this act is mainly attributed to the increasing drive disagreement in the yield mould of a function. We consider the number of companies taking part in a maven interpret drawing string. Each of the company gets the order from its immediate downstream company to be fulfilled. In Bullwhip way out the orders to the suppliers tend to buzz off a larger variance than gross sales to the buyer. This charter distortion then gets amplified man propagating upstream.The paper mainly focuses on how the Bullwhip effect the batten downing of the beseech and make out and the main causes leading to this. It alike focuses on the PG discipline study to unders tand the Bullwhip effect and the steps taken to dampen the bullwhip effect. Further it aims at quantifying the bullwhip effect and reducing its impact on the return chain.AcknowledgementI am thankful to Mukesh Patel initiate of Technology Management and Engineering (MPSTME) for giving me this opportunity to understand the Bullwhip Effect and the study causes and the PG case. Further more(prenominal) serving us understand the various techniques and procedures for writing a research project.I would also like to designate my sincere gratitude to my college mentor Prof. Jinu Kurian for her continuous guidance and comport and macrocosm acquirable at all judgment of convictions whenever the need whitethorn arise. I would also like to thank Prof. Prasad Chakrabarty for his help and support in the project. tabularise of ContentsIntroductionThe bullwhip effect occurs when the assume order discrepancy in the write out chain is amplified as they moved upstream in a supply chain. D istorted culture from single end of a supply chain to the opposite may lead to tremendous inefficiencies. Companies can effectively deal with the bullwhip effect by thoroughly understanding its underlying causes. Organizational leaders ar implementing various innovative strategies that bind new challengesintegrating new information systemsdefining new organizational inter relationshipsimplementing new fillip and measurement systems.At macroscopic level, Bullwhip Effect gene grade inefficiencies in production plan, sourcing, capacity utilization, distribution and the profit generation. plot of land if we take a look at the direct level it induces additional bloodline which is placed un befittingly to maintain the serve levels. It also reduces the performance level by decreasing the incoming cash and the dominance drop revenue. It can even dilute any companys competitive strategies.2 situationors have changed the landscape of supply chain management in the last few years significantly.Availability and use of the technology and software applications to exit capture and sharing of information across a supply chain mostly through extranets change magnitude indulgence of members of the supply chain in order to move towards to put aside the traditional arms-length relationships amongst severally other and in its place move towards closer, partnership-type arrangements. Again, the networks everyplace which these collaborations take place must include the unavoidable levels of performance, scalability, security and reliability to realise these benefits to their maximum potential.Problem StatementTo analyse the Bullwhip Effect in health care sector and to find out its causes, consequences and cures.SignificanceGlobal competition in the world food market directly contains many challenges to achieve adegree of predictability in the supply chain and remove the impact of Bullwhip Effect.Researchers have examined the bullwhip effect and some models to red uce it, however a very few research has been done on analysing the Bullwhip Effect in healthcare sector and to find out its causes, consequences and cures quantifying the effect of bullwhip and itsMeasurement still carcass an exigent research path.Research MethodsA case-study based approach was employed to conduct the research. Data were collected primarily through interviews, observations and archival sources. At the infirmarys, Interviews were conducted, in person, with doctors, gives, administrators, and other infirmary supply. At the diagnostic laboratory, own(prenominal) interviews were conducted with the CEO, pathologists and other lab technicians. As far as information gathering is concerned, we decided to employ an informal, minimally structured, non-directive interview approach, enabling to minimize the influence of the assumptions..Literature ReviewFluctuations in consider have a varying graph when we compare from industry to industry. Driven by seasonal subscribe to and business cycles, preen industry faces major demand adjustments, while the diaper market is subjected to constant demand in the market arena. Due to misjudgement of demands, the big players in the retail market can be subjected to take stock shortages or surpluses. just now given the compriseency of demand in the diaper market the diaper supply chain should be more efficient and accurate. But it isnt the case. The diaper market even with the reliable demand patterns isnt able to match the demand-production