Virginia Mason And Owens & Minor (A) Case Solution & Answer

Virginia Mason And Owens & Minor (A) Case Solution

Virginia Mason is a non-profit hospital, which is located in Seattle. It is a privately held hospital, which uses Owens & Mirror as its key alpha vendor in the management of supplies since 2004. The hospital enjoys a good reputation in its specialized primary health care services and broad clinical operations in the Western Washington. The hospital carries a strong essence of team work, which is represented by its mission statement, including the word “team medicine”. Virginia Mason has an expanded capacity with 336 licensed beds and 400 physicians. Despite of the fact that the hospital is a non-profit organization it had successfully generated $665 million during the fiscal year of 2007. (Brem, 2010)

The company follows the Toyota Production System, i.e. TPS, in order to become the quality as well as the market leader in the US healthcare industry. The modes is known as the Virginia Mason Production System, i.e. VMPS. Under the Toyota Production System; Virginia Mason strictly focuses on teamwork and tries to control the defects by bringing defects at a zero level. It does so through identifying the activities, which do not add value to the service flows generated by the hospital.

The Owens & Mirror has been involved in JIT (Just-in-time) and low unit measure services for the Virginia Mason Company. Both the companies have been considering to change the pricing model, which is believed to be outdated. Both the companies have partnered and created a TSCC, i.e. “Total Supply Chain Cost”, pricing model. TSCC is an activity based model, which assigns the inventory handling and distribution costs drivers to the Virginia Mason, thereby, assuring O&M’s profitability. The company’s senior management believes that TSCC is a better cost effective model, which tends to streamline the company’s distribution activities, directly impacting the fee.

The company’s vendor: O&M, used the cost plus pricing method for the clients, but VM suggested the vendor to apply TSCC model for VM’s activities. It is believed that the cost plus model is inefficient as compared to the Total Supply Chain Cost Model, as it does not trace the supply chain costs which occurs due to inefficient practices at the company. The VM’s management believes that TSCC model comes with better advantages to the company. Firstly, the model helps the company in identifying the problem areas that tends to decrease its value and then the model helps in taking immediate actions in order to retain the organizational efficiency and eliminate the threats. Additionally………………………, 

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