Prevalence of Bullwhip Effect in Hospitals

Prevalence of Bullwhip Effect in Hospitals

Kannan Sethuraman (Melbourne Business School, Australia) and Devanath Tirupati (Indian Institute of Management, India)
Copyright: © 2008 |Pages: 8
DOI: 10.4018/978-1-59904-889-5.ch135
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Lee, et al. (1997b) state the impact of increased volatility as, “Distorted information from one end of the supply chain to the other can lead to excessive inventory investment, poor customer service, lost revenues, ineffective transportation, and missed production schedules.” Although there is a growing body of research on managing the bullwhip effect in manufacturingbased supply chains (Baganha & Cohen, 1998; Chen, Drezner, Ryan & Simchi-Levi, 2000; Chen, Ryan & Simchi-Levi, 1997; Metter, 1997), little research exists on its presence in service chains, and we are unaware of any reported research on this subject. In this chapter, we present several examples of distorted information in hospitals resulting in variability amplification and causing inefficiencies similar to the bullwhip effect. We highlight the underlying causes for this phenomenon and propose actions that can mitigate the detrimental impact of this distortion.

Key Terms in this Chapter

Coordination: Refers to managing the various entities in the value (supply) chain to optimize the performance of the value chain. While synchronization focuses on the individual processes of the system, coordination deals with managing the various entities of the chain. In the hospital service chain context, the surgeons, hospital departments, patients, pharmacists, and so forth are examples of entities whose activities/processes need to be coordinated to improve the chain performance.

Batch Size/Batching: Refers to the practice of processing several units together to take advantage of economies of scale. In the context of hospitals, the surgeons’ preferences for long theater sessions with several surgeries scheduled in one session is an example of batching that is motivated by the time and effort involved in the surgeons’ visits to the hospital.

Synchronous Operations: Refer to management of the entire process together in harmony to achieve the goals of the system. Synchronization involves coordination of all resources, subsystems, and processes so they are in harmony in order to achieve the total system performance, not on local performance measures.

Bullwhip Effect: Represents the tendency for demand variability to increase, often considerably, as you move up the supply chain (from retailer, to distributor, to factory, to raw material suppliers, etc.).

Service Value Chain: Represents the chain of activities that generates value to the customer. In this chapter, the hospital service value chain captures the journey that a patient travels through the hospital in achieving the required care.

Bottleneck: The limiting resource(s) that constrains the performance of a system. Typically, bottleneck(s) refers to the resource or the constraint that limits the output of the system.

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