Advantages and disadvantages of each alternative from deterministic analysis

Advantages:

By acquiring 8 new machines, the center gets extra funds of $50000 annually from the NKF headquarter. With the increased efficiency of the new machines, this option will allow the center to meet the demand of accepting more patients. By accepting this option, the replaced 8 machines will still have a remaining lifetime of 5 years at the end of year 10; hence only 12 dialysis machines need to be considered for future replacement at the end of year 10.

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Disadvantages:

The main disadvantage of this option is the need for a large amount of loan from the bank.

With bank interest being compounded at 7% annually, a total interest of $57000 is paid to the bank for this five year loan. This sum of money can be put aside for other better uses by the center. Moreover, due to the servicing of bank loan, the funds left for replacing the present twelve 5-years-old machines is just $161538. This amount of funds is simply insufficient for carrying out the replacement of 12 dialysis machines at end of year 10. Hence, if a large amount of addition funds is not provided by the NKF HQ or from sponsorship at the end of year 10, this alternative is simply not feasible. Other disadvantages of alternative 1 includes; the staffs at the center have to deal with a sudden increase of patients and as new machines allow dialysis time to be shorten, patients will obviously preferred to be treated by the new machines. The centre has to make necessary arrangement to solve these problems.

Advantages:

Alternative 2 will allow the center to meet the demand of accepting all new patients by the end of year 7, and thereby received the addition funds provided.

Alternative 2 required a smaller amount of loan compared to alternative 1. Hence the interest paid to the bank is much lesser. The sum of funds available at the end of year 10 has therefore increased. By accepting this option, the replaced 8 machines will have a remaining lifetime of 5 years for 4 machines and a remaining lifetime of 7 years for the other 4 machines, at the end of year 10. Coupled with the fact that more funds are available at the end of year 10, alternative 2 allows for more flexibility when replacing the other 12 dialysis machines, compared to alternative 1. Moreover, by spreading the acquisition of new machines into 2 phases, staff at the centre has more time to get use to the increased workload due to a gradual increase of patient accepted instead of a large sudden increase.

Disadvantages:

Alternative 2 will incur a higher maintenance cost in the 2 years where the lives of 4 machines are extended. Furthermore, the centre will not receive any additional funds for these two years. Although the fund available at the end of year 10 is much higher than alternative 1, it is still insufficient for replacing the other 12 machines at end of year 10. As the old machines are being replaced in two batches, disruption to the dialysis schedule would also occur as the replacements of machines are carried out. Some patients would have to be diverted to other NKF centers during the replacement of machines.

Advantages:

The main advantage of this option is that the centre does not have to take any loan from the bank. With the three new machines, the centre has the capability of accepting some of the new patients. As can be seen from the deterministic analysis, the funds left at the end of year 10 is higher than both alternative 1 and alternative 2. In another words, more funds are available for the replacements of dialysis machines at the end of year 10.

Disadvantages:

The main disadvantage of this option is that the centre cannot accept the entire number of new patients who have applied to have their dialysis done there. Hence the centre does not receive additional funds from NKF HQ. A higher maintenance cost is also required for the maintenance of the upgraded machines. Due to the fact that only 3 new machines are being acquired in this alternative, at the end of year 10, a total of 17 machines need to be considered for replacement compared to 12 machines in both alternative 1 and alternative 2.
Advantages:

The advantage of this option is that the centre does not have to take any loan from the bank. By upgrading all 8 machines and not acquiring any new machines, the funds left at the end of year 10 is the highest among all alternatives. This can be seen from the deterministic analysis.

Disadvantages:

Alternative 4 will incur a higher maintenance cost for 5 years as all of the 8 machines are upgraded. Furthermore, the centre will not receive any additional funds. The number of patients that the centre can treat remained the same, this means that the new applicants have to look for other alternatives for their dialysis treatment. At the end of year 10, all 20 machines need to be considered for replacement. This will prove to be a big burden on the centre although the funds that remains from this alternative is the highest.

Advantages:

The advantage of alternative 5 is that the centre does not have to take any loan from the bank too.

Disadvantages:

The centre will not receive any additional funds, and the number of patients that the centre can treat remained the same. As for alternative 4, all 20 machines need to be considered for replacement at the end of year 10, for alternative 5. Since the funds remaining at the end of year 10 is much lesser than that of alternative 4, alternative 5 is not preferred over alternative.

Analysis for all alternatives from probabilistic analysis.

In the probabilistic analysis, the risk of machines breaking down during operation is taken into consideration. Further analysis on the decision of signing a repair contract had also been carried out. From the result of probabilistic analysis, it can be seen that alternative 4 provide us with the highest amount of fund left at the end of year 10 with or without a repair contract. The repair contract should be taken up only if alternative 4 is chosen as the choice for replacing the machines. If other alternatives are chosen, the repair contract should not be sign as it offers no benefits Net losses will be suffered with signing of the contract for other alternatives.

Recommendations and Conclusions.

Due to the lack of information about the future, this study is conducted based on a rather short period of 5-years. From all the advantages and disadvantages of each alternatives discussed earlier, we came to a conclusion that based on a 