Hardy Hospital Case Study PDF

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CASE STUDY: HARDY HOSPITALPRCH3019 LOGISTICS MANAGEMENTNAME: RIDHIMA BEHLSTUDENT ID: 0914592PROFESSOR: NEIL BISHOPDATE: 06-03-ContentsIntroduction...................................................................................................................................Main Issue................

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HARDY HOSPITAL CASE STUDY

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CASE STUDY: HARDY HOSPITAL

PRCH3019 LOGISTICS MANAGEMENT

NAME: RIDHIMA BEHL STUDENT ID: 0914592

PROFESSOR: NEIL BISHOP DATE: 06-03-2020

HARDY HOSPITAL CASE STUDY

Contents Introduction................................................................................................................................... 2 Main Issue..................................................................................................................................... 2 Issues............................................................................................................................................ 2 Assumptions.................................................................................................................................. 3 Analyses....................................................................................................................................... 4 Alternatives................................................................................................................................... 4 Recommendations.......................................................................................................................... 5 Appendices.................................................................................................................................... 5 Question 1................................................................................................................................. 5 Question 2................................................................................................................................. 6 Question 3................................................................................................................................. 6 Question 4................................................................................................................................. 7

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Hardy Hospital Case Study Introduction Hardy Hospital is a healthcare facility within the State University. The entity seeks to provide differentiated healthcare services to improve health outcomes for the patient population. The hospital is allowed to operate as a separate legal entity under the management of the university. The management is allowed to make decisions on operational aspects as well as inventory management. The case study focuses on the concept of inventory management and how it can be utilized to improve operational efficiency at Hardy hospital. Main Issue Carol Highgrove is the Director of Materials and has been instructed by Dre Paris, the Director of University Operations, to investigate the purchasing and supplies system. The university has realized that the current materials system is not operating as per the established objectives. Due to the changes in the established systems, the organization is unable to reduce overall costs, which would have translated into an improvement in overall performance. Issues The case study also identifies additional issues, including the fact that the hospital is not in a position to control the total expenses. The surge in the total expenses arises from the fact that the established objectives concerning inventory management have not been adhered to. Consequently, the levels of inventory are out of the control hospital and cannot be utilized effectively to help boost the organizational objectives. The organization has also been faced with unusual variations in the order frequencies as well as order sizes for the stock-keeping units. For this reason, the purchasing departments within the hospital and the university are unable to plan

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for the purchase process. The healthcare facility has also been faced with a situation where the inventories tend to be exhausted before new orders have come in. The hospital is unable to operate at the desired level and is, therefore, not in a position to achieve the overall objectives. The lack of proper inventory management policies has also resulted in a situation where the hospital tends to carry higher levels of stock-keeping units. The fact that the organization is unable to use the stock at the current time means that it continues to accumulate additional storage costs and does not help improve overall performance. The computerized materials management system that is relied on by the hospital is approximately ten years old. The facility has not seen the need to improve the computerized system as they feel that it is working as expected. Additionally, the case study has focused on a human resource problem since the workers in the purchasing department are not motivated, and they do not update the inventory system as they should. The final issue identified by the case study is the cumbersome nature of special orders. The university and the hospital have divided the purchasing systems into regular and special orders, and the latter has not bee recorded effectively. Assumptions The case study has to be considered based on particular assumptions, such as the fact that the organization has not considered the levels of stock-keeping units. The organization might also be operating under the assumption the current levels of stock-keeping units are sufficient to maintain operations. The third assumption is that the computerized system is operating efficiently and does not need to be updated to meet the needs of the current operating environment. Finally, the case study also shows that the organization is operating under the notion that the workers understand the intricate details of the ordering system, and they can ensure all orders are processed in time.

