Supply Chain and Capacity Management

During the pandemic medical resources quickly became scarce causing healthcare professionals to prioritize everything from testing to treatments.  Polymerase chain reaction or PCR testing laboratories quickly became strained as a surge of people with cold symptoms flooded health care providers or lined up at testing sites to verify whether they contracted the COVID-19 virus.  Early in the pandemic people had to go online, fill out a questionnaire, and see if they were even qualified to take the PCR test to control both testing supplies and lab testing capacity.  Initially asymptomatic people were disqualified from testing reserving capacity for those who were sick with symptoms.  As hospitals began filling up, healthcare professionals were asking those with very mild symptoms to stay home to recover without medical treatment keeping hospital supplies and space available for patients with more serious symptoms and those patients who are considered high risk.

Supply Chain and Capacity Management

Although many businesses face issues with supply chain and capacity management, these issues were brought to the attention of the world because of the pandemic’s strain on the healthcare system.  Beyond the shortages of equipment like hospital ventilators or the global supply of personal protective equipment or PPEs, there was a capacity issue on where to place patients.  Supply Chain Management (SCM) can be defined as “The integration of key business processes regarding the flow of materials from raw material suppliers to the final customer” (Wisner, Tan, & Leong, 2012).  By definition, supply chain is focused on the materials and getting it to the customer.  Let’s consider an auto repair shop.  Although it is important to make sure the shop is equipped with and storing the proper working tools and parts to repair automobiles, it is equally important to have a space to put the vehicle so they can be worked on.  The number of auto repair stations a shop has, the more automobiles the shop can work on.  The same goes for hospitals.  The more inpatient beds a hospital has, the higher the capacity to treat patients requiring admission.  In the Journal of Healthcare Management, Capacity Management (CM) is “Defined as an organizational response to experienced demand” and “focusing on fluctuating demand with existing resources” (McCaughey, Cathleen, & DelliFraine, 2015).  These resources include (1) equipment, (2) spacing, and (3) human resources.  Back to the auto repair shop comparison, even if all the equipment and spacing is available to work on an automobile, it is useless if there is no qualified mechanic to do the repairs.  This holds especially true for healthcare; even if there is capacity and equipment to treat patients, it is all moot if there are no qualified healthcare providers to treat patients.

During the peek of the pandemic, many hospitals went way over their capacity limit depleting resources and taking up space.  In the case of Martin Luther King Jr. Community Hospital in Los Angeles, which is licensed for 131 beds, at one point 224 patients were being admitted and treated causing administrators to repurpose areas like the hospital chapel and gift shop to be used as treatment areas (Rosenfeld, 2020).  While this was an extraordinary situation and an extreme example of capacity management stress testing, it is also a reminder that demand fluctuations can occur and can be extreme. Supply chain and capacity management play an important role in the service industry, especially in healthcare.  As stated in the International Journal of Management Reviews, “In the health-care context, the inability to match fluctuating demand with available capacity has more serious consequences than it does in other traditional services” (Jack & Powers, 2009).  Any disruption preventing a patient from being treated could cause dire consequences to the patient resulting in death.  While other service industries may not have that serious of consequence to human life, serious disruption in supply chain or capacity management could be dire to the company resulting in its death to either business or reputation.

Discussion

Just as it is important to make sure a business is adequately equipped to meet typical demand as well as atypical demand surges, it is also important to find a balance since there is finite space and resources an organization can employ.  Space used to store resources is space not being used to service customers or patients resulting in loss of potential revenue or treating patients.  In contrast, not allocating space to store equipment necessary to serve customers or patients could diminish or strain the organizations capacity to serve.  While organizations and hospitals were strained causing administration to find areas for equipment storage and patient treatment, resulting in space being repurposed for as surge in demand, it is also important to develop a strategy to wind down or taper the resources because of the surge in demand.  Retailers are learning this lesson as they over ordered and overstocked due to supply chain disruptions.  Overstocking caused many retailors to deep discount their inventory to clear way for new inventory reducing profit margins (Wile, 2022).  Know your capacity to help consumers, take control of your supply chain, and find that balance.  Also, be prepared with an emergency plan in case of an atypical surge in demand.

References

Jack, E. P., & Powers, T. L. (2009). A review and synthesisof demand management,capacity management and performance in health-care services. International Journal of Management Reviews, 149-174.

McCaughey, D., Cathleen, E. O., & DelliFraine, J. L. (2015). Improving Capacity Management in the Emergency Department: A Review of the Literature, 2000-2012. Journal of Healthcare Management (60)1, 63-75.

Rosenfeld, D. (2020, December 31). Patients treated in gift shop, chapel as COVID-19 cases flood L.A. hospital. Retrieved from The Mercury News: https://www.mercurynews.com/2020/12/31/amid-coronavirus-crush-mlk-community-hospital-extends-patient-care-to-gift-shop-chapel/

Wile, R. (2022, November 21). Big-box retailers are struggling with excess inventory. That’s good news for holiday shoppers. Retrieved from NBC News: https://www.nbcnews.com/business/consumer/retailers-excess-inventory-good-news-holiday-shoppers-rcna57702

Wisner, J. J., Tan, K.-C., & Leong, G. (2012). Principles of Supply Chain Management: A Balanced Approach. Mason, OH: South-Western.