1、DSE7100 Managing Service Operations Discussion ofDiscussion of ShouldiceShouldice Hospital Limited Case Hospital Limited CaseAssignment #2: Assignment #2: Questions for Questions for ShouldiceShouldice Hospital Limited Hospital Limited1.How Successful is the Shouldice Hospital? 2.How do you account
2、for the success of the hospital?3. What is the strategic service concept of Shoudice Hospital? How are the elements in the service systems designed and managed to support the strategic service concept?4.As Dr. Shouldice, what actions, if any, would you take to expand the hospitals capacity?5. How wo
3、uld you implement changes you propose? Patents do not feel that that are staying in hospitalPatients are taking a vocationThis is a clubFocusedHow is Shoudice different from other Hospitals?How Successful is Shouldice Hospital? 140,000 highly satisfied “Alumni”(past patients) 1,200 backlog of schedu
4、led operations Demand appears to expand with supply Superior quality Shouldice Method of Hernia operation imitated by competitor Low recurrence rate, 0.80% vs 10% High degree of employee satisfactionCost Comparison: Shouldices vs. Other HospitalsShouldiceOthersCosts of typical operations$954 (p9)$20
5、00-4000Transportation$200-600$0Time Lost from work in Hospital 4days5daysTime lost from work while recovering5days10daysValue of time lost (ranging from $50 to 500 per day)$450-4500$750-7500Total before Allowancefor recurrence$1604-6054$2750-11500Probability of Recurrence0.80%10.00%Expected Cost of
6、Recurrence$13-48$275-1150Total cost to patient, employee and insurer$1,617-6,102$3,025-12,650How About the Profitability of Shouldice Hospital?Hospital:Revenues (4 days X $111/day x 6,850 patients/year)3,041,400Cost2,800,000Profit: 241,400Clinic:Revenues ($450+ 60 + 75 X 0.20) X6,850) 3,596,250Cost2
7、,000,000Profit1,596,250Total Profit1,837,650Return on equity Total Depreciated Assets: $5 mil Return on Asset: 1,837,650/5,000,000 = 37% What is the return on Asset if they expand the capacity by 50% at the cost of $2 mil? 1,837,650 x 1.50 / 7,000,000 = 40%“The Dream World ” Shoudice is offering: hi
8、gh quality service at low price Shodice is having Highly satisfied customers Happy Employees Shouldice is also making high profitHow is all of this achieved?What are the major reasons for the success? Maximizing the difference between perceived quality and value to the patient on one hand and the co
9、st of supplying services on the other. What is the Unique Service Concept? What does Shouldice hospital offer to its customers? The hernia surgery (the Shouldice method) Peace of mind/low risk/Low Recurrence Independence/Dignity/Control Social experience, fraternity Excused absence from work without
10、 guilt A vocation Market Focus focus on a narrow segment of potential patients who have hernia and they are predominantly male, older in age, essentially in good health large market potential: 600,000 operations in U.S. in 1979 Internal Focus Doctors: Dedicated to quality of shoudice method, toleran
11、ce for boredom, family oriented Nurses: people oriented, assist patients Staff: flexible, team orientedOperating Concept Shouldicce achieves outstanding results as a low price and at a high profit because: Everything done by the hospital is designed to maximize the difference between perceived quali
12、ty and the value of the service provided patients on one hand and the cost of providing the service on the other.How did they do that? Patients are carefully screened Patients are active participants in the service delivery process The avoidance of general anesthestics allows a wide range of involve
13、ment of patients Staff is freed from much disagreeable work Reducing the cost of nursing, housekeeping and laundry Structure hospital jobs that involves more counseling and positive interaction with the patientsHow did they do that? The Clinic is a focused factory resulting in: Highly productive sur
14、geon: 300 hernia/yr Vs. 30 by less focused surgeon Sharing of expensive services such as anesthetist Short and relatively regular hours for surgeon high compensation ($50,000 + $40,000) Opportunities for surgeons to observe and and advise one another Peer group pressure that leads to higher level of
15、 self-control of quality A conscious effort is made to make Shouldice a “family”experienceThe elements in the service system to support the service Concept (managerial elements) Service encounter Doctors and nurses are carefully recruited Employees trained to help / counsel patients Communal dinning
16、 for doctors, nurses , staff and patients Quality adherence to Shouldice method opportunity for surgeon to observe & advise one anotherThe elements in the service system to support the service Concept (managerial elements) Managing capacity & demand Admission by appointment: scheduled service Screen
17、ing patients: easier to estimate the service time walk-in patients or local residents on waiting list to make up cancelled reservation Information Medical Information questionnaire Free annual check-up - unique data base on the result of the surgery Annual reunion to keep alumni informed and gather
18、customer feedbacks- loyal customer base - effective word-of-mouthThe elements in the service system to support the service Concept (structural elements)Delivery system Maximum degree of customer participation Efficient and low cost Avoid a typical hospital atmosphereFacility design Acres of gardens
