Media: Business Day
Words: 768
Date: 3 August 2013
Title: Cracking the wrong whip

Incorporating basic operations management principles into the public service could dramatically improve service delivery in many sectors.

By Anton Grütter and Norman Faull

Last month the minister of Health, Dr Aaron Motsoaledi, called on ward sisters in public sector hospitals to place orders for supplies three months in advance. This was in response to a question about the problems experienced by patients in getting their medication timeously (SAFM, Morning Live, 26 July 2013).

While on the face of it this advice seems to make sense, there is more than half a century of research to tell us that it will make the problem worse, not better.
The “bull-whip” effect, first documented by Jay Forrester in 1958, is a well-known phenomenon in supply chains that every student of operations management learns about as they progress in their studies. What happens is that when a customer near the end of a supply chain (like a ward sister) places an order under conditions where s/he is uncertain whether the order will be delivered on time and in full they instinctively add a bit of “safety stock” just in case. And a little more when they have to place orders long in advance.

The bulk pharmacy receiving orders from many wards then experiences an upward spike in demand and also increases the order it places on the regional distribution centre. The bull-whip travels up the supply chain and is amplified through every successive order until the factory producing the medication faces order patterns that fluctuate wildly between highly exaggerated demand followed by slumps in demand.

It becomes very difficult to manage production and distribution of supplies under these circumstances. When people in the supply chain work under pressure, the consequences are poor delivery performance, high cost because of under-utilisation of resources when demand slacks, warehouses full of products that customers do not need, and, in the case of public sector hosptials, medication that expires because it was not ordered in response to actual demand.

The Minister of Health cannot be expected to be an operations management expert. He was educated and trained as a clinician. Like many other professionals in government he excelled and was promoted into a managerial and eventually a political position without much to prepare him for the operational requirements of the job.

Over the last decade similar scenarios have played out in South Africa where well-intentioned managers do exactly the wrong thing to address a problem in their area of responsibility. For example, long waiting times in customer-facing facilities such as hospitals and courts is an endemic problem. The instinctive response by the public is to arrive earlier, as early as four o’clock in the morning, in an attempt to be first in the queue. But only one person can be first in the queue, the rest end up overwhelming the available staff and have to wait their turn. Why then do public sector managers tell the public to come earlier in the morning rather than later in the day when they are not as busy? (Cape Argus, 27 June 2012, p. 4).

This creates a demand peak early in the morning that puts the facility staff under great pressure. Then they work like Trojans to process the people only to find that by lunch-time that they don’t have any more customers. Naturally they slump back in their chairs mentally exhausted by the pressure they were working under, and then find themselves accused of being lazy and having a bad attitude. To be sure, there are staff who exploit this situation, but by far the majority of customer-serving public sector staff are people who are trying to do their best under very difficult working conditions.

The solution to this problem is to reduce peak demand by communicating to citizens that if they come later in the day they will wait less. Much like Eskom is trying to reduce the evening demand peak for electricity.

Management have let them down, because it is management’s responsibility provide the operational systems that enable staff to do their work effectively. But can we hold public sector managers accountable for this situation when they have not been educated in the basics of operations management?

There are tried-and-tested techniques available to ministers to help them do their job better. For example, just-in-time supply systems, pull scheduling, demand and capacity management and queuing theory to mention a few that can be applied to improve service delivery. Operations management is under-utilised in the public sector as a means to eliminate waste and improve flow of patients and customers, supplies and information through the service delivery processes. It is high time that this deficiency is recognised and steps taken to incorporate operations management practices into public sector service delivery improvement.