Video Case: Project Management at Arnold Palmer Hospital
1. Read the case that follows.
2. View the video tour of Arnold Palmer Hospital that addresses this issue. 3. If you wish to have further background, reread the material in this chapter of the text. 4. Answer the questions about the case, and if your instructor wishes, email them to him or her. The equivalent of a new kindergarten class is born every day at Orlando’s Arnold Palmer Hospital. With more than 10,500 births in 2004 in a hospital that was designed in 1989 for a capacity of 6,500 births a year, the newborn intensive care unit was stretched to the limit. Moreover, with continuing strong population growth in central Florida, the hospital was often full. It was clear that new facilities were needed. After much analysis, forecasting, and discussion, the management team decided to build a new 273-bed building across the street from the existing hospital. But the facility had to be built in accordance with the hospital’s Guiding Principles and its uniqueness as a health center dedicated to the specialized needs of women and infants.
Those Guiding Principles are: Family-centered environment, a healing environment where privacy and dignity are respected, sanctuary of caring that includes warm, serene surroundings with natural lighting, sincere and dedicated staff providing the highest quality care, and patient centered flow and function. The Vice president of Business Development, Karl Hodges, wanted a hospital that was designed from the inside out by the people who understood the Guiding Principles, who knew most about the current system, and who were going to use the new system, namely, the doctors and nurses. Hodges and his staff spent 13 months discussing expansion needs with this group, as well as with patients and the community before developing a proposal for the new facility on December 17, 2001.
An administrative team created 35 user groups, which held over 1,000 planning meeting (lasting from 45 minutes to a whole day). They even created a “Supreme Court” to deal with conflicting views on the multifaceted issues facing the new hospital. Funding and regulatory issues added substantial complexity to this major expansion, and Hodges was very concerned that the project stays on time and within budget. Tom Hyatt, Director of Facility Development, was given the task of onsite manager of the $100 million project, in addition to overseeing ongoing renovations, expansions, and other projects.
1. Develop the network for planning and construction of the new hospital at Arnold Palmer. 2. What is the critical path and how long is the project expected to take? 3. Why is the construction of this 11-story building any more complex than construction of an equivalent office building? 4. What percent of the whole project duration was spent in planning that occurred prior to the proposal and reviews? Prior to the actual building construction? Why?
CHAPTER 4 : FORECASTING DEMAND
Video Case: Forecasting at Hard Rock Cafe
1. Read the case that follows.
2. View the video tour of Hard Rock Cafe that addresses this issue. 3. If you wish to have further background, reread the material in this chapter of the text. 4. Answer the questions about the case, and if your instructor wishes, email them to him or her. With the growth of Hard Rock Cafe—from one pub in London in 1971 to more than 110 restaurants in more then 40 countries today—came a corporate-wide demand for better forecasting. Hard Rock uses long-range forecasting in setting a capacity plan and intermediate-term forecasting for locking in contracts for leather goods (used in jackets) and for such food items as beef, chicken, and pork. Its short-term sales forecasts are conducted each month, by cafe, and then aggregated for a headquarters view. The heart of the sales forecasting system is the point-of-sale system (POS), which, in effect, captures transaction data on nearly every person who walks through a cafe’s door. The sale of each entrée represents one customer; the entrée sales data are transmitted daily to the Orlando corporate headquarters’ database.
There, the financial team, headed by Todd Lindsey, begins the forecast process. Lindsey forecasts monthly guest counts, retail sales, banquet sales, and concert sales (if applicable) at each cafe. The general managers of individual cafes tap into the same database to prepare a daily forecast for their sites. A cafe manager pulls up prior years’ sales for that day, adding information from the local Chamber of Commerce or Tourist Board on upcoming events such as a major convention, sporting event, or concert in the city where the cafe is located. The daily forecast is further broken into hourly sales, which drives employee scheduling. An hourly forecast of $5,500 in sales translates into 19 workstations, which are further broken down into a specific number of wait staff, hosts, bartenders, and kitchen staff. Computerized scheduling software plugs in people based on their availability.