19、to encourage exercise & rapid recovery minimize hospital feeling (carpeting and odorless disinfectant etc) Stairways are designed for patients to use right after operations No TVs and Telephones in rooms to encourage walking Operating rooms are located in semicircle to encourage doctors to help each
20、 other and use the same anesthetistThe elements in the service system to support the service Concept (structural elements) Location large city near air port - access to worldwide market large local population to fill up cancelled bookings Capacity planning Elective procedures - scheduled operations
21、Balancing Capacity and improving capacity utilization Needs to increase capacityThe Capacity Decision Where is the bottle neck? How should they increase the capacity? How should they implement that change?Shoudice Hospital Limited: Analysis of CapacityCurrent Throughput6,850 Operations/50 weeks = 13
22、7 operations/week ( with a peak of 165/week)CapabilitiesExamination Rooms:(6 rooms x 3 hrs (1-4 PM) x 5 days x 60 min/hr) / (20 min / exam) = 270 patients /weekAdmitting Procedure:(2 people x 4 hrs (1-5 PM) x 5 days/week x 60 min/hr) / (10min/patient) = 240 patients/weekNursing Station:(2 stations x
23、 4 hrs (1-5 PM) x 5 days/week x 60min/hr)/(10 min/patient)=240 patients /weekShoudice Hospital Limited: Analysis of CapacityCapabilities Operating Rooms: (5 rooms x 8.5 hrs/room/day x 1.1 hrs/patient x 5 days/week)/ = 188 patients /week Surgeons: 11 surgeons x 3.5 operations /day x 5 days = 178 pati
24、ents/week Hospital rooms: (see transparency) 89 rooms = 134 patients per week (assuming use of weekends for convalescence and 3.5 days average stay) 103 rooms = 148 patients (assuming use of weekend for convalescence, 3.5 days average stay, and use of 14 “hostel” rooms for two nights each week)How t
25、o expand the capacity? Aim : increase capacity & maintain control of service quality Alternatives: Add Saturday operations Add a new floor (45 more hospital beds) Establish a new facility for hernia Expand to other types of operations Others?Please Help Shoudice to make the Decisions Which alternati
26、ve do you recommend? Why? How do you implement the solution that you are recommending?Add in a new floor (45 beds) Total Number of Rooms: 89 +45= 134 Total number of patents per week = 193 137 current throughput/148 theoretical = x / 193 theoretical New throughput = 193 x (137/148)= 179 patients / w
27、eek Additional patients per year=(179-137) x 50=2100 additional revenue for the clinic = 2100 x (450+0.20 x 75) = $976,500 Less cost 176,500 Return on investment = 800,000/2,000,000=40%Add in a new floor (45 beds) Disadvantages Require to schedule doctors to the full capacity of five days per week I
28、ncrease work load on admissions, kitchen, laundry, housekeeping and accounting Further staggering of meal hours for patients (100 seat dinning room) Disruption during construction Advantages Easy to control and maintain quality Retain the culture and environmentSchedule Saturday as an Operating Day
29、Use 89 + 14 rooms, 3.5 average stay Total number of patents per week = 180 137 current throughput/148 theoretical = x / 180 theoretical New throughput = 180 x (137/148)= 167 patients / week Additional patients per year=(167-137) x 50= 1450 additional revenue for the clinic = 1450 x (450+0.20 x 75) =
30、 $674,250 Less cost 124,250 Net increase in profit: 550,000 for no additional investmentSchedule Saturday as an Operating Day Disadvantages Require to schedule 23-25 operations on Saturday Six surgeons and a supervising surgeon have to work on Saturdays Additional other personnel Violates the implie
31、d contract that Shouldice has with its surgeons, strong opposition by the senior doctors Operating close the the theoretical capacity of the facility Advantages No investment is needed Can still maintain qualityA Second Facility for Treating Hernia Advantages New location close to the customers, say
32、 USA Improve its competitive position and increase its profits Operate in a less restrictive environment New Opportunities for existing personnel Transfer of knowledge and expertise to the new facilities Disadvantages Requires a significant investment and Dr. Shoudices time Control of quality It is
33、difficult to create the same culture and atmosphere Potential competition with the existing facilityDiscussion Questions1.Describe Shoudice Hospitals service package. 2.How are the distinctive characteristics of a service firm illustrated by Shoudice Hospital?Shoudice Hospitals Service PackageSuppor
34、ting Facility Acres of gardens to encourage exercise & rapid recovery Carpeting and odorless disinfectant etc to minimize hospital feeling Stairways are designed for patients to use right after operations No TVs and Telephones in rooms to encourage walking Operating rooms are located in semicircle t
35、o encourage doctors to help each other and use the same anesthetist Located to a large city: Toronto, access to worldwide market, large local population to fill up cancelled bookings.Shoudice Hospitals Service PackageFacilitating Goods:Medical suppliesFood, medicine etc.Explicit Services Quality her
36、nia surgery using the Shouldice method, low recurrence Very experienced doctorsShoudice Hospitals Service PackageImplicit Services Peace of mind/low risk Independence/Dignity/Control Social experience, fraternity Excused absence from work without guilt A vocation Shoudice Hospitals Distinctive CharacteristicsCustomer Participation in the Service Customer Participation in the Service ProcessProcessSimultaneitySimultaneityIntangibilityIntangibilityPerishabilityPerishabilityHeterogeneityHeterogeneityENDThank You
