Logistic and Transport Management to Reduce Health-care Cost
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The Health Care Sector in Mauritius provides medical solution and services to the general population in Mauritius. The Health sector budget is more than 10 Billion rupees annually excluding capital expenditure projects for infrastructural works such as construction of Hospitals and other health institutions. The overall health in Mauritius is a cause of great concern today, both for the government and for the public. Fundamental changes are needed in the health sector in an attempt to improve the quality of life. As such, one of the main sector where it deserves many changes is the logistic sector which encompasses the flow of information, the supply chain management, the procurement sections and the transport management.
Logistics, a poorly understood and often un-appeared process, accounts for a sizeable portion of a hospital's operating budget. Studies have shown that 30% to 46% of the hospital expenses are invested in various logistical activities and that almost half of the costs associated with supply chain processes could be eliminated through the use of best practices.
Today medical costs have escalated heavily and has become the number one issue in health care for the past decades. Government, as well as private companies are working hard to find solutions so as to reduce health care cost. New technologies are currently being developed so as to ease the services as well as to reduce cost taking into consideration of efficiency and effectiveness. Methods of delivering health care cost are profoundly being changed. Medical information by way of web-enabled technology is quickly replacing the more traditional ways people seek advice and information. Today quality management of patient care and managing logistic to reduce health care cost are integral cost reduction tools that are currently being studied in most health service program.
1.1: Problem statement
Although logistic and transportation system is smoothly running to palliate the whole movement in the healthcare sector, there is still room for improvement which can also contribute to reduce heavy cost and contributing to save money, i.e. public fund. In fact the Transport Section situated at the Vagrant Depot at Grand Riviere North West - Port Louis caters for all the movement of goods, people and services throughout the whole country. The service level of this system is difficult to measure as a whole but can be concluded as to be enough good but still need improvement as there are many loopholes which needs to be considered and corrective measures taken in order to achieve a better quality service.
Many attempts have been made to improve the service quality of the existing transportation system and with the help of Internal Control remarks and National Audit report, many remedial actions have been taken but still the Ministry is facing a big challenge to fully satisfy all stakeholders in the health sector and improve the health services.
From experience and observation made, it is concluded that customers and other stakeholders of the transport system, also need changes and as individual, should add their contribution so as to improve continually. It is therefore obvious that users of transport section need to be continually monitored so as to enhance the service level and hence to determine customer needs and bring customer satisfaction.
1.2: Study Aims
The aims of studying management of logistic is to consider that part of Supply Chain Management that plans, implements, and controls the efficient, effective, forward, and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption (up to patients) in order to meet customers' requirements as well as to reduce cost in the long run.
It needs to see how the Logistic and supply Chain Management can contribute to improve the logistic and distribution system in the Ministry of Health and Quality of life.
Today many companies are managing their logistic system by the help of information system thus keeping database of the daily activities, the planning and the action taken so as to facilitate the workload and not only satisfy their customers but also to delight them.
Objectives of the study
- To identify along the distribution channel where there have been poor planning and control.
- To identify the method that can be used to reduce cost and save public money.
- To assess whether these studies can contribute in the implementation of the strategies for reducing cost in the health sector.
- To identify those factors that will bring changes in the whole system.
- To formulate recommendations and strategies so as to improve the system.
1.3: Vision and Mission of the Ministry of Health and Quality of Life
The vision of the Ministry of Health and Quality of Life is to build a healthy nation through the delivery of compassionate, quality and cost-effective services to the population.
1.3.2: Mission Statement
Enhance the health status of the population;
Improve the quality of health care delivery with a view to increasing patients'satisfaction;
Enhance social equity through the provision of a wider range of health services to the whole population;
Ensure that the health sector is consolidated and that the health services remain accessible to every citizen.
This can be implemented with the help of the Logistic and Supply Chain Management so that the movement of medical and pharmaceutical products, medical staffs and patients are transported at the right time and right place without causing any deficiency and break in the supply chain.
1.4: Outline of the study
Chapter 1: Introduction
This chapter provides an overall description of the Logistic and Supply Chain Management, more precisely in the Transport Section, at the Ministry thus exposing the aims and objectives of the study.
Chapter 2: Literature Review
This chapter reviews the definition, the literature of theories, the concept, the history, the interrelation between transportation and logistic, the routing planning, the implied transport cost and the implementation of the Supply Chain Management among others. It describes about various theories and concepts that has been applied in various context to the logistic and transportation system for improvement in the service level.
Chapter 3: Methodology
This chapter gives guidance to this dissertation. In fact the methodology explain various variables used through questionnaires and perceptions from people and other users in the Supply Chain at the Ministry of Health and Quality of life to reach a conclusions and make recommendations.
Chapter 4: Results and Discussion
This chapter looks at the overall results obtained in the survey made (questionnaires) and helps in making analysis of the results thus exposing them diagrammatically through graphs and charts.
Chapter 5: Conclusions and recommendations
This chapter concludes the study made and sets recommendations in the system that will lead to changes which will help to reducing cost as well as improving the system in terms of Quality.
2.0:0 Definition of Logistic
TheOxford English Dictionarydefines logistics as "the branch ofmilitary sciencehaving to do with procuring, maintaining and transportingmateriel, personnel and facilities." Another dictionary definition is "the time-related positioning of resources."
Logistics is commonly seen as a branch ofengineeringthat creates "people systems" rather than "machine systems". When we talk in terms of HRM logistics means giving inputs i,e recruiting manpowers which ultimately works for the final consumer or to deliver services.
