Technology and Technology and Operations Management Operations Management

Week 3 Week 3

Michaelmas term 2007Michaelmas term 2007

Course OutlineCourse Outline

Week 1:Week 1: Lessons from Mars Lessons from Mars Week 2:Week 2: Managing Quality Managing Quality Week 3:Week 3: Managing Front Office OperationsManaging Front Office Operations Week 4:Week 4: Managing Back Office Operations Managing Back Office Operations Week 5:Week 5: Managing the Supply Chain Managing the Supply Chain Week 6:Week 6: Managing Innovation Managing Innovation Week 7:Week 7: ‘Discovery’ Exercise ‘Discovery’ Exercise Week 8:Week 8: Managing Projects and Programmes Managing Projects and Programmes

Service in ShouldiceService in Shouldice

What is the service concept of What is the service concept of Shouldice Hospital? Shouldice Hospital?

What would a patient typically sayWhat would a patient typically sayabout it after the experience?about it after the experience?

A Stitch in Time: Shouldice Hospital

Evidence of success at Evidence of success at Shouldice (1)Shouldice (1)

Evidence of service success:Evidence of service success:i.e. achieving satisfactioni.e. achieving satisfaction

The reunionThe reunion The recommendation to othersThe recommendation to others The extended orderbookThe extended orderbook The position of potential expansionThe position of potential expansion The profitability of the hospitalThe profitability of the hospital The value to patientsThe value to patients The motivation of the employeesThe motivation of the employees

Evidence of success at Evidence of success at Shouldice (2) Shouldice (2)

Evidence of profitabilityEvidence of profitability

For the Hospital:For the Hospital:Revenues: 4 days x $111 x 6850 patientsRevenues: 4 days x $111 x 6850 patients = $3,040,000= $3,040,000Costs (p.10)Costs (p.10) = $2,800,000= $2,800,000ProfitProfit = $ 240,000= $ 240,000

For the Clinic:For the Clinic:Revenues: $510 x 6850 + 20% anaesthetic ($75 x 6850)Revenues: $510 x 6850 + 20% anaesthetic ($75 x 6850) = = $3,596,000$3,596,000Cost (p.10)Cost (p.10) = $2,000,000= $2,000,000ProfitProfit = $1,596,000= $1,596,000

Evidence of success at Evidence of success at Shouldice (3)Shouldice (3)

Cost to patientsShouldice Other

hospitals

Operating cost (p.13) $95 $2000 – 4000

Transportation 200 – 600

Time lost from work at Hospital (p.7) 5 days 10 days

Time lost from work recovering 5 days 10 days

Value @ 50 to 500 / day $1,600 - $6050 $2,250 - $11,500

Recurrence 0.8% 10%

Weighted cost $15 – 20 $275 – $1,150

Total all costs $1,615 - $6,100 $3,025 - $12,650

Evidence of success at Evidence of success at Shouldice (4)Shouldice (4)

Fulfilling the service conceptFulfilling the service concept What is the service concept of the hospital?What is the service concept of the hospital?

To the patient:To the patient: Peace of mindPeace of mind A holiday experienceA holiday experience New friends – a fraternityNew friends – a fraternity You are special but treatment is standardYou are special but treatment is standard

To the employee:To the employee: A direct professional contributionA direct professional contribution A team and a place in the teamA team and a place in the team

Methods used at Shouldice (1)Methods used at Shouldice (1)

Standardisation:Standardisation: screening of patientsscreening of patients

Participation:Participation: patients do much of the workpatients do much of the work

Work environment:Work environment: staff freed from usual disagreeable workstaff freed from usual disagreeable work

Economics:Economics: sharing of expensive servicessharing of expensive services

Best practice:Best practice: interaction of surgeonsinteraction of surgeons

Motivation:Motivation: all employees interface with the customerall employees interface with the customer

Methods used at Shouldice (2)Methods used at Shouldice (2)

Facilities for patients:Facilities for patients: Avoidance of hospital atmosphereAvoidance of hospital atmosphere Use of TVs, ‘phonesUse of TVs, ‘phones The Schedule and Programme The Schedule and Programme (keep moving!)(keep moving!)

StairwaysStairways Operating rooms in semi-circleOperating rooms in semi-circle

Future expansion options (1)Future expansion options (1)

Capacity at present:Capacity at present: 6850 operations/50 weeks =6850 operations/50 weeks = 137 patients/week137 patients/weekExamination RoomExamination Room 270 patients / week270 patients / weekAdmitting ProcedureAdmitting Procedure 240 patients / week240 patients / weekNurses’ StationNurses’ Station 240 patients / week240 patients / weekOperating RoomOperating Room 188 patients / week188 patients / week

DoctorsDoctors 178 patients / week178 patients / weekRoomsRooms 8989 == 134 patients / week134 patients / week

103103 == 148 patients / week148 patients / week Bottleneck: number of rooms

Future expansion options (2)Future expansion options (2)

Add a floor (45 more beds)Add a floor (45 more beds) 29% increase, $930,000/year29% increase, $930,000/year, , i.e. 45% return on investmenti.e. 45% return on investment

Add a Saturday shiftAdd a Saturday shift 148 to 177 patients/week = $627,000 /year148 to 177 patients/week = $627,000 /year

Develop another facilityDevelop another facility Replicate Shouldice on new specialtyReplicate Shouldice on new specialty BUT: when will service system break down?BUT: when will service system break down?

for patientsfor patients for individual employeesfor individual employees for team and conceptfor team and concept

Explaining success of ShouldiceExplaining success of Shouldice

Every employee has a roleEvery employee has a role Every employee interfaces with ‘customer’Every employee interfaces with ‘customer’ Control of customer inputControl of customer input Necessary flexibility to keep to scheduleNecessary flexibility to keep to schedule Small enough to work;Small enough to work;

big enough to be knownbig enough to be known

SummarySummary

FinancialFinancial OperationsOperations

Marketing People

Shouldice is an effective integrated system Represented by the problems it does not have!!

Profitability

Budget failure

No future orderbook

Unexplained overhead costs

Breakdowns & absenteeism

Yield on resource activities

Failure on customer expectation

Delays & unexplained bottlenecks

Lack of commitment

Lack of cooperation & flexibility

Exclusivity

Interfaces between functions

Undefined product/service

Unforecastable demand

Unspecified requirementsof customers

Creating an effective and manageable Creating an effective and manageable service systemservice system

Consider the operations as a customer processing system, rather Consider the operations as a customer processing system, rather than a product processing systemthan a product processing system

Recognise the total design of the service system as the Recognise the total design of the service system as the basis for inspection – not customer questionnairesbasis for inspection – not customer questionnaires(as proof of the service concept)(as proof of the service concept)

Separate the profitability for the customer Separate the profitability for the customer and profitability for the providerand profitability for the provider

Value employees in terms of consistency, Value employees in terms of consistency, standards and individualitystandards and individuality

Protect the customer from queues inside the organisationProtect the customer from queues inside the organisation Create an image, and experience, of the facilities as an expression Create an image, and experience, of the facilities as an expression

of marketing statementsof marketing statements