Supply Chain Partners: Virginia Mason and Owens &
Synopsis:
Michael Stefanic, director of cost management at Owens & Minor (O&M), a medical and surgical supplies distributor and Daniel Borunda, material systems manager at Virginia Mason (VM) Medical Center came together to try to battle healthcare costs and improve the healthcare supply chain. Virginia Mason, a private non-profit healthcare organization based out of Seattle, offered both primary and specialized care and developed the Virginia Mason Production System (VMPS). The VMPS was a modified version of the Toyota Production System that helped VM work towards its goal of being a quality leader, emphasized line-level employee teamwork, and fought for a zero defect rate. The components of VMPS included value-stream mapping (flowcharting), improvement workshops that sought to eliminate waste and improve efficiency, and the “everyday lean idea” used by VM employees in an attempt to reduce waste and add value. They sought to implement their “alpha vendor” idea where a few key vendors acted as partners in the supply chain and provided both goods and services at the lowest cost.
Owens & Minor sought to provide value-added services to its customers while offering expertise in lowering costs for them as well. Such services included inventory management, activity-based pricing, consulting, and outsourcing. The majority of O&M’s customers paid fees on a cost-plus basis (customers paid the base manufacturer price plus a specified percentage mark-up added by the distributor). However, Stefanic wanted to fully explore the advantages of activity-based pricing, instead, believing it to be superior to the cost-plus model. O&M met with VM where Stefanic presented his activity-based idea. As a result, VM decided to collaborate with O&M and engage them as being VM’s medical/surgical supply alpha vendor. Virginia Mason decided to temporarily use the cost-plus pricing model while they discussed how they could capture more costs in the activity-based pricing model with
Michael Stefanic, director of cost management at Owens & Minor (O&M), a medical and surgical supplies distributor and Daniel Borunda, material systems manager at Virginia Mason (VM) Medical Center came together to try to battle healthcare costs and improve the healthcare supply chain. Virginia Mason, a private non-profit healthcare organization based out of Seattle, offered both primary and specialized care and developed the Virginia Mason Production System (VMPS). The VMPS was a modified version of the Toyota Production System that helped VM work towards its goal of being a quality leader, emphasized line-level employee teamwork, and fought for a zero defect rate. The components of VMPS included value-stream mapping (flowcharting), improvement workshops that sought to eliminate waste and improve efficiency, and the “everyday lean idea” used by VM employees in an attempt to reduce waste and add value. They sought to implement their “alpha vendor” idea where a few key vendors acted as partners in the supply chain and provided both goods and services at the lowest cost.
Owens & Minor sought to provide value-added services to its customers while offering expertise in lowering costs for them as well. Such services included inventory management, activity-based pricing, consulting, and outsourcing. The majority of O&M’s customers paid fees on a cost-plus basis (customers paid the base manufacturer price plus a specified percentage mark-up added by the distributor). However, Stefanic wanted to fully explore the advantages of activity-based pricing, instead, believing it to be superior to the cost-plus model. O&M met with VM where Stefanic presented his activity-based idea. As a result, VM decided to collaborate with O&M and engage them as being VM’s medical/surgical supply alpha vendor. Virginia Mason decided to temporarily use the cost-plus pricing model while they discussed how they could capture more costs in the activity-based pricing model with