AN ANALYSIS OF THE FACTORS AFFECTING THE PROPER OPERATIONS OF

SUPPLY CHAIN MANAGEMENT IN HOSPITALS IN MUMBAI.

A Research Project submitted in partial fulfilment

Of the requirements for the degree of MBA (Tech)
In Mechanical/Operations

By
Arjun Duvedi
602

Under Supervision
Of
Prof. Dr. Jinu Kurian.

Year of Graduation 2015

DECLARATION
1

I hereby declare that this research project titled, An Analysis of the Factors Affecting the
Proper Operations of Supply Chain Management in Multi-Speciality Hospitals in
Mumbai submitted by me is based on original work carried out by yours truly. I certify that
it has not been submitted anywhere else. I would further like to state that Mukesh Patel
School of Technology Management and Engineering- NMIMS (deemed-to-be-university)
will have the copyright on the project report submitted by me to the college (MPSTME)

Thanking You

Arjun Duvedi

Table of Contents
Abstract................................................................................................................... 4
Introduction............................................................................................................. 5
Background:........................................................................................................... 5
Research Question:................................................................................................... 6
Objective of research:............................................................................................... 6
Literature Review...................................................................................................... 6
Methodology:............................................................................................................ 8
Data collection:...................................................................................................... 8
Data Analysis:........................................................................................................ 8
Factor Analysis................................................................................................... 8
Descriptive Statistics............................................................................................ 9
Results & Findings:.................................................................................................. 10
Conclusion............................................................................................................. 11
Recommendations.................................................................................................... 11
Limitations of the study & Scope for further Research....................................................12
References:............................................................................................................. 13

List of Figures
Figure 1: Burns SCM model......................................................................................................5

List of Table
Table 1: KMO and Bartletts Test..........................................................................................................8
Table 2: Rotated Component Matrix......................................................................................................9
Table 3: Descriptive Statistics..............................................................................................................10

Abstract
The research is conducted to study the factors affecting the proper operation of supply chain
management in a multi-speciality hospitals. The supply chain activities for the research are
only limited to the activities conducted by the hospitals for the daily operations. A thorough
analysis of the factors both internal and external, affecting the operations of the supply chain
is the aim of the research. The various factors affecting the operation of the supply chain will
be identified by conducting personal interviews with the employees who handle supply chain
operations and observing the supply chain activities at different hospitals in Mumbai, these
factors will be analysed and a suitable suggestions to reduce the effect of these factors will be
suggested at the end of the paper.

Introduction
Background:
Supply chain management (SCM) in the health care sector is a relatively new field
and is still in a growing phase. Therefore, the purpose of this paper is to identify the barriers
that affect the proper operation of the supply chain in a multi-speciality hospital and provide
with suggestions and solutions to reduce the effect of these factors. Supply chain
management is ultimately about influencing behaviour in particular way and in a particular
direction.
The term SCM was first used in the 1980s and as such is a relatively new discipline
within management theory with tools and concepts still being developed, it is a multidisciplinary subject which has its origins in a number of fields including purchasing, logistics
and operations, which implies that there is internal coordination within the organisation along
with intra-integration of organisation (integration with suppliers, distributes and customers).
According to (Burns L. , 2002), the three major type of players in a healthcare SCM
system are: Producers, Purchasers (GPOs or group purchase organisations), and health care
providers (Hospitals). This chain is shown in fig 1.

Figure 1: (Burns L. , 2002)

Hospital supply chains present healthcare systems with a prime opportunity both to
help improve patient care and mitigate increases in expenses. The greatest opportunity is for
hospitals to transform their supply chains into a strategic function which is both vital and
collaborative in nature. As such, administrators and clinicians would collaborate on
anticipating and ordering all medical and non-medical items such as gloves, diagnostic,
drugs, sheets and machines. This process would curb costsbut also yield more far-reaching
benefits such as creating a system that provides and validates product information and drug
specifications and effectiveness. Thus, as a result, the supply chain would not only help
control escalating costs but also boost efficiency and optimize clinical outcomes (Schwarting,
Bitar, Arya, & Pfeiffer, 2011).

