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Weak inventory management system at hong hung general hospital

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UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business NGUYEN THI HOANG YEN WEAK INVENTORY MANAGEMENT SYSTEM AT HONG HUNG GENERAL HOSPITAL MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2021 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business NGUYEN THI HOANG YEN WEAK INVENTORY MANAGEMENT SYSTEM AT HONG HUNG GENERAL HOSPITAL MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: Dr DOAN ANH TUAN Ho Chi Minh City – Year 2021 Weak Inventory Management System at Hong Hung General Hospital Table of Contents List of tables .5 List of figures Executive Summary Acknowledgments Company overview 1.1 Hung Duy Corporations 1.1.1 Overview 1.1.2 Organization structure .10 1.2 Hong Hung General Hospital 10 1.2.1 Hong Hung Logo .11 1.2.2 Mission, Vision, Value 12 1.2.3 Organization structure .13 1.2.4 Finance and Accounting Department 13 1.2.5 Inventory work-flow at Hong Hung Hospital 15 Symptoms 17 2.1 Decrease inventory turnover 17 2.2 Decrease profit margin 19 Problems identifications 21 3.1 Potential problems 21 3.1.1 Weak inventory management 22 3.1.2 Poor financial planning 23 3.2 Validating problems 24 3.2.1 Weak inventory management 24 3.2.2 Poor financial planning 25 3.2.3 Main problem 27 Cause validation 29 4.1 Potential causes 29 4.1.1 Lack of integrated solutions for whole range of business functionalities 29 4.1.2 Unclear task work-flow and impact 30 Weak Inventory Management System at Hong Hung General Hospital 4.1.3 Imprecisely inventory planning and forecasting 30 4.2 Validating causes .31 4.2.1 Lack of integrated solutions for whole range of business functionalities 31 4.2.2 Unclear task work-flow and impact 31 4.2.3 Imprecisely inventory planning and forecasting 32 Alternative solutions 33 5.1 Proposal solutions: 33 5.1.1 Solution 1: Two-bins system (Kanban system) .34 5.1.2 Solution 2: Microsoft Dynamic 365 (ERP solution) .36 5.2 Evaluation and solution decision: 37 5.3 Action plan 40 5.4 Expected outcome 51 Supporting information 52 Appendices .55 References 65 Weak Inventory Management System at Hong Hung General Hospital List of tables Table : Competitor comparison (Source: Internal survey) 11 Table : Inventory turnover from 2017 - 2020 of Hong Hung General Hospital (Source: Internal Report of Financial Statement) 17 Table : Gross profit margin 2017 - 2020 of Hong Hung General Hospital 19 Table : Advantages and Disadvantages of Alternatives Solutions 39 Table : Project Plan to implement Kanban system from June, 2021 to Jun, 2022 .50 Weak Inventory Management System at Hong Hung General Hospital List of figures Figure : Hung Duy Organization Structure (Source: Internal organization chart) .10 Figure : Hong Hung General Hospital Organization Structure (Source: Internal organization chart) 13 Figure : Finance Organization Structure - Hong Hung General Hospital 13 Figure : Existing inventory control work flow at Hong Hung hospital (Source: Summarized by author based on interview) 16 Figure : Inventory turnover graph (Source: Internal Report of Financial Statement) 18 Figure : Initial Cause - Effect Map (Source: Consolidated by author) 21 Figure : Updated Cause - Effect Map (Source: Consolidated by author) 28 Figure : Final Cause - Effect Map (Source: Consolidated by author) 29 Figure : Theoretical grounding & critical analysis (Source: Consolidated by author) 33 Figure 10 : Fish bone analysis diagram of the week inventory management (Source: Consolidated by author) 33 Figure 11 : Application Programming Interface (API) (17) 35 Figure 12 : Two-bins system process (Sources: GREGORY SCHMIDT) (18) 35 Figure 13 : Microsoft Dynamics 365 functionaries (Source: erpsoftwareblog) (20) 37 Figure 14 : Evaluation Proposal Plan by author 39 Figure 15 : Project implementation plan form proposal by author 40 Weak Inventory Management System at Hong Hung General Hospital Executive Summary As strategic plan aligned with Hong Hung General Hospital’s vision is ³WR EHFRPH WKH OHDGLQJ SURYLQFLDO JHQHUDO KRVSLWDO LQ WHUPV RI SURIHVVLRQDO TXDOLW\ PHHWLQJ WKH -RLQW &RPPLVVLRQ VWDQGDUGV -&, VWDQGDUGV DQG EH D SODFH WR VWXG\ UHVHDUFK DQG WUDLQ KHDOWKFDUH ZRUNIRUFH RI 7D\ 1LQK SURYLQFH´, year 2020 was a turning point of expansion business up to triple capabilities This signal is an opportunity to serve community health-care needs, offer expanded services and improve your hospital’s bottom line Expansions last on average about four to five years but have been known to go on anywhere from 10 months to more than a decade to be stable, in this case to challenge company how to plan properly resources including finance, people and technology Recently, loss profit margin and reduction inventory turnover are issues need to discover Through interviewing relevant key persons in charge to identify main problem, poor inventory management system has experienced to evaluate efficiency when separating operational activities by department Information has been the key point to look at for a better organization and new developments to give any decisions ³7KH PRUH LQIRUPDWLRQ ZH KDYH WKH PRUH RSWLPDOO\ ZH FDQ RUJDQL]H RXUVHOYHV WR GHOLYHU WKH EHVW RXWFRPHV 7KDW LV ZK\ GDWD FROOHFWLRQ LV DQ LPSRUWDQW SDUW IRU HYHU\ RUJDQL]DWLRQ :H FDQ DOVR XVH WKLV GDWD IRU WKH SUHGLFWLRQ RI FXUUHQW WUHQGV RI FHUWDLQ SDUDPHWHUV DQG IXWXUH HYHQWV´ (1) Toward main problem, potential causes are Lack of integrated solutions for whole range of business functionalities, unclear task work flow and impact, imprecisely inventory planning and forecasting In this paper, in-depth interviews, literature review and historical data are supported, main cause is validated to focus on “Lack of integrated solution for whole range of business functionalities” and effective solution proposed in order to improve inventory management in particular and the accounting management system in general Weak Inventory Management System at Hong Hung General Hospital Acknowledgments The paper has not been successful if having no any supports and encouragements of my thesis supervisor - Dr Doan Anh Tuan I would like to take this chance to show my gratitude to valuable suggestions and precious time during period of study: first of all from course “Corporate Finance” to motivate me to choose Finance field in my final thesis During proposal thesis review, Dr Tran Phuong Thao and Dr Nguyen Phong Nguyen as examining committee, I would raise my sincere gratitude for their precious comments and advice helped my thesis journey to take on its final shape I would like to give big thanks to my mother who is always besides me any decisions to make me now Also, I am grateful to have experienced with wonderful classmates and my trust team together from 1st course to final course at ISB I must also send my sincere thankfulness to Hong Hung General Hospital management especially Mr S Hong - Board of Supervisors who gives all favorable conditions to have interview with key persons in charge, provide data and input comments to fulfill whole picture of organization during action plans Last but not least, I want to express my biggest “Thank You” to all great people who make me feel fortunate to have them in my life Weak Inventory Management System at Hong Hung General Hospital Company overview 1.1 Hung Duy Corporations 1.1.1 Overview Hung Duy Trading Industry Transport Import - Export Company Limited (Hung Duy) was established in 1994 as Tapioca starch factory and now becomes corporation operating in all brands divided into 05 fields with total headcount of 1339 up to December 31st 2020: Tapioca starch manufacturing: Hung Duy has factories locating in Hoa Hoi Industrial Zone and Ninh Dien Industrial Zone in Tay Ninh Province Distribution: total 12 prestigious brands in the market up to now: Vina Kyoei Steel, Castrol Petrol Oil, Binh Tay Steel Wire Netting, Unilever, Vinamilk, Kinh Do, Thanh Thanh Cong, Abbott Nutrition, Kimberly-Clark, Masan Consumer, FES (with Pho Cafe brand) and Tuong An (oil products) Transportation: company has more than 60 trucks with capacity from 01 ton to 40 tons per truck Industrial Trees: area of 250 hectare (ha) to plant rubber trees Health-care: Hong Hung General Hospital (precursor of Cao Van Tri General Hospital in 2007) Hospitality: Cana Commercial and Entertainment, Sunrise Hotel, Victory Hotel (2) Weak Inventory Management System at Hong Hung General Hospital PROJECT MANAGEMENT PLAN (START June, 2021 – June, 2022) No I Process Purpose Responsibility Analysis Align process I.1 Action Map workflow Classify products/inventory Analyse current process to evaluate turnover ratio to propose/adjust new lead time/reorder point Set meeting with related departments to collect needs/align work-flow/person in charge by steps Pharmaceutical Department/Consu mable Department/Finan ce Accounting Department Set meeting with related departments to know how to classify products Conduct the classification on Pharmaceutical the excel file provided by Pharmaceutical Department Department/Consu mable Department Look on the inventory turnover rate to identify if ratio is high or low 44 Time Schedule (month/ 2021) Time Schedule (month/ 2022) 10 11 12 Weak Inventory Management System at Hong Hung General Hospital No Process Purpose Action Responsibility - Suggest to propose new lead time/reorder point to map in new system - Develop unique formula for deciding on the number of items that will go into each bin according to their frequency of use and the time it takes to replace them from order to delivery I.2 Set objective to lower safety stock and inventory Collect requirement of inventory level Aligned with Consumable Departments to have minimum inventory level, then