CHAPTER 15 Lean operations and JIT Short case: Just-in-time at Jimmy’s St James’s Hospital, in Leeds in the north of the UK, affectionately known as ‘Jimmy’s’, is Europe’s largest teaching hospital. It employs around 4500 people to support the 90 000 in-patient treatments per year and over 450 000 total admissions. Under increasing pressure to reduce costs, to contain inventory and to improve service, the Supplies Department has undertaken a major analysis of its activities, to try and adopt some of the ideas from the JIT approach.
The initial review highlighted that Jimmy’s had approximately 1500 suppliers of 15 000 different products at a total cost of ? 15 million. Traditionally, the Supplies Department ordered what the doctors asked for, with many cases of similar items supplied by six or more firms. Under a cross-functional task force, comprising both medical and supply staff, a major programme of supplier and product rationalization was undertaken, which also revealed many sources of waste. For example, the team found that wards used as many as 20 different types of gloves, some of which were expensive surgeons’ gloves costing around ? per pair, yet in almost all cases these could be replaced by fewer and cheaper (20 pence) alternatives. Similarly, anaesthetic items which were previously bought from six suppliers, were single-sourced.
The savings in purchasing costs, inventory costs and general administration were enormous in themselves, but the higher-order volumes also helped the hospital negotiate for lower prices. Suppliers are also much more willing to deliver frequently in smaller quantities when they know that they are the sole supplier. Peter Beeston, the Supplies Manager, said: ‘We’ve been driven by suppliers for years ... hey would insist that we could only purchase in thousands, that we would have to wait weeks, or that they would only deliver on W ednesdays! Now, our selected suppliers know that if they perform well, we will assure them of a long-term commitment. I prefer to buy 80 per cent of our requirements from 20 or 30 suppliers, whereas previously, it involved over a hundred. ’ The streamlining of the admissions process also proved fertile ground for improvement along JIT principles. For example, in the Urology Department, one-third of patients for non-urgent surgery found their appointments were being cancelled.
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One reason for this was that in the time between the consultant saying that an operation was required and the patient arriving at the operating theatre, there were 59 changes in responsibility for the process. The hospital reorganized the process to form a ‘cell’ of four people who were given complete responsibility for admissions to Urology. The cell was located next to the ward and made responsible for all record keeping, planning all operations, ensuring that beds were available as needed, and telling the patient when to arrive. As a result, the 59 handovers are now down to 13 and the process is faster, cheaper and more reliable.
Jimmy’s also introduced a simple kanban system for some of its local inventory. In Ward 9’s storeroom, for example, there are just two boxes of 10 mm syringes on the shelf. W hen the first is empty, the other is moved forward and the Ward Sister then orders another. The next stage will be to simplify the reordering: empty boxes will be posted outside the store, where codes will be periodically read by the Supplies Department, using a mobile data recorder. Chapter 15: Short case study 1 Copyright © 2006 Pearson Education Limited Slack: Operations Management, 5th edition
The hospital’s management are convinced of the benefits of their changes. ‘Value for money, not cost cutting, is what this is all about. We are standardizing on buying quality products and now also have more influence on the buying decision ... from being previously functionally oriented with a number of buyers, we now concentrate on materials management for complete product ranges. The project has been an unmitigated success and although we are only just starting to see the benefits, I would expect savings in cost and in excess inventory to spiral!
The report on Sterile Wound Care Packs shows the potential that our team has identified. The ‘old’ pack consisted of four pairs of plastic forceps, cotton wool balls and a plastic pot, which were used with or without additional gloves. This pack cost approximately 60 pence excluding the gloves. The “new” pack consists of a plastic pot, swabs, etc. , and one pair of latex gloves only. This pack costs approximately 33 pence including gloves. Total target saving is approximately ? 20 000. ’ Chapter 15: Short case study 2 Copyright © 2006 Pearson Education Limited
Slack: Operations Management, 5th edition Questions 1. List the elements in St James’s new approach which could be seen as deriving from JIT principles of manufacturing. 2. What further ideas from JIT manufacturing do you think could be applied in a hospital setting such as St James’s? Chapter 15: Short case study 3 Copyright © 2006 Pearson Education Limited Slack: Operations Management, 5th edition Short case: Flexibility helps JIT at L’Oreal L’Oreal cosmetics is now the world’s largest toiletries and cosmetics group, with a presence in over 140 different countries.
In the UK, the 45 000 square metre purpose-built facility in mid-Wales produces 1300 product types in a spotlessly clean environment, which is akin to a pharmaceutical plant in terms of hygiene, safety and quality. The plant has 55 production lines and 45 different production processes, and the manufacturing systems employed are of a flexibility that allows them to run each of the 1300 product types every two months – that means over 150 different products each week. But the plant was not always as flexible as this.
It has been forced to enhance its flexibility by the requirement to ship over 80 million items each year. The sheer logistics involved in purchasing, producing, storing and distributing the volume and variety of goods has led to its current focus on introducing JIT principles into the manufacturing process. To help achieve its drive for flexibility and for JIT production, L’Oreal organized the site into three production centres, each autonomous and focused within technical families of products. Their processes and production lines are then further focused within product sub-divisions.
Responsible for all the activities within his area, from pre-weighing to dispatch, is the Production Centre Manager, whose role also encompasses staff development, training and motivation. Within the focused production centres, improvement groups have been working on improving shop-floor flexibility, quality and efficiency. One of the projects reduced the setup times on the line which produces hair colourants from 2. 5 hours to only eight minutes. These new changeover times mean that the company can now justify even smaller batches, and may give the company the flexibility to meet market needs just-in-time.
Prior to the change in setup time, batch size was 30 000 units; now batches as small as 2000– 3000 units can be produced costeffectively. Chapter 15: Short case study 4 Copyright © 2006 Pearson Education Limited Slack: Operations Management, 5th edition Questions 1. What did L’Oreal do to help it organize the process of setup reduction? 2. What do you think L’Oreal gained from doing each of these things? 3. If we could halve all changeover times in the factory, what effect would this have on inventory? Chapter 15: Short case study 5 Copyright © 2006 Pearson Education Limited
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