Variances between forecast and actual sales are then examined to see why errors occurred. Hard Rock doesn’t limit its use of forecasting tools to sales. To evaluate managers and set bonuses, a 3-year weighted moving average is applied to cafe sales. If cafe general managers exceed their targets, a bonus is computed. Todd Lindsey, at corporate headquarters, applies weights of 40% to the most recent year’s sales, 40% to the year before, and 20% to sales 2 years ago in reaching his moving average.
An even more sophisticated application of statistics is found in Hard Rock’s menu planning. Using multiple regression, managers can compute the impact on demand of other menu items if the price of one item is changed. For example, if the price of a cheeseburger increases from $6.99 to $7.99, Hard Rock can predict the effect this will have on sales of chicken sandwiches, pork sandwiches, and salads. Managers do the same analysis on menu placement, with the center section driving higher sales volumes. When an item such as a hamburger is moved off the center to one of the side flaps, the corresponding effects on related items, say french fries, is determined.
1. Describe three different forecasting applications at Hard Rock. Name three other areas in which you think Hard Rock could use forecasting models. 2. What is the role of the POS system in forecasting at Hard Rock? 3. Justify the use of the weighting system used for evaluating managers for annual bonuses. 4. Name several variables besides those mentioned in the case that could be used as good predictors of daily sales in each cafe. 5. At Hard Rock’s Moscow restaurant, the manager is trying to evaluate how a new advertising campaign affects guest counts. Using data for the past 10 months (see the table) develop a least squares regression relationship and then forecast the expected guest count when advertising is $65,000.
CHAPTER 5 : PRODUCT AND SERVICE DESIGN
Video Case: Product Design at Regal Marine
1. Read the case study that follows.
2. View the video tour of Regal Marine and its product design, then view the video clip containing the authors’ observations. 3. If you wish to have further background, reread the material on product design in Chapter 5. 4. Answer the questions about the case, and if your instructor wishes, e-mail your answers to him or her. Global firms like Regal Marine know that the basis for an organization’s existence is the good or service it provides society. Great products are the keys to success. With hundreds of competitors in the boat business, Regal Marine must work to differentiate itself from the flock. As you read in the Global Company Profile that opened this chapter of your text, Regal continuously introduces innovative, high-quality new boats. Its differentiation strategy is currently reflected in a product line consisting of 22 models. But why must Regal Marine constantly worry about designing new boats? The answer is that every product has a life cycle. Products are born. They live and they die. As Figure 5.1 shows, a product’s life cycle can be divided into four phases: introduction, growth, maturity, and decline.
Figure 5.2 shows the four life cycle stages and the relationship of product sales, costs, and profit over the life cycle of a product. When Regal is developing a new model boat, it typically has a negative cash flow. If the boat is successful, those losses may be recovered and yield a profit prior to its decline. The life cycle for a successful Regal boat is three to five years.
To maintain this stream of innovative new products, Regal constantly seeks design input from customers, dealers, and consultants. Design ideas rapidly find themselves in Regal’s styling studio, where Computer Aided Design (CAD) technology speeds the development process. A Regal design engineer can start with a rough sketch or even just an idea and use the graphic display power of CAD as a drafting board to construct the geometry of the new boat. The CAD system helps the designer determine engineering data such as the strength, dimensions, or weight. It also allows the designer to be sure all parts will fit together. Existing boat designs are always evolving as the company tries to stay stylish and competitive. Moreover, with life cycles so short, a steady stream of new products is required. A few years ago, the new product was the 3-passenger $11,000 Rush, a small, but powerful boat capable of pulling a water-skier.
The next year, it was a 20-foot inboard-outboard performance boat with so many innovations that it won prize after prize in the industry. Then it was a redesigned 42-foot Commodore that sleeps six in luxury staterooms. With all these models and innovations, Regal designers and production personnel are under pressure to respond quickly. By getting key suppliers on board early and urging them to participate at the design stage, Regal improves both innovations and quality while speeding product development. Regal finds that the sooner it brings suppliers on board, the faster it can bring new boats to the market. The first stage in actual production is the creation of the “plug,” a foam-based carving used to make the molds for fiberglass hulls and decks. Specifications from the CAD system drive the carving process. Once the plug is carved, the permanent molds for each new hull and deck design are formed. Molds take about 4-8 weeks to make and are all handmade. Similar molds are made for many of the other features in Regal boats–from galley and stateroom components to lavatories and steps. Finished molds can be joined and used to make thousands of boats.
1. How does the concept of product life cycle apply to Regal Marine products?
Regal Marine knows that the basis for its existence is the excellent boats it provides to society. In order to make their products stay and have solid place in the market over time, Regal marine constantly needs to take different innovative or economic steps to do so. This could mean adding new features to the boats or for example producing in a higher volume to reduce the costs of each boat.
In emphasis, product life cycles are becoming shorter and the rate of technological change is increasing. The concept of product life applies to Regal Marine because Regal is constantly under pressure to introduce new products – and those products have life cycles of relatively few years. As the video suggests, it is a matter of typically less than five years before a boat is out of style and its life cycle terminated. To maintain this stream of innovation and with so many boats at varying stages of their life cycles, Regal constantly seeks design input from customers, dealers, and consultants.
Indeed, when Regal is developing a new model boat, it typically has a negative cash flow. If the boat is successful, those losses may be recovered and yield a profit prior to its decline. The life cycle for a successful Regal boat is three to five years.
To conclude, most products have a limited and even predictable life cycle, companies must constantly be looking for new products to design, develop, and take to market. Good operations managers insist on strong communication among customers, product processes, and suppliers that results in a high success rate for their new products. 2. What strategy does Regal use to stay competitive?
Regal Marine uses a strategy of product differentiation and innovation, which constantly introduces new products with new innovations and new styling to stay competitive in the luxury performance boat market.
Developing new products faster can result in a competitive advantage. A Regal boat earns its reputation for inspiring performance based on the design of its hull — the core over which everything else is built.
Regal continuously introduces innovative, high-quality new boats. Its differentiation strategy is currently reflected in a product line consisting of 22 models. 3. What kind of engineering savings is Regal achieving by using CAD technology rather than traditional drafting techniques? The sophisticated CAD system not only has reduced product development time but also has reduced problems with tooling and production, resulting in a superior product. By using graphic models you reduce the cost and effort otherwise needed to show customers or developers the new ideas and you can easily change and adapt to whatever needs comes up. This kind of system can also assist in choosing the right components and forecast what you need to get the new product in production.
The cost and time saving using CAD is typical. Tests are economical. Engineering labor is cut down by a ratio of 4:1. Most importantly, it allows them to be creative economically and rapidly. 4. What are the likely benefits of the CAD design technology? The payoff from CAD is not only evident in efficiency, creative designs, and styling but by production of the code necessary for the numerical machines, such as the machines used to make the plugs in Washington state and for those applications of the numerical control machines at Regal Marine. CAD also provides, as a by-product, very effective and comprehensive documentation of design variables.
In sum, the benefits of the CAD design technology are as follows:
• Reduced product development time
• Reduced problems with tooling
• Reduced problems in production
• Easier development of new ideas.
• Determine whether these ideas can be realized or not .
• Easy change of the design
• Cost calculations
• Shorter design time
• Product quality
• Production cost reductions
• Database availability
CHAPTER 6: QUALITY MANAGEMENT AND INTENATIONL STANDARDS
Video Case: Quality at the Ritz-Carlton Hotel Company
1. Read the case study that follows.
2. View the video tour of the Ritz-Carlton Hotel Company and its strategy decisions, then view the video clip containing the authors’ observations. 3. If you wish to have further background, reread the material on quality in Chapter 6. 4. Answer the questions about the case, and if your instructor wishes, e-mail your answers to him or her. Ritz-Carlton. The name alone evokes images of luxury and quality. As the first hotel company to win the Malcolm Baldrige National Quality Award, the Ritz treats quality as if it is the heartbeat of the company. This means a daily commitment to meeting customer expectations and making sure that each hotel is free of any deficiency. In the hotel industry, quality can be hard to quantify.
Guests do not purchase a product when they stay at the Ritz: They buy an experience. Thus, creating the right combination of elements to make the experience stand out is the challenge and goal of every employee, from maintenance to management. Before applying for the Baldrige Award, company management undertook a rigorous self-examination of its operations in an attempt to measure and quantify quality. Nineteen processes were studied, including room-service delivery, guest reservation and registration, message delivery, and breakfast service. This period of self-study included statistical measurement of process work flows and cycle times for areas ranging from room service delivery times and reservations to valet parking and housekeeping efficiency. The results were used to develop performance benchmarks against which future activity could be measured. With specific, quantifiable targets in place, Ritz-Carlton managers and employees now focus on continuous improvement.
