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AN ANALYSIS OF THE FACTORS AFFECTING THE PROPER OPERATIONS OF SUPPLY CHAIN MANAGEMENT IN HOSPITALS IN MUMBAI.

A Research Project submitted in partial fulfilment

Of the requirements for the degree of MBA (Tech)

In Mechanical/Operations

By

Arjun Duvedi

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Under Supervision

Of

Prof. Dr. Jinu Kurian.

Year of Graduation 2015

DECLARATION

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I hereby declare that this research project titled, “An Analysis of the Factors Affecting the Proper Operations of Supply Chain Management in Multi-Speciality Hospitals in Mumbai” submitted by me is based on original work carried out by yours truly. I certify that it has not been submitted anywhere else. I would further like to state that Mukesh Patel School of Technology Management and Engineering- NMIMS (deemed-to-be-university) will have the copyright on the project report submitted by me to the college (MPSTME)

Thanking You

Arjun Duvedi

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Table of ContentsAbstract................................................................................................................................................4

Introduction.........................................................................................................................................5

Background:......................................................................................................................................5

Research Question:............................................................................................................................6

Objective of research:........................................................................................................................6

Literature Review................................................................................................................................6

Methodology:.......................................................................................................................................8

Data collection:................................................................................................................................8

Data Analysis:..................................................................................................................................8

Factor Analysis............................................................................................................................8

Descriptive Statistics....................................................................................................................9

Results & Findings:...........................................................................................................................10

Conclusion..........................................................................................................................................11

Recommendations..............................................................................................................................11

Limitations of the study & Scope for further Research..................................................................12

References:.........................................................................................................................................13

List of Figures

Figure 1: Burns SCM model......................................................................................................5

List of Table

Table 1: KMO and Bartlett’s Test...........................................................................................................8Table 2: Rotated Component Matrix.......................................................................................................9Table 3: Descriptive Statistics...............................................................................................................10

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Abstract

The research is conducted to study the factors affecting the proper operation of supply chain management in a multi-speciality hospitals. The supply chain activities for the research are only limited to the activities conducted by the hospitals for the daily operations. A thorough analysis of the factors both internal and external, affecting the operations of the supply chain is the aim of the research. The various factors affecting the operation of the supply chain will be identified by conducting personal interviews with the employees who handle supply chain operations and observing the supply chain activities at different hospitals in Mumbai, these factors will be analysed and a suitable suggestions to reduce the effect of these factors will be suggested at the end of the paper.

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IntroductionBackground:

Supply chain management (SCM) in the health care sector is a relatively new field and is still in a growing phase. Therefore, the purpose of this paper is to identify the barriers that affect the proper operation of the supply chain in a multi-speciality hospital and provide with suggestions and solutions to reduce the effect of these factors. Supply chain management is ultimately about influencing behaviour in particular way and in a particular direction.

The term SCM was first used in the 1980s and as such is a relatively new discipline within management theory with tools and concepts still being developed, it is a multi-disciplinary subject which has its origins in a number of fields including purchasing, logistics and operations, which implies that there is internal coordination within the organisation along with intra-integration of organisation (integration with suppliers, distributes and customers).

According to (Burns L. , 2002), the three major type of players in a healthcare SCM system are: Producers, Purchasers (GPO’s or group purchase organisations), and health care providers (Hospitals). This chain is shown in fig 1.

Hospital supply chains present healthcare systems with a prime opportunity both to help improve patient care and mitigate increases in expenses. The greatest opportunity is for hospitals to transform their supply chains into a strategic function which is both vital and collaborative in nature. As such, administrators and clinicians would collaborate on anticipating and ordering all medical and non-medical items such as gloves, diagnostic, drugs, sheets and machines. This process would curb costs—but also yield more far-reaching benefits such as creating a system that provides and validates product information and drug specifications and effectiveness. Thus, as a result, the supply chain would not only help control escalating costs but also boost efficiency and optimize clinical outcomes (Schwarting,Bitar, Arya, & Pfeiffer, 2011).

Figure 1: (Burns L. , 2002)

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Research Question:

What are the factors affecting the proper operations of the supply chain in a multi-speciality hospital in Mumbai?

Objective of research:The objective of the paper is to list out the various factors affecting the operations of the supply chain management in a multi-speciality hospital and to suggest various methods to reduce the effect of these factors.

Literature ReviewAccording to the author (McKone, Hamilton, & Willis, 2005) even though there is

well-documented evidence of noteworthy competitive advantage and cost reduction resulting from SCM practices yet the healthcare industry has been extremely slow to embrace these practices. This is due to the various barriers that affect the implementation of supply chain in healthcare sector. These obstructions include inconsistent relations with suppliers, need for performance management, limited education on supply chain, misaligned or conflicting incentives and lack of executive support.

According to the author (Forslund & Jonsson, (2009)) the factor that affect the proper operation of SCM in an organisation is the disability of the organization to integrate it supply chain performance activities. The factors that affect the integration of supply chain performance are of two types, they are, external factors and internal factors. The external factors are lack of trust in the relationship, lack of a parallel communication structure between supply chain partners and different goals and priorities. The internal factors are manual performance data management and non-standardized performance metrics.

The author (Gilaninia, 2011) of this paper analysed the effect of information sharing and the supply chain performance. The author concluded by stating that proper information sharing has a positive impact on the supply chain performance and vice-versa. The author drafted four hypotheses to justify the results, these are:

1. Sharing and information technology of supply chain, affect accountability of supply chain.

2. Information technology and Information Sharing of supply chain, affect the supply chain efficiency.

3. Responding of supply chain, affect the supply chain performance.4. The efficiency of supply chain affects the performance of supply chain.

The author identified two intervening variables between information sharing and supply chain, these are supply chain responsiveness and supply chain efficacy. The factors affecting the proper information sharing according to the author are the quality of data, the number of channels and the extensive coverage.

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The author also states that the integration of supply chain will have certain effects such as it will lead to better collaboration and better coordination, establish new relationships with customers to identify customer needs, develop the efficiency of sales and marketing channels, it will help in more powerful distribution and transmission of information and it will increase the speed of supply chain.

The author concluded the paper by stating that the cause of poor efficiency in the supply chain are the lack of accuracy of the information and adequacy of information systems that are responsible for providing and processing information.

As per the research conducted by (Storey, Emberson, Godsell, & Harrison, 2006) the various barriers to the proper operations of a supply chain are knowledge and transparency of information, behaviour of supply chain and measurement of supply chain performance. The author also stated that there is a large gap between the theoretical and the applied supply chain activities in hospitals.

The author (Hasan & Alim, 2010) has considered the factors having an impact on supply chain in cross border sourcing. The author stated that barrios such culture, language, import and export policies, government norms and technological difference have an impact on the supply chain in case of cross border sourcing.

As per the research conducted by (KUCUKUSTA & TUTUNCU) the factors affecting the proper operation of supply chain management in healthcare are lack of top management commitment, accuracy of information, real time information sharing and communication systems used by the institute. The author also stated that the focus of the supply chain management should shift form departments to the organisation as a whole.

From the literature review we can conclude that the factors such as information sharing, top management commitment, communication tools, relationship and trust on suppliers, absence of performance management systems for supply chain, technological differences and the inconsistency of goals of suppliers and health care institutes affect the proper operation of supply chain activates in healthcare facilities. No literature was found regarding Indian healthcare industry and the factors that affect the supply chain management in Indian conditions are still unknown for healthcare sector.

The following gap was found in the literature review:

No such research has been done for multi-specialty hospitals in Mumbai. The factors affecting the operations of supply chain management in Indian conditions

are still unknown.

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Methodology:

The sample for the research was taken form 14 multi-speciality hospitals based in Mumbai, the respondents were mainly doctors, nurses and support staff that are directly related with the supply chain activities that are conducted in the various hospitals. A total of 40 responses were collected for the research.

Data collection:The data was collected for the multi-speciality hospitals with the help of questioners and interviews. The data collection was done keeping in mind the research objective i.e. the factors that affect the proper operations of supply chain management in hospitals in Mumbai. The factors which were identified are: daily planning tools, communication tools, infrastructure, knowledge about supply chain, departmental focus, logistics performance, trust on supplier and material sourcing process.

