Merton

Shouldice Hospital A Cut Above

Case Study 2

Prepared By

Steven Weidner

Gregory W. Judge

MC 550 Operational Management

City University

Renton, WA

October 15, 1996

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 plant, 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 loss market share and end up with excess capacity.

Problem Justification

There is limited operating facts presented in the case so assumptions have made based on the information that was presented.

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 there treatment.

Capacity is nearly 100% full if they do 30 operations a day and the patients stay 3 days. This would fill up 90 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 there full time potential of 7 days. 70% of maximum capacity is, according to Haywood-Farmer and Nollet the “best operating point”. To increase it rate of service utilization will decrease the service quality.

Because it is a service they can not store there product. To increase their output and maintain their quality they would need to increase they size of the plant where the service is provided. This involves large capital investments and considerable time. Construction would also cause a disruption to the quality and country club atmosphere of the hospital. Therefore the plant has limited flexibility.

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 because the staff is made up of a “gregarious nursing staff” and the doctors’ schedule 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”.

The case states the reason they are considering the expansion is because of “considerable unsatisfied demand”. The market place will fill this demand in one way or another. Also, if the procedures have been around sense the 1940’s they probably not any secret.

List of Alternative Courses of Action

Courses are action are based on that the assumption that the reason for their desired expansion are to met an unmet market demand and is not driven by addition profit or other reasons. This assumption is required because of the limited information provided in the case.

1) They could do nothing different and continue to do as they are currently doing.

2) They could add an additional day by operating on Saturday

3) They can increase additional beds by 50%.

4) They can meet the unmet market

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