Video Tip: Supply Chain Management at Arnold Palmer Hospital

We think our video case studies on the Arnold  Palmer Hospital for Children and Women have been very popular for 2 reasons. First, they cover seven different OM topics–from quality to layout to process design to JIT to capacity to project management to  SCM–which means you can follow one organization from start to finish during the semester. And second, hospitals are a great example of a service application of OM that students can relate to. So if you are looking for a video to spice up your supply chain (Chapter 11) lecture, this is a good choice.

Arnold Palmer Hospital (APH) used to belong to a 900 member national group purchasing organization (GPO), through which it saved money on virtually every staple it needed.  But not everyone was pleased. Doctors, for example, were given only limited brand choices of certain surgical implants, like pacemakers, through the GPO. And it was difficult to take advantage of local vendors who might provide better service and prices. By creating its own, much smaller GPO, with only 7 local hospital members, APH realized it could save 7%, around $7 million annually, on its $100 million in purchases. This savings came despite the increased overhead of starting one’s own purchasing department.

In this 8-minute video, you will see the power of an interesting group, a Medical Economics Evaluation Committee. The committee allowed hospital staff to have  input into the approved products list, picking the medical tools they preferred, but only after agreeing to stick with a few choices at the best prices–truly a combination of medicine and economics.

The video also shows the 3 tiers of suppliers and how they are effectively integrated into the supply chain to drive down costs, reduce inventory, and improve quality.