get approval of Boards of Directors Pharmaceutical Department/Consu mable Department Product classification & sub- Build up the audit plan/ classification appointment auditors I.3 Review & update Lower inventory, set new Enhance planning and limit ordering points, potentially set stock-out new lead times 45 Time Schedule (month/ 2021) Time Schedule (month/ 2022) 10 11 12 Weak Inventory Management System at Hong Hung General Hospital No II Process Purpose Action Responsibility Development - Measure how many shelves/bins, how spaces will be used/barcode papers/barcode scanner Measure and collect needs - Define color shelves/bins with red is - Draw in excel file to have map to identify which catalogue will be arranged based on product classification & subclassification stage #I II.1 Shelves/bins Approve purchase order Get approval purchase order based on map Order Contact supplier by phone or email to buy shelves/bins by color, barcode papers/ barcode scanner Proceed payment Proceed payment after invoicing Pharmaceutical Department/Consu mable Department Warehouse Accountant 46 Time Schedule (month/ 2021) Time Schedule (month/ 2022) 10 11 12 Weak Inventory Management System at Hong Hung General Hospital No Process Purpose Action Responsibility Schedule to arrange inventory as approved map II.2 Set-up Arrange Shelves/Bins Print list as arranged to search - Build up barcode tool system - Setting up the initial Interface to the hospital's database, and configuring the Tool system (HIS) to be II.3 barcode hardware support IT development simplifying and automating infrastructure the reorder process - Interface barcode tool system with hospital’s system Test III Test tool to make sure all are recorded on time and run IT/Pharmaceutical reports as requested (aligned Department/Accou by Pharmaceutical nting Department Department and Accounting Department) Training program For Nurses/Key users/IT 47 Time Schedule (month/ 2021) Time Schedule (month/ 2022) 10 11 12 Weak Inventory Management System at Hong Hung General Hospital No III.1 Process Kanban system Purpose Action Responsibility - Understand how Kanban system works then all involved persons can figure out risk and loss if stuck in any steps; how it works and contact point if having any HR works with issues Pharmaceutical Department to Human have training needs (define Resources/Pharma - Ensure staffs/key uers needs/how many sessions/how ceutical know: (1) to only pick from many people per Department/IT the primary bin, (2) after session/schedule time) picking the last item from a bind, to place the empty bin on the top shelf (3) pull second bin to replace primary bin - only change bins once empty III.2 Soft skills training Enhance communication skill to interact and understand multiple perspectives to coordinate better and more professionally Find the suitable academy and Human Resources register the course 48 Time Schedule (month/ 2021) Time Schedule (month/ 2022) 10 11 12 Weak Inventory Management System at Hong Hung General Hospital No Process Purpose Action Responsibility Enhance planning skill in order to plan and arrange Find the suitable academy and Human Resources resources more appropriately register the course with the situation IV Go-live Kanban system - Data upload IV.1 Go-live Implement the system - Go-live activities - Online support (IT) IV.2 Monitor IV.3 Review frequently Make sure process are under Monitor actual buffer and control inventory IT/Pharmaceutical Department/Consu mable Department - If the results are accepted, proceed next step If not, return to part #Collect Track process and adjust on inventory level requirement to time review - Create additional catalogue as new demand on the Kanban 49 Time Schedule (month/ 2021) Time Schedule (month/ 2022) 10 11 12 Weak Inventory Management System at Hong Hung General Hospital No Process Purpose Action Responsibility Time Schedule (month/ 2021) Time Schedule (month/ 2022) warehouse if any V Satisfaction Evaluation Sample collection definition Check and V.1 evaluation process Satisfaction assessment survey that covered aspect of the Kanban system: (1) Faster (2) More reliable (3) Fewer variance/differences Deputy Evaluate and assess results Pharmaceutical (4) Fewer stock-outs Officer/Manageria (5) Less work l (6) Less space Accountant/Chief (7) Fewer expired items (8) More satisfied than before Accountant (9) Degree of overall satisfaction Analyse results V.2 Update/Impro Improve, Rectify the plan Improve, Rectify the plan and/ ve plan and/ or process if necessary or process if necessary Table 5: Project Plan to implement Kanban system from June, 2021 to Jun, 2022 50 10 11 12 Weak Inventory Management System at Hong Hung General Hospital 5.4 Expected outcome As Ms Han comments “Currently, inventory data needs a lot of time to import data from HIS (6-8 files) and faces human risk to involve in this process Integrated