The sampling technique used for the process was snowball sampling, it is a type of non-probabilistic sampling in which the initial subject points the researcher to the next subject who performs similar operations or handles the similar tasks.

The questioner was used interviews were no possible. The respondents were asked to rate the various identified variables on a scale from 1 to 5. 1 having the lowest impact and 5 having the highest impact. The results of the telephonic interview and the questioner which were collected and further analysed.

Data Analysis:

Factor AnalysisFactor analysis was used to analyse the data further. It was conducted using SPSS software. Factor analysis was conducted using the principle component extraction method along with verimax rotation to get the desired components. The Eigen-value of more than one was used to determine the number of components extracted.

Before the factor analysis is conducted the data was tested for suitability, this was done by using the KMO and Bartlett’s test for sphericity. The data can only be analysed with factor analysis if it passes the KMO and Bartlett’s test. The following table shows the result of the tests:

Table 1: KMO and Bartlett’s Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .545

Bartlett's Test of Sphericity

Approx. Chi-Square 61.135

Df 28

Sig. .000

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From the table we can see that the value of KMO test is 0.545, and for the data to be suitable it should have a KMO value of more than 0.5. Thus, from table 1 we can see that our data has passed the KMO test.

Similarly, the Bartlett’s test value of significance is 0.000, for the data to be suitable it should lie between 0.000 and 0.005. Thus, from table 1 it is clear that the data has passed the Bartlett’s test and is suitable for being analysed Factor analysis.

Now the factor analysis was conducted. There were four components which were extracted after the factor analysis and the loadings of the 8 variables on these 4 components is shown by the table below:

Table 2: Rotated Component Matrix

Component

1 2 3 4

Trust .881

Supplier Infrastructure .735 .342

Communication tools .883

Planning tools .340 .763

Logistics .901

Material Sourcing Process .872

Departmental focus .879

Supply chain Knowledge .457 .667

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 5 iterations.

The above table only shows the variables having loading of more than 0.3 the remaining values were ignored because they did not have sufficient loading. The variable having the highest loading with a particular component is grouped into that component.

Descriptive Statistics We can identify the variable with has the maximum impact on the supply chain operations in a multi-speciality hospital by analysing the descriptive statistics table shown below:

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Table 3: Descriptive Statistics

Mean Std. Deviation Analysis N

Trust 2.6000 .81019 40

Infrastructure 4.6250 .49029 40

Communication tools 4.3250 .61550 40

Planning tools 3.8250 .54948 40

Logistics 4.4500 .71432 40

Material sourcing 1.8500 .66216 40

Internal focus 3.9750 .86194 40

Supply Chain Knowledge

3.1500 .80224 40

In the above table the variables having maximum mean will have more impact on the supply chain operations in a multi-speciality hospital. Thus, from the table logistics, communication tools and infrastructure have the major impact on the operations of the supply chain in a multi-speciality hospital.

Results & Findings:

From the descriptive statistics table it was found that the factor having the highest impact on the supply chain operations in a multi-speciality hospital is infrastructure then logistics and then communication tools. Thus these factors should be given more consideration while planning the operations.

From the factor analysis 4 components were extracted. The list of the components along with the variables grouped in them is listed below:

Component 1: The variables having the highest loading on this component are logistic and material sourcing process. These factors can be used to measure the supply chain performance of the hospital. Thus the component can be labelled as supply chain performance review.

Component 2: The variables having the maximum loading on this component are communication tools and planning tools. These variables mainly linked with the information sharing planning done in the hospital. Thus the component is named as planning and information sharing.

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Component 3: The factor having the maximum loading on this component is trust between the suppler and the hospital along with the infrastructure shared. The supplier and hospital infrastructure will limit the capabilities of the supply chain and thus put a cap on the supply chain performance. Trust is also an important factor in the supply chain, lack of trust may result in the poor supply chain operations. As this component will result in selection or changing of suppliers it is labelled as Relationship with Suppliers.

