To: Dr. Byrnes Shouldice, Alan O’Dell
From: An MBA Student
Date: May 09, 2006
Subject: Problems and Plans - Operational Assessment of the Shouldice Hospital Thank you for the opportunity to consult on your Shouldice Hospital operational assessment. I understand that you have implemented a well developed focus strategy (market focus and internal focus) successfully and Shouldice achieves outstanding results by maximizing the difference between perceived quality and value to the patient on one hand and the cost of supplying services on the other. The nurses and doctors treat their patients with care and understanding and treat them more like family members. This has led to the high level of praise for this hospital and its treatment. The rising number of satisfied patients and word of mouth referral has led to demand for the facilities services which outstrip the facility’s current capacity. I understand that you are looking for guidance on specific actions in order to increase the hospital’s capacity while at the same time maintaining control over the quality of the service delivered, and the hospital management. I have identified the problems and offered a list of alternate courses of action.
Problem Definition: The problem is that Shouldice is facing a paradox of change. Shouldice is operating at its “best operating level” for a service company with limited flexibility in its facility, a specialized work force but are failing to meet all the demand for its chosen market niche. Adding additional capacity to meet the unmet market need may upset the existing work force and lower service quality. Failing to meet the market demand may invite competition that could eventually cause Shouldice to lose market share and end up with excess capacity.
Problem Justification: It is assumed that they are operating at the “best operating level” because the way the case describes how efficiently the hospital is ran and how the patients appear to be pleased with their treatment. Capacity is nearly 100% full if they do 30 operations a day and the patients stay 3-4 days. This would fill up 89 beds for a 5 day work week. They also have 15% (14 hostel rooms) additional capacity for peak times. This also works out to be about 70% capacity of their full time potential of 7 days. 70% of maximum capacity is the best operating point. To increase it rate of service utilization will decrease the service quality. For capacity analysis, refer to Appendix-B.
To increase their output and maintain their quality they would need to increase the size of the hospital. This involves large capital investments and considerable time. Construction would also cause a disruption to the quality and country club atmosphere of the hospital.
Due to shift restrictions the current operating rooms are completely un-utilized for 2 days of the week as well as 15.5 hours of each weekday. Kitchen and common area are designed to accommodate one hundred patients and it is important that these facilities be kept up to ensure patients still receive the high level of satisfaction with the experience at Shouldice.
The staff also has limited flexibility. Surgeons and surgeons’ assistants are specialized fields that have limited desire to be cross trained. It is assumed that the staff is happy with the existing work schedule and do not want a change. Increasing the days worked would cause more aggressive scheduling of the operating rooms and may make it hard to maintain the same kind of working relationships and attitudes. Alternative Courses of Action: Alternative courses of action are based on the assumption that the reason for their desired expansion is to meet an unmet market demand.
i) They could add an additional day by operating on Saturday. ii) They could do nothing different and continue to do as they are currently doing. iii) They can add a new floor...