Shouldice Hospital Case

Group #8 Assignment #1: Shouldice Hospital case 1. How does the hospital's operations strategy support its business strategy? 2. How well is the hospital currently utilizing its beds? 3. Evaluate the effects of the following two alternatives on the utilization of the bed capacity. a) a. Adding operations on Saturday (assuming that 30 operations would still be performed each day). b) b. Increasing the number of beds by 50 percent (assuming that the hospital would increase the number of operations performed each day and perform operations five days per week with the same number of operations per day). 4. What is your recommendation to the hospital (consider the two options above and the option of no change on capacity)?
This conclusion can be adequately drawn after using the capacity utilization rate (capacity used divided by the best operating level) to show how close to its best operating level Shouldice Hospital is operating. The best operating level is the capacity for which the process was designed, and is the volume of output at which unit cost is minimized. The best operating level remains constant on a daily basis throughout the course of the week and is equal to ninety beds a day. The capacity used on the other hand somewhat fluctuates throughout the seven day period. On Tuesday, Wednesday, and Thursday the capacity utilization rate of the beds is 100% (90 capacity used/ 90 best operating level). However, on Monday and Friday the capacity utilization rate is 66.7% (60 capacity used /90 best operating level). Finally, on Saturday and Sunday the capacity utilization rate falls to 33.3% (30 capacity used/ 90 best operating level). By taking the total capacity used, and the total best operating level over the seven day period we get a capacity utilization rate of 71.4% (450 capacity used/ 630 best operating level). With a capacity utilization rate of 71.4% it is hard to argue that Shouldice Hospital is not currently utilizing its beds in an adequate manner based on their current operating
Assuming the number of operations is increased to 45 per day, by increasing the number of operations from 6 operations per room per day, to 9 per room per day, would allow for the additional 15 operations per day. The hospitals bed (capacity) utilization rate on Tuesday, Wednesday, Thursday would be 100% (135/135), on Monday and Friday it would be 66.67% (90/135), and on Saturday and Sunday it would be 33.33% (45/135). This option leaves the hospital’s bed (capacity) utilization rate to be the same as it currently is with operations five days a week, with 90 beds and 30 operations per day. But, it would allow for 15 more operations to be performed per day five days a week, for a total of 45 operations per day, which ultimately makes the hospital more money. The hospital needs to consider if the increase in profits, the increase in beds and the increase in operations can be handled without changing its business