DEPARTMENT OF

MANAGEMENT SCIENCES

CASE STUDY

CAPACITY PLANNING AT ARNOLD

PALMER HOSPITAL
VIDEO CASE:

CAPACITY PLANNING AT ARNOLD PALMER HOSPITAL

Question No. 1:

Given the discussion in the text (see Figure S6.5) what approach is being taken
by Arnold Palmer Hospital toward matching capacity to demand?

Answer:

With the help of demographic analysis they used forecasted demand

Demographic analysis includes the sets of methods that allow us to measure the
dimensions and dynamics of populations. These methods have primarily been
developed to study human populations, but are extended to a variety of areas
where researchers want to know how populations of social actors can change
across time through processes of birth, death, and migration. In the context of
human biological populations demographic analysis uses administrative records
to develop an independent estimate of the population. Arnold palmer hospital
approaches to lead strategy; the lead capacity strategy adds capacity before the
demand actually occurs. If the demand does not materialize then the Arnold
Palmer Hospital could quickly find themselves with unused/empty beds as well as
the expenditure of ramping up capacity unnecessarily. It is done in anticipation of
demand and the capacity is increased. It is a very aggressive strategy and is
used to lure customers i.e. patients away from other competitors in this hospital
industry.

Question No. 2:

What kind of major changes could take place in Arnold Palmer Hospital's
demand forecast that would leave the hospital with an underutilized facility
(namely, what are the risks connected with this capacity decision)?

Answer:

Arnold Palmer Hospital management like this approach as it minimizes risk.

However, lead capacity strategy does have some risk. Capacity decision based
on lead strategy, and disadvantage to this strategy is that it often results in
excess inventory, which is costly and often wasteful. Similarly in case of Arnold
Palmer Hospital when actual demand is not equal to the forecasted demand it
might be a risk and waste of so many resources like unused beds, equipment,
machinery etc.

Question No. 3:

Use regression analysis to forecast the point at which Swanson needs to “build
out” the top two floors of the new building, namely when demand will exceed
16000 births?

Answer:

x y xy x2
1 6144 6144 1
2 6230 12460 4
3 6432 19296 9
4 6950 27800 16
5 7377 36885 25
6 8655 51930 36
7 9536 66752 49
8 9825 78600 64
9 10253 92277 81
∑xy - n
10 10555 105550 100
11 b = 12316 135476 121
12 13070 156840 144
13 ∑ 13600
x2 - n ( ) 2 176800 169
∑x = 91 ∑y = 120,943 ∑xy =
∑ x2 = 819
966,810

b= 176800- 13(7)(9303)
819 - 13|(49)

b= 3680

a= -
a= 9303 - 6680(7)

a= 16457

Linear Regression

y = a + bx

y= 16457+3680(13)

y= 64297