Introduction: • Business exist to offer goods & services to consumers • Transformation: When the business uses resources (inputs) to create valued & profitable goods & services (outputs) needed, wanted & demanded by & offered to consumers. • Operations: all activities performed by the org. to transform resources into valued, profit-generating goods & services * Operations management: The management of such activities or Critical decisions that need to be made by operations managers.
The Link between Operations & Profitability: • The efficiency of the operations → Affect the profitability of the goods & services • It costs money to create goods & provide services • Example: • The pharmacy must pay for: *medications, containers, & bags *computers (for labels & bills) & software * electricity, rent, salaries for staff * other costs
Profit: The money left-over after deducting all the costs or expenses associated with operating & creating the goods& services that are sold. ( Profits=Sales – Costs) • Must be prudent in purchasing & managing the inputs. • Maximizing the efficiency of creating & services sold requires: 1)Careful planning 2)Analysis 3) Management
Operations Managements is a critical, multifaceted area of interest to any business due to its connection to profitability. • Examples: • Using inferior ingredients or vials • Underpaid pharmacists • Inferior computer • Profitability is not just about finding lowest cost inputs or raising the prices to cover the cost.
Typical Pharmacy Outputs (Goods & Services): • Tangible inputs: Can be seen or touched & their quality may be evaluated (goods are tangibles) • In the creation of goods, there are many intangible , nonproduct inputs as well as the tangibles (services are intagibles) • Examples of intangible: *speed *proficiency *interaction with patients (assistance?) →All of which will influence the return of the pt. in the future
In community pharmacy, a common example of a service: packaging, adding information, billing insurance co. All of which add value to the product. • Resources →Services is NOT easily understood • Providing info. must: *recall info. or *look it up & *apply info. to pt. *communicate info. clearly
Typical Pharmacy Outputs: • Community Pharmacy Practice: • Prescription meds. Filling based on Dr.s’ orders • Compounding • OTC meds • Nutritional supplements • Offering & fitting durable medical equipment • Info. about Rx , OTC meds. & nutritional supp. • Health & beauty aids • Greeting cards • Disease-state mgt. • DUR • Counseling on drug use • Providing meds. to nursing home residents • Adjudication of claims with insurance co. • Screening for Dis • Special convenience packaging
Institutional Pharmacy Services: • Prescription meds. Filling based on Dr.s’ orders • Compounding • IV meds. & sol’ns preparation • Meds delivery to floors • Oversight & inventory of controlled substances • Order collection from floors • Drug event monitoring • Formulary mgt. • Therapeutic interchange • Rx med counseling • MUE • Rx med carts filling • DI to h/c providers • TPN & PN • Emergency crash carts stocking • PK dosing • Clinical drug trials
The outputs of a business justify its existence. • Many consumers categorize businesses by what they provide→ As if the G & S are predetermined based on the category of the business • Instead G & S are driven by decisions made owners or managers (taking into considerat’n consumer opinion) • The mission defines the reason for the business’s existence & communicates the advantages it has in the G & S it offers
Owners or managers can: add, enhance, eliminate, or change the G & S offered which need strategic planning • Strategic planning can assist in identifying the internal & external factors faced by the business: *Strengths *Weaknesses *opportunities *threats
Typical Pharmacy Inputs (Resources): • Examples of Resources Used to Fill a Prescription: • Rx meds • Pharmacist who ordered Rx meds • Delivery service provided by wholesaler • Technician who stores meds • Shelf where med. sat until used • Vial used • Computers used • Service offered by insurance co. • Label printed by comp. • Software used by computer • Phone line used • Clerk who rung the Rx • Register used • Counter • The pharmacy facility • Electricity & other utilities used by pharmacy
Each of the resources plays a critical role in transforming the med received by wholesaler to med dispensed to pt. • Many of such resources are transparent (taken for granted) i.e. electricity • The resource influences the efficiency & ability to perform activities in Rx filling • Some resources are not critical but ↑ efficiency & ultimately profitability of process i.e. shelving units
The 10 Decisions Under the Purview of the Operations Management: • Designing G & S (offer competitive advantage) • Process strategies (implement & manage process) • Managing quality (quality maintained) • Location strategies (conductive & appropriate) • Layout strategies (conductive & appropriate) • Human resources (personnel mgt. is very import.) • Scheduling (personnel mgt. is very import.) • Supply chain-management (efficient inputs supply) • Inventory management (minimize cost of invent.) • Maintenance (of resources used in operations to function properly)
Each of above factors & strategies used to max. their efficiency are relevant to both community & institutional pharmacies.
Designing Goods & Services: • To be in line with consumers needs & wants • Require analysis & planning • Goods: tangible (held & touched) • Services: intangible (experienced by consumer) • Except for compounding, designing goods → up to manufactures • ↑ Opportunities to design innovative & creative services to accomplish the goals
Services can be designed in 3 different approaches: • Customer service • Product service • Service products
Customer Service: Aimed @ improving the customer’s experience & geared toward improving overall sales → perceived as overhead costs • Product Services: Add value to a specific product to enhance its sales & are consumed after the product is purchased • Service Product: Independent of company’s tangible offerings & can be consumed separately
Planning: Plays a critical role in development of G & S. • Analyses of internal & external environments: Play a role in determining the capabilities of the pharmacy & the needs in the market. • Offering G & S consistent with consumer needs & wants→↑chances of profitability • The offering of services will affect multiple aspects of pharmacy’s operations , i.e. marketing, production, delivery, internal communications. Each of which can influence the day to day processes used to offer G & S to customers.