The goal is 100% customer satisfaction: If a guest’s experience does not meet expectations, the Ritz-Carlton risks losing that guest to competition. One way the company has put more meaning behind its quality efforts is to organize its employees into “self-directed” work teams. Employee teams determine work scheduling, what work needs to be done, and what to do about quality problems in their own areas. In order that they can see the relationship of the specific area to the overall goals, employees are also given the opportunity to take additional training in hotel operations. Ritz-Carlton believes that a more educated and informed employee is in a better position to make decisions in the best interest of the organization. Discussion Questions
1. In what ways could the Ritz-Carlton monitor its success in achieving quality? 2. Many companies say that their goal is to provide quality products of services. What actions might you expect from a company that intends quality to be more than a slogan or buzzword? 3. Why might it cost the Ritz-Carlton less to “do things right” the first time? 4. How could control charts, pareto diagrams, and cause-and-effect diagrams be used to identify quality problems at a hotel? 5. What are some non-financial measures of customer satisfaction that might be used by the Ritz-Carlton?
CHAPTER 7: PROCESS DESIGN
Video Case: Process Strategy at Wheeled Coach Ambulance
1. Read the case study that follows.
2. View the video tour of Wheeled Coach Ambulance and its process decisions, then view the video clip containing the authors’ observations. 3. If you wish to have further background, reread the material on process strategy in Chapter 7. 4. Answer the questions about the case, and if your instructor wishes, e-mail your answers to him or her. Chapter 7 turns to helping managers find the best way to produce their goods. A process strategy is how a company, like ambulance manufacturer Wheeled Coach, the world’s largest, transforms its resources into finished products. The 350 employees at Wheeled Coach make only custom-made ambulances.
Virtually every vehicle is different. Wheeled Coach accommodates this growth by providing a wide variety of options and an engineering staff accustomed to innovation and custom design. Wheeled Coach’s growth, now requiring that more than 20 ambulances roll off the assembly line each week, makes process design a continuing challenge. Wheeled Coach’s response has been to build a focused factory: Wheeled Coach builds nothing but ambulances. Within the focused factory, Wheeled Coach established work cells for every major module feeding an assembly line, including aluminum bodies, electrical wiring harnesses, interior cabinets, windows, painting, and upholstery.
Labor standards drive the schedule so that every work cell feeds the assembly line on schedule, just-in-time for installations. The chassis, usually that of a Ford truck, moves to a station where the aluminum body is mounted. Then the vehicle is moved to painting. Following a custom paint job, it moves to the assembly line, where it will spend seven days. During each of these seven workdays, each work cell delivers its respective module to the appropriate position on the assembly line. During the first day, electrical wiring is installed; on the second day, the unit moves forward to the station at which cabinetry is delivered and installed, then to a window and lighting station, on to upholstery, to fit and finish, to further customizing and finally to inspection and road testing. Discussion Questions
1. Why do you think major auto manufacturers do not build ambulances? 2. What is an alternative process strategy to the assembly line that Wheeled Coach currently uses? 3. Why is it more efficient for the work cells to prepare “modules” and deliver them to the assembly line than it would be to produce the component (e.g., interior upholstery) on the line? 4. How does Wheeled Coach determine what tasks are to be performed at each workstation?
CHAPTER 8: LOCATION DESIGN
Video Case: Where to Place Hard Rock’s Next Cafe
1. Read the case study that follows.
2. View the video tour of Hard Rock Cafe that addresses this issue. 3. If you wish to have further background, reread the material in this chapter of the text. 4. Answer the questions about the case, and if your instructor wishes, e-mail your answers to him or her. Some people would say that Oliver Munday, Hard Rock’s vice president for cafe development, has the best job in the world. Travel the world to pick a country for Hard Rock’s next cafe, select a city, and find the ideal site. It’s true that selecting a site involves lots of incognito walking around, visiting nice restaurants, and drinking in bars.
But that is not where Mr. Munday’s work begins, nor where it ends. At the front end, selecting the country and city first involves a great deal of research. At the back end, Munday not only picks the final site and negotiates the deal, but then works with architects and planners and stays with the project through the opening and first year’s sales. Munday is currently looking heavily into global expansion in Europe, Latin America, and Asia. “We’ve got to look at political risk, currency, and social norms—how does our brand fit into the country,” he says. Once the country is selected, Munday focuses on the region and city. His research checklist is extensive. Hard Rock’s Standard Market Report (for off-shore sites)
1. Read the case that follows.
2. View the video tour of Arnold Palmer Hospital that addresses this issue. 3. If you wish to have further background, reread the material in this chapter of the text. 4. Answer the questions about the case, and if your instructor wishes, email them to him or her. Orlando’s Arnold Palmer Hospital, founded in 1989, specializes in treatment of women and children and is renowned for its highquality rankings (top 10% of 2000 benchmarked hospitals), its labor and delivery volume (more than 10,000 births per year, and growing), and its neonatal intensive care unit (5th highest survival rates in the nation). But quality medical practices and high patient satisfaction require costly inventory—some $30 million per year and thousands of SKUs.* With pressure on medical care to manage and reduce costs, Arnold Palmer Hospital has turned toward controlling its inventory with just-in-time (JIT) techniques.
Within the hospital, for example, drugs are now distributed at nursing workstations via dispensing machines (almost like vending machines) that electronically track patient usage and post the related charge to each patient. The dispensing stations are refilled each night, based on patient demand and prescriptions written by doctors. To address JIT issues externally, Arnold Palmer Hospital turned toward a major distribution partner, McKesson General Medical, which as a first-tier supplier provides the hospital with about one quarter of all its medical/surgical inventory. McKesson supplies sponges, basins, towels, mayo stand covers, syringes, and hundreds of other medical/surgical items. To ensure coordinated daily delivery of inventory purchased from McKesson, an account executive and two service personnel have been assigned full-time to the hospital. The result has been a drop in Central Supply average daily inventory from $400,000 to $114,000 since JIT. JIT success has also been achieved in the area of custom surgical packs.
Custom surgical packs are the sterile coverings, disposable plastic trays, gauze, and the like, specialized to each type of surgical procedure. Arnold Palmer Hospital uses 10 different custom packs for various surgical procedures. “Over 50,000 packs are used each year for a total cost of about $1.5 million,” says George DeLong, Head of Supply Chain Management. The packs are not only delivered in a JIT manner but packed that way as well. That is, they are packed in the reverse order they are used so each item comes out of the pack in the sequence it is needed. The packs are bulky, expensive, and must remain sterile. Reducing the inventory and handling while maintaining an assured sterile supply for scheduled surgeries presents a challenge to hospitals. Here is how the supply chain works: Custom packs are assembled by a packing company with components supplied primarily from manufacturers selected by the hospital, and delivered by McKesson from its local warehouse.
Arnold Palmer Hospital works with its own surgical staff to identify and standardize the custom packs to reduce the number of custom pack SKUs. With this integrated system, pack safety stock inventory has been cut to one day. The procedure to drive the custom surgical pack JIT system begins with a “pull” from the doctor’s daily surgical schedule. Then, Arnold Palmer Hospital initiates an electronic order to McKesson between 1:00 and 2:00 P.M. daily. At 4:00 A.M. the next morning McKesson delivers the packs. Hospital personnel arrive at 7:00 A.M. and stock the shelves for scheduled surgeries. McKesson then reorders from the packing company, which in turn “pulls” necessary inventory for the quantity of packs needed from the manufacturers. Arnold Palmer Hospital’s JIT system reduces inventory investment, expensive traditional ordering, and bulky storage, and supports quality with a sterile delivery.
1. What do you recommend be done when an error is found in a pack as it is opened for an operation? 2. How might the procedure for custom surgical packs described here be improved? 3. When discussing JIT in services, the text chapter notes that suppliers, layout, inventory, and scheduling are all used. Provide an example of each of these at Arnold Palmer Hospital. 4. When a doctor proposes a new surgical procedure, how do you recommend the SKU for a new custom pack be entered into the hospital’s supply-chain system?
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