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Analysis Hardy hospital is faced with several problems related to inventory management, and they are not able to reduce overall costs. The inventory management system faces several challenges, such as the lack of updated, computerized materials management. The organization has also failed to ensure that the workers are trained on how to interact with the computerized inventory systems to help them maintain data integrity. Additionally, the systems in the organization have failed to ensure they can predict future changes in supplies to ensure they can place orders at the right time. The move will ensure the hospital is in a position where high levels of stock-keeping units are maintained for long periods. Alternatives The organization has to consider various alternatives to help them bolster the inventory management system to reduce expenses and improve organizational performance. The organization needs to focus on improving the computerized materials management system. The move will have to be coupled with additional training for the workers to ensure they understand the new system, and they can update the new orders. Additionally, the workers will also be in a position to inform workers about the stock keeping units that have been held for extended periods. The hospital also needs to consider coming up with a system where special orders can be recorded effectively.

Recommendations The organization has to consider a comprehensive action plan that focuses on aspects such as ensuring variations in order frequencies and sizes are monitored. The computerized

HARDY HOSPITAL CASE STUDY system should be updated and connected to all functional areas. The improvement will ensure once a product is used, then the system can record that, and when a particular level is reached, then a new order can be placed. The workers have to be subjected to a training and sensitization program that will ensure that they understand that the order turnaround times have to be improved. The organization also needs to focus on ensuring the ordering system is streamlined between the hospital and the university to ensure all orders are handled simultaneously. Appendices Question 1: a) Workers are paid a wage of $20 for every hour they are processing orders. For one employee to process one order they spend three hours to complete processing one order. The cost of processing one order is $20 * 3hours = $60 per order processed. b) The price of storage is $4.60 per square feet. The total storage room used is 36,750 square feet. Hence, price of total storage space occupied is S4.60 * 36,750 Square feet = $169,050 The workers are paid a salary of $32,000 per person annually Therefore, total amount money paid to the workers is 5 * 32,000 = $160,000 In addition, the employees are given benefits of 20% of what they get as salary Total benefit all the employees get is 20% *160,00 = $32,000 Total amount paid to the employees is 32,000 + 160,000 = $192,000 Other costs including taxes = $200,000 annually Therefore, inventory holding cost = $169,050 + $192,000 + $200,000 = $561,050

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HARDY HOSPITAL CASE STUDY Assumptions i) Orders arrive without delay ii) No Running out of stock iii) Demand rate is constant Question 2: To calculate total number cases annually 52 weeks * 11.63/4= 151.19 cases Order cost = $10 (561,050/ 4,150,000)100 = 13.52 percent Cost per case is $84.60 0.1352 * 84.20 = 11.38 cases The following is formula of calculating Economic Ordering Quantity is EOQ = ((2 * D * S)/ H)1/2 = ((10 * 2 * 159.19)/11.38)1/2 = ((3023.80)/11.38)1/2 = 16.30 cases Reorder point Demand rate = 11.63/4 = 2.9075 = 5.815 cases for every seven days Lead time is 14 days Therefore, reorder point = 2.9075 * 2 = 5.815 cases Question 3: Total Cost = Holding Cost + Purchasing Cost + Ordering Cost = (Q/2) H + DC + (D/Q) S

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HARDY HOSPITAL CASE STUDY D is used to represent demand rate annually Q is used to show the quantity to be ordered H is used to represent carrying/holding cost S used to represent cost of ordering C is used indicate cost of every unit Total = ((156/2) 84.60) + (10 * 159.19) + (159.19/186)60 = 51.35 + 1991.9 + 6598.80 = $8242.05 Inventory Holding Cost = 52 weeks * $8242.05 = $461,554.80 Adopting a Fixed Quantity System can be used to save money as it uses an approach that assumes values are constant and their values are well known; thus, it becomes easy to approximate the end results and what is required. Question 4: a) If the number of items being ordered is constant it would be very easy for them to know the items required and they will be able to cut off the cost of ordering. b) The use of another system will help them work on employees' integrity, process orders without delays as well as reduce the cost of holding and ordering items. c) I would recommend that the University come up with a department that will make sure that crucial items are prioritized while it comes to processing orders. The department should also make sure that orders are used properly to avoid wastage.

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