The medicinal supplies distribution department of a large hospital provides the nursing floors and medical departments with all of the supplies needed to service the patients requiring medical attention. These items include medicines, bandages, I,V$.$ tubing, catheters, syringes, tourniquets, strainers, scalpels, swabs, I.D$.$ bracelets, and other items. Each floor and department has different medicinal needs, and carts carry supplies to the floor or area. Over time, the medicinal supplies distribution department's workload has increased, while staff size has remained constant. Concerns over staffing problems, budget constraints, and maintaining the quality of service have prompted the formation of a continuous improvement task force to investigate the problems.

Their mission is to provide quick, accurate service to the medical staff while continuously improving the provision process to make it more efficient, more compatible with medical staff needs, and more cost$-$effective. To begin the problem$-$solving process, a flowchart of the process of supplying medical items is created $($Figure $1).$ This chart details the activities involved in stocking the carts, checking inventory on the carts, reordering necessary items, and taking carts to their respective floors. Records of the items in inventory are kept by a computerized inventory control system. When a patient uses items from the cart, nurses and other medical staff record the chargeable items on the patient's chart.

These items are billed to the patient when accounts payable figures the bill. Computer inventory records are compared with a complete list of items charged to all patients$*$ bills. When inventory records and items taken from the cart and billed don't match, a lost charge report is generated. This report is used by the medical staff to determine which patients should be charged for what items.

While patient care is first and foremost in importance, significant costs from incorrect charges are being incurred by the hospital. Other problems with medicinal supplies distribution involve items not found on carts, items out of stock on carts, incorrect inventory counts leading to incorrect reordering or product spoilage, and lengthy waits for items to be brought to the floor from inventory storage $($Figure $2).$

Task force members have decided to investigate this situation from a cost$-$of$-$quality point of view. At first, some of the group members are concerned about ensuring that quality patient care is not overlooked. Others think that the emphasis on quality patient care has caused costs to be ignored.

Fortunately, the task force leader understands the use of quality costs in decision making. Using quality costs, a manager can determine the usefulness of investing in new equipment, changing a standard operating procedure, or revising a service design. The task force intends to use quality costs to guide the changes they will make to the inventory system. The first step is to convince group members to study this situation from a cost$-$of$-$quality point of view. The leader reminds group members that quality costs are any cost that the hospital would not have incurred if the quality of the product or service were perfect. Quality costs are the portion of the operating costs brought about by providing a medical service that does not conform to performance standards. Quality costs are also the costs associated with the prevention of poor quality. To identify quality costs, the leader encourages a brainstorming session.From reading the case, and from your knowledge of hospitals, identify prevention costs, appraisal

costs, failure costs, and intangible costs in this situation.

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Figure $1.$ Flowchart: Process of Supplying Medical Items