There is, realistically, no ‘true' name or definition that should be pedantically applied, because product differs, companies differs and system differs. “Logistics is a diverse and dynamic function that has to be flexible and has to change according to the various constraints and demands imposed upon it and with respect to the environment in which it works. And therefore these terms are used interchangeably, in literature and in the business world. (logistic and distribution management - Alan Rushton)
2.1:0 OVERVIEW OF LOGISTICS
Council of Logistics Management (1991) defined that logistics is “part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of manufacture and the point of consumption in order to meet customers' requirements”.
Johnson and Wood's definition (cited in Tilanus, 1997) uses “five important key terms”, which are logistics, inbound logistics, materials management, physical distribution, and supply-chain management, to interpret.
Logistics describes the entire process of materials and products moving into, through, and out of firm.
Inbound logistics covers the movement of material received from suppliers. Materials management describes the movement of materials and components within a firm. Physical distribution refers to the movement of goods outward from the end of the assembly line to the customer. Finally, supply-chain management is somewhat larger than logistics, and it links logistics more directly with the user's total communications network and with the firm's engineering staff. The commonality of the recent definitions is that logistics is a process of moving and handling goods and materials, from the beginning to the end of the production, sale process and waste disposal, to satisfy customers and add business competitiveness. It is ‘the process of anticipating customer needs and wants; acquiring the capital, materials, people, technologies, and information necessary to meet those needs and wants; optimising the goods- or service-producing network to fulfil customer requests; and utilizing the network to fulfil customer requests in a timely way' (Tilanus, 1997).
Simply to say, ‘logistics iscustomer-oriented operation management'. Logisticsis the management of the flow ofgoods,informationand other resources in arepair cyclebetween the point of origin and the point of consumption in order to meet the requirements of customers.
Logistics involves the integration of information,transportation,inventory, warehousing, material handling, and packaging, and occasionallysecurity. Logistics is a channel of thesupply chainwhich adds the value of time and place utility. Today the complexity of production logistics can be modelled, analyzed, visualized and optimized by plant simulation software.
2.2:0 History and Advancement of Logistics
Logistics was initially a military activity concerned with getting soldiers and munitions to the battlefront in time for flight, but it is now seen as an integral part of the modern production process. The main background of its development is that the recession of America in the 1950s caused the industrial to place importance on goods circulations.
It was initially developed in the context of military activities in the late 18th and early 19th centuries and it launched from the military logistics of World War II. The probable origin of the term is the Greek logistikos , meaning ‘skilled in calculating'. (BTRE, 2001) Military definitions typically incorporate the supply, movement and quartering of troops in a set. And now, a number of researches were taken and made logistics applications from military.
2.3.0: INTERRELATIONSHIPS BETWEEN TRANSPORTATION AND LOGISTICS
Without well developed transportation systems, logistics could not bring its advantages into good transport system in logistics activities could provide better logistics efficiency, reduce operation cost, and promote service quality. The improvement of transportation systems needs the effort from both public and private sectors. A well-operated logistics system could increase both the competitiveness of the government and enterprises.
2.4.0: Transportation Costsas a Characteristics in Logistics
Transport system is the most important economic activity among the components of business
logistics systems. Around one third to two thirds of the expenses of enterprises' logistics costs are spent on transportation.
According to the investigation of National Council of Physical Proceedings of the Eastern Asia Society for Transportation Studies, Vol. 5, pp. 1657 - 1672, 2005
Cost related to Transportation of goods does not only includes fuel cost but include the followings:
- Overhead cost
- Maintenance cost
- Drivers' and loaders / helpers' salaries
- Depreciation cost
- Management cost
- Fuel cost
Transport costs have significant impacts on any organization, be it a public body, i.e. a government institution or a private firms. In may organization, transportation cost are influenced by the ways users are managing and utilizing. These represents the cost of moving a passenger or a good from one place to its destination, including all associated cost involved within the activities. These rates are often visible as transport service providers should be aware of the all information to secure the transaction.
2.4.1: Factors that affect transportation cost
The most important factors that affect transportation cost are thus:-
- Geography - This factor is mainly concerned with distance and accessibility. Distance is commonly the most basic condition affecting transport costs. It can be expressed in terms of length, time, economic costs or the amount of energy used. It varies greatly according to the type of transportation mode involved and the efficiency of specific transport routes.
- Type of product. Many products require packaging, special handling, are bulky or perishable. As such, in the case of health sector, it involves moving medical items, pharmaceutical products, patients, medical staff, medical services etc
- Economies of scale. Another condition affecting transport costs is related to economies of scale or the possibilities to transportation of goods in larger quantities so as to lower the cost. As far passengers are concerned, it should involved merging of trips within the same route.
- Energy - Transport activities are in fact large consumers of energy, especially fuel and oil. Consideration has to be given to minimise trips and hence minimising fuel consumption.
- Mode. Different modes are characterized by different transport costs. Reduction in cost is also due to different mode of transport. For example one cannot transport a small box of 25 kg in a lorry of 5 tons. This could well be transported in a small van or a car which will use less fuel.
2.5.0: Deficiencies that Drive Up Logistics Operations Costs
Logistics, a poorly understood and often unappreciated process, accounts for a sizeable portion of a hospital's operating budget. Studies have shown that 30% to 46% of hospital expenses are invested in various logistical activities and that almost half of the costs associated with supply chain processes could be eliminated through the use of best practices.
In hospitals, logistics cover not just support services such as purchasing, stores and the pharmacy, but also health care services such as patient care units and operating rooms. Many activities that could be carried out by support personnel are often on the list of duties performed by health care personnel. The result is that the internal supply chain within a hospital is often highly fragmented.
