NNPHI Kaizen Program: Increasing Purchasing Process Efficiencies

Summary

Impact Statement:

DOH-Seminole County realized savings of $7764 for goods and services from price negotiations during the first quarter following a Kaizen event – almost double the goal set by the QI team. Other improvements in the requisition process included a 38% decrease in process time, in addition to increases in the approval rate for submitted requisitions and the rate of correctly completed forms. The overall result is a much more efficient process that procures goods and services at significantly reduced costs.

Summary:

The Florida Department of Health in Seminole County (DOH-Seminole) participated in a week-long intensive Kaizen event that involved a systematic analysis of the requisition process to help identify waste and redundancies within the established model. The goal statement was "To reduce the transactional costs of goods and services procured through the MyFloridaMarketPlace (MFMP) system." Transactional cost was defined as actual employee time spent working on a requisition and the overall cost of items procured for the agency. The team consisted of the entire business office, as well as representatives from administration and operations, and program representatives responsible for purchasing goods and services. Measures of success included reducing employee time spent processing a requisition, decreasing the number of requisition denials by both the state and local purchasing offices due to missing or incorrect information, and decreasing actual item cost. Through various improvement tools, including a prioritization matrix and root cause analysis, key solutions were discovered to help increase efficiencies and generate a new process map. Structure was given to the workflow, with specific methods required to initiate a request for goods and services. Limitations were placed on who could request items for their department, a detailed purchasing request form with clear instructions was generated, and a required price negotiation practice was put into place for items over a certain dollar threshold. Participants tested process improvement changes to ensure that anticipated outcomes were reached. Quantitative goals were established for the four identified measures and reviewed quarterly. Currently, all measures have been surpassed.

Organization that conducted the QI initiative:

DOH-Seminole

Citation:

Mehta, U. Public Health Quality Improvement Exchange. NNPHI Kaizen Program: Increasing Purchasing Process Efficiencies. Fri, 09/15/2017 - 11:26. Available at https://www.phqix.org/content/nnphi-kaizen-program-increasing-purchasing-process-efficiencies. Accessed September 14, 2024.

Background and Aim

Aim statement:

The project goal is to reduce the transactional cost of goods and services procured by DOH-Seminole through the MFMP system using a Kaizen event rapid improvement approach. There was a need to cut costs of items by $18,000 within 1 year and reduce actual process time needed per purchase order. For the purposes of this event, staff focused on the top three identified commodities: promotional items, contract services, and items costing more than $1,000. Conditions that must be adhered to include established state policies and procedures for using the MFMP system, Florida statutes related to purchasing, and state term contracts.

Need For The QI Initiative:

The need for this project was based on anticipated budgetary reductions within the next fiscal year. Project importance was established by the finance/business manager and was identified on the DOH-Seminole quality improvement (QI) plan.

Area for Improvement:

The vision of this project is to have a procurement process that will ensure that the goods and services are obtained as needed, quickly processed, and cost effective, ensuring sound fiscal accountability. With budgetary changes anticipated within the next fiscal year, efficiency in how goods and services are procured is crucial to ensuring that clients' services are maintained and that the funding received supports as many needs as possible. Stakeholder groups positively affected by this process improvement project include health department employees (state and local), clients, and Seminole County taxpayers.

Root Cause:

A Kaizen event is geared toward eliminating all waste and otherwise addressing the highest priority improvements as feasible with available resources. The current work process revealed much waste with searching, inspecting, and rework because no reliable process was in place. If staff redesign the process to eliminate wastes and redundancies (particularly in the quoting and approval areas) and provide reference information for completing tasks, decision-making guidelines, and job aids to help identify needed and correct information… then defects and rework loops will be reduced, and overall labor time required (employee time) to complete the process will be reduced.

Planning and Execution Details

QI Implementation:

Staff identified many problems to be solved and potential efficiencies that could be gained from waste analysis. On the basis of the findings, staff implemented several changes to ensure a more streamlined process. First, they chose to centralize purchasing to the business office and to clearly identify roles and responsibilities. They then placed the expectation of responsibility on the supervisors to take ownership of their budgets and to submit the purchasing request forms to the business office. To assist them in this expectation, trainings were provided in late January to update them on the new requisition process. One aid created was a clear listing of all staff roles and expected responsibilities. A centralized reference point was also created to locate preferred vendors and verify whether they are under state term contract. When the purchase request form is submitted to the business office, the staff members are responsible for obtaining quotes under the new guidelines: If the first quote is more than $1,000, a second quote is required, and any quotes more than $2,500 require the use of eQuotes. The implementation of the new process will ultimately reduce the cost and number of requisitions to increase efficiency. With the new process, staff have eliminated the need for the program manager to be in the MFMP approval queue. The waste analysis determined that this new process could save 3 days in time spent, equaling more than $700 in eliminating just this one step.

Focus activities

Administration:

Procurement

Purchasing

QI Methods:

Kaizen

PDCA/PDSA Cycle (Plan, Do, Check/Study, Act)

QI Tools:

Cause and Effect Diagrams

Five whys

Prioritization Matrix

Process maps

Root cause analysis

Surveys

Other QI tools:

Value stream mapping

Working with others

Measure definition sheet

Stakeholder analysis

PrISM

Value/waste analysis

Lessons learned (Status, Reason, Learning, and Direction [SRLD])

Continual improvement system (CIS)

QI Tool Documentation:

Kaizen- FINAL Prism Template-SP updated May 15 2014.docx

Kaizen- FINAL Waste Value Analysis- SP.xlsx

Kaizen- FINAL Process Map-SP.pptx

Kaizen- FINAL CauseEffect-SP.pptx

2X2 of issues.pptx

Copy of Continual Improvement System_050714.xlsx

Kaizen- FINAL Goal Statement-SP.docx

Kaizen- FINAL Measure 4 Definition-SP.docx

Kaizen- FINAL Measure 3 Definition-SP.docx

Kaizen- FINAL Measure 2 Definition-SP.docx

Kaizen- FINAL Measure 1 Definition-SP.docx

Initiative Dates:

11/1/13 to 1/20/14

Methods of evaluation:

One of the key components of the Kaizen event was developing measurements. Staff decided to measure four areas of what could be quantitatively achieved. The number of quality submitted forms was the first measurement and is calculated by tallying the total number of errors on the request forms. The percentage would equal the number of correct and complete forms divided by the number of submitted forms recorded locally. This number will indicate whether the job aids and the purchase request forms benefit the requestors. The target for this measurement is more than 75% superior-quality submitted forms. Staff have partially measured and determined the need to improve the inspecting process. The second measurement was to determine the number of quality submitted requisitions. The benefit for this measurement is obtaining the number of approved versus re-do requisitions recorded by the Tallahassee office. The target for this measurement is to have more than 90% of correct requisitions submitted. As of the end of February, staff reached the target of 90% and hope to increase it more by the end of March. One of the goal statements for the Kaizen event was to reduce the cost of purchased items. Staff targeted $4,500 per quarter. This figure will be measured by the dollar amount of negotiated savings when a price is lower than that of the preferred vendor or if the vendor issues a reduced percentage on the invoice. Staff have already been able to demonstrate a savings of more than $7,668 since implementation. Another goal tied to cost reduction is obtaining at least five new vendors per quarter. By adding more vendors, staff are attempting to validate the vendors on the preferred vendor list. The fourth measurement is the reduction of employee labor time. To measure this, staff decided to perform five monthly time studies that would document the process from form completion to submission to the Tallahassee office. The goal is to reduce employee labor time by 25%. This will be a constant improvement process, as with all Kaizen events, and staff intend to communicate and identify needs by providing updates to the Management Advisory Council. They have placed a communication board in the business office to have an open canvas on which to work so all stakeholders can play a role and voice their concerns or suggestions.

Supplemental Materials:

Sample of materials produced

Initiative photo(s)

Supplemental Files:

Attachment	Size
Kaizen- FINAL Slideshow- SP.pdf	3.76 MB
Kaizen- FINAL Agenda-Daily Summary-SP.pdf	1.92 MB

Results

Measurable QI Outcomes:

The first measure was to grade the quality of the order forms. The goal was to have a minimum of 75% of the forms submitted be accurate and filled out completely. In the first month of implementation, 80% of the forms submitted were correct and complete. By April, 100% of the purchase request forms were of superior quality. The second measure was to document how many of the requisitions submitted to the Tallahassee office were complete and without errors, with a goal of 90% of requisitions to be submitted without errors. In February, 90% were correct, and by April, staff superseded their goal with 100%. For the first quarter of the year, staff demonstrated that 93% of the requisitions were complete and accurate. The third measure was to reflect $4,500 per quarter based on price negotiations, and staff successfully saved $7,764 in just the first quarter. The process time study goal was to reduce the amount of time it took to identify a need to purchase and the final approval from the Tallahassee office by 25%, and staff actually saw 38% in time reduction. Staff have been able to show an improved process time overall from 415 minutes before the Kaizen event to 302 minutes post-Kaizen.

Other QI Outcomes:

Through the process of using waste analysis and the purchase request form, staff determined there was potential for saving DOH-Seminole money on quotes obtained, ensuring that they are obtaining the best quote based on the quote evaluation form, and saving money in employee time spent on the requisition process. Fewer employees are submitting fewer requests, and the three programs that have requestors have been trained on multiple occasions since the implementation of the new requisition process. The implementation of the new process will ultimately reduce the cost and number of requisitions to increase efficiency. Staff performed a time study of the old process and were able to demonstrate a total reduction in the requisition process time from the identification of need through the approval process in MFMP from 24 days down to 6 days. There were identified issues with trust and accuracy by removing the supervisors from the MFMP approval flow. In an effort to reduce and possibly eliminate errors, staff generated several job aids. Staff modified the purchasing request form to be more user friendly and attempted to reduce errors by creating prepopulated fields and linking associated forms electronically. Many program managers indicated that they were not aware of their programs’ blanket purchase orders (BPOs), so staff created an electronic BPO list. Requestors can now refer to the purchasing folder shortcut that was placed on their computer desktops and locate everything needed in one location. In the purchasing folder, requestors can find exactly what is needed to complete an accurate requisition. Staff placed the object and organization codes list in the purchasing folder. Staff created a preferred vendor list, so requestors can have a central point of reference for vendors and their contact information. A quote guideline and quote evaluation form were developed to assist the requestors in determining whether they are receiving an acceptable quote. A vendor satisfaction survey was created to better assist in determining the actual preferred vendors.

Lessons Learned, Observations and Insights:

Some relevant factors were identifying the need to purchase. There are currently no instructions to clearly identify a need to make a purchase. When staff created the order form, they experienced technical issues with formatting the document and permissions to allow more than one user to have the document open. Staff also received feedback from the program managers, who wanted price lists. Staff asked for a specific dollar amount for the purchase, but many of the program managers thought they did not have a good grasp of the actual cost of the items they wanted to purchase.

Future Plans:

Staff plan to conduct monthly update meetings to review time studies, review errors on form submissions, and review cost savings beginning in July 2014. They will incorporate the requisition training into the new hire process for all new managers and requestors as needed.

Training and Preparation

Information about the Community

Population Size:

250,000 to 499,999

Population Characteristics:

Seminole County is located in East Central Florida, 15 minutes north of Orlando. The county is predominantly a residential community, and approximately 70% of its residents work outside the county. An estimated 30% of the population lives in unincorporated areas of the county, and the remainder live in incorporated areas, which include the seven distinct municipalities of Sanford, Altamonte Springs, Lake Mary, Casselberry, Oviedo, Winter Springs, and Longwood. Seminole County is the most densely populated county in the Central Florida region, with 422,718 (2010 U.S. Census Bureau) residents living within 321 square miles or 1,317 persons per square mile. Sanford is home to an international airport that receives visitors to Central Florida area attractions located within 30–90 minutes away. Orlando Sanford International Airport is the 3rd most active international airport in Florida and the 13th most active in the United States, receiving historically more than 1 million international charter arrivals annually. The ethnic/racial distribution for Seminole County in 2009 was estimated at 82.8% white, 15.6% Hispanic, 9.4% black, 4.3% Asian or Pacific Islander, and 0.1% American Indian or Alaska Native. The unemployment rate for the county in 2009 was 10.2% compared with a 10.8% Florida and national rate. The median annual household income is $51,842, the per capita income for the county is $24,591, and 7.4% of the population is identified as below the poverty line (2010 U.S. Census Bureau). The number of uninsured persons between the ages of 0 and 64 years was 20.7% (2010 estimate). A significant number of persons aged 65 years or older, 11.7% (2009 estimate), reside in the county. DOH-Seminole currently has a diverse workforce of 195 employees who represent the county’s population and possess the language skills necessary to communicate with clients, including English, Spanish, and French Creole. Services at DOH-Seminole are provided at two locations: Sanford and Casselberry. Among the public health challenges facing Seminole County are a moderate level of poverty in rural locations and a transitory population that can be attributed to the county’s proximity to several metropolitan areas (Orlando, Kissimmee, and Daytona Beach). The anticipated continuation of reduced state funding to support local operations, as experienced in the last several years, presents challenges in meeting the agency’s core public health functions and community needs, as do the threat of new and emerging infectious diseases and the potential reduction of federally funded programs.

NNPHI Kaizen Program: Increasing Purchasing Process Efficiencies

Summary

Background and Aim

Planning and Execution Details

Results

Training and Preparation

Information about the Community

Information about the Health Department

QI Staff Information

Accreditation Details

Collaborations

Contact Information of the Submitter

Comments

Please contact either Udgit

Revisions based on reviewers'

Revisions created by Diana

Revised by Sara Warren

QI Spotlight

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NNPHI Kaizen Program: Increasing Purchasing Process Efficiencies

Summary

Background and Aim

Planning and Execution Details

Results

Training and Preparation

Information about the Community

Information about the Health Department

QI Staff Information

Accreditation Details

Collaborations

Contact Information of the Submitter

Comments

QI Spotlight