General Operations Management

• Introduction:• Businesses 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 organization 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 goods &

services sold requires: 1)Careful planning 2)Analysis of internal & external factors 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 intangibles:*speed*proficiency*interaction with patients (assistance?)

→All of which will influence the return of the patient in the future

• In community pharmacy, a common example of a service: packaging, adding information, billing insurance company. All of which add value to the product.

• Transformation of Resources to create Services is NOT always easily understood

• Providing information must: *recall info. or *look it up

& *apply info. to pt. *communicate

information 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 Disease• 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 by 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 & the strategies used to max. their efficiency are relevant to both community & institutional pharmacies.

1) 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:

1. Customer service2. Product service3. Service products

1. Customer Service: Aimed @ improving the customer’s experience & geared toward improving overall sales → perceived as overhead costs2. Product Services: Add value to a specific product to enhance its sales & are consumed after the product is purchased3. 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 pharmacist2. ↓the need to maintain a large inventory3. More control over the pace of filling Rxs4. ↑pharmacist contact with pt5. 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:

1. 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 metroplex &

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 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 available 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 & autherisation)• 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: