1. Technology and
Operations Management
Week 3
Michaelmas term 2007

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

3. Service in Shouldice
 What is the service concept of
Shouldice Hospital?
 What would a patient typically say
about it after the experience?

4. A Stitch in Time: Shouldice Hospital

5. Evidence of success at
Shouldice (1)
Evidence of service success:
i.e. achieving satisfaction
 The reunion
 The recommendation to others
 The extended orderbook
 The position of potential expansion
 The profitability of the hospital
 The value to patients
 The motivation of the employees

6. Evidence of success at
Shouldice (2)
Evidence of profitability
 For the Hospital:
Revenues: 4 days x $111 x 6850 patients = $3,040,000
Costs (p.10) = $2,800,000
Profit = $ 240,000
 For the Clinic:
Revenues: $510 x 6850 + 20% anaesthetic ($75 x 6850) =
$3,596,000
Cost (p.10) = $2,000,000
Profit = $1,596,000

7. Evidence of success at
Shouldice (3)
Cost to patients
Shouldice 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

8. Evidence of success at
Shouldice (4)
Fulfilling the service concept
 What is the service concept of the hospital?
 To the patient:
 Peace of mind
 A holiday experience
 New friends – a fraternity
 You are special but treatment is standard
 To the employee:
 A direct professional contribution
 A team and a place in the team

9. Methods used at Shouldice (1)
Standardisation: screening of patients
Participation: patients do much of the work
Work environment: staff freed from usual disagreeable work
Economics: sharing of expensive services
Best practice: interaction of surgeons
Motivation: all employees interface with the customer

10. Methods used at Shouldice (2)
Facilities for patients:
 Avoidance of hospital atmosphere
 Use of TVs, ‘phones
 The Schedule and Programme (keep moving!)
 Stairways
 Operating rooms in semi-circle

11. Future expansion options (1)
 Capacity at present:
6850 operations/50 weeks = 137 patients/week
Examination Room 270 patients / week
Admitting Procedure 240 patients / week
Nurses’ Station 240 patients / week
Operating Room 188 patients / week
Doctors 178 patients / week
Rooms 89 = 134 patients / week
103 = 148 patients / week
 Bottleneck: number of rooms

12. Future expansion options (2)
 Add a floor (45 more beds)
 29% increase, $930,000/year, i.e. 45% return on investment
 Add a Saturday shift
 148 to 177 patients/week = $627,000 /year
 Develop another facility
 Replicate Shouldice on new specialty
 BUT: when will service system break down?
 for patients
 for individual employees
 for team and concept

13. Explaining success of Shouldice
 Every employee has a role
 Every employee interfaces with ‘customer’
 Control of customer input
 Necessary flexibility to keep to schedule
 Small enough to work;
big enough to be known

14. Summary
Shouldice is an effective integrated system Represented by the
problems it does not have!!
Financial Operations
 Profitability  Breakdowns & absenteeism
 Budget failure  Yield on resource activities
 No future orderbook  Failure on customer expectation
 Unexplained  Delays & unexplained bottlenecks
overhead costs
Marketing People
 Undefined product/service  Lack of commitment
 Unforecastable demand  Lack of cooperation & flexibility
 Unspecified requirements  Exclusivity
of customers  Interfaces between functions

15. Creating an effective and manageable
service system
 Consider the operations as a customer processing system, rather
than a product processing system
 Recognise the total design of the service system as the
basis for inspection – not customer questionnaires
(as proof of the service concept)
 Separate the profitability for the customer
and profitability for the provider
 Value employees in terms of consistency,
standards and individuality
 Protect the customer from queues inside the organisation
 Create an image, and experience, of the facilities as an expression
of marketing statements