Logistics is a complex process. The people involved vary with the type of products in questions: for example, stores manage medical and non-medical supplies, the pharmacy looks after pharmaceutical products; and food services manages the procurement and processing of food products.
2.6.0: Materials and Methods in transportation and logistics
The literature on accounting in health care industry covers a number of themes. Many researches have been carried out and many titles and articles have been provided regarding how to reduce the escalating medical costs and improve quality management in transportation and logistics. Some have been successful, while others have shown failures.
Procurement, storage, mobilization, distribution and other aspects of providing material assistance to the health sector, and the handling of those supplies, require a good organizational structure to ensure the efficient management and utilization of resources that in emergency situations, tend to be limited.
This structure is provided by logistics, the strategy of achieving practical objectives promptly and methodically while making the most effective use of available resources.
2.6.1: The two basic premises:
1. Supply logistics cannot be unprepared at the time of an emergency. Organizations of health institutions must see it as a cornerstone of emergency planning and preparedness efforts. Employing resources appropriately, and being able to secure those that are not at hand, depends on first identifying their availability and location, as well as the sources for obtaining them. All those activities demanded by logistical deployment during an emergency - the mechanisms for standardizing the various processes and all the necessary documents for recording information and controlling, monitoring and following up on the flow of supplies - must be prepared, understood, and tested in advance.
2. The various stages in the flow of supplies, from their point of origin to the moment they reach their recipients - whether they be the organizations managing the emergency or the actual beneficiaries of the assistance - are a chain made up of very close links. This is called the chain supply. How any one of these links is managed invariably affects the others. Supply management must therefore be the focus of an integral approach that looks at all the links in the sequence and never loses sight of their interdependence. This is known as supply chain logistics.
Some of these procedures reflect the standards of international organizations involved in disaster response. Many others, however, are the distillation of concrete experiences by those in the field.
Information in PAHO/WHO's Scientific Publication Medical Supply Management after Natural Disasters
2.7.0: Supply chain management (SCM)
SCMis the management of a network of interconnectedbusinessesinvolved in the ultimate provision ofproductand servicepackages required by end customers (Harland, 1996).
Supply chain management spans all movement and storage ofraw materials, work-in-process inventory, and finished goods from point of origin to point of consumption (supply chain).
Definition of Supply Chain Management (SCM) provided by the APICS Dictionary:
It defines SCM as the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally."
- Supply chain management is the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole (Mentzer et al. , 2001 ).
- A customer focused definition is given by Hines (2004:p76):
"Supply chain strategies require a total systems view of the linkages in the chain that work together efficiently to create customer satisfaction at the end point of delivery to the consumer. As a consequence costs must be lowered throughout the chain by driving out unnecessary costs and focusing attention on adding value. Throughput efficiency must be increased, bottlenecks removed and performance measurement must focus on total systems efficiency and equitable reward distribution to those in the supply chain adding value. The supply chain system must be responsive to customer requirements."
- Global supply chain forum:-
Supply Chain Management is the integration of key business processes across the supply chain for the purpose of creating value for customers and stakeholders (Lambert, 2008).
- According to theCouncil of Supply Chain Management Professionals(CSCMP), “S upply Chain Management encompasses the planning and management of all activities involved in sourcing , procurement , conversion, and logistics management.” It includes the important components of monitoring and collaboration withall partners in the chain. They can besuppliers,agents, service providers, andcustomers, users and other stakeholders in the chain. In fact, supply chain management integrates both supply and demandmanagement within and across companies. Accordingly to the same Council (CSCMP), self-organizing network of businesses that cooperate to provide product and service offerings has been called the“Extended Enterprise”.
“A supply chain, as opposed to supply chain management, is a set of organizations directly linked of the upstream and downstream flows of products, services, finances, and information from a source to a customer. Managing a supply chain is supply chain management” (Mentzer et al. , 2001).
Supply chain management softwareincludes tools used to execute supply chain transactions, manage supplier relationships and control associated business processes.
Supply chain event management (abbreviated as SCEM) is a consideration of all possible events and factors that can disrupt a supply chain. With SCEM possible scenarios can be created and solutions devised.
2.8.0: Transport Management System (TMS)
TMS are one of the systems managing thesupply chain. They belong to a sub-group called Supply chain execution (SCE). TMS, has become a critical part of any (SCE) Supply Chain Execution and Collaboration System in which real time exchange of information with other SCE modules has become mission critical.
Transportation Management Systems manage three key processes of transportation management:
2.8.1: Planning and Decision Making in Transportation and Logistics
TMS will define the most efficient transport schemes according to given parameters, which have a lower or higher importance according to the user policy: transport cost, shorter lead-time, fewer stops possible to insure quality, flows regrouping coefficient…
2.8.2: Transport follow-up
TMS will allow following any physical or administrative operation regarding transportation: traceability of transport event by event (shipping from A, arrival at B, customs clearance…), editing of reception, custom clearance, invoicing and booking documents, sending of transport alerts (delay, accident, non-forecast stops…)
2.8.3: Measurement of the Transport Management System
TMS have or need to have a Logistics KPI reporting function for transport.
