Capacity planning

chapter 7 supplement
Arnold palmer Hospital
Introduction
 One of only six hospitals in the U.S. to specialize
in health care for women.
 Hospital’s main focuses is delivery of babies.
 Originally built with 281 beds and a capacity
for 6,500 births per year
 With continuing population growth in its market
area serving 18 central Florida counties.
 Arnold Palmer Hospital was ready to move
ahead with a budget of $100 million and a
commitment to an additional 150 beds.
 Swanson decided to expand the hospital in
stages wit commitment to handle up to 16,000
births per year.
1. Given the capacity planning discussion in
the text what approach is being taken by
Arnold Palmer Hospital toward matching
capacity to demand?

 Now using leading demand with increment expansion through:

1. New building will provide sufficient capacity for several years.
2. Top 2 floors ( lift unfinished for additional beds till needed.
3. Operating rooms (4th floor ) available for horizontal expansion, will be built when needed.
► Using average capacity increments via using straddle strategy to match
capacity demand.
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)?
 Changing in capacity will have sales and cash flows implications, it also have quality,
supply chain, HR and maintenance implications, all must be considered to avoid any
future failure or decreasing in revenues, which would be occurred by poor decisions.
 To avoid any risk there are special considerations for good capacity decisions as follows:
1. Forecast demand accurately through studying specific issues such as:
• Services that would transfer to new facility
• Service that would remain in existing facility
• Staffing needs, Capital equipment
• Regulatory requirements
2. Understanding the technology and capacity increments after determining
the volume, technology decision may be aided by analysis of cost, HR
required and Quality.
3. Find optimum operation size, where technology and capacity increments
often dictate on optimal size for capacity.
4. Build for Change. In our fast-paced world change in inevitable, so buildings
and equipment should be designed with modifications in mind to
accommodate future changes.

 Summing up:
Any change in the following factors will influence the demand and it
will be a risk ,
• Technology , Building restrictions
• Competitors , Cost of Capital
• HR options , Regulations
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 16,000 births.

2015 2016
a 5,873 a 5,873
b 466 b 466
Y 15,658 Y 16,124
Presented By

Ahmed Salah Ali Mohamed Gharib