Case Study: Capacity Planning at Arnold Palmer Hospital

View the video tour of Arnold Palmer Hospital that addresses this Issue. (http:// videodiscs_03. HTML) 3. If you wish to have further background, reread the material in this chapter of the text. 4. Answer the questions about the case, and if your instructor wishes, email them to him or her.

Orlando Arnold Palmer Hospital, founded in 1989, specializes in treatment of women and children and is renowned for its high quality rankings (top 10% of 2000 benchmark hospitals), its labor and delivery volume (more than 10,000 births per year, and growing), and its neonatal intensive care unit (5th highest survival rates in the nation). But quality medical practices and high patient satisfaction require costly inventory?some $30 million per year and thousands of SKU.

With pressure on medical care to manage and reduce costs, Arnold Palmer Hospital has turned toward controlling Its Inventory with Just-Len- time TIT) techniques. Wealth the hospital, for example, drugs are now distributed at nursing workstations Vela dispensing machines (almost Like vending machines) that electronically track patient usage and post the related charge to each patient. The expensing stations are refilled each night, based on patient demand and prescriptions written by doctors.

To address KIT issues externally, Arnold Palmer Hospital turned toward a major distribution partner, McKesson General Medical, which as a first-tier supplier provides the hospital with about one quarter of all its medical/surgical inventory. McKesson supplies sponges, basins, towels, mayo stand covers, syringes, and hundreds of other medical/surgical Items. To ensure coordinated daily delivery of inventory purchased from McKesson, an account executive and two service personnel have been assigned full-time to the hospital.

The result has been a drop In Central Supply average dally Inventory from $400,000 to $114,000 since KIT. KIT success has also been achieved In the area of custom surgical packs. Custom surgical packs are the sterile coverings, disposable plastic trays, gauze, and the like, specialized to each type of surgical procedure. Arnold Palmer Hospital uses 10 deferent custom packs for various surgical procedures. “Over 50,000 packs are used each year for a total cost of about $1. 5 million,” says George Delano, Head of Supply Chain Management. The packs are not only delivered in a KIT manner but packed that way as well.

That is, they are packed in the reverse order they are used so each item comes out of the pack in the sequence it is needed. The packs are bulky, expensive, and must remain sterile. Reducing the inventory and handling while maintaining an assured sterile supply for scheduled surgeries presents a challenge to hospitals. Here Is how the supply chain works: Custom packs are assembled by a packing company with components supplied primarily from manufacturers selected by the hospital, and delivered by McKesson from Its local warehouse. Arnold Palmer Hospital works with its own surgical staff to identify and


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