matching. The major cause to this supply chain inefficiency can be subjected to Bullwhip Effect. The term was coined by Procter Gamble who notice amplification in the information distortion as the information of the order travelled upstream in the supply chain.Bullwhip effect or Whiplash effect can be majorly seen in the forecast driven distribution channels. It indicates a wish of synchronization among the members across the supply chain. Even if there is a small f luctuation in the customer sales, it reflected upstream in an amplified form. Because of this supply patterns does not match the demand patterns resulting in inventory surplus at various stages of the supply chain.CUsersIndia background knowledgeblwhp.jpgAs the customer demand would be seldom perfectly stable, businesses should forecast demand in order to match the demands with the production and managing their inventory levels.Some of the major reasons behind bullwhip effect are-Forecast ErrorsOverreaction to backlogsLead time variabilityNo communication and no coordination along the supply chain membersDelay in information and material f scurvyPrice fluctuations harvest-home promotionsOrder batching stabbing material orders from ProcterGamble to its suppliers fluctuated over time. On get along noticing it was found that farther down the chain, when sales at retail stores were studied, it was found that the fluctuation which was present, were small. It is reasonable to assume that the consumers of the diapers at the last stage of the supply chain used them at a steady rate. Although consumption at the end product was stable, orders for raw material were toweringly variable, increasing be and making it serious for supply to match demands.Lack of coordination amidst supply chain members also results if information distortion occurs within the supply chain. Considering the Bullwhip effect PG observed in the diaper supply chain. As a result of the bullwhip effect, orders PG receives from its distributors are much more variable than the demand for the diapers at retailers. The lack of the supply chain coordination between members has an adverse effect on manufacturing represent. It ontogenys the manufacturing cost in the supply chain. PG and its suppliers must satisfy a stream of orders that is even more variable than customer demand. ProcterGamble responded to the increase change by either building purposeless capacity or by holding excess inventory, both of which increase the manufacturing cost per unit produced. It even increases the transposition lead time in the supply chain. The increased variability due to bullwhip effect makes scheduling at PG and supplier platformts much more difficult as compared to a situation with level demand. There are times when the capacity which is available and inventory cannot supply the orders coming in. This results in high(prenominal) substitute lead times in the supply chain from both PG and its suppliers.It even hurts the level of product availability and results in more stock outs in the supply chain. Very high fluctuations in orders make it difficult for PG to supply all distributor and retailer orders on time. This increases the likelihood that retailers result run out of stock, resulting in lost sales for the supply chain. It also leads to an increase in the inventory costs. To handle the increased variability in demand PG has to carry a higher level of inventory than would be needfu l if the supply chain was coordinated. As a result, inventory costs in the supply chain increase. The high levels of inventory also increase the warehousing space needed and thus the warehousing cost incurred.It impacts the transportation cost in the supply chain. The transportation pick outments over time at PG and its suppliers fluctuate with the orders being filled. As a result of bullwhip effect, transportation requirements fluctuate significantly over time. This raises transportation cost because surplus transportation capacity needs to be maintained to cover high demand periods. It also leads to the increase in labour costs associated with shipping and receiving in the supply chain. comprehend requirements for shipping at PG and its suppliers fluctuate with orders. A standardised fluctuation occurs for the labour requirements for receiving at distributors and retailers. The various stages have the cream of carrying excess labour capacity in response to the fluctuation in orders. Either option increases total labour cost.PG estimated that due to the manual interventions required in their process of ordering, billing and shipment systems, each(prenominal) deal to its customers cost between $35 to $75 to process.Sharing point-of-sale (POS) data across the supply chain can help reduce the bullwhip effect. A primary cause for information distortion is the fact that each level of the supply chain uses orders to forecast the future demand. Given that orders received by polar levels vary, forecasts at contrary levels also vary. If retailers share POS data with other supply chain stages, all supply chain stages can forecast future demand