An online monthly research publication by the Ivey Business School 

Volume 14, Number 5
May 2008

The best medicine

Fredrik Odegaard finds that management science is often just what the doctor ordered

“Management science is often seen as complex because we use fancy mathematics. The point that most people don’t understand is that we use mathematics to make it simpler to analyse problems, not more complex.”

Ivey professor Fredrick Odegaard is talking about a recent study where he used management science to examine porter operations at two major Vancouver hospitals. When patients need to take diagnostic tests, such as CT-scans, hospitals rely on porters to move them between departments. The two Vancouver hospitals in the study were finding that medical staff and equipment sat idle because of delays moving patients to and from their appointments. “The doctors were complaining, the porters were complaining, and everyone was pointing fingers at each other,” says Odegaard. “As management scientists, we slowed things down and looked at the whole system to see how it worked and what we could do to improve it.”

In a paper published in Journal for Healthcare Quality, Odegaard and his co-authors outlined ten steps to improve the porter management system. While the paper prescribed a number of performance measures and standards to make the system more efficient, the main problem identified by Odegaard was deceptively simple. “One of the things we looked at was the demand and supply of porters in a given hour,” he says.

They found that the peak demand for porters was around seven or eight o’clock in the morning, when most hospital surgeries start. This peak time was covered by the night shift, which consisted of fewer porters than the dayshift beginning at 10 A.M. The increase in the number of porters during the dayshift resulted in a gradual clearing of the bottleneck, but by then most of the damage had been done. Odegaard and his collaborators proposed a very simple way to solve the problem: move a few of the porters from one shift to the other. “The porters were basically putting out fires,” says Odegaard. “By doing something simple we ended up reducing the big backlogs and saving money.”

Odegaard has been contacted by other hospitals experiencing similar problems, and has also recently received a grant to study access and quality of care issues for patients with diabetes in Sweden. “Sometimes when organizations have problems they look for elaborate solutions, such as expensive software. But before investing millions of dollars, we in management science see if there are simple things that can be done to improve the whole system.”

In another stream of research, Odegaard focuses on revenue management. Recently he applied management science to the growing area of online auctions. With the remarkable success of eBay, many firms are using the Internet to auction both new and used products.

The difficult question for firms is how to sequence the auctions in a way to optimize revenue. If Dell, for example, has 100 laptops to sell, does it conduct 100 auctions simultaneously, or does it auction them one item at a time? “It’s a trade-off,” says Odegaard. “If Dell releases all the laptops simultaneously, it gets less revenue, but if it sells them one at a time, it incurs inventory and depreciation costs, and runs the risk of the technology becoming outdated.”

In his research, Odegaard reviewed a year and a half of auctions by Dell over its eBay channel – about 6000 transactions. Through the application of management science techniques, he developed a mathematical model that incorporated the data and created an optimal auction strategy for increasing revenue. The model can be customized to any organization that conducts online auctions.

In the past, the liquidation value for used products was about 10 percent of the cost of goods sold. Now firms like Dell are auctioning products online for almost 50 percent of their retail value. “That’s a huge jump in revenue,” says Odegaard, “so up to this point firms have been happy. The next step is how to do even better, and that’s where my model kicks in.”
 

Professor Odegaard's Homepage

Faculty Focus: Q&A with Professor Glenn Rowe on leadership in the NHL

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