solutions for whole range of business functionalities is good idea but considering budget for this topic because priority thing in short term below years to focus is operational activities analytic Management evaluates efficiency of hospital activities such as ratio of emergency, ratio of death and rare drugs/medicines… of the period instead of financial information This is the reason why fixing directly main issue to control inventory in Consumable Department is critical to focus now.” And solution can support company right direction in short term A Kanban system allows employees to use items from the first bin until it runs out Key users will be trained to know how per cycle is working: taking the last item from the bin will place the empty bin in a top self area where the need to order will be recognized The person who places orders will scan the barcode on the bin and the order placed on the same day While waiting for the new order of supplies to arrive, the employees will use the products in the second bin The system prevents items that are needed regularly from running out and there is less danger of those with an expiration date of going to waste Well-managing inventory in Consumable Department, then company has record cost of goods sold more accurately that impacts on gross profit margin increases and inventory turnover increases as well The solution isn’t a separated improvement-focused initiative to release key users from their actual work It is just a systematic way to track and manage the process by visual management Even good system control, it is vital to keep good records having in stock to reflect the flow of supplies into and out of health care 51 Weak Inventory Management System at Hong Hung General Hospital facility, this is more and less from human This is an important thing to convince staffs to understands that there is a lot of benefits if implementing new system and following new processes During action plan in the early step, company has opportunities to streamline existing processes then can connect all work items in one platform after alignment involved partners Although one of the aims of a hospital is to ensure that drug supplies are always available and accessible for clinical staff, inventory optimization did not seem to be a priority in health-care decision making for a long time so hospital warehouse estimation level by department should be reviewed all time to make sure sufficient amounts enough to use as strategic plan (6) Increased visibility, transparency, and accountability enable most teams to achieve higher levels of productivity and efficiency than they ever imagined possible Next, company can utilize all current resources by maximizing system performance to synchronize automatically data of consumable warehouse management tool to hospital management system VNPT HIS and EPR FAST Business by opening API as priority interface’s requirement The solution is free risk from human touch by extracting data of VNPT HIS, converting to template then importing to ERP FAST system and improve real time inventory reports Supporting information To understand current circumstances and existing issues of the department, both of methodologies including Quantitative and Qualitative research are used Quantitative research focuses on historical data and statistical information from analyzing financial statement, internal reports, managerial reports Qualitative research is to understand deep perspectives, thoughts of key peoples in the enterprise and their fundamental reasons for them In this paper, data have been mostly extracted from internal reports, theories supports and dept-interviews INTERVIEW GUIDE: Research Objectives: 52 Weak Inventory Management System at Hong Hung General Hospital To clarify main reasons for poor inventory management system at Hong Hung Hospital and recommend solutions for better improvement system to narrow down as much as possible variance book accounting versus inventory to enhance quality information of efficiency evaluation by departments Overall duration: 30-60 minutes General discussion outline: # Key sessions Purposes Timing 1st interview Initial sharing: To understand current issues of the 15-30 minutes department Dept-interview: to clarify and validate main 15-30 minutes problems and causes leading to decrease profit margin, decrease inventory turnover and Inaccuracy efficiency evaluation by departments 2nd interview Recommendations and conclusions: to propose 15-30 minutes solutions and receive comments to choose best one to set priority to implement at the mean time Designed Questions Content: # Key sessions How you feel about your job at Hong Hung Hospital? Why? (refer to topic: working environment, managers and other employees, benefits packages, career opportunities…) What is your opinion about Hong Hung Hospital's accounting department performance? What you think about flow of cash in the company? I see that it maintain quite low in financial statement How often profitability reports to submit (monthly/quarterly/yearly) for stakeholders? What impacts on the decrease of gross profit margin (from 78% 2017 to 61% 2019) and reduce inventory turnover (-1.11) in 2019 comparing to 2018? How about the company's debts? 