OBSTACLES FOR INVENTORY MANAGEMENT PERFORMANCE
IN THE HEALTHCARE SECTOR
Master thesis, Msc, Supply Chain Management
University of Groningen, Faculty of Economics and Business June 22, 2018
Jesper Jan Kloppenburg Student number: 3087654 e-mail: J.J.Kloppenburg.1@student.rug.nl Supervisor/ university Prof. Dr. J. de Vries Co-assessor/ university A.C. Noort, MSc Supervisor/ field of study
K. Visser
Medisch Centrum Leeuwarden
Acknowledgment: Gratitude goes out to the people who have helped me in conducting and writing this thesis research. There are too many to enumerate all of the people who assisted me;
however, their contributions are gratefully appreciated. Special appreciation goes out to: From the university: Supervisor Prof. Dr. J. de Vries for his constructive and supportive feedback, I enjoyed and gained a lot of insights from our sessions. And A.C Noort, MSc for his
time invested and perceptive questions. Additionally, I would like to express my gratitude to fellow student, J. de Jong for his support and feedback. From Medisch Centrum Leeuwarden: K. Visser, R. Schievink and the department of asset management for providing me with documents
and access to people and the organization. But also, for making me feel welcome in the organization and providing me with a place to work.
ABSTRACT
The surging and ever-increasing cost of healthcare causes increased pressure on healthcare providers to evaluate and cut costs of their operations. It is paramount to improve inventory management performance in order to drive down cost. However, improvement methods for inventory management from the industry do not seem to have the same effect in healthcare. Existing literature points to the interplay between stakeholder interests, unpredictable and variable service requirements, and healthcare information technology as possible reasons for the lack of inventory management performance. This study aims to explain this interplay with answering the following research question: How does the interplay between stakeholder interest, variable and
unpredictable service demand and healthcare IT influence inventory management performance in the healthcare sector? This is done by exploratory research conducted as a single case study at a
non-academic hospital located in the north of the Netherlands. The primary data source is interviews. This study provides multiple conclusions about inventory management performance. First and foremost, this research displays that performance is primarily influenced by the interplay between the three previously mentioned concepts. The primary obstacles that affect these concepts are managing ability of managers, poor understanding of each other’s interests, environmental influences, lack of planning, lack of data collection, no data-driven decision-making, lack of integration, system limitations and overburdening of the treatment staff. Further research is needed to investigate how these obstacles can be relieved.
Table of Contents
TABLE OF CONTENTS 3
1 INTRODUCTION 4
2 THEORETICAL FRAMEWORK 6
2.1 HEALTHCARE SECTOR 6
2.2 INVENTORY MANAGEMENT IN THE HEALTHCARE SECTOR 7
2.3 OBSTACLES FOR INVENTORY MANAGEMENT PERFORMANCE IN THE HEALTHCARE SECTOR 8
2.4 CONCEPTUAL MODEL 12
3 RESEARCH METHODS 13
4 RESULTS 16
4.1 BACKGROUND 16
4.2 STAKEHOLDER INTERESTS 20
4.3 VARIABLE AND UNPREDICTABLE NATURE OF SERVICE REQUIREMENTS 22
4.4 HEALTHCARE IT 23
4.5 INTERPLAY 25
5 DISCUSSION 26
6 CONCLUSION 33
REFERENCES 35
APPENDIX A -INTERVIEW GUIDE 40
APPENDIX B – CODING TREE 46
Tabel
TABLE 3.1:OVERVIEW OF INTERVIEWEES 15
Figure
FIGURE 2.1:CONCEPTUAL MODEL:THE INFLUENCE OF THE ORGANIZATIONAL CONTEXT, SERVICE REQUIREMENTS AND IT ON INVENTORY
MANAGEMENT IN THE HEALTHCARE SECTOR. 13
FIGURE 4.1:USAGE OF MOBILE EQUIPMENT 17
FIGURE 4.2:BUY-IN PROCESS FOR MOBILE EQUIPMENT 18
FIGURE 4.3:STAKEHOLDERS INVOLVED IN RELATION TO EACH OTHER AND THE PATIENT 19
FIGURE 5.1:STAKEHOLDER INTERESTS AND PERCEIVED POWER 27
FIGURE 5.2:MECHANISM OF STAKEHOLDER INTEREST 28
FIGURE 5.3:MECHANISM OF VARIABLE AND UNPREDICTABLE NATURE OF SERVICE REQUIREMENTS 29
FIGURE 5.4:MECHANISM OF HEALTHCARE IT 31
1 INTRODUCTION
The cost of inventory in hospitals is between 10% and 18% of total revenue (Jarett, 1998). Considering the surging pressure on healthcare providers to cut costs, one would expect
inventory management to be a priority for cost reduction practices (Brandao de Souza, 2009). However, as Nicholson, Vakharia and Erengue (2004) point out, healthcare organizations have made little progress in improving their inventory management, despite the potential for cost savings. In addition, Volland, Fügener, Schoenfelder and Brunner (2017) argue that inventory management is underexposed both in practice and theory, and they suggest this might be because of its supportive role and high complexity.