Various functions of a TMS:
- Planning and optimizing of terrestrial transport rounds
- Transportation mode and carrier selection
- Management of air and maritime transport
- Real time vehicles tracking
- Service quality control
- Vehicle Load and Route optimization
- Transport costs and scheme simulation
- Shipment batching of orders
- Cost control, KPI reporting and statistics
Typical KPIs include but not limited to:
- % of On Time Pick Up or Delivery Performance relative to requested
- Cost Per Metric - mile; km; Weight; Cube; Pallet
2.8.4: Route Planning and Optimization
- Reduce Distribution Costs & Fleet Miles - Daily routes are created using powerful algorithms and street-level routing, in conjunction with your business constraints
- Increase Resource Utilization-Make better use of existing resources by delivering more and driving less. The answer to increasing volume is not always to put more vehicles on the road, but to make smart, efficient
- Make Sound Business Decisions -Understand how delivery costs affect the profitability of each customer by knowing the actual cost per stop
- Set Driver Standards - Creating route plans and gathering actual information allows you to set performance standards and expectations-which can result in less overtime and better driver performance
- Decrease Routing Time - Let your routers spend less time configuring routes and more time assessing what-if scenarios to produce better, more efficient routes.
- Contingency Planning - Prepare for holiday or seasonal spikes and other "what if" scenarios
- Reports - Driver manifests, maps, directions, resource utilization, customer delivery cost, actual versus projected by route and by stop, planned route summaries and many more reports to help consistently in evaluating a system.
2.8.5: Load Optimisation
- A Quick Load Design which should be also accurate for many Route Types - Each route requires different loading system. In fact different types of equipment are used at different loading and unloading bays depending on the routing system.
- Multiple Loading Strategies - These are different types of techniques used for operating at the loading and unloading bays. It could be in terms of software or some working methods used by machine operators so as to increase the output of work by minimising physical efforts.
- Building Load in advance - a common techniques applied by many warehouses is to pre-build or to prepare the load in advance and store them in some identified location and which will be useful and same time in a Pre-Build Orders - Load orders to be picked, built and pre-staged throughout the day, all while continuing to have them allocated to the correct route and truck during the final loading pass
- Load Design to Reduce Product Breakage - Most breakage occurs within the first 10 minutes of a route due to poor packing.
- Reports - Final load sheet, driver check-out, load validation and pick sheets provide you with all of the detailed information required.
2.9.0: Supply chain management must address the following problems
2.9.1: Distribution Strategy
Definition of strategy
“ A strategy is a pattern of major objectives, purposes or goals and essential policies or plans for achieving those goals, stated in such a way as to define what business the company is in or is to be in and the king of company it is or is to be .” (Drucker, 1961)
2.9.2: The distribution strategy
The business environment is unpredictable and complex to anticipate and forecast effectively. As such strategies have to be developed so as to meet the need of everybody in the supply chain. These include patterns of actions that should be planned and intended in the management of the transport so as to handle the distribution channel in a more appropriate way. This strategy can also be developed in the supply chain management whereby it will raise a question of centralising or decentralising the warehousing and delivery. This strategy will of course reduce the day to day transport arrangement problem.
2.9.3: Trade-Offs in Logistical Activities:
There are many activities in logistic system andTrade-offs may increase the total cost if only one of the activities is optimized. For example, a full loaded lorry distributing stores is more economical on a cost than less than the lorry load capacity (e.g. half lorry load). The full lorry load of a product will reduce transportation costs and will therefore decrease the inventory holding costs which may in turn decrease total logistics costs. It is therefore imperative to take a systems approach when planning logistical activities. These trade-offs are key to developing the most efficient and effective Logistics and SCM strategy.
2.9.4: Distribution Network Configuration: number, location and network missions of suppliers, production facilities, distribution centers, warehouses, cross-docks and customers.
2.9.5: Tiering of Suppliers
Organisations have for many years sought to reduce their supplier base as they seek to implement a lean supply regime. Segmenting the chosen supply base into tiers gives a measure of priority in the management of the supply chain.
The first tier is reserved for the immediate and direct suppliers of assemblies / manufacturers etc, whereas the second and third tier suppliers are reserved for component suppliers who supply the first tier suppliers, thus removing them from direct involvement with the manufacturer.
Therefore tiering is important in the direction and management of the supply chain as the first tier supplier is responsible for ensuring that there has been a movement in the supply chain and also is receiving from his direct supplier.
- Information: Integration of processes through the supply chain to share valuable information, including demand signals, forecasts, inventory, transportation, potential collaboration, etc.
- Inventory Management: Quantity and location of inventory, including raw materials, work-in-progress (WIP) and finished goods.
- Cash-Flow: Arranging the payment terms and methodologies for exchanging funds across entities within the supply chain.
Holding a huge amount of inventory mean huge capital tide up and therefore involving large amount of money and also increasing the holding cost. A good management in logistic and supply chain will undeniably give rise to a good cash flow and managing fund equitably.
Several models have been proposed for understanding the activities required to manage material movements across organizational and functional boundaries.One model is the SCM Model proposed by the Global Supply Chain Forum (GSCF). Supply chain activities can be grouped into strategic, tactical, and operational levels.
Importance of Supply Chain Management
Organizations increasingly find that they must rely on effective supply chains, or networks, to compete in the global market and networked economy. In Peter Drucker's (1998) new management paradigms, this concept of business relationships extends beyond traditional enterprise boundaries and seeks to organize entire business processes throughout a value chain of multiple companies .
During the past decades, globalization, outsourcing and information technology have enabled many organizations, such as Dell and Hewlett Packard , to successfully operate solid collaborative supply networks in which each specialized business partner focuses on only a few key strategic activities (Scott, 1993). This inter-organizational supply network can be acknowledged as a new form of organization. However, with the complicated interactions among the players, the network structure fits neither "market" nor "hierarchy" categories (Powell, 1990). It is not clear what kind of performance impacts different supply network structures could have on firms, and little is known about the coordination conditions and trade-offs that may exist among the players. From a systems perspective, a complex network structure can be decomposed into individual component firms (Zhang and Dilts, 2004).