53 Weak Inventory Management System at Hong Hung General Hospital How to make sure revenue are defined correctly from input? Do we have any work-flow to define which one will catalogue revenue by department? Could you share us inventory management system and process? How to evaluate efficiency performance by department if we unbreak COGS and confuse in allocating revenue by cost center to manage? 10 What is your opinion about Hong Hung Hospital, departmental and your personal issues? What solutions you think it can help you to solve your problems? 11 According to my research, what you think lack of integrated solutions for whole range of business functionalities that causes weak inventory management? 12 How about the risk assessment? Do you think hospital aware the importance of it? 54 Weak Inventory Management System at Hong Hung General Hospital Appendices Appendix : Health insurances’ rejected expenditures (Vietnam Dong) 56 Appendix : Revenues break-down by in-out patient and services 56 Appendix : Increased health insurance package 2019 57 Appendix : Transcription Summary .58 55 Weak Inventory Management System at Hong Hung General Hospital Appendix 1: Health insurances’ rejected expenditures (Vietnam Dong) Appendix 2: Revenues break-down by in-out patient and services 56 Weak Inventory Management System at Hong Hung General Hospital Appendix 3: Increased health insurance package 2019 57 Weak Inventory Management System at Hong Hung General Hospital Appendix 4: Transcription Summary Interviewee Questions & Answers Coding Q1 How you feel about your job at Hong Hung Hospital? Why? (refer to topic: working environment, managers and other employees, benefits packages, career opportunities…) Ms H - Career path: have opportunities to rotate other branches during Hong Duy Corporation Such as my mirror, I work more than 10 years and now promoted to HR Manager in the hospital - Benefits: such as professional training to improve levels/skills (full sponsorship) - focus mostly to department who working directly with patients - Salary: functional department, salary is quite competitive in Tay Ninh province, equivalent with Le Ngoc Tung General Hospital Regarding to Accounting-Finance department, salary is adjusted from 4millions VND to 6.8millions minimum wage (entry staff level) comparing to precursor of Cao Van Tri General Hospital (before Oct/2020) - Working environment is good, can adapt all requirements such as spaces, with nature, full facilities along with modern medical equipment and experienced medical staffs Ms HA - As you know that hospital has been expanded triple capability but recruitment requirement in accounting department is not changed They prefer quite simple degree and skills to handle admin works separately not multitasks Also we have implemented more complex systems, with unskilled provided, it should be key persons to handle and train to team members before implementing new systems - We have more headcount in accounting department, from to in administration office and to working Not good benefit, Working directly with customers (cashiers) but budget is not enough to pay higher level or skills to join team I think salary environment: not proactive is one of issues we need to consider if we want to attract good candidates to apply these positions and quite comfortable zone - Current benefits: salary is not high, but seniority so 7millions (accountant) to 8.5millions (general accountant) Moreover, profit sharing is equivalent to month salary Annual leave is 12 days - Career path: yes but not clear enough to motivate employees to commit - Over time: not pay salary, just compensate day off Department will handle and inform to HR department Working environment: not proactive and quite comfortable zone 58 Team-work Comfortable environment Cut cost/increase benefitsalary when moving to HHH as expansion business growth Good environment ... activities 12 Weak Inventory Management System at Hong Hung General Hospital 1.2.3 Organization structure Figure 2: Hong Hung General Hospital Organization Structure (Source: Internal organization chart)... by 21 Weak Inventory Management System at Hong Hung General Hospital the list of potential problems which are: weak inventory management and poor financial planning 3.1.1 Weak inventory management. .. internal controls related to inventory 24 Weak Inventory Management System at Hong Hung General Hospital Another explanation of Mr S HONG regarding to COGS fluctuation, updated legal and changes
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