Research Question:
What are the factors affecting the proper operations of the supply chain in a multi-speciality
hospital in Mumbai?
Objective of research:
The objective of the paper is to list out the various factors affecting the operations of the
supply chain management in a multi-speciality hospital and to suggest various methods to
reduce the effect of these factors.

Literature Review
According to the author (McKone, Hamilton, & Willis, 2005) even though there is
well-documented evidence of noteworthy competitive advantage and cost reduction resulting
from SCM practices yet the healthcare industry has been extremely slow to embrace these
practices. This is due to the various barriers that affect the implementation of supply chain in
healthcare sector. These obstructions include inconsistent relations with suppliers, need for
performance management, limited education on supply chain, misaligned or conflicting
incentives and lack of executive support.
According to the author (Forslund & Jonsson, (2009)) the factor that affect the proper
operation of SCM in an organisation is the disability of the organization to integrate it supply
chain performance activities. The factors that affect the integration of supply chain
performance are of two types, they are, external factors and internal factors. The external
factors are lack of trust in the relationship, lack of a parallel communication structure
between supply chain partners and different goals and priorities. The internal factors are
manual performance data management and non-standardized performance metrics.
The author (Gilaninia, 2011) of this paper analysed the effect of information sharing and
the supply chain performance. The author concluded by stating that proper information
sharing has a positive impact on the supply chain performance and vice-versa. The author
drafted four hypotheses to justify the results, these are:
1. Sharing and information technology of supply chain, affect accountability of supply
chain.
2. Information technology and Information Sharing of supply chain, affect the supply
chain efficiency.
3. Responding of supply chain, affect the supply chain performance.
4. The efficiency of supply chain affects the performance of supply chain.
The author identified two intervening variables between information sharing and supply
chain, these are supply chain responsiveness and supply chain efficacy. The factors affecting
the proper information sharing according to the author are the quality of data, the number of
channels and the extensive coverage.

The author also states that the integration of supply chain will have certain effects such as it
will lead to better collaboration and better coordination, establish new relationships with
customers to identify customer needs, develop the efficiency of sales and marketing channels,
it will help in more powerful distribution and transmission of information and it will increase
the speed of supply chain.
The author concluded the paper by stating that the cause of poor efficiency in the supply
chain are the lack of accuracy of the information and adequacy of information systems that
are responsible for providing and processing information.
As per the research conducted by (Storey, Emberson, Godsell, & Harrison, 2006) the
various barriers to the proper operations of a supply chain are knowledge and transparency of
information, behaviour of supply chain and measurement of supply chain performance. The
author also stated that there is a large gap between the theoretical and the applied supply
chain activities in hospitals.
The author (Hasan & Alim, 2010) has considered the factors having an impact on
supply chain in cross border sourcing. The author stated that barrios such culture, language,
import and export policies, government norms and technological difference have an impact
on the supply chain in case of cross border sourcing.
As per the research conducted by (KUCUKUSTA & TUTUNCU) the factors affecting
the proper operation of supply chain management in healthcare are lack of top management
commitment, accuracy of information, real time information sharing and communication
systems used by the institute. The author also stated that the focus of the supply chain
management should shift form departments to the organisation as a whole.
From the literature review we can conclude that the factors such as information
sharing, top management commitment, communication tools, relationship and trust on
suppliers, absence of performance management systems for supply chain, technological
differences and the inconsistency of goals of suppliers and health care institutes affect the
proper operation of supply chain activates in healthcare facilities. No literature was found
regarding Indian healthcare industry and the factors that affect the supply chain management
in Indian conditions are still unknown for healthcare sector.
The following gap was found in the literature review:

No such research has been done for multi-specialty hospitals in Mumbai.

The factors affecting the operations of supply chain management in Indian conditions
are still unknown.