Callender and Grasman (2010) describe that hospitals maintain high inventory levels; they attribute this to poor inventory management and the practice of using personal judgment for determining safety stock levels instead of using quantitative or scientific models. These unsophisticated methods are especially particular since there is, as in the industrial sector and other services, an increased pressure on healthcare providers to improve performance and decrease cost. To do so, companies have increasingly relied on improvement methodologies from manufacturing, such as Lean, business process reengineering (BPR) or other methods (Proudlove, Moxham & Boaden, 2008; Radnor, Holweg & Waring, 2012). Implementation of these methods has had a significant impact on quality, satisfaction and the cost of and time spent on activities (Radnor & Boaden, 2008). However, Joosten, Bongers and Janssen (2009) and Radnor et al. (2012) find that methods from the industrial sector often are suboptimal in improving performance in the healthcare sector: they improve one process but decrease
and an opportunity for the healthcare sector (Bates et al., 1998; Poon et al.,2006). This research investigates inventory management performance in the healthcare sector and how it is influenced by the interplay of stakeholder interests, unpredictable and variable demand for services, and healthcare IT. The goal of this paper is to shed light on the complex underlying mechanism of variables that explain inventory management performance and how they interrelate to each other. This is done by answering the following research question: How does the interplay between
stakeholder interest, variable and unpredictable service demand and healthcare IT influence inventory management performance in the healthcare sector?
For the past two decades, inventory management has been recognized as a key direction for decreasing the rising cost of healthcare (Dacosta‐Claro, 2002). A recent study by Volland et al. (2017) supports this view. They find that costs for logistic operations, including inventory management, are the second-largest cost for hospitals, making up 30% of the total running cost. In their study, they estimate that half of these costs can be eliminated by improving efficiency. This would mean a significant cost reduction for operations as a whole. One important upside of reforming inventory management is that there is no direct link between reducing cost and quality of care (Jarett, 1998). In line with this, a study by Jackson Healthcare (2014) finds that several logistics activities (e.g., restocking and searching for resources) are performed by nurses or medical staff, limiting their available time for patient care. If these activities were less time-consuming or eliminated, it would lead to direct improvement for time available for patient care. While the upside of improving inventory management is clear, as demonstrated by the above-mentioned studies, improving inventory management in practice proves to be challenging (Nicholson, Vakharia & Erenguc, 2004). Existing literature on the topic of inventory
management in healthcare is both scarce and predominantly focused on quantitative methods and tools (e.g., economic order quantity or enterprise and material resource planning). Scholars argue that there is a need for more qualitative research that unveils how certain concepts or
characteristics work in practice (Nicholson, Vakharia & Erenguc, 2004; De Vries, 2011; Volland et al., 2017).
management performance and how they function. They can apply this knowledge to (re)design their processes in a way that alleviates these obstacles and ensures good inventory management performance. To identify the key constructs of inventory management performance in the healthcare sector and elaborate on the interplay between them and inventory management performance, the theory-building case study method is used.
The remainder of this paper consists of a theory chapter, where existing literature on the topic is discussed; a method chapter; a results chapter; and a discussion and conclusion chapter, where conclusions, new insights, limitations and directions for further research are presented.
2 THEORETICAL FRAMEWORK
This research aims to pinpoint the key constructs that influence inventory management performance, elaborate on their interplay and analyze how this interplay influences inventory management performance in hospitals. Inventory management performance is defined in this research as the performance of the inventory system, encompassing user satisfaction, patient safety, efficiency, material availability, cost and adherence to budget (Rouse, 2008; Volland et al., 2017; Aptel and Pourjali, 2001; Burns et al., 2002; Callender & Grasman, 2010; Moons et al., 2018). This theoretical framework uses existing literature to pinpoint the concepts that can explain performance and make assumptions about their interplay. These assumptions lead to a conceptual understanding about the relationship of and interplay between variables. The proposed conceptual model is then compared and further developed using data collected and analyzed in this research.
2.1 Healthcare Sector
1990). The success of these improvement plans in healthcare is ambiguous. On the one hand, there have been some successes, which have led to significant improvements such as a 48% increase in flow time in cancer treatment in Scotland, savings of $3.1 million in the Royal Bolton Hospital and a 90% drop in infections after a change in intravenous line insertion procedures at Pittsburgh General Hospital (Guthrie, 2006; Radnor, Walley, Stephens, & Bucci, 2006; Fillingham, 2008). However, these methods are not turnkey solutions. As Joosten et al. (2009) point out, often an improvement for one process degrades performance for a different process. In line with this reasoning, Radnor et al. (2012) argue that improvement methods are only implemented as a “tool” to improve one specific process, but a system-wide approach is missing, which leads to suboptimal and unsatisfying results. From these studies it is clear that there is a need to improve, but also that it is in practice difficult to turn this desire into effective practice. Moeller (2010) attributes part of this difficulty in healthcare to the industry being based on different characteristics. For example, the healthcare sector has different objectives; its objective is the treatment of patients instead of profitability. This view is supported by Joosten et al., who also attribute part of this difference to the numerous stakeholders involved; variable and sometimes contradicting interests make the stakeholder landscape in healthcare complex. Boonstra, Versluis and Vos (2014) add that the healthcare sector is complex because of processes requiring a high degree of integration, which makes them unclear and hard to understand.
Bate, Mendel and Robert (2008) point out that the existing literature on healthcare improvement methods are part of the problem. They argue that most literature is primary focused on what methods work, but not on why something works. The aforementioned arguments illustrate the urgency with which the healthcare sector needs to address the rising cost of healthcare. It is self-explanatory that processes need to become more efficient and waste needs to be reduced. Notwithstanding, the healthcare sector is a highly complex and challenging environment with numerous factors and different characteristics that have to be carefully considered.
2.2 Inventory Management in the Healthcare Sector
argue that material management is one key force used to cope with the increasing cost of healthcare. They have concluded that after personal costs, costs for logistical operations such as inventory are the biggest costs, making up more than 30% of hospitals’ running cost, and they estimate that about half of the cost of logistics can be eliminated through efficient logistics management, leading to significant cost reduction for all operations. Despite the potential that lies in improving inventory management, little progress has been made in this area of the healthcare sector, even though an estimated $23 billion in cost savings is to be gained from improved inventory management (Callender & Grasman, 2010).
Volland et al. (2017) provide some direction for a possible cause in pointing out that, unlike in other industries, logistics receives little attention in healthcare because of its complexity and supportive role. Joosten et al. (2009) attribute part of this complexity to the numerous
stakeholders involved and their variable and sometimes contradictory interests, such as medical staff who want high safety stock levels because of patient safety and purchasers who want low safety stock levels because of budgetary pressures. In addition, Lewis, Balaji and Rai (2010) and Moons et al. (2018) state that inventory management in healthcare is complex due to variable demand, rare and expensive products and devices, difficulty of tracking inventory and the imperativeness of treatment. This again is complicated by the existence of a number of stock points within a hospital in combination with several different processes (e.g., administrative, care, logistics) all interacting in order to provide a high level of patient care. In order to deal with this complex environment, current methods of inventory management depend on surplus
planning, resulting in high stock levels, low utilization, waste and a lack of monitoring or overspending of budgetary guidelines (Moons et al., 2018).
three concepts, that are based on literature, assumed to have a high impact on inventory management performance.
One of the first obstacles that can be derived from literature is stakeholder interests. The healthcare sector is encompassed by an organizational complexity fueled by contradictory or competing interests among stakeholders (Currie & Suhomlinova, 2006).
The second obstacle is the variable and unpredictable nature of service requirements and demands. The healthcare sector is characterized by the variable and unpredictable nature of service requirements, variable and unpredictable nature of service requirements play an important role because research indicates that the inability to deal with this results in more medical errors (Litvak, Buerhaus, Davidoff, Long, McManu & Berwick, 2005). It should go without saying that medical mistakes can have far-reaching implications. For example, a stock out of medicine or equipment can endanger a patient’s life, while in a manufacturing setting this would simply lead to extra costs or lost revenue (Moons, Waeyenbergh, & Pintelon, 2018).
The third obstacle is IT. The improper use of IT is both an obstacle and an opportunity for the healthcare sector (Bates et al., 1998; Poon et al., 2006). Burns et al. (2002) find that IT lacks a holistic interfirm approach; often, each department has its own systems and there is no overlap between them, which leads to miscommunication and misinformation. In addition, some areas seem underdeveloped in adopting IT solutions; inventory management is one of these adoption problem areas. IT problems in hospitals have been attributed by scholars to continuously evolving technology and inadequate IT infrastructure (Callender an Grasman, 2010; Burns et al., 2002). It remains, however, unclear how these obstacles relate to each other and how they influence inventory management in a hospital setting.
Stakeholder interest. Organizational context is a crucial factor in the healthcare sector but is often
2007, p. 280). McElroy and Mills (2000) and Post et al. (2002) describe the concept of stakeholder interest as an individual or group in a certain environment who has an interest in the outcome of a project or process. They view the term “interest” as interchangeable with or equal to “stake,” which is defined as the perceived or actual risk or benefit from activities of an organization (Post et al. 2002; Donaldson & Preston, 1995). Stakeholders are compelled to satisfy their own interests and pursue this by steering the organization to do so (Laine, 2010). The significance of a specific stakeholder relies on the demands of a firm and the degree to which the firm is dependent on the stakeholder in fulfilling its requirements. It goes without saying that not all stakeholders are equally important to a firm (Jawahar & McLaughlin, 2001). Stakeholder interest in healthcare can be divided into two variables, silo interest and competing interest (Souza & Pidd, 2011; Boonstra et al., 2014).
Souza and Pidd (2011) state that fragmented care and the forming of functional silos, combined with the development of their own silo interests they cause, are among the biggest challenges of healthcare organizations. Professionals and stakeholders are isolated in functional silos, which are created by organizing professionals in specific groups. In a hospital it is possible that over a 100 of such functional silos to exist, which develop their own goals, status and
Variable and unpredictable nature of service requirements. Aptel and Pourjali (2001) find in
their comparison of 197 U.S. and French hospitals that material requirements of hospitals have high degrees of variation and are often unexpected, which makes it hard to make predictions in the short term. Overall there is a high degree of variation to be found in the healthcare sector; no patient is similar. Literature defines the variable and unpredictable nature of service requirements in the healthcare sector as the fact that “variability in the demand for any service presents a significant challenge to the efficient distribution of limited resources. In health care, when hospital occupancy is high, peaks of demand necessarily produce crowding, staff overloads, and unmet patient needs” (McManus et al., 2003, p. 1491).
Moons et al. (2018) categorize this variability into three predominant factors that influence inventory management operations in healthcare organizations. First, they identify flow stress, which is stress caused by the variability in arrival rates of patients needing care, which results in peaks and valleys in the demand for care and resources. Second, there is clinical stress, which is caused by the difference in severity and type of disease that patients have, which again leads to peaks and valleys in demand. Third, there are competing responsibilities and professional abilities of practitioners; no two practitioners or employees are the same (Litvak et al., 2005). Volland et al. (2017) point to the high variation and unpredictable nature of service requirements as one of the primary reasons for the difficulty of inventory management in the healthcare sector. This view is complemented by Neuhauser, Provost and Berman (2011), who point out that variation is undesirable for efficient processes in most cases, because it forms a barrier for standardization and task-specific learning. Nevertheless, there can also be useful variation in healthcare; every patient is unique and should be cared for in a different way. Last, Plsek and Wilson (2001) point out that variation is coherent with complex systems. This creates a complex situation where, on one hand, there is a desire to eliminate variability while, on the other hand, variability is synonymous with the healthcare process.
Healthcare IT. One of the big game changers for inventory management in the last decades was,
administrative purposes)” (Menon et al., 2000, p. 84). The introduction of IT in healthcare has had a significant effect on patient satisfaction and safety (Poon et al., 2006). In one study serious medication errors dropped by 55% because of the use of computerized physician order entry and accompanying decision support (Bates et al., 1998). That being said, there remains a gap in the holistic adoption of IT in healthcare, both in practice and in literature (Poon et al., 2006). Inventory management is one of these adoption problem areas. Herzlinger (2006) points out that unique aspects of the healthcare sector (Van Der Meijden et al., 2003) affect the adoption of IT and the governance structures that accompany it (Mettler, 2009). The problem has been attributed by scholars to two main causes: inadequate IT infrastructure (Callender & Grasman, 2010; Burns et al., 2002) and scarcity of quantifiable information concerning inventory levels, consumption, products and the cost of procedures in order to communicate with key inventory management stakeholders (Moons et al., 2018).
2.4 Conceptual Model
The above-mentioned studies lead to a conceptual understanding of the link between the inventory management performance, stakeholder interests, the variable and unpredictable nature of service requirements, and healthcare IT. This understanding is presented in figure 2.1. It remains, however, unclear what the relationship is between the factors and how they influence inventory management performance. The goal of this research is to illuminate the mechanism that influences inventory management performance and gain an understanding of which concepts influence this mechanism in what way. The research question is answered using the following sub-questions: 1) How do stakeholder interests influence inventory management in the healthcare
sector? 2) How does the variable and unpredictable nature of service requirements influence inventory management in the healthcare sector? 3) How does healthcare IT influence inventory management in the healthcare sector? The answers provide an understanding of how the interplay
Figure 2.1: Conceptual model: The influence of the organizational context, service requirements and IT on inventory management in the healthcare sector.
Based on current literature on the topic, propositions about these factors can be made, and this research confirms or reject these propositions and elaborates on them using data collected in this research.
The first proposition is twofold: The stakeholder interests in influencing inventory
management performance are amplified by the existence of functional silos of interest and conflicting interests. The interplay between both concepts amplifies the influence of both concepts.
The second proposition is: The variable and unpredictable nature of service requirements
causes flow- and clinical stress, compromising inventory management performance.
The third proposition: IT infrastructure and scarcity of quantifiable information lead to
healthcare IT underperformance, which has an influence on inventory management performance.
The fourth proposition: The interplay of stakeholder interest, the variable and unpredictable
nature of service requirements, and healthcare IT explain inventory management performance in the healthcare sector.
3 RESEARCH METHODS
150,000 outpatient visits a year. The investigated inventory management process was that of mobile medical equipment used by nurses, such as drip-feed and blood pressure monitors. The hospital aims towards cutting costs and gaining more control over the process because of tighter budgets and new regulations concerning equipment safety. Using this research, they want to determine obstacles or problem areas they should pay attention to.
A single in-depth case study, with the mobile equipment inventory system as the unit of analysis, was most fitting for this research because of the limited time available (six months) and the complexity of the unit of analysis. A qualitative case study was chosen as the method of investigation because it was possible to research the phenomenon in a natural setting without biasing the outcome. Furthermore, the topic is both novel and complex and exists in an exploratory phase where knowledge about variables or their interplay are not adequately
understood. The decision to use qualitative research was made because of the desire to gain deep and richer data on the phenomenon using a small number of interviewees. The problem of generalization or biased views of interviewees was combatted by interviewing multiple employees who hold key roles if possible and comparing their responses for similarities or contradictions. Additionally, the data was triangulated with other sources of data such as, observations or system outputs (Karlsson, 2016).
Table 3.1: Overview of interviewees
In addition to interviews, this research also used process descriptions, enterprise resource planning output and observations as data sources to triangulate the evidence found in interviews and to gain more or other insights. Observations were performed by shadowing stakeholders with the aim of mapping their job routines and roles in the inventory management process. Notes were taken for comparison with other stakeholder observations and interview data. Documentation, such as process descriptions and system outputs, were additionally consulted for triangulation and to assist with obtaining an overview of the key stakeholders in the inventory management process. The first process descriptions were given out by the company supervisor of this study. Validity was differentiated into four different types, which are all taken into account: construct validity, external validity, internal validity and ecological validity (Karlsson, 2016).
