Three Reasons Why LEAN Six Sigma Has Been Weak And Puny at Driving out All Waste and Inefficiency in Healthcare Organization's Supply Chains

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LEAN Six Sigma has been wildly successful at improving existing processes and managing old ones at for-profit and non-profit organizations for 20 years now. Yet, this same LEAN Six Sigma System has been weak and puny at driving out all waste and inefficiency in these same organization's innate or natural supply chain ( or the things hospitals buy, use and discard after their useful life has ended) because LEAN Six Sigma projects have focused only on material flow, work flow and information flow in their supply chain. A new one year study by Strategic Value Analysis® In Healthcare (SVAH), Skippack, Pennsylvania, outlines how healthcare organizations can fill this huge saving and quality gap with the new tenets of Supply Six Sigma™ to link quality, speed and low cost together.

Robert T. Yokl, President and Chief Value Strategist, Strategic Value Analysis® In Healthcare says that, "We all know (or should know) that the LEAN Six Sigma System was designed to focus its efforts on generating quick, verifiable results linked to ambitious goals to reduce defects, thereby dramatically reducing the cost of the variation of a healthcare organization's processes to near zero by a targeted date. And, just as important, to hold and sustain those gains going forward."

However, Yokl says, "the "missing link", which is costing healthcare organizations billions of dollars a year in waste and inefficiencies, is that the traditional LEAN Six Sigma methods and practices don't focus on the functional requirements of the products, services and technologies they are buying. What's missing is that hospitals need to find out what their customers (internal and external) absolutely positively require in their products, services and technolo-gies characteristics, performance and functions."

In short, the differentiator between the LEAN Six Sigma System and what Yokl calls the Supply Six Sigma™ System is that the traditional LEAN Six Sigma approach focus is on processes, whereas, the Supply Six Sigma™ System focuses its efforts on the functions of a healthcare organization's products, services and technologies and kick starts the search for lower cost alternatives to meet those functions.

To change this paradigm a new study by Strategic Value Analysis® In Healthcare, a supply chain performance management consultancy firm, says that, "LEAN Six Sigma practitioners should embrace the new tenets of Supply Six Sigma™ that focuses exclusively on the innate or natural supply chain where 3%, 7% or even 9% supply related savings reside or they are leaving big bucks on the table at their hospitals untouched". Based on Yokl's one year's re-search this huge gap in LEAN Six Sigma performance has happened because of these three reasons:

1. LEAN Six Sigma projects have focused only on material flow and work flow and informa-tion flow in hospital's supply chains, and not the innate or natural supply chain (or the things hospital's buy, use and discard after their useful life has ended) were hospitals can save 3%, 7% or even 9% in new supply savings that are just waiting to be harvested.

2. Traditional LEAN Six Sigma approach never even touches the edges of the innate or natural supply chain because of the conventional wisdom that "to save money you must standardize on the products, services and technologies you purchase",. As opposed to embracing the new Supply Six Sigma™ philosophy of "customization" of the products, services and technologies you buy that will save healthcare organizations 12% to 22% beyond price, standardization and sourcing strategies and tactics.

3. Broader and deeper supply expense reductions requires a strategic approach, not a problem solving approach as is now offered by today's conventional LEAN Six Sigma Systems. To move to the next level of supply chain savings hospitals need to embrace a strategic approach if they are to "wring the towel dry" on their supply chain savings.

In addition to these three reasons why the LEAN Six Sigma System isn't working to drive out all cost in a healthcare organization's supply chains, Yokl in his new Podcast "Creating A Culture of A Accountability With Supply Six Sigma™ talks about the six impediments that are holding back huge supply chain savings at healthcare organizations which we have provided an excerpt from here:

1. Tradition (or "we have always done it that way)

Webster's definition of tradition is, "a long-established way of thinking or acting," but is this the best practice for an organization when it is deciding on the best value product, service or technology. I don't think so! Since things change and people change continuously in healthcare organizations, we must always be testing the products, services and technologies we are purchasing to insure their relevancy and conformity to requirements.

2. Poor or Inaccurate Performance Specifications

Most products, services and technologies that are now in use at hospitals were purchased from the data supplied from manufacturer's catalogs or sales representatives. They were not based on the actual performance specifications required for the product, service or technology. This universal practice has given birth to thousands of over-performing and under-performing products, services and technologies utilized throughout an organization that are wasteful and inefficient.

3. Wasteful and Inefficient Methods and Practices

There are four reasons that SVAH have uncovered for waste and inefficiencies in a healthcare organization's value chain that are causing 80% of the waste and inefficiency:

A. Old and New Technologies

Old technologies such as printers, copiers, computers, lab and biomedical equipment, are prone to spit out too much paper, rip and mutilate forms, and require a huge amount of maintenance to keep operational. Therefore, a targeted effort should be made to evaluate all technologies that have gone beyond their useful life to insure that they are still meeting their performance requirements.

New technologies such as point of service glucose tests, re-useable, disposable products and automated supply cabinets are purported to be faster, better, cheaper and glitzier, but all too often they are in reality less reliable, supply intense and costlier than the technology that they are replacing.

B. Too Many Hand-offs

A simple product like plastic trash bag liners could have six or more hand-offs (different people handling the product) before it reaches your trash can on any given day. Just think how much more complex the value chain is for chemicals, materials, instruments and services. You can then realize why waste and inefficiency creeps into value chains without you even realizing it.

C. No One Sees The Big Picture!

Products, services and technologies are purchased, stored, distributed, consumed by numerous customers (internal and external), and then disposed of after their useful life without having an owner of their value chains. By necessity and practicality there is shared ownership of a product, service and technology's value chains. This is why waste and inefficiency naturally creeps into value chains, because no one ever sees the big picture.

4. Customers Left Out Of The Loop

Although we would all like to think that we, as customers, are always consulted about changes in our products, services and technology's value chains, when in fact we rarely, if ever, bring our customers into the loop. Because of this fact, frequently, inappropriate changes are made in our products, services and technologies' value chains (new storage area, new shelving, new personnel, new policy and procedure, new maintenance schedule, new disposal method, new contract, etc.). If we had been brought into the loop we would have seen the flawed thinking in the proposed change and would have taken corrective action to prevent this non-conforming change from affecting our value chain.

5. Feature Rich Products, Services And Technologies

Our world is too feature rich, especially when it relates to a hospitals' products, services and technology purchases. Pacemaker features alone exceed 106 available choices, while only 13% to15% is ever really medically required. Healthcare organizations however continue to purchase unnecessary pacemaker features that increase the price of their implants by as much as 26%. The reason for these value mismatches is that hospitals accept most product, service and technology features as being absolutely positively necessary as a functional requirement, when in most purchases the opposite is true.

6. Customization Vs. Standardization

In purchasing circles, it has been the conventional wisdom that to obtain the lowest cost for a product, service or technology they must be standardized (or one size fits all) to conform to the same specification organization-wide, when in fact, this philosophy is a myth! Empirical data now makes it crystal clear that for an healthcare organization to truly have the lowest cost products, services or technologies, a customized solution is required to meet the unique functional requirements of all customers.

By way of example, most hospitals have standardized on one desk top computer to meet its primary functional requirement of providing information, thus meeting 80% of the organization's customer's needs, while other customers (20%) find the standardized computers to be a functional mismatch for their needs (under-specified or over-specified). This practice then creates many outliers, such as, the maintenance department buying a higher quality computer off-contract for heavy duty work, or environmental services wasting the value of the computer by using it for routine work, or fund raising utilizing their computers just to hold contributor's records, because no other product is available to meet this primary function.

As this example demonstrates, it is a rare occurrence, if ever, that one product, service or technology can satisfy all of the functional requirements of all customers, without incurring waste, inefficiency and higher cost than necessary in a product, service or technology's value chain. Once healthcare organizations understand and internalize this reality, they can then embrace the concept of customization with enthusiasm, thereby, increasing their savings yield on any and all products, services and technologies that they are purchasing.

The bottom line being, once the total costs are calculated for a standardized vs. customized approach to purchasing of your products, services and technologies, the customization strategy will reduce any organizations' value chain waste and inefficiency by more than 13% to 17%.

Yokl says that "The traditional approach to LEAN Six Sigma, a 5-step improvement process, will be employed to Define, Measure, Analyze, Improve and Control (DMAIC) a process in order to design or redesign it. However, the 10, 20, 40 or even 50 products, services and technologies utilized to make the same processes hum won't even touch the edges of your innate or natural supply chain by employing the conventional approach to LEAN Six Sigma".

"On the other hand Yokl states, "when LEAN Six Sigma practitioners employ the new Supply Six Sigma™ 6-step improvement process to Understand, Investigate, Speculate, Analyze, Plan and Execute they will then have the opportunity to design or redesign the thousands of products, services and technologies their hospital purchases annually and save 3%, 7% or even 9% on their supply expenses - almost overnight."

About The Company: Strategic Value Analysis® In Healthcare, Skippack, Pennsylvania is a software, training and consulting firm specializing in supply chain performance management. SVAH's mission is to give our clients greater control over their supply chain by providing them with better information, better focus, and better systems so they can make better decisions on their second biggest expenditure.


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