Traditionally, companies in a supply network concentrate on the inputs and outputs of the processes, with little concern for the internal management working of other individual players. Therefore, the choice of an internal management control structure is known to impact local firm performance ( Mintzberg, 1979 ).
In the 21st century, changes in the business environment have contributed to the development of supply chain networks. First, as an outcome of globalization and the proliferation of multinational companies, joint ventures, strategic alliances and business partnerships, significant success factors were identified, complementing the earlier "Just-In-Time", "Lean Manufacturing" and "Agile Manufacturing" practices.
Secondly, “ technological changes, particularly the dramatic fall in information communication costs, which are a significant component of transaction costs, have led to changes in coordination among the members of the supply chain network ” (Coase, 1998).
Many researchers have recognized these kinds of supply network structures as a new organization form, using terms such as " Keiretsu ", "Extended Enterprise", "Virtual Corporation", "Global Production Network", and "Next Generation Manufacturing System ".In general, such a structure can be defined as "a group of semi-independent organizations, each with their capabilities, which collaborate in ever-changing constellations to serve one or more markets in order to achieve some business goal specific to that collaboration (Akkermans, 2001).
The main task of all hospitals is the improvement of the patient's state of health. The provision of the medical treatment and patient care - core processes of the hospital, create demand for patient-related support services. These secondary processes can be of medical or non-medical nature.
Additional services summarized in tertiary processes are not directly linked to patients, but are necessary for proper operation of the healthcare facility.
In many processes of hospital logistics, material transport plays a decisive role. According to requirements, hospital material transport is either scheduled (planned) or on-demand (un-scheduled).
Compared to industrial applications, the quality of material transport in healthcare facilities must be of the highest quality. Wrong or inaccurate deliveries could have fatal implications for patients, hospital employees, and visitors.
This subject addresses the following researches:
- What is the present Distribution Network Configuration and the transport management system at the Ministry of Health and Quality of life. Whether an improvement of the complete transportation system can contribute to reduce cost in the long run.
- What are the Distribution Strategy?
- Whether an improvement in the logistic and transport management system can contribute to reduce cost in the health.
- Perception of users and other stakeholders in the Transportation and Logistic System?
2.1.0: Overview of the Existing Transport System
Transport operations at the MOH determines the efficiency of moving goods and people. However there is no common rules and regulations for each health institution but each hospital have developed their own way of operating transport though common practices, depending on the specialised services.
Transport system in any hospital takes a crucial part in the manipulation of logistic. A good system needs a clear plan and program of logistics and a proper transport implementations and techniques to run the daily activities within the institution.
The Supply chain execution at the MOH means managing and coordinating the movement of materials, information and funds across the supply chain.
Strategies were thought many times to improve the health sector in Mauritius both in terms of quality service and cost reduction. This was to be accomplished by the impact of all aspects of the hospital activities on behalf of the size of each hospital. For instance, some strategies in the health sector share a set of values and guiding principles that reflect a more holistic concept of the individual, and acknowledge the social, economic and environmental influences on health.
Supply chain management is fact a cross-functional approach which includes managing the movement of medical and non medical goods / materials from manufacturers / suppliers into the government health institutions, internal carriage of same to users including patients and the movement of patients, medical practitioners and other health staffs within the organization in an objective to contribute in the healthcare system and in the smooth running of the organization.
As organizations strive to focus on core competencies and becoming more flexible, they reduce their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement.
2.0.1: Examining the current cost of logistic and transportation in the Health sector
“ The current economic crisis in Mauritius is the best motivation that need s to red uce Health Care Logistics costs”
All supportive services in all the Hospitals should be concerned to examine every opportunity to reduce and manage hospital logistics expenses while providing flawless customer service. Hospital administrators should be aware that the world economic crisis is dominant and they should put to all their efforts in reducing hospital costs in all sections
There's a pressing need to review health care practices in Mauritius in order to improve hospital/care service providers and to strengthen their efficiency and effectiveness. Improvement in service operations will definitely provide better cost control and help to maintain the quality of health care delivered to the public.
Hospital logistics is one such process, in which the goal is to efficiently deliver medical supplies and devices to the patient. Hospital logistics operations always have the potential for expense reductions and efficiency gains. In the current context, where health institutions must carefully manage public funds, and where public accountability and patients' rights are becoming more and more pressing, improving the logistics process through the implementation of best practices has become a must. Identifying best practices by benchmarking the hospital/care provider logistics process can help facility managers find cures for the ailing health sector.
Logistics and supply chain management have been a dominant issue in developed market economies for Japan and a number of other Asian countries.
2.1.2: Transport Users' Satisfaction
This is an attitude that generate from a user of the service offered comparing to what was his expectations. What was the perception and what he received.
It is important to note that achieving customer satisfaction is the main aim of a service provider. In fact many transport users at the Ministry of Health and Quality of Life are also not satisfied of the actual service provided by the Transport Section. In other word, they show dissatisfaction as they have their own perception that the service offered do not meet their expectation. Trips are always delayed, the waiting time for the transport coming to pick them up are always late, drivers are rough, vehicles are old and not comfortable, etc. People always compare the present service at the Ministry to those in developed countries.
The Quality of the Service Provided by the Transport Service
Quality and performance are always evaluated by users of the service and this is achieved through customer (users) driven excellence which includes understanding what is actually required and expected by the users of the service.
If the service is satisfied by the users, the organisation and therefore the health institutions can survive and this will add value to the quality of the health service. Good service quality leads to customer satisfaction.