The starting point for the study was mapping the key stakeholders involved in the inventory management process by using observations and process descriptions as input. The mapping method suggested by Bourne et al. (2005) was used, listing the stakeholders on one axis of a table and listing the predominant stakeholder interest along the other axis along with their perceived power. An overview of the process and problems regarding inventory management of mobile equipment in the hospital was created using data obtained from observations, work documents, meetings and interviews. Likewise, the sub-questions regarding the variables were answered by analyzing the data collected from the interviews and observations. Next, the findings of this research were discussed and compared to existing literature. A
Role Interview
Duration
(minutes) Word count
Head MID (IT and Electro) Interview A 56.5 2700
Head MID (Mechanical Engineering and
People) Interview B 50.25 1886
Interview Head Material Logistics Interview C 20 972 Interview Head Patient Planning Interview D 30 1441 Interview head purchaser
Interview E 36.33 2536
interview Operation Manager Interview F 25.6 2534
Nurse (OR) Interview G 62.5 3502
Asset Management (1) Interview H 49.5 2920
Asset management (2) Interview I 22.25 1656
coding tree was used as a sense-making tool for the interviews, using the method described in Karlsson (2016). The resulting coding tree can be found in appendix B. The coding tree displays how data has been categorized and analyzed to explain certain concepts or variables. The codes were inductive codes, or open codes, which means there was no list of predefined codes but they were induced from recurring patterns or subjects mentioned. A benefit of this coding method is that interviews are not influenced by the existence of predefined codes and the codes are specifically adjusted to the data from the interviews. The variables are presented in the first column of the coding tree. In front of this column are first-order quotes, which a code has been assigned to; this corresponding code is presented in the third column. In the last column, the corresponding theme across codes is listed. The coding process was performed as follows. First, all corresponding text fragments were grouped and assigned a certain code. Double codes were deleted after the codes were matched to a particular theme either deduced from literature or induced. These themes were then assigned to the particular variable they provided an explanation for. Results were reported by looking at the coding list and reporting on data that explained the mechanism that a variable had on inventory management or on the other variables. Relevance and validity in this instance were determined by looking at the coding tree for explanations of the phenomena and ensured through the recurrence of similar statements and arguments provided in the quotes. In particular, the study looked for data that explained or elaborated on the assumptions made in the theoretical framework about the interplay of the variables on inventory management performance. These findings were supported with quotes from interviewed stakeholders.
4 RESULTS
4.1 Background
should be reported to the Result Responsible Entity (RVE) manager, and if there is a problem with the equipment the Medical Technical Service (MID) is called in. Decentral stock points receive stock for generic and high-usage mobile equipment from the central stock point on a daily basis. If the RVE manager notices that there is a shortage of certain equipment, it is brought in to increase availability.
Figure 4.1: Usage of mobile equipment
The inventory management system has multiple stocking points for mobile equipment, where resources can be taken and returned. The stock points are located in multiple departments; stock can also be returned and taken across departments. If equipment is needed, nurses can take it. Purchase managers are responsible for buying the equipment, and the medical technical service is responsible for on-time servicing, maintenance and keeping track of the equipment. The location and use of equipment is registered by hand on paper. The problem the hospital experiences is a lack of equipment at assigned places. This leads to employees searching for equipment and underutilizing it. In addition, the equipment is occasionally expired; if the Dutch health inspector found this equipment in an audit, there would be major consequences. This happens because equipment servicing is done by finding the equipment and then checking its validity stickers manually, but sometimes the equipment is put out of sight of the technical service. This is because nurses tend to ration equipment so that it is available when they need it and they do not have to walk around or search for it.
translate to 7 million per year. Evaluation of the equipment happens once a year in a medical assessment (MI); this evaluation is shared with the director and it is determined which equipment should be replaced. Normally, if equipment is more than 10 years old and costs more than 10,000 euros, it is discussed on an object level, and if the equipment is more than 10 years old and costs less than 10,000 euros, it is discussed as a provisional sum. If equipment is replaced, it happens mostly on a one-to-one basis so that the amount of mobile equipment stays the same. Internal requests for investment are received and processed by the asset management department. In the current situation, purchasing deals with negotiations with third parties. Asset management oversees the replacement of generic centralized mobile equipment, and departments themselves can request specific mobile equipment; investment also comes from the central budget. The buy-in process is presented buy-in figure 4.2, which represents department-specific equipment. The difference from generic equipment is that the RVE manager is not the owner of the buy-in process, but asset management is the process owner and initiator. Of the requests for investment at the moment, about 20 percent are granted.
Figure 4.2: Buy-in process for mobile equipment
There are two groups of stakeholders: the user group and the supportive group. These two groups consist of nurses and RVE managers as the user group, and the MID, asset management, purchasing, logistics and planning departments as the support group. Planning and logistics have, however, a more indirect role in the management process, since logistics only manages beds as mobile equipment and planning only manages the inflow of patients. Figure 4.3 presents a representation of the stakeholder landscape and the relationship and dependency among the stakeholders and their distance to patient care. The patient is represented but has not been interviewed, because he himself has no stake in the inventory management process of mobile equipment other than creating a demand for equipment.
Figure 4.3: Stakeholders involved in relation to each other and the patient
integration among departments and systems is low. One of the heads of the MID indicated in an interview that departments sometimes use the same IT system but they do not share the information that generated. This is because the information does not get priority, or other stakeholders do not think it is to their benefit to share the information. In addition, not all information is registered in the IT system, and nurses always use the system to look up information.
4.2 Stakeholder interests
Among the stakeholders there is some alignment in interests as well as some contradictory or competing interests. The primary competing and overlapping interests mentioned are patient safety, traceability, maintenance, technical capabilities, availability and finance: "Our number one
priority is patient safety, so even though there are budget restrictions, and we see that something is not safe anymore we will take it out of service and replace it is necessary" (Head MID A); "We always have to take into account a financial perspective, our department is financially driven. But my task especially is making sure orders arrive on time for the right price" (Head purchaser E). In
satisfying these interests, power plays an important role. The head of the purchasing department, for instance, indicates that he has sufficient power in the inventory management of mobile equipment process. On the other hand, the RVE manager reports that her power is situational: "For
example, the mobile equipment that the nurses use is not that specific buy-in wise; this is the same for the whole hospital. And the decision-making—not every department is involved. There are some pilot departments that have input. We did not get picked to be involved in this" (RVE manager
J).