based on customer demand. Sharing of POS data helps reduce information distortion because all stages now respond to the kindred change in the customer demand. Sharing aggregate Point Of Sale data is sufficient to reduceinformation distortion. PG has convinced many retailers to share demand data. PG in turn shares the dat a with its suppliers, improving coordination in the supply chain.In a continuous replenishment programs (CRS), the wholesaler or the manufacturer replenishes the inventorey regularly based on Point of sale data. In its simplest form, CRS seeks to bequeath more accurate production planning of inventories and also matching of supply and demand. Success with continuous replenishment programs is achieved when production planning has become demand-driven on an end-to-end basis throughout the supply chain.. Vendor-managed inventory (VMI) is a family of business models in which the buyer of a product provides certain information to a supplier of that product and the supplier takes full responsibility for maintaining an agreed inventory of the material, usually at the buyers consumption location (usually a store). A third gear-party logistics provider can also be admitd to make sure that the buyer has the required level of inventory by adjusting the demand and supply gaps. PG now employs vendor-managed inventory (VMI) in its supply chain, commencement with its supplier, 3M, and its customer, Wal-MartIn VMI, packaged-goods behemoth Procter Gamble (PG) initiated a value determine scheme for sales to retailers. Value pricing was PG label for every daylight low pricing (EDLP), a pricing system under which retailers are charged a consistent price rather than a high baseline price punctuated by sporadic, occult discounts. PG had many reasons for converting to EDLP. Its sales force had grown to rely on discounting to drive sales and the use of plenteous discounts had spiralled out of control, cutting into earnings.BackgroundSMS Hospital, operating in Jaipur, is one of the largest government healthcare providers in Rajasthan. It consists of more than 500 beds and offers healthcare services ranging from a 24 hour accident and emergency service, to subacute aesculapian and surgical care, operating menage suites, intensive care, ocus on cardiac and orthopedics areas and head injury and orthopedic related trauma and community care. The hospital services more than 40,000 affected role role admissions and an average length of placate of 3.62 days for all patients.There are10 operating rooms (OR) with state of the art equipment, in-patients have hospital wards, acute cases beyond normal post-operative hospital care have rehabilitation unit for recovery and related give earant services in the hospital facilities. These rooms are being used for major inpatient procedures. On an average of about 27,000 operations are performed in these rooms in a year. Specialty and staffed with suitably fitted nurses and technicians organizes 500+ beds in the hospital. The operational Room Management persona (ORMD) is the central division, which faces fooling challenges of managing and allocating the staff and equipment so that surgeries can be performed in an efficient, cost effective, and safe manner. The equipment that is owned by the hospital may eithe r be dedicated to a landing field or be shared across theatres. The Operating Room staff is comprised of registered nurses, nurse assistants, scrub technicians and unit secretaries and an Operating Room nurse supervises all these. Equipment to be used for Operating Rooms may either be owned by the hospital or be procured from outside on a loan/hire basis. The Operating Room Management Department is responsible for assignment of theatre suitable for the scheduled surgical process and ensuring the availability of staff and equipment when needed.Quality and cost of patient care implications are on overstaffed, undermanned, and unbalanced nursing teams. The hospital has adopted a loan-blend strategy to meet its nurse requirements in both wards and Operating Rooms. The hospital has employed a mathematical group of permanent, full time nurse staff, which is also, complemented by a bank of casual, part time nurses which are available at short notice. Also, the hospital also has made so me arrangements with several private agencies, which are know for providing qualified nurses for short periods to hospitals, on a temporary basis. Fifty % of the hospitals requirements) in the terms of nurse requirements are usually been met by permanent staff, thirty% by part time nurses and twenty% from agency staff.The hospital havent employ any specialist/surgeon, but only has a small group of physicians for overall inadvertence of the wards. Instead, it has arrangement with a large group of adviser surgeons who hold privileges to avail of the hospital facilities for treatment of their patients. The hospital derives its revenues from the fees charged for the use of its facilities ORs, hospital beds and other services from the patients. In most cases hospital charges are borne by patients medical insurance providers and the hospitals revenue is based on negotiated rates with these firms.Value ChainFigure 1 illustrates a schematic description of SMSs service value chain. As sho wn in the figure, the multi-stage process begins with the patients consultation with his or her primary care physician. Upon receiving a referral from the general practitioner to visit a medical specialist, the patient result then be assessed by a specialist. This stage does not involve the hospital and may consist of several visits to the doctors office and diagnostic laboratories, deals with the assessment of patients condition and treatment options. A determination of the need for surgery results in the addition of the patient to the doctors list of patients requiring surgery/hospitalization. Typically, specialist doctors have privileges at several hospitals in the area, and the choice of hospital for surgery is determined by a number of factors that include cost, patient preference, case complexity, wait involved, facilities and other services provided by the hospital. Following the choice of hospital, the patient is scheduled for surgery by assigning a slot in one of the docto rs theatre sessions at the hospital. It is not uncommon for electoral surgeries to be scheduled several weeks to a few calendar months in advance. The schedule for each session along with patient and surgery details is expected to be communicated by the doctors office to the hospital well in advance to enable the hospital to make adequate arrangements. The surgeons operating list is not frozen and is high-power with additions possible at a later stage (in some cases a few hours in advance) and the hospital is expected to be responsive and be able to provide the requisite support of staff, equipment and supplies.Surgery represents the third stage of the value chain and exaltation Marys hospital is responsible for providing required support services. These include staffing the theatres with qualified nurses and technicians, and making available all equipment and supplies needed. The hospital is also responsible for pre-operative care of the patient and getting the patient ready for surgery and for post-operative care. Insufficient capacity and delays in these phases can result in blockage and ravenous of theatre resulting in underutilization of ORs with consequent adverse impact on hospital costs and efficiency. Post-operative care in hospital wards and in subsequent rehabilitation areas, if necessary represent the fourth and fifth stages before the patient is discharged and exits thehospital system. Constraints on bed capacity in wards can lead to fewer surgeries being scheduled resulting in disappoint theatre utilization. This is in contrast to the rehabilitation services, where capacity shortage may only lead to patients being off-loaded to other facilities owned by competitors, thereby resulting in loss of potential revenue.Planning and Scheduling at SMS HospitalPlanning and scheduling at Saint Marys hospital is similar to other hospitals in Australia with annual theatre plans forming the basis for hospitals activities. The theatre plan involves assignm ent of theatre sessions to consultant surgeons and essentially defines the demand for hospitals services. A half-day slot is considered the basic unit for this purpose and thus each theatre has a capacity of 10 sessions per week, based on a five day week. As set forth earlier, surgeons expect hospitals to provide complete flexibility in organizing the activities within their sessions and hence assignment of a theatre session to a surgeon commits the hospital for providing the necessary staff and equipment for operation and post-operative care, and hence the hospital workload is a direct consequence of the theatre plan.In practice, theatre planning at Saint Marys begins ternion to four months in advance, in September/October for the following year. The plan is developed in consultation with the surgeons and varies teensy from year to year, except for changes to accommodate vacation periods of surgeons and other planned absence seizures. The plan can be characterized as cyclic with effort to evenly spread out sessions assigned to individual surgeons. Further, to the extent feasible, weekly schedules are adopted. For example, a surgeon with 50 sessions would be assigned one session per week, usually in the same time slot every week (say, Monday morning). One feature of session plan at Saint Marys Hospital that merits special mention relates to the practice of concentration of sessions assigned to particular specialty. As a result, we find, sessions identical to diverse specialties peaking on different days of the week. Such practices are not unique to Saint Marys and are kinda common at other hospitals in Australia.The annual session plan forms the basis for nurse and technician staffing in the hospital. The labor cost of nurses and technicians is perhaps the most significant controllable operating cost at Saint Marys and directly impacts the hospitals financial viability. Staffing plan for nurses in the OR theatres is prepared for each calendar month on a monthly basis, two weeks in advance to conform to regulatory requirements. The initial plan is developed on the basis of the session plan. The nurse schedule is revised and frozen only a day in advance, at which time the requirements are assessed based on surgery lists available in the hospital. Besides adjustments for providing the required number of qualified nurses, the final schedule takes into account deviations from the initial plan (for example, absence due to sickness, or inability to schedule the nurse due to excess overtime on the preceding day etc.) At this stage there is only very limited flexibility in repute of permanent, full time staff and the nurse scheduler relies on part time staff, supplemented by supply from foreign agency to meet the requirements. As mentioned earlier, current practices at Saint Marys hospital result in 20-25% of nursing needs being met with agency sources. In monetary terms, the proportion is higher due to higher rates paid for the temporar y staff. Nurse staffing in wards is similar and schedules are frozen only a day in advance.ObservationsOur interviews with doctors/surgeons indicated that in a majority of specialties there is no discernable pattern in the demand for nonappointive surgeries. This is in contrast to illnesses such as flu, hay fever that exhibit pronounced seasonality. Thus, daily demand for elective surgery end customer demand can be reasonably be described as fairly uniform with no seasonality (day of the week, month etc.) and low to moderate variability. Figure 2 describes the pattern of admissions (which corresponds to demand) for orthopaedic surgeries at Saint Marys hospital by day of the week. The figure is based on data for one year and excludes the holiday period (mid-December to mid-January) in Australia during which most doctors avoid scheduling elective surgeries. The data in Figure 2 shows mild seasonality by month (admissions range from a low of 332 to a peak of 512 with mean of 470) and high variability by day of the week. Excluding the weekends, the average daily admissions range from a low of 58 on Fridays to a peak of 123 on Wednesdays. The pattern is similar for other specialties, except for the location of the peak. While in Figure 2 the peak occurs on Wednesdays and Thursdays, for other specialties it exponent occur on other days of the week. Taken in conjunction with our premise that end customer demand is fairly constant, Figure 2 suggests strongly presence of phenomena similar to the bullwhip effect. In the remainder of this section we discuss briefly the impact of this pattern on hospital performance operational and financial.First, increased variability in the number of surgeries performed directly impacts the demand for post-operative services in the wards. Consequently, on peak days, shortage of beds makes the wards the bottleneck, thereby seting the number of surgeries and reducing the theatre utilization and hospital throughput, which in turn lea ds to inflict revenues and lower operating profits. While the hospital is a not-for-profit organization, operating profits represent one of the observe supporting sources for financing investments in equipment and facilities, and lower levels or absence of operating profit can severely restrict the hospitals ability to provide state-of-the-art high quality service.Second, the demand for nursing services both in theatres and wards is directly affected by higher variability and results in higher labor costs. With Saint Marys strategy of meeting the nursing demand with a mix of full time, part time and agency staff, higher variability of demand translates to the need for higher levels of flexibility and larger proportion of casual and agency staff. higher(prenominal) wage rates for these categories increases operating costs and leads to lower profits.Third, SMSs reliance on flexible (part time and agency) staff affects the hospitals operating performance in more subtle, but signifi cant manner. Higher levels of temporary staff leads to back up changes in the composition of support staff assigned to each theatre, thereby inhibiting development of cohesive support teams. Consultant surgeons in our interviews mentioned this factor repeatedly as the primary cause of inefficiencies in theatre, requiring more operating time and reduction in efficient use of theatre capacity. The role of cohesive support teams in improving OR efficiencies is well known and has been noted in many other hospital environments. In the absence of such a support team, the surgery list scheduled for each session tends to be shorter (thus reducing hospital revenues). Alternately, with normal list the theatre time pull up stakes be higher than planned, resulting in overtime and increasing operating costs. In either case, this practice adversely affects hospitals profits. Furthermore, this factor influences the doctors choice of hospital, command prompt use of Saint Marys for more complex c ases requiring its facilities. For simpler cases, the doctors tend to choose other hospitals with more