Many researchers who have studied in the field of quality and customer satisfaction have concluded that there is a relation between customer satisfaction and quality. According to Seth, Deshmukh and Vrat (2005), service quality indeed affects customer satisfaction . And now studies have shown that many organisations are moving from satisfying their customers to delighting their customersin a view to obtaining loyal and profitable in business. In fact customer delight involve going beyond satisfaction to what can be described as a pleasurable experience for the client.
“ While customer satisfaction require s delivering according to customer expectation, customer delight on the other hand requires exceeding the expectation of the customer”.
At the Ministry of Health and Quality of Life, the question of delighting users of logistic and transport does not arise because many users are still not satisfied with the actual system itself. These people are waiting more than their expectation and therefore are unsatisfied.
Logistic in the health sector refers to a large number of different names which include:
- Physical distribution
- Business Logistics
- Material Management
- Procurement and supply
- Product flow
- Marketing logistics
- Supply chain management
- Demand chain management
- Transport Management System
Today opportunity exists to enhance public safety, improve clinical outcomes, decrease death rates, and improve quality of life. However it has been seen that the cost implicated in the implementation of such objectives is increasingly affecting the government budget 30 to 45 % of the hospital expenses are invested in various logistical activities and almost half of these cost can be eliminated through the use of best practices.
These health care expenses can still be decreased by Managing the Logistic system. Some are:-
- Redressing the distribution system of pharmaceutical medicines to outpatients;
- Managing stakeholders;
- Controlling pilferage;
- Implementing best practices in the procurement system to avoid fraud;
- Managing and planning transportation system, including routing for ambulances and other health vehicles to reduce cost;
- Reducing services such laundering of hospital clothes;
- Reducing cost in managing Human Resources
2.1.3: The advantages received at the Health Services through Logistics
During the recent years, the attitudes have now changed towards distribution and logistics. Various elements have created, within the logistic system, many additional costs. These cost are referred to cost of transportation, movement of people and goods, storage of goods etc. But now it is recognised that logistics operation provide means by which the product can reach the customer / users or the patients in appropriate conditions at the required place.
Therefore it is important to go through competitive tendering exercise on the basis of obtaining the lowest possible cost, the highest possible value to the customer (i.e value for money) and the quality required.
The Transport Management at the Ministry of Health and Quality of Life
The Transport Section at the Ministry of Health and Quality of Life is located at the Vagrant Depot, Grand Riviere where it caters for a huge fleet of vehicles approximately 429 vehicles of different types such as cars, vans, 4 x 4 vehicles, minibuses, buses, lorries, caravans, ambulances etc. A list of all the vehicles including the date of purchase are at Annex I.
An organigram representing the Transport Management System is as below:-
Objectives of the Transport Section
- Control and monitor the movement of all vehicles
- Control and monitor the job of all drivers attached to the transport section
- Perform maintenance and repairs to all vehicles
- Follow up with suppliers regarding repairs and servicing for vehicles still under guarantee
- Follow up with accidents and taking corrective measures
- Provide transport facilities to all Hospitals and other government health institutions
- Ensure a continuous flow of materials and other medical consumables throughout all government health institutions
The Ministry of Health comprises the following health institutions:-
- 5 Regional Hospitals
- 4 Specialised Hospitals
- 3 District Hospitals
- 2 Mediclinics
- Area Health Centres
- Community Health Centres
- Central Health Lab.
Observations at the Transport Section at MOH
There are presently only 15 mechanics and one workshop supervisor to cater for 429 vehicles. Most of the mechanics have been transferred from the former Police Mechanical Workshop which was recommended to be closed by the MAB. Subsequently all the mechanics were posted to different Ministries where there are existing mechanical workshops to repair their own vehicles.
Most of the mechanics have no academic qualifications but have been given on job training. However, it has since some years, due to insufficient manpower, most of the maintenance and repairs are outsourced to third party service provider (private garage) where they are paid for the worked performed.
For instance, some minor repairs are still performed in-house by the mechanics of the Vagrant Depot while all major repairs are outsources. However there is no existing contract in between the Ministry and the outsourced company, i.e. the private mechanical workshop. Presently there are only a few such private company and which are in the vicinity of the Transport Section that perform the repairs and works are outsourced “on a pick and choose system” whereby the Head or the Workshop Supervisor may decide in the choice of the service provider.
The amount for those repairs are paid upon submission of a claim by the private workshop for the works performed, no matter how much is the amount. This system seems to be not in accordance with the Public Procurement Act 2006 in which it is clearly stated at section (….) that provision should be made to contract out the service by the prescribed procurement method within a ceiling.
In some cases, mechanical parts are purchased by the store section of the Transport Section and issued to the private workshop for the repairs to be effected and the private workshop is paid for only the service workmanship and services.
From records many identical parts are purchased from different suppliers, on different dates and at different prices. Had there been a computerized systems and a proper planning, procurement of parts could have been planned well in advance to procure in bulk at competitive prices.
The system at Vagrant Depot Transport Section is not computerized and all data entries and follow up are made manually. The Plant Register for vehicles are not kept properly. Details pertaining to repairs and replacement of all parts are not recorded in an orderly manner. Whenever required, it needs to retrieve information from different books and ledgers which are kept in a complete disorderly manner
The overtime budget for the Transport section is extensive and it has been observed that there is an abuse of overtime performed by Drivers from most of the health institutions. There is no good control and monitoring of the drivers' attendance. Normally drivers work after normal working hours to convey staff, materials or any other services required. However it has been observed that some drivers works at full fledge after normal working hours while some others are not offered the opportunity to work overtime.