The biggest outlier in in terms of interest is the purchasing department, whose primary interest is the financial perspective. Though the department indicates this as being important, it has also nuanced its interest statement by stating that in the broader scheme, the quality of products and availability have priority over financials: “In the first place, a product should be good and
available at the right location and secondly comes price, I think. If I forget this, then I have a problem, then everyone will have forgotten that I had great purchasing performance. As a medical professional you just want supplies to be available; price comes in second” (head purchaser E).
interests and also because it is complex due to the covenant for the safety of medical assistance equipment.
Stakeholders indicate that there is little conflict among them but that a substantial number of the conflicts that do arise do so because there is no understanding of each other’s processes, between the user and supporting groups: “Most conflict/ disagreement is between the treatment
departments (users) and the supporting departments. There needs to be some understanding of each other’s processes. I think there is room for improvement in this. I don’t want to say it is bad, because there is quite a good understanding of each other’s interests, but there is always room for improvement” (Manager Operations F). One of the nurses indicated that for new infuse pumps and
lines, she felt like there was no understanding of their interest as nurses in the buy-in process of this equipment. They indicated that their power position in the organization is limited in the inventory management process of mobile equipment. The RVE manager indicated that they have limited power, but enough power concerning department-specific equipment. Inside the walls of the hospital, there seem to be silos with their own cultures, processes and interests. These silos are especially present within and between the treatment departments: “At our
department you really feel like you are on an island. We are quite isolated from the rest of the hospital. I work at this department and for the rest I do not see anything else. The only connection is that we treat the same patients and I know some of the other nurses that work in the hospital”
(Nurse G). In line with this, these silos seem to function as businesses of their own that do not consider each other’s interests or that of the hospital. The existence of these silos also creates ethical stress among the stakeholders, who have to choose between the interest of their silo or that of the general hospital: “I am from the RVE, but I am also employed by the hospital. This is
sometimes difficult in our job positions, because this means sometimes having to choose between interests.” (RVE manager J).
The presence of this conflict is especially present in the treatment departments, although it is not limited to them: “People need to consider their process but also need to look beyond their
own processes. And this is something we could improve on. I think in general that this is underdeveloped in hospitals, this forms a challenge” (Operation Manager F). An example of the
and they have a desire to centralize this even more. In this example, the existence of different silos hinders the availability of information and also the efficient distribution of responsibilities.
Lastly, there are also conflicts between the user and support groups because of silos only looking out for their own interests: “As department leader, you should be very consequent with
this and indicate that you need more equipment in the decentral stock location so that you can return the equipment to the central buffer. But they in turn are too easy in maintaining these rules, they just keep this equipment. Every department looks at their own needs” (Head MID A). As
indicated by this quote, the leader of the department has a crucial role in minimizing the negative effects of these silos and maintaining communication with the rest of the hospital. Members of the user group made similar statements: “I doubt that everyone is qualified for their job. A lot of people
are doing their job for years while the world is completely changed, and it not evaluated if that person in that position is still the right person. In a hospital you have to deal with a lot of highly educated people who do not fear opening their mouth, a very difficult group of people, and to manage this well, you have to be really qualified and strong as a manager, and I think this is not always the case, being nice is not enough” (Nurse G).
4.3 Variable and Unpredictable Nature of Service Requirements
As indicated by the head of patient planning, the operation manager and the head of the MID, the flow stress caused by inbound patients is high: “You have to deal with very big fluctuations in patient groups. Sometimes you really need four machines, and after that it can very well be that you only use one for the entire month and then one day you need five machines out of the blue” (Head MID A). Hospitals know that patients will come in, but they do not know what kind of patients will come in and what their needs are. In addition, the demand for
equipment. In some cases, equipment is used only occasionally, but because of additional quality regulations, its use has become standard practice. The organization has to act and work together to signal these trends, because otherwise they are not able to guarantee availability: “The patient may no longer fall, because we need to monitor every falling incident and evaluate it. And what you see then is that it could have been prevented by using an optiscan. Also, these kinds of thing determine your need for equipment, so also quality issues effect your demand for equipment” (RVE manager J).
As a countermeasure to coping with flow and clinical stress variability, stakeholders have increased their capacity to handle demand variability for equipment. However, increasing
capacity is currently done by continuously increasing the amount of equipment in the inventory management system, resulting in low utilization: “We do not monitor usage. For us, ‘in use’ is equipment being in the hospital, and if they really get used, that is the question. We cannot see this. I would not know how much the equipment is really in use; what I do know is that the efficiency can be improved” (Asset management H).
In addition to unpredictability of demand, demand planning, or the nonexistence of demand planning, for mobile equipment also plays a part in maintaining high variability. Equipment demand is not taken into account for plannable care, despite the information being available to set up an information system for planning. Stakeholders indicate that demand for equipment is highly variable and hard to predict: “I know that in our hospital information system epic, the possibility for planning the need for equipment exists based on procedures. But in the current system, we do not yet have this possibility; we have the tools and collect the data to do this but we have not yet implemented this” (Operations manager F). The current system works with decentralized buffers that are restocked if a certain threshold is met. This could be made much less resource-intensive if demand could be predicted.
4.4 Healthcare IT
The support group reported that they can access sufficient information from the IT system; they mentioned, however, that traceability of mobile equipment is a problem. The
over the things that move over departmental boundaries—where people complain about it not being available and then we buy extra ones—I think you can fix this by improving on
traceability. If you leave my dinner plates through the whole of my house, I would also have to search for a plate the next morning and this would take time” (Asset management H).