efficiently nonionic OR theatres, perhaps with more limited range of services. As the more complex cases typically involve higher costs, this behavior has an adverse impact on Saint Marys finances. Under the Australian system the fees account payable (to the hospital and doctor) are based on predetermined rates for each class and do not depend on the case complexity within each class.To summarize, increased variability in the demand for elective surgeries at Saint Marys hospital results in lower efficiencies, higher operating costs and lower revenues leading to lower profits. Thus, the presence of bullwhip effect leads to degradation of performance as in the case of construct goods reported in the literature. While this is intuitive and not surprising, it is interesting to note the dynamics are different from those observed in manufacturing higher levels of inventories and short ages.Macintosh HDUsersvasvigakkharDesktopScreen Shot 2012-12-29 at 2.09.56 AM.pngMacintosh HDUsersvasvigakkharDesktopScreen Shot 2012-12-29 at 2.13.36 AM.pngMethods for coping with the Bullwhip EffectThe preceding section highlighted the different causes of the bullwhip effect in the healthcare sector and identified strategies to mitigate the detrimental impact of the effect. We briefly summarize the strategies (see Table for a summary)(i) Reducing precariousness In order to minimize or eliminate bullwhip effect, it is important to reduce uncertainty throughout the service value chain. If information about customer can be centrally managed and if each stage of the service value chain can be provided with latest information in a timely manner, it will help eliminate duplication of effort at different stages and also ensure data consistency across all groups that require that data. It is also critical that dynamic updating of information is performed which will greatly help reduce u ncertainty.(ii) Reducing variability There is inherent variability in the customer demand process and any effort that can be taken to minimize this variability will help reduce the overall bullwhip effect. Also, localized practices that lead to increased variability in demand at any of the stages should be eliminated with better coordination. Use of good forecasting methods will also assist the reduction of variability.(iii) Developing strategic partnerships The bullwhip effect can be minimized by developing key strategic partnerships with different links in the service value chain. For example, in case of hospitals, the hospital giving medication has to forge strategic alliances with medical specialists. These partnerships will change the way in which the information is shared and will help foster better coordination between the two parties. Although this may not fully eliminate bullwhip effect, it will go a long way in reducing the effect.(iv) Realignment of incentives One pri me reason for the lack of coordination and meaningful information sharing is that the different entities are evaluated on the basis of different criteria and receive rewards for different activities. The evaluation and reward system should be modified to stress cooperation across stages and so that the planning is performed on system-level objectives and not on division/local level objectives.(v) Improving coordination across stages of service value chain To reduce the bullwhip effect, it is also important to ensure coordination across stages that are facilitated and improved.Summary and Future ResearchIn this paper we have identified and described a phenomenon in healthcare industry that is similar to the bullwhip effect observed in the manufacturing sector which results in amplification of demand variability upstream in the service chain. Not surprisingly, this distortion likewise leads to performance degradation. However, the similarity with the manufacturing sector does not ext end much further since the causes and the impact are somewhat different.For example, while bullwhip effect in manufactured goods results in higher levels of inventory and shortages, in hospitals it leads to lower levels of throughput, higher operating costs and longer patient waits. Hence, initiatives and strategies for minimizing the bullwhip effect and its impact require a different approach that addresses directly the root causes. Our study also indicates that the potential for performance improvements is quite significant. While our study focused on hospitals and other allied institutions in the health sector, we conjecture that a similar phenomenon may be present in other service industries. For example, billing practices in consumer utilities (electricity, flub etc) and credit card services with monthly cycles leads to variable unbalanced loads in certain segments. Similarly, scheduling practices in auto repair industry result in some variability amplification. Together this suggests that a more detailed study of the bullwhip phenomenon in services is warranted and may lead to order-of-magnitude performance improvements similar to those cognise during the past two decades in the manufactured goods industries.