During the past years it has been observed from records that the rate of accidents have increased in numbers. The cost of repairs due to accidents are on the high side several times accidents have resulted in a total lost of the vehicle. The causes of these accidents have been recorded as follows:-
- Drivers' carelessness
- Third parties in fault
- Dangerous driving
- Drivers' under the influence of alcohol ( Drink-driving)
- Mechanical problems
- Human behavior (or misbehaviour)
- Fatigue - (fatigue, often due to sleep disorders or disruption)
- Low road safety awareness
Some other reasons are:-
- Pedestrians choosing to cross the roads at unsafe places;
- Cycling without proper lights at night;
- Motorists driving too close;
- Drivers being too aggressively or without due care and attention;
- Non-wearing of seat belts;
- Parking of vehicles at inherently dangerous locations or on the footpaths;
- Fitting aggressive bull bars to vehicles' fronts;
- Persons working in live traffic underestimating the need to wear conspicuous jackets:
- Undertaking road works that are poorly signed, etc.
An Interview with Mr B. Gowreesungker, Head Transport Management and Workshop Superintendent of the Ministry of Health and Quality of life.
- The main Transport Section is in operation at the Vagrant Depot, Grand-Riviere since many years and now it has been decided to transfer the location at the ex- DWC compound Port Louis. What is your personal opinion on this transfer and whether the proposed location would be favourable in terms of access, space available and security of vehicles?
The transfer to Ex-DWC premises has already been turned down. Another appropriate location is being sought to house both the workshop and the Transport Management Unit.
In fact the Ex-DWC premises was found to be in a remote place where access for all staff and vehicles from all over the island would be difficult. Most of the staff at the Transport Section were reluctant to go over there.
- The Transport Section at Vagrant Depot Mechanical Workshop comprises of 15 mechanics and one supervisor to perform all repairs and maintenance of a fleet of 417 government vehicles for the Ministry of Health and Quality of Life.
- Do you think that these few workers are enough to cope with the heavy workload in repairs and maintenance of vehicles ?
In fact, the few mechanics at the workshop is insufficient to repair the whole Ministry's fleet of vehicles.
My opinion is that the trend is towards contracting out of the services for maintenance and repairs. The reasons are:
People are reluctant to work. They are resistant to change. Mechanics are lazy and do not like to work. Much time is taken to repairs simple things and this causes delays in all other activities
- Are you in favour to increase the number of mechanics, recruit a few Mechanical Engineers and reorganise the workshop so that all repairs and maintenance will be performed in house? Will it not be economical to repair in-house than to contract out?
No, I am not in favour to increase the number of mechanics at the workshop and consider to re-organise it.
According to me, it will be not economical to repair in-house than to contract out.
- Most of the major repairs are contracted out to private mechanical workshops.
- Are you satisfied with “contract out of Repairs and Maintenance” in terms of price and work done?
The prices are cheaper compared to all government workshop and performance of work done is satisfactory.
- How do you control / justify price and performance of the service providers for the repairs?
By re-do works.
- Do you very often perform re-do works to check performance of the service provided by the private garage.
Yes, very often
- Outsourcing the whole activities of Logistic and Transportation (including movement of goods, people, patients and services) will help to get rid of a “burden” from the Ministry's responsibility. Are you in favour of outsourcing the whole logistic and transport system which is considered to be a non-core activity for the Ministry of Health and Quality of Life?
I have experience in the field and have also visited the Singapore airport.
Outsourcing has been done at the Singapore airport for the logistic and transport service. However, here at the Ministry of Health and Quality of Life, we need quality people to monitor and supervise the service.
- Overtime payment to drivers working after their normal working hours is a big issue which inflate the Transport budget.
- What are the steps you have proposed or are proposing now to decrease overtime for Drivers?
It is a fact that some overtime inflates the annual budget. However I propose that drivers working on shift can decrease the overtime paid in excess to their normal salaries.
- Are you in favour of implementing a shift system for drivers' schedule of duty as existed at all Hospital?
- According to you, will drivers accept to work on a shift system?
Yes, but some drivers would be reluctant to work on shift for fear of losing their excess amount earned monthly.
- The fuel consumption for vehicles at the Ministry of Health is on the high side and this is due to:
- Too many activities at the ministry
- Unplanned routing and logistic system
- Old vehicles consuming much fuel
- Unauthorised and unnecessary trips made by responsible officers
- Vehicles are used by officers who are not eligible for
As a Transport Superintendent, what are the steps you will propose to reduce cost of running vehicles?
A GPS system to control the where-about of all drivers on a trip.
- With the latest technology, many companies are going the way to run hybrid vehicles thus saving energy, i.e. minimising the use of fuel.
What is your opinion on buying hybrid vehicles as from now on, so as to save the cost of fuel?
A hybrid vehicle would be efficient but this applies to purchase of cars only. As far as heavy vehicles are concerned, it will not work.
- According to the list of vehicles available at the MOH, it appears that many vehicles are old enough and which undergo extensive cost of repairs and maintenance. The idea to dispose those old vehicles and replace by new ones seems brilliant but the cost implicated is out of the Ministry's budget. What new idea do you have in regard to disposal of those vehicles and replacement by new ones.
This cost the government a very huge amount of money, that is a higher investment cost.
As such, replacement in phases would be better
A new idea is to go for leasing of vehicles from a private firms.
- The management of the Ministry is at the head office situated at Emmanuel Anquetil Building Port Louis whereas the management of the Transport Section is situated at Vagrant Depot at Grand-Riviere. Do you have good communication in between the Head Office and the Transport Section?
Communication is erratic at times and period
- What do you think if the Transport Section will be fully computerised and all data would be readily available at the Transport Section?
This will be much beneficial and advantageous for the Ministry.
- What is your future plan in managing Transport Section in view to reduce logistic cost?