Even though the support group can generally access sufficient information from the IT system, they suggested that the user group cannot access sufficient information from the IT system. The user group underscored the lack of information they can collect from the IT system. They indicated that the information in the system is not correct all of the time or available to them; furthermore, they indicated that because the system is designed to suit all of the nursing departments, it is generic and lacks emphasis on important information for specific departments. Thus, this information is lost in the bulk of information that the IT system spits out: “Those vital
things would be nice to have clearly visible without going through the entire file. The system is globally suited to please everyone, or maybe this is not done because not everyone sees the importance of this. I feel like this could be improved. We do not get optimal performance this way” (Nurse G).
The purchasing department is content with the information they can access from the system. Nonetheless, they are under the impression that the inventory management process can be improved by collecting more information on usage of equipment and inventory status in order to reorder products more efficiently: “This is a bit exaggerated, but in the current status of
mobile equipment, equipment is purchased, put in use and at a certain time replaced. But what we really should do is see, evaluate: How is the user experience? How easy is it to maintain the equipment? How much is equipment in use? If we were to reorder can we do with less? If we would know this, we would be able to do a lot more with the current resources” (Purchaser E).
The result of the system not working correctly or not being fully integrated is that processes are performed on paper or have not been fully digitized, which has led to a decrease in
efficiency: “I frequently experience problems with Youforce, I fill in certain information and it is
not registered correctly. And in other systems, you cannot put everything into the system, so still a lot has to be registered on paper. Sometimes things give more work than it saves; this worsens the efficiency” (RVE Manager J). Adding to the problem is the pressure on the user group to
the RVE mangers to request equipment using [the] IT system, but we will probably have to guide them intensively and steer them because otherwise this will go wrong. And I don’t blame them— they work with it too little to get a good feeling for it. Also, the people directly related to care are incredibly busy and do not have time to involve themselves also with the management of
equipment” (Asset Management I).
4.5 Interplay
As the previous chapters set forth, there is a relationship between the concepts that influence the performance of inventory management. Key stakeholders in the process indicated that they also experience cohesion between the concepts. They indicate that the concepts have a strong impact on each other’s impact and influence: “I think there is a strong cohesion between
stakeholders, variability and IT systems. I think an IT system that is well suited—and for this you need to work together with the stakeholders and consider their interests, you need to look at your process, how are you going to arrange this? This needs to be good, because garbage in is
garbage out” (Operation manager F).
The results advocate the importance of IT systems for satisfying stakeholder interests toward data usages in processes but also for, for instance, inpatient safety regulations.
Understanding stakeholder interests and mitigating them in order to create a more integrated organization is paramount in order for IT systems and the governance systems that accompany them to work.
As an example of the relationship between variability and stakeholder interest, the nurses have an interest in the availability of equipment, but this availability is uncertain because of the unpredictability of service demand and because there is now information on inventory levels from the IT system. They ration equipment to satisfy their availability interest, decreasing the equipment that is available for the hospital in general. This results in ever-increasing stock levels, as more equipment is bought as safety stock: “However, we keep increasing capacity by
increasing equipment numbers, and the cause of this was rationing of the nurses, so that they do not have to walk and search for it. I think there is efficiency to be gained in using equipment more of the time and using it smarter, but then it would also have to be more traceable”
5 DISCUSSION
The results of this study indicate that qualitative aspects play a considerably larger role in explaining inventory management performance in the healthcare sector then the ratio of literature between qualitative and quantitative does suggest. The objective of this research was to identify key concepts, using existing theories, that explain inventory management performance and to research how the relationship between the concepts influences performance. The research question was: How does the relationship between stakeholder interest, unpredictable and
variable demand for services and healthcare information technology explain inventory
management performance? Based on the relevant theories on the topic, four propositions were
constructed about the suggested outcomes of the research. The propositions about the
relationship were evaluated in practice in this study and are analyzed in this discussion chapter.
Proposition 1: Stakeholder interest in influencing inventory management performance is amplified
by the existence of functional silos of interests and conflicting interests; the interplay between these concepts amplifies the influence of both concepts.
Stakeholder
group MID
Asset
Management Purchasing
Operation
manager Nurse RVE Manager
Medium/ mostly sufficient Perceived Power in Mobile inventory management process Low/ insufficient Maintenance and patient safety patient safety Primary Interests in inventory management of mobile equipment Financial perspective Traceability and maintenance Availability and patient safety Availability and patient safety High/ Always sufficient
Figure 5.1: Stakeholder interests and perceived power
These conflicts are mainly driven by poor understanding of each other’s interests, which primarily manifests itself between the user and supporting stakeholder groups. These conflicting interests work counterproductively in achieving inventory management performance because needs are not met and time has to be invested to solve conflicts. These findings are in line with existing literature, and this study adds to current literature the importance of a mutual
understanding of each other’s interests to minimize conflicts and their impact.
Secondly, the findings illustrate that silos act as a catalyst in forming different interests and conflicts and cause amplification of their impact. The interviewees indicate that, this manifests itself predominantly, but not only, between the user and support groups. Interviewees in the user group indicate that they feel like they are isolated from the rest of the hospital and they feel a conflict between choosing between the interest of the hospital or that of their own silo. These silos create environments where stakeholders stop communicating and evaluating processes; these barriers prevent the efficient organization of processes and an understanding of each other’s interests. Other studies have similar findings about the working of silos in hospitals and their relationships to conflict.
further the understanding of how the variable stakeholder interest mechanisms work, and how they influence inventory management performance.
Figure 5.2: Mechanism of stakeholder interest
Proposition 2: The variable and unpredictable nature of service requirements causes flow- and
clinical stress, compromising inventory management performance.
