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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

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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 1940s they

probably not any secret.

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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 demand with external capacity.

Evaluation of Alternatives

1) Doing nothing is a valid consideration. Their existing system and reputation sets

them apart as a market leader and it is assumed to be a profitable setup.

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If it is working do not try to fix it. It is unknown if the existing set up is acceptable

to management as far as profit and other operating measures however, we will

assume that it is. The assumed risk is if they do not do any thing then

competition will enter the market place and could eventually take patients away

from Shouldice. There is insufficient data presented to truly analyze this risk.

2) Adding an additional operating day on Saturday is also a valid consideration. It

would utilize ideal plant capacity. It could increase the number of patents

served by 20% or 1500 people a year. Would this be a sufficient number of

patents served to keep competition from entering the same market is unknown.

It will be assumed that what the vice president meant by considerable unsatisfied

demand was more than 20% so there would still be an unmet need to pull

competition into the market place. Adding a Saturday is also assumed to have a

negative impact on the work force that drive down the serve quality that gives

Shouldice a competitive advantage. It would increase rate of service utilization

beyond 70%. This could be offset by hiring addition staff but one should

consider the time it takes the new staff to come up the efficiency curve.

3) Increasing the number of bed by 50% would not be advisable unless they added

more doctors and surgery rooms because the existing plant capacity and number

of doctors could not fill an addition 45 beds. They would be operating the

surgery rooms at over capacity. The construction requires large capital

investment, time, and would disrupt the country club atmosphere.

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4) Meeting the unmet market demand with external demand is also a valid

consideration. It could be done in several different ways. They could look to

other facilities that are similar and team with their doctors to train them in the

Shouldice processes and share in the profits. This would help keep the

competition out of the market and could be done as a silent partner until the

service quality reach a level that Shouldice would want to associate their name

with the other facility. Another option would be to subcontract or franchise the

operation.

Recommendations

I would recommend a combination of doing nothing with the existing staff and plant

as to maintain the country club atmosphere and gregarious nursing staff that gives it

its competitive advantage and meet the unmet market demand with external sources

of capacity to keep the competition from entering the market.