My future plans are
- to go for computerisation of the Transport Management
- For a Quaisy-System whereby the Transport System will be a separate entity in a form of a corporate body where different units (e.g. hospitals, Health Care Centres etc) will have to buy the service from that body against payment of a propose rate and amount)
From the Interview made with the Head Transport Management and Workshop Superintendant, it is observed that he is not keen to re-organise the workshop of the Transport Section because some workers are reluctant and lazy to work. A fleet of approximately 419 vehicles comprising all types of vehicles is not really easy to manage for logistic and also for maintenance and repairs. However from bills effected to private garage for repairs, it appears that the price is exorbitant and on the high side although the management of the transport section is fully satisfied. In contradiction, it is also observed from the interview that the performance for works contracted out are not all times satisfactory, but in many cases, they are referred back to the private garage for a “re-do” exercise until the bill or the claim is signed for payment.
The workshop yard has also been observed to be like a dumping ground whereby everything starting from tyres to condemned vehicles are lying everywhere in a disorderly manner. There is no proper planning to stock used parts, and other stores in an orderly manner. There are no markings for parking and all vehicles are parked in such a disorder that it becomes difficult for drivers to remove them in the morning at the starting time for duty.
As far as space is concerned, it is understood that during the year 1800 this location was meant for slaves into prison and from the Government program the place will be taken over by the Ministry of Art and Culture so as to preserve it.
The new location for the Transport Management and Workshop was well identified at the Ex-DWC Transport Division at Pailles. The place was in the centre of the island and had good road access for vehicles to move in and out of the compound. But due to unwillingness and reluctant to go, the transport section did not move and the new location is now being occupied by the Main Store of CSD. The staff did not want to move there as they claimed the place was far away from their resident and had to walk long distance before reaching their place of work.
Mixed road functions (Our roads, including the dual carriageways, carry a heterogeneous mixture of traffic; everywhere near centres of human habitations there are people on foot and on bicycles using the roads with all sorts of motor vehicles. These all-purpose roads, accommodating through flow, distribution and access functions, have higher accident risks
The Road infrastructure in Mauritius is in fact very poor. Most of the roads are narrow and two-way at the same time, with poor tarring, lightings, bending and curving at many parts, uneven humps and slopping. On the top of that, there are many round-abouts all along the trunk roads with pedestrian crossing and even with traffic lights
Some roads which have been built to lower design standards and subjected to lower levels of maintenance than other main roads, can produce problems for vehicle drivers. Often, inconsiderate planning has led to inconsistencies such as accesses at bends, hill crests or near intersections).
Government vehicles are not insured against any insurance policy and therefore whenever accident occurs, huge amount of money are spent in paying third parties' due and in repairs of the government vehicles. No actions have ever been taken against any faulty drivers for any re-payment cost of repairs.
The Distributed Channel at the MOH
The distribution channel is mainly from the Central Supply Division (CSD) at Plain Lauzun where all supplies are received from suppliers and manufacturers. The main logistic system from suppliers /manufacturers to patients are as below in the diagrammatic representations:-
The distribution mainly includes medical and non-medical items and pharmaceutical products. A fleet of lorries with lorry drivers and loaders are attached to the CSD and stores are distributed on a daily basis as per the requirement from hospitals and after packing the items by each store at CSD.
However it has been observed that the distributions are very often delayed. The reasons for the delays are:-
- Unplanned activities for collection and distribution of store items;
- The fleet of vehicles is narrow, i.e there is only a few lorries posted on site at CSD for distribution;
- Distribution of medical store items are made in the morning only and drivers and loaders refuse to work in the afternoon;
- No action can be taken against these drivers and loaders as many of them have been recruited on post by political backing.
Requirements for items such medical disposable, pharmaceutical products and other non-medical items for all hospitals and other government health institutions are computed by the Supply Chain Manager and submitted to the Procurement Section for procurement and supply.
At the Head Quarter, all the requirements are considered at the level of the Committee of Need whereby the quantity are examined and cross checked with those figures from previous years. The Specifications are prepared, the estimated costs are worked out and funds are earmarked at the finance section. The requirements are then considered and approved by the Departmental Tender Committee and the Accounting Officer for invitation of bids.
The next step is the invitation for bids by appropriate bidding methods as recommended by the Public Procurement Act 2006, such as Open Advertised Bidding method. Request for Sealed Quotation, Informal Quotation etc., with a closing date where bid from potential bidders have to be deposited in the Tender Box situated at the Ministry (for a threshold of less than Rs 50 M) or in the Tender box situated at the Central Procurement Board (for a threshold above Rs 50 M)
On closing date, bids are opened publicly by the Opening Committee and the bids received from all the prospective bidders are submitted to the
Competitive Tendering Exercise
Since many years all procurements at the Ministry of Health and Quality of Life are processed through competitive bidding exercise according to the Financial Management Manual (FMM) and the Public Procurement Act first published in 2006.
Procurement activities at the Ministry of Health and Quality of Life are centralised. All purchases above a threshold of Rs 100,000 are processed by the Procurement Section at the Head Office and those below the threshold are processed at the hospital.
In fact at the Procurement Section at the Head Office is subdivided into 7 units as follows:-
- Medical Equipment Section
- Non-Medical Products sections
- Medical Disposable Sections
- C-Lab and Reagent Section
- Pharmaceutical Products Section
- Works and Services Section
- Clearing and Forwarding Division
Methods of Tendering
All procurement including of goods, works and services should normally conform with the Public Procurement Act 2006. As such, the main methods of tendering are:
- Opened Advertised Bidding (National and International)
- Restricted Bidding
- Request for Sealed Quotations
- Direct Procur
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