2) Process Strategies: • The operations process involves many steps. • The order in which steps are performed →influence efficiency of operations → influence profitability (e.g. filling Rx drug not put on the shelf yet) • In process used to create goods → customer is NOT likely to be involved *In services → customer may be integrally involved (waiting for Rx to be filled)
The process used by pharmacy to create goods & provide services have specific capacity. • Capacity is determined by the resource that imposes the greatest limitation on the process. • This limiting factor is BOTTLENECK • To increase capacity → Identify & eliminate bottleneck • Bottlenecks & other obstacles to efficient providing of G & S →↓quantity of goods created & services provided
Example: A pt. is waiting for a refill in a limited space of a crowded pharmacy. • Solution: Line up each pt med. Refills so that pt can get all his meds once a month & contact every pt before Rx is due to be filled.
This will allow for: 1. Pt to discuss his med problems with pharmacist 2. ↓the need to maintain a large inventory 3. More control over the pace of filling Rxs 4. ↑increase pharmacist contact with pt 5. Significantly ↓ pt traffic in pharmacy
A flowchart (diagram of the steps involved in creating & offering G & S) → helpful in: a. analyzing the resources used b. designing the process c. identifying & evaluating the capacities of each element of the process d. identifying the areas that can be improved→ improve efficiency e. manage the quality *The more detailed the diagram is → the easier it is to evaluate the time & resources necessary @ each step of the process (flowchart for filling Rx)
3) Managing Quality: • Measuring quality is very important & depends on kind of G & S provided. • Quality of goods can be based on objective standards (i.e., quantity of active ingredient) • Quality of services can be based on subjective standards (quality of DI provided) • Services , although intangible → need to be evaluated
2 Types of costs associated with quality: • The cost of maintaining quality 2. The cost associated with poor quality
1. The cost of maintaining quality: a. Prevention Cost: Result from the use of resources ( time & personnel) to prevent errors from occurring e.g. training employees & use of technology b. Appraisal Cost: Result from the use of resources to inspect, test & audit to identify a drop in quality of service or product.
2) Cost associated with poor service quality: a. Internal Failures: Errors or defects that are identified & rectified before consumers receive the product or service (e.g., a mistake in labeling) b. External Failures: *Errors or defects in G or S that are actually delivered to the consumers & frequently identified by consumers (wrong med). *Take much more time & money to correct
4) Location: Can affect: • How easily & efficiently the inputs for operations can be acquired * How easily the outputs of operations can be transferred to consumers of these outputs • Which outputs are chosen to be offered by a given business ( designing of G & S )
Examples: • Conductive to attracting qualified pharmacists to work there • Proximity to consumers (busy metrplex & requires public transportation → pharmacy has no stock→ pt inconvenience → ? Return • Large population that need drive-thru window (mothers with sick infants)
If located near people who need its products → ↑chance of attracting them to the pharmacy ( dermatologic clinics )
5) Pharmacy Layout: • Location of various G & S within the pharmacy • Designed to maximize efficiency of processes conducted to create G & S • Counseling area • Patients’ movements through the pharmacy
6. Human Resources: • Examples of evaluating tools to determine HRs needed to accomplish the operations: *job design *job analysis to make good decisions about the HRs needs for specific operations • Supply & demand → may prevent finding enough efficient pharmacists
Environmental factors may cause higher pay, better working hrs, or better benefits • Motivated, productive & competent pharmacists → greater profitability • Training on their responsibilities is important (phone ring) • HRs are play a big role in transformation of inputs → outputs
7) Scheduling: • Regulations → licensed pharmacists present during pharmacy working hours • Individual work preference • Scheduling support staff ( chart demand) using computer system → most help needed with greatest Rx filling (careful planning, evaluation of sales, volume trends)
Chase strategy: Personnel availably when predicted demand is greatest (after a weekend) • Level Scheduling: to provide a level amount of production so that a constant workforce can be employed to handle the demand day after day & week after week (preparing IV sol’ns) • Forecasting Strategy: Forecasting demands for G&S requires use of info, mathematical functions & statistical analyses
Scheduling the delivery of orders is important (@ night or when closed or not busy) requires relationships with →suppliers
8) Supply-Chain Management: • Supply chain is the chain of business that supply the pharmacy with necessary inputs. • Wholesalers: The primary vendors; they distribute the majority of prescription drugs in the USA. • Should have relationships with reputable companies that provide reliable services. • Some chain pharmacies receive goods from distributors they own + wholesalers
Services may include: • Electronic order submission • Next-day delivery service • Private-label programs • Advertising programs • Special-handling services • Pharmacy computer systems • Pricing • Store planning
Key elements in choosing suppliers: • Timely delivery of needed & properly stored meds by licensed & reputable wholesalers @ best price • Wholesalers: (difference in services & autherization) • Large full-service • Regional • Smaller • Secondary • Different types may be used to meet different needs
9) Inventory management: • Too much inventory: money sitting on the shelves • Too little inventory: insufficiency in the system 10) Maintenance: