By Jon Miller | Post Date: January 16, 2006 5:30 PM | Comments: 0
In a January 12, 2006 Wall Street Journal article (which you can also find on the Pittsburgh Post Gazette) titled Just-in-Time Inventories Make U.S. Vulnerable in a Pandemic raises a question that is very common to organizations first starting out implementing Lean manufacturing. That question goes something like "Just in Time production is very good, but what about 'just in case' we get that big order? Shouldn't we have inventory?"
The article talks about how there is a short supply of some vaccines and even a lack of some drugs at many hospitals in the United States, and how this leaves us particularly vulnerable to pandemic outbreaks of disease. Part of the blame for this is placed on the "just in time" supply chain where stocks of these drugs have been kept very low in an effort to be cost-efficient. This paragraph from the article summarizes the main message in a nutshell:
"Most fundamentally, the widely embraced "just-in-time" business practice -- which attempts to cut costs and improve quality by reducing inventory stockpiles and delivering products as needed -- is at odds with the logic of "just in case" that promotes stockpiling drugs, government intervention and overall preparedness."
Remember that all inventory is a symptom of your problems. Some of these problems you may not be able to fix right away, but the goal of kaizen is the eventual elimination of all waste to achieve zero defects, zero inventory, low cost, etc. even if it takes a very long time. Building a warehouse and calling it good is giving up.
For those of us who have looked deeper into what "just in time" means at the place where it was coined and first practiced as a fully functioning system - Toyota - we understand that "just in time" is only possible where you have "heijunka" or a smooth and level loaded production schedule. When people are getting sick and dying, that's a demand spike that you can't smooth out by asking people to wait. It might be a good idea to buffer these spikes with inventory.
TPS would say carry inventory until you can "fix the problem" of your slow response time or the demand spike of a pandemic. So there is nothing inherently wrong with carrying inventory in a "just in time" system, so long as that inventory was there to support flow and buffer the problems you can't fix right now.
So what are some of the problems that exist with the vaccine manufacturing value streams that require this "just in case" inventory? The article explains that fewer companies manufacture vaccines because in a year with an outbreak that is less severe, there is less demand for their product. Not only is their business highly demand-variable, but if you are successful in keeping down the epidemic you sell less of your product. The free market may not be the best one for life-saving products like these.
Another revealing paragraph from the article states:
"Most if not all of the medical products or protective-device companies in this country are operating almost at full capacity," says Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota. "That's the reality of today's economy: just-in-time delivery with no surge capacity."
Anytime we hear "operating almost at full capacity" and "nor surge capacity" we need to ask: "How much of what you do is overproduction?" and "What's your OEE?" In our experience few pharmaceutical companies have clear answers to either of these questions. These are two areas of opportunity to realize potential improvements in production capacity at little or no investment.
Dr. Osterholm continues "Investors punish companies for having excess capacity they don't use." Perhaps production output and capacity utilization should not be the only ways that vaccine manufacturers are rewarded. If we keep fire stations open and fire trucks idle in case of an emergency, why can't we do the same for hospitals, doctors, and vaccine manufacturers? Speed and flexibility, or the ability to meet demand spikes rapidly for critical vaccines would be a good way to measure how effective these organizations are. This can be achieved through kaizen and the application of Lean principles, rather than inventory, as any Lean manufacturer can tell you.
The article also cites a reluctance on the part of the government to buy and own this stockpile of "just in case" inventory of medicine, as well as other legal barriers creating disincentives for companies to invest in medicines and processes to produce them quickly in response to pandemics. Despite the claim below by Dr. Bishop, there are things hospitals and government could do:
"You can't plan for a surge capacity in an emergency room of 500 or 1,000 patients from the 20 you see in a day," says Michael Bishop, a Bloomington, Ind., emergency physician who used to be on the board of directors for the national trade association for emergency physicians. "Nobody could afford to do that. You can't have 10 doctors and 100 nurses sitting around waiting for something to happen."
Why can't you? In kaizen you need to think of what you can do, not what you can't. Ask "why?" when you think you've hit a "can't".
When you need surge capacity you can hire out a hotel and make the guest rooms into hospital suites during a pandemic. It would probably cost you less than a stay in a hospital bed. It's not perfect, but it's better than what we have now which would be waiting for hours in an emergency room during a pandemic.
Create Standard Work in healthcare and cross train so that you can scale up and down in emergencies. You can have "reserve" nurses trained in triage or other basic medical treatment. How about a National Reserves of healthcare workers. Instead of being trained to fight, these reservists could be trained to heal in times of emergency. Flying American reservists into disaster areas to save lives (instead of the opposite) would be kaizen, change for the better.Comments are moderated to filter spam and inappropriate content. There may be a delay before your comment is published.