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Assignment 2
1.
OPSMGT 255
Capacity Planning
25 marks
Learning Objective:
The purpose of this part of the assignment is to assess your understanding of how spreadsheets can be used for capacity planning and the role that it plays in different types of organisations.
Capacity Planning for Decent Cut hospital:
“Decent Cur” is a company that manufactures medicines and health care products. It also operates at
private hospital in Auckland that performs surgical operations. Decent Cut hospital faces variable demand for their elective surgery service. They have prepared the following annual forecast of patient-days for the demand they expect each month for the next calendar year. A patient-day is one patient staying for one day at the hospital. Currently, the hospital employs 80 nurses.
The management of Decent Cut needs to decide for the next year how many nurses to hire and fire at
the start of each month, based on the following demand forecast:
Table 1
Elective Surgery Service Hospital Stay Forecast
Month
1
2
3
Demand (patient-days)
723
701
709
4
860
876
931
988
8 9
10
783
632
574
11
12
540 579
6
7
Assume that one nurse working for one month can provide a total of 10 patient-days of care during that period. Each nurse is paid $3550 per month and can work up to 175 hours/month. Only at the beginning of each month nurses can be hired or fired; no part-time employment is possible. Hiring each nurse costs $5550 and firing each nurse costs $7800.
a) Develop the least cost plan that fully satisfies the forecasted demand. Present this plan to the
management of Decent Cut hospital in a report that summarises your findings, your capacity plans, and gives a detailed recommendation based on your findings.
b) One of the managers has also asked you to discuss the following questions in the report:
How much money does the hospital save using this plan rather than a level capacity plan (also fully satisfying demand)? Show you workings to support your answer.
• What TWO methods could the hospital feasibly use in order to smooth demand? Which ONE of those would you recommend here and why?
• Reworking your least-cost plan – what savings could be made if the hospital outsourced the HR function which would reduce the cost by a third for hiring and firing of nurses, that is, the
cost for hiring and firing would be two thirds of the original cost? What drawbacks would need
to be considered in this specific business situation?
(Word limit: approximately 200 words)
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