Component 4: The fourth factor is representing the departmental focus in hospitals and the lack of supply chain knowledge. The various departments are more focused to improve their departmental efficiency rather than improving the efficiency of the whole hospital. This factor is labelled as departmental focus & lack of awareness about supply chain.

ConclusionThis research is carried out to identify the various factors that affect the operation of supply chain management in a multi-speciality hospital in Mumbai, to find the relationship between these factors and to analyse the impact of these factors on the supply chain operations in a multi-speciality hospital.

After conducting the literature review, data collection and analysis it was found that the supply chain operation in a multi-speciality hospital are affected by trust, infrastructure, departmental focus, communication tools, planning tools, logistics, material sourcing process, departmental focus and supply chain knowledge.

After conducting the factor analysis the following conclusions can be drawn “There are four important components that hinder the proper operation of supply chain in multi-speciality hospitals they are supply chain performance review, planning and information sharing, relationship with suppliers and departmental focus & lack of awareness about supply chain”.

Recommendations

From the finding listed above it can be seen that communication stools, infrastructure and logistics management play have the maximum impact on the supply chain operations in a multi-speciality hospital and steps should be taken to reduce the effect of these factors. The following recommendations are listed to reduce the effect of the identified variables on the supply chain performance in a multi-speciality hospital in Mumbai.

Real Time Data Sharing:

At present there is no real-time data sharing between the hospitals and their suppliers due to which there is a delay between information sharing. If a real time information sharing system is installed the supplier will have sufficient information in hand to prepare for the

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next order even before the order is placed. This will result in a more responsive supply chain with more efficient operations.

Review Of Supply Chain Performance

In most of the hospitals the supply chain performance is not reviewed. This may result in greater cost of operating the supply chain, longer cycle time and reduce the overall efficiency of the operations. Thus the organisation should have performance reviews of the supply chain to identify the activities that are affecting the performance and operations of the supply chain.

Supply Chain Awareness:

Lack of awareness about supply chain has been identified as a factor that effects the operation in supply chain in a multi-speciality hospital. As the staff is unaware about the process they do not know which steps are to be taken to improve the performance of the supply chain. By spreading awareness about the supply chain, hospitals can ensure that every employee works towards the improvement of supply chain operations.

Limitations of the study & Scope for further Research

This research only takes into consideration the multi-speciality hospitals and is restricted to Mumbai only and does not consider other categories of hospitals, thus further research can be conducted to identify the various factors that influence the operation of supply chain in hospitals.

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References:

Burns, L. (2002). The healthcare valuc chain. San Francisco : Jossey-Bass.

Burns, L. (2002). The Healthcare Value Chain. San Francisco: Jossey-Bass.

Forslund, H., & Jonsson, P. ((2009)). Obstacles to supply chain integration of the performance management process in buyer-supplier. International Journal of Operations & Production Management 29.1 , 77-95.

Gilaninia, S. (2011). The Impact of Information Technology Application on Supply Chain. INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS-vol 3, No 8, 489-496.

Hasan, R., & Alim, M. A. (2010). Factors Affecting Supply Chain Management Efficiency in Cross Border Outsourcing. Logistics and Transport Management Master Degree Project No.2010:60, 143.

KUCUKUSTA, D., & TUTUNCU, O. (n.d.). SUPPLY CHAIN MANAGEMENT INTEGRATION AND ITS EFFECTS ON PERFORMANCE IN HOSPITALITY INDUSTRY. Turkey: Dokuz Eylul University, Center for Quality and Excellence, Izmir,Turkey.

McKone, S. K., Hamilton, P., & Willis, S. B. (2005). The ailing healthcare supply chain: a prescription for change. The Journal of Supply Chain Management, Winter 2005, Volume: 41 Issue: 1 pp.4-17 (14 pages), 4-17.

Schwarting, D., Bitar, J., Arya, Y., & Pfeiffer, T. (2011). The Transformative Hospital Supply Chain.

Storey, J., Emberson, C., Godsell, J., & Harrison, A. (2006). Supply chain management: theory, practice and future challenges. International Journal of Operations & Production Management, suppl. Supply chain management theory and practice 26.7, 754-770.