Methodology:
The sample for the research was taken form 14 multi-speciality hospitals based in Mumbai,
the respondents were mainly doctors, nurses and support staff that are directly related with
the supply chain activities that are conducted in the various hospitals. A total of 40 responses
were collected for the research.
Data collection:
The data was collected for the multi-speciality hospitals with the help of questioners and
interviews. The data collection was done keeping in mind the research objective i.e. the
factors that affect the proper operations of supply chain management in hospitals in Mumbai.
The factors which were identified are: daily planning tools, communication tools,
infrastructure, knowledge about supply chain, departmental focus, logistics performance,
trust on supplier and material sourcing process.
The sampling technique used for the process was snowball sampling, it is a type of nonprobabilistic sampling in which the initial subject points the researcher to the next subject
who performs similar operations or handles the similar tasks.
The questioner was used interviews were no possible. The respondents were asked to rate the
various identified variables on a scale from 1 to 5. 1 having the lowest impact and 5 having
the highest impact. The results of the telephonic interview and the questioner which were
collected and further analysed.
Data Analysis:
Factor Analysis
Factor analysis was used to analyse the data further. It was conducted using SPSS software.
Factor analysis was conducted using the principle component extraction method along with
verimax rotation to get the desired components. The Eigen-value of more than one was used
to determine the number of components extracted.
Before the factor analysis is conducted the data was tested for suitability, this was done by
using the KMO and Bartletts test for sphericity. The data can only be analysed with factor
analysis if it passes the KMO and Bartletts test. The following table shows the result of the
tests:
Table 1: KMO and Bartletts Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy.

Bartlett's Test of Sphericity

.545

Approx. Chi-Square

61.135

Df

28

Sig.

.000

From the table we can see that the value of KMO test is 0.545, and for the data to be suitable
it should have a KMO value of more than 0.5. Thus, from table 1 we can see that our data has
passed the KMO test.
Similarly, the Bartletts test value of significance is 0.000, for the data to be suitable it should
lie between 0.000 and 0.005. Thus, from table 1 it is clear that the data has passed the
Bartletts test and is suitable for being analysed Factor analysis.
Now the factor analysis was conducted. There were four components which were extracted
after the factor analysis and the loadings of the 8 variables on these 4 components is shown
by the table below:
Table 2: Rotated Component Matrix
Component
1

Trust

.881

Supplier Infrastructure

.735

Communication tools

.342

.883

Planning tools

.340

Logistics

.901

.763

Material Sourcing Process .872

Departmental focus
Supply chain Knowledge

.879
.457

.667

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 5 iterations.

The above table only shows the variables having loading of more than 0.3 the remaining
values were ignored because they did not have sufficient loading. The variable having the
highest loading with a particular component is grouped into that component.

Descriptive Statistics
We can identify the variable with has the maximum impact on the supply chain operations in
a multi-speciality hospital by analysing the descriptive statistics table shown below:

Table 3: Descriptive Statistics

Mean

Std. Deviation Analysis N

Trust

2.6000

.81019

40

Infrastructure

4.6250

.49029

40

Communication tools

4.3250

.61550

40

Planning tools

3.8250

.54948

40

Logistics

4.4500

.71432

40

Material sourcing

1.8500

.66216

40

Internal focus

3.9750

.86194

40

3.1500

.80224

40

Supply
Knowledge

Chain

In the above table the variables having maximum mean will have more impact on the supply
chain operations in a multi-speciality hospital. Thus, from the table logistics, communication
tools and infrastructure have the major impact on the operations of the supply chain in a
multi-speciality hospital.
Results & Findings:
From the descriptive statistics table it was found that the factor having the highest impact on
the supply chain operations in a multi-speciality hospital is infrastructure then logistics and
then communication tools. Thus these factors should be given more consideration while
planning the operations.
From the factor analysis 4 components were extracted. The list of the components along with
the variables grouped in them is listed below:
Component 1:
The variables having the highest loading on this component are logistic
and material sourcing process. These factors can be used to measure the supply chain
performance of the hospital. Thus the component can be labelled as supply chain
performance review.
Component 2:
The variables having the maximum loading on this component are
communication tools and planning tools. These variables mainly linked with the
information sharing planning done in the hospital. Thus the component is named as
planning and information sharing.
Component 3:
The factor having the maximum loading on this component is trust
between the suppler and the hospital along with the infrastructure shared. The
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supplier and hospital infrastructure will limit the capabilities of the supply chain and
thus put a cap on the supply chain performance. Trust is also an important factor in
the supply chain, lack of trust may result in the poor supply chain operations. As this
component will result in selection or changing of suppliers it is labelled as
Relationship with Suppliers.
Component 4:
The fourth factor is representing the departmental focus in hospitals
and the lack of supply chain knowledge. The various departments are more focused to
improve their departmental efficiency rather than improving the efficiency of the
whole hospital. This factor is labelled as departmental focus & lack of awareness
about supply chain.

