Category Archives: Facility Decisions: Location and Capacity

Community Hospital

Community Hospital

In 1983, Community Hospital, which had served the downtown area of a large We t Coast city for more than 25 years, closed and then built a new hospital in a thinly populated area about 30 mile's' west or the city. The new hospital, also named Community Hospital, was located on a parcel of land owned by the original hospital for many years. This new hospital, which opened October I. 1983. is a four-story structure that includes all the latest innovations in health-care technology. The first floor houses the emergency departments: intensive care unit; operating room: radiology, laboratory. and therapy departments: pharmacy: housekeeping and maintenance facilities and supplies, as well as other supportive operations. All administrative offices. such as the business office, medical records department, special services. and so forth. are located on the second floor. as are the cafeteria and food service facilities. The two upper floors contain patient rooms divided into
surgical, medical, pediatric, and obstetric units.

Community Hospital has a total capacity of 177 beds assigned as follows:

Community Hospital

Community Hospital

For the first six months of the hospital's operation things were rather chaotic for the administrator. Sam Jones. All his time was occupied with the multitude of activities that go along with starting a new facility such as seeing that malfunctioning equipment was repaired, arranging for new staff to be hired and trained establishing procedures and schedules making necessary purchasing decisions and attending endless conferences and meetings. All during this period Mr. Jones had been getting some rather disturbing reports from his controller Bob Cash regarding Community Hospital's financial situation. But he decided that these financial matters would simply have to wait until things had settled down. Finally in April Mr. Jones asked Mr. Cash to prepare a comprehensive report on the hospital's financial position and to make a presentation with his new assistant administrator Tim ewrnan who had recently received a degree in hospital administration. In his report. Mr. Cash stated: "As you both know we have been running at an operating cash deficiency we opened last October. We expected of course to he losing money at the start until we were able to establish ourselves in the community and draw in patients. We certainly were right. During our first month we lost almost $ 221 ,000. Last month. in March, we lost 58,000.
"The reason, of course, is pretty straight ward. Our income is directly related to our patient census (i .e., patient load). On the other hand, our expenses are taxed and are running at about $235,000 a month for salaries and wages. $75.000 a month for supplies and equipment, and another $10,000 a month in interest charges. Our accumulated operating deficit for the six months we've been here totals $715.000, which we've covered with our hank line of credit. I suppose we can continue to borrow for another couple of months, but after that I don't know what we're going to do.

Mr. Jones replied, "As you said, Bob, we did expect to be losing money in the beginning, but I never expected the loss to go on for six months or to accumulate to almost three quarters of a million dollars. Well, at least last month was a lot better than the first month.

Do you have any figures showing the month-to-month trend?"

Bob Cash laid the following worksheet on the table:

Community Hospital

Community Hospital

Questions
1. Evaluate the situation at Community Hospital with respect to trends in daily patient census, occupancy rate, and income.
2. Has there been any change in revenue per patient-day over the six-month period (assuming a 30-day month)?
3. At what capacity level will the hospital achieve break even?

4. What questions might we raise about the constant level of salaries and supplies relative to past and future operations?

Bruegger’s Bagel Bakeries(questions)

Questions

l. Find an ASP on the Internet that provides detailed maps that include directions with distances and times between locations. Determine the travel times and distance between the two potential commissary sites and each of the four retail locations.

2. One alternative is for Nord to subcontract out the delivery of the bagels to a local food delivery service that has quoted a delivery charge of five cents per dozen bagels per mile. Using this cost as a criterion, which site should Nord select for the commissary? .•

3. Another option is to use a company truck, which is available, for the deliveries: With this alternative, Nord estimates that the driver will have to make one delivery per day to each of the four locations, and that the driver and truck will cost $30.00 per hour, including the driver's benefits. Under this scenario, which commissary site should Nord select?

4. Which of these two alternative methods of delivery (that is, outsourcing or keeping it in-house) do you recommend and why?

5. What.additional factors should Nord take into consideration in Inflecting a new commissary site south of Boston?

Bruegger’s Bagel Bakeries

Bruegger's Bagel Bakeries

Founded in 1983 in Burlington, Vermont, Bruegger's Bagel Bakeries i a retail bagel concept that has grown to more than 300 neighborhood bagel bakeries throughout the United States. These stores are located in major downtown areas suburban strip shopping centers and easy-to-drive-to quick-service locations. In addition to bagels the bakeries also offer a wide variety of cream cheeses, soups, coffees, and deli-style sandwiches that customers either can enjoy on the premises or take out. Every Bruegger's bakery bakes its own bagels throughout the day providing customers with fresh hot bagels. However in order to ensure that only the highest quality bagels are served and that there is consistency in both the quality and size of the bagels among its many retail locations Bruegger's initially prepares the raw bagels at central commissaries. These commissaries are responsible for mixing the dough forming the bagels and proofing them that is allowing them to rise properly under a controlled temperature and humidity environment. The raw bagels are then distributed to individual 10-
cations where they are first boiled in water and then baked. Currently Bruegger's has more than 30 retail locations in the greater Boston area most of them being located in downtown Boston and in the suburds north and west of Boston. There are also four stores that are located south of Boston. The addresses for each of these bakeries and the average number of dozens of bagels that each receives daily are shown below:

 Bagel Bakeries

Bagel Bakeries

Currently these four locations are provided with bagels from a central commissary that is located in Woburn, Massachusetts, northwest of Boston. Because this commissary is reaching its maximum capacity management has decided to locate a new commissary south of Boston to provide bagels for these four locations. (It also is expected that there will be additional future locations south of Boston that also will be served by this commissary.) Nord Brue, founder an a current CEO at Bruegger's, working with I real estate consultant in Massachusetts, has identified the following two potential locations for this commissary:

Bagel Bakeries 1.2

Bagel Bakeries 1.2

 

Solved Problems

Problems

1. The Speedy Ambulance Service is searching for a location that will serve both as it headquarters and as a garage for its ambulances. You have been asked to chair the site selection search team. The team has identified the following factors that need to be considered in choosing a location, and also has assigned the following weights to these factors

Solution 2.4

Solution 2.4

The search team has found three sites and has assigned the following factor ratings to
each of them:

solution 2.4

solution 2.4

a. Which site would you recommend to the search committee?
b. What is the impact on the site selection if the weight of the "access to major highways" factor is reduced to 5 and the weight of the "local tax incentives" factor is increased to 20?

2. Edtoys.com is a virtual company that offers a wide variety of educational children's toys through its website. When an order is received. it is immediately sent electronically to the manufacturer for direct shipment to the customer. With this type of structure. Edtoys.com does not have to maintain inventories of toys or become involved in their delivery. Management is therefore focusing primarily on making its website as customer friendly as possible and expanding its number of product offerings. Edtoys.com has seen tremendous growth in the past several years and needs to find a new and larger location for its offices. Based on conversations with several members of Edtoys.com's top management team a consulting firm has identified the following factors that should be taken into consideration in choosing a new site for its offices and also has assigned the following weights to each of these factors:

solutions 2.5

solutions 2.5

Facility Decisions: Location and Capacity 315
The consulting firm has identified two possible locations and has assigned each of them the following factor ratings:

 Solution 2.6

Solution 2.6

Which site should the consulting firm recommend to Edtoys.com?
3. Patorano's Pizza, -a chain of Italian pizza restaurants, wants to expand its operations into Asia, specifically in the Peoples' Republic of China (PRC). Unfortunately, due to a lack of food purveyors and suppliers, management must build its own distribution center and commissary, where many of the foods used in the restaurant will be either partially or fully prepared. (For example, the dough for the pizza will be mixed and portioned at the commissary.) The first stage of its business plan has identified specific locations for the first three restaurants to be opened. The X and Y coordinates and estimated annual sales for each of these three locations are presented below:

solution 2.7

solution 2.7

a. Draw a grid map and locate each of the planned restaurants on it.
b. Assuming that the volume of products to be shipped is directly proportional to sales, calculate the coordinates for the central commissary that will minimize distribution costs. Plot these coordinates on the grid map.
c. The second phase of the business plan calls for two more locations at the following  grid locations and with estimated sales shown below:

solution 2.8

solution 2.8

What is the impact of these additional restaurants on the location of the central
commissary ?

4. Jane's Office Supplies is a small retail chain that sells high-priced designer office supplies to senior executives. It has recently opened three locations in the metropolitan Washington, DC, area that are currently being supplied from the corporate warehouse in Dallas, Texas. The X and Y coordinates for these locations are provided in the table below along with the annual sales that each location generates. In order to reduce shipping costs, management has decided to open a distribution center in the Washington DC, area.

solution2.9

solution2.9

a. Draw a grid map and locate each of the three stores on it.
b. Assuming that the volume of products to be shipped is directly proportional to sales
in each store, calculate the coordinates for the distribution center that will minimize
distribution costs. Plot these coordinates on the grid map.
5. Having determined the optimal location for its distribution

Solved Problems

Problem 2

Personal Nursing Services (PNS) provides individualized nursing care to patients in three hospitals in the metropolitan area of a major city. For a variety of reasons, assignments often change at the last minute in terms of the number of patients to be cared for at each hospital. As a result, the nurses working for PNS report each morning to PNS's headquarters for their daily assignments. PNS then provides vans to take the nurses to their respective hospitals. The vans also pick them up at the end of the day and re-turn the nurses to the headquarters so that they can file their reports before going home. Consequently. the vans make two round trips a day to each hospital. The location of each hospital is located on the grid map at left.
PNS has experienced rapid growth in the demand for its services and is therefore looking to move into larger facilities a Using the center-of-gravity method. determine the ideal location for its new headquarters PNS has submitted a proposal to a fourth hospital that is located at coordinates  X = 20, Y = 5. If it is awarded the contract for this hospital, where should its headquarters building now be located?

Problem 2

Problem 2

Solution:

From looking at the grid map, we calculate the coordinates of each of three hospitals now
being served as follows

solution 2.1

solution 2.1

Facility Decisions: Location and Capacity

a. Using a spreadsheet and based upon the three hospitals that are currently under contract, we calculate the
coordinates for the new headquarters as follows:

solution 2.2

solution 2.2

Thus, the new headquarters' location should be at coordinates X = 25.0. Y = 36.7.
b. To add the fourth hospital, we simply update the spreadsheet with the fourth hospital's coordinates and recalculate the X and Y coordinates for the new headquarters location .

solution 2.3

solution 2.3

Thus, if PNS is awarded the contract for the fourth hospital, then the ideal location for its new headquarters would be at coordinates X = 23.8 and Y = 28.8.