The results indicate a coherent relationship between variability and the performance of inventory management. This is in line with previous studies on the topic. Variability is explained by two factors: flow and clinical stress. The link between these two factors in explaining
inventory management performance had not yet been made, and the results reveal a clear relationship both between the two concepts and regarding their influence on performance. Flow stress is the stress caused by variability in the inflow of patients. The interviewees indicate that this is indeed highly variable and, because of this, the need for equipment is also highly variable. As stated in literature, this variability is undesirable for efficient processes.
low. The interplay between flow and clinical stress determines the impact that it has on the inventory. This relationship is again influenced by the constantly changing environment in which the hospital operates; this manifests itself in agreements with third parties which can change both patient inflow and the type of patient that comes in. Furthermore, there is a lack of the use of quantitative data to plan requirements or safety stocks or to calculate order quantities; the results are that variability is not mitigated. Previous studies have similar findings. In order to be able to deal with this variability, interviewees indicate that they increase capacity by increasing
inventory levels (buffering) without an actual increase in demand. These findings confirm the suspicions of other authors about the inefficiency of inventory management in the healthcare sector.
Figure 5.3: Mechanism of variable and unpredictable nature of service requirements
Proposition 3: IT infrastructure and scarcity of quantifiable information lead to healthcare IT
underperformance, which has an influence on inventory management performance.
tasks. That being said, both the support and user group express that they do not think the user group can acquire enough information from the system. Because of the many users, the systems are too general for the specific needs of independent users, and they cannot acquire the
quantitative information they would like to see. Additionally, information is not correct in all cases, which causes confusion. Regarding the lack of quantifiable information, undoubtedly the results illustrate an absence of collection of usage and traceability data. The consequence of this scarcity is that inventory stock levels are not evaluated, and there is a weak information-sharing link among the different stock points. Equipment has to be searched for when needed for usage or maintenance. Most importunately, no decision-making is done based on mathematical models using real data input, leaving the decision-making to be educated guesswork in most cases. This study finds that there is a relationship between these problems and the IT infrastructure or lack thereof. Among systems and departments, there is a lack in integration and information sharing, which results in a lack of information to base decisions on. In addition, because of system limitations, much work is still done on paper, limiting the ability to track and share information among stakeholders; these findings support existing literature. That notwithstanding, this research advances the understanding that the overburdening of treatment staff causes
Figure 5.4: Mechanism of healthcare IT
Proposition 4: The interplay of stakeholder interest, the variable and unpredictable nature of
service requirements, and healthcare IT explain inventory management performance in the healthcare sector.
The theory-building case study elaborates on the mechanisms that influence inventory
management performance of mobile equipment in the healthcare sector. In the previous chapters, the individual influences of stakeholder interests, variability and unpredictability of service demand and healthcare IT were discussed. Figure 7 summarizes a representation of the
mechanism of inventory management performance of mobile equipment in the healthcare sector. The research results provide irrefutable evidence that a relationship between the three variables exists.
The relationship manifests itself in a way where one factor influences another. This is especially prevalent in the relationship between variability and IT systems, where the lack of planning amplifies the effect of the highly variable and unpredictable nature of service requirements. This again is influenced by the lack of quantifiable information that is a
much harder to implement because it creates a constantly changing environment and
requirements for such a system. These findings are in line with other studies on IT in healthcare. A useful IT system can compensate for variability to some extent, but the system becomes increasingly complex if the variable and unpredictable nature of service requirements increases. The same goes for the influence healthcare IT has on stakeholder interest; scholars suggest that a holistic implementation brings with it organizational and governance structural change. This research supports this view. Nonetheless, this relationship goes both ways: healthcare IT systems are influenced by the different stakeholder interests that want something from the system.
Finally, the relationship between the variable and unpredictable nature of service requirements and stakeholder interests manifests itself in that stakeholders have certain desires to combat variability, such as by increasing capacity. On the other hand, stakeholder interest also creates variability in service requirements by changing demands, such as new patient safety demands.
This research demonstrates the complexity of inventory management of mobile equipment in hospitals by elaborating on the concepts that influence performance and analyzing the
mechanisms involved. On a practical level, this study is relevant for managers in the healthcare sector who are responsible for managing inventory, especially mobile equipment or for people
concerned with material management or in other ways involved in inventory management. By being aware of the existence of the barriers described in this study, managers can more easily identify the obstacles that this research has brought to light and alleviate them to improve performance.
This study advances the existing knowledge on inventory management performance. However, the study demonstrates that there much more research is still necessary to fully understand the mechanisms and to what degree they explain inventory management performance. Nonetheless, this research takes a step in the right direction by exploring the
relationship among the mechanisms that influence performance. Generalization is a limitation for this study, since all the cases are from within the same hospital. This limits the external validity of the outcomes. However, it is unlikely that there would be a sizable difference in outcomes if this study were conducted at another case hospital, since the concepts are taken from existing literature and problems tend to be similar across the healthcare sector. Still, there is a lack of qualitative studies that explore relationships between variables. There is also a need for more quantitative studies, but as pointed out by this study, hospitals should collect more data to allow for mathematical modeling and more quantitative studies.
6 CONCLUSION
This research reaches multiple conclusions about how the mechanisms of stakeholder interest, variable and unpredictable nature of service requirements and healthcare IT explain inventory management performance. First and foremost, this research shows that an interplay exists between the three concepts in explaining performance. The results indicate that there is interaction between the three concepts, where one concept directly influences the impact of another.
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