Conclusion
This research is carried out to identify the various factors that affect the operation of supply
chain management in a multi-speciality hospital in Mumbai, to find the relationship between
these factors and to analyse the impact of these factors on the supply chain operations in a
multi-speciality hospital.
After conducting the literature review, data collection and analysis it was found that the
supply chain operation in a multi-speciality hospital are affected by trust, infrastructure,
departmental focus, communication tools, planning tools, logistics, material sourcing process,
departmental focus and supply chain knowledge.
After conducting the factor analysis the following conclusions can be drawn There are four
important components that hinder the proper operation of supply chain in multi-speciality
hospitals they are supply chain performance review, planning and information sharing,
relationship with suppliers and departmental focus & lack of awareness about supply chain.

Recommendations
From the finding listed above it can be seen that communication stools, infrastructure and
logistics management play have the maximum impact on the supply chain operations in a
multi-speciality hospital and steps should be taken to reduce the effect of these factors. The
following recommendations are listed to reduce the effect of the identified variables on the
supply chain performance in a multi-speciality hospital in Mumbai.

Real Time Data Sharing:

At present there is no real-time data sharing between the hospitals and their suppliers due
to which there is a delay between information sharing. If a real time information sharing
system is installed the supplier will have sufficient information in hand to prepare for the
next order even before the order is placed. This will result in a more responsive supply
chain with more efficient operations.

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Review Of Supply Chain Performance

In most of the hospitals the supply chain performance is not reviewed. This may result in
greater cost of operating the supply chain, longer cycle time and reduce the overall
efficiency of the operations. Thus the organisation should have performance reviews of
the supply chain to identify the activities that are affecting the performance and
operations of the supply chain.

Supply Chain Awareness:

Lack of awareness about supply chain has been identified as a factor that effects the
operation in supply chain in a multi-speciality hospital. As the staff is unaware about the
process they do not know which steps are to be taken to improve the performance of the
supply chain. By spreading awareness about the supply chain, hospitals can ensure that
every employee works towards the improvement of supply chain operations.

Limitations of the study & Scope for further Research

This research only takes into consideration the multi-speciality hospitals and is restricted to
Mumbai only and does not consider other categories of hospitals, thus further research can be
conducted to identify the various factors that influence the operation of supply chain in
hospitals.

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References:
Burns, L. (2002). The healthcare valuc chain. San Francisco : Jossey-Bass.
Burns, L. (2002). The Healthcare Value Chain. San Francisco: Jossey-Bass.
Forslund, H., & Jonsson, P. ((2009)). Obstacles to supply chain integration of the performance
management process in buyer-supplier. International Journal of Operations & Production
Management 29.1 , 77-95.
Gilaninia, S. (2011). The Impact of Information Technology Application on Supply Chain.
INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS-vol 3,
No 8, 489-496.
Hasan, R., & Alim, M. A. (2010). Factors Affecting Supply Chain Management Efficiency in Cross
Border Outsourcing. Logistics and Transport Management Master Degree Project
No.2010:60, 143.
KUCUKUSTA, D., & TUTUNCU, O. (n.d.). SUPPLY CHAIN MANAGEMENT INTEGRATION AND
ITS EFFECTS ON PERFORMANCE IN HOSPITALITY INDUSTRY. Turkey: Dokuz Eylul
University, Center for Quality and Excellence, Izmir,Turkey.
McKone, S. K., Hamilton, P., & Willis, S. B. (2005). The ailing healthcare supply chain: a
prescription for change. The Journal of Supply Chain Management, Winter 2005, Volume: 41
Issue: 1 pp.4-17 (14 pages), 4-17.
Schwarting, D., Bitar, J., Arya, Y., & Pfeiffer, T. (2011). The Transformative Hospital Supply Chain.
Storey, J., Emberson, C., Godsell, J., & Harrison, A. (2006). Supply chain management: theory,
practice and future challenges. International Journal of Operations & Production
Management, suppl. Supply chain management theory and practice 26.7, 754-770.

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