Service modularity in managing healthcare logistics

• Date: 11 February 2019
• Pages: 174-194
• Published date: 11 February 2019
• DOI: https://doi.org/10.1108/IJLM-12-2017-0338
• Author: Timo Pohjosenperä,Päivi Kekkonen,Saara Pekkarinen,Jari Juga
• Subject Matter: Management science & operations,Logistics

Service modularity in managing

healthcare logistics

Timo Pohjosenperä

Department of Marketing, Management and International Business,

Oulu Business School, University of Oulu, Oulu, Finland

Päivi Kekkonen

Industrial Engineering and Management,

University of Oulu, Oulu, Finland, and

Saara Pekkarinen and Jari Juga

Department of Marketing, Management and International Business,

Oulu Business School, University of Oulu, Oulu, Finland

Abstract

Purpose –The purpose of this paper is to examine how modularity is used for enabling value creation in

managing healthcare logistics services.

Design/methodology/approach –Material logistics of four different kinds of hospitals is examined

through a qualitative case study. The theoretical framework builds on the literature on healthcare logistics,

service modularity and value creation.

Findings –The case hospitals have developed their material logistics independently from others when

looking at the modularity of offerings, processes and organisations. Services, such as assortment

management, shelving and developing an information platform, have been performed in-house partly by the

care personnel, but steps towards modularised and standardised solutions are now being taken in the case

hospitals, including ideas about outsourcing some of the services.

Research limitations/implications –This paper proposes seven modularity components for healthcare

logistics management: segmentation, categorisation and unitisation of offerings, differentiation and

decoupling of processes, and centralisation and specialisation of organisations. Thus, this study clarifies the

three-dimensional concept of modularity as a cognitive frame for managing logistics services with

heterogeneous customer needs in a rapidly changing healthcare environment.

Practical implications –Modularity offers a tool for developing logistics services inside the hospital and

increases possibilities to consider also external logistics service providers.

Social implications –Managing healthcare logistics services through modularity has potential social

implications in developing healthcare processes and changing the usage of health services. On a wider scale,

modularity is helping healthcare systems reaching their goals in terms of service quality and cost.

Originality/value –This paper shows the context-specific antecedents of service modularity and the usage

of modular thinking in managing healthcare logistics.

Keywords Europe, Case study, Logistics services, Outsourcing–insourcing, Healthcare logistics

Paper type Research paper

1. Introduction

The importance of material flows as part of health services is recognised nowadays both

in the management of healthcare organisations and in academic research (e.g. Beier, 1995;

Jarrett, 1998; Landry and Philippe, 2004; Kumar et al., 2008). This awareness originates

from the global dilemma of healthcare organisations aiming to gain more value and

reduce costs (see e.g. Kaplan and Porter, 2011). New models have been sought from

industry for increasing healthcare logistics efficiency and effectiveness while still

keeping in mind the unique features of healthcare that constrain the applicability of

knowledge from the industrial and retail sectors (de Vries and Huijsman, 2011;

Abdulsalam et al., 2015). Thus, healthcare logistics has become a constantly growing

field of research and an important development area for healthcare organisations

(Volland et al., 2017).

The International Journal of

Logistics Management

Vol. 30 No. 1, 2019

pp. 174-194

© Emerald PublishingLimited

0957-4093

DOI 10.1108/IJLM-12-2017-0338

Received 15 December 2017

Revised 5 June 2018

15 September 2018

31 October 2018

Accepted 4 November 2018

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0957-4093.htm

174

IJLM

30,1

One of the concepts developed in the manufacturing industry is modularity, which is

used as an enabler for postponement (e.g. Gualandris and Kalchschmidt, 2013) and

mass-customisation (e.g. Feitzinger and Lee, 1997; Salvador et al., 2004) strategies. However,

other disciplines have also adopted and modified the modularity concept (see e.g.

Campagnolo and Camuffo, 2010). The expanding research stream of service modularity

(Frandsen, 2017) has brought up new aspects from various empirical contexts (Brax et al.,

2017), including logistics (Pekkarinen and Ulkuniemi, 2008; Bask et al., 2010) and recently

also healthcare services (Vähätalo and Kallio, 2015; Silander et al., 2017). Overall, modularity

can be seen as a useful cognitive frame for categorisation and interpretation of diverse

economic phenomena (MacDuffie, 2013; Gärtner and Schön, 2015).

The aim of this study is to describe how modularity is used for enabling value creation in

healthcare logistics services. We approach the question by first itemising the antecedents of

modularity and then analysing the central components of modularity in healthcare logistics.

Healthcare organisations, such as hospital units, wards and municipal health centres, have

diverse needs for logistics services. As the needs are heterogeneous, modular services may

offer a way to achieve the desired outcomes. In this examination, the outcomes of

modularisation are reflected in the value creation literature, where the mechanisms, actors

and their roles in value creation processes are under discussion. According to Grönroos

and Voima (2013), the customer and service provider are in changing roles of both

facilitating and creating value.

The empirical research is based on an interdisciplinary study carried out in four case

hospitals in Finland. Two hospitals in northern Finland, a university hospital and a regional

hospital, have their own in-house logistics service departments that take care of purchasing,

deliveries, warehousing and service development activities. However, both hospitals are also

considering opportunities for using external logistics service providers (LSPs) for some of

their logistics operations. A regional hospital in south–western Finland has adopted

a centralised model to also offer logistics services to municipal health centres in its region.

Finally, a newly established private hospital in southern Finland has developed a modern,

lean approach to material logistics and support services, including the systematic use of

outsourced services from external providers.

This paper is organised as follows. Section 2 gives an overview of the concepts of

modularity and value creation, especially in the context of healthcare material logistics.

Section 3 introduces the case hospitals. Section 4 defines the qualitative methods and data

collection of this research. The results and analysis in Sections 5 and 6 are organised in

accordance with the supply chain partnering model by Lambert et al. (1996), describing the

drivers, facilitators, components and outcomes of value creation through modularity.

The results are discussed in Section 7, and the conclusions are presented in Section 8.

2. Modularity and value creation in healthcare logistics services

2.1 Modularity –definitions

The history of modularity can be traced back to the standardisation efforts of the industrial

era, for instance in operations management. Rutenberg (1971) addressed the need for

commonality across product variants. Fundamental to modular designs are the modules

that have a specific function; they should be relatively independent and have standardised

interfaces to enable integration (Baldwin and Clark, 2000). Later, the concept of modularity

has also been adopted in many other disciplines, including logistics services (e.g. Bask et al.,

2010; Pekkarinen and Ulkuniemi, 2008) and healthcare (Vähätalo and Kallio, 2015;

Broekhuis et al., 2017; Silander et al., 2017). In the service domain, modularity is defined as

being formed of one or many bundles of tasks highly interdependent of each other but

loosely dependent on other modules creating value for the customer through efficiency and

customisation (see Kriegel et al., 2013; Ulkuniemi and Pekkarinen, 2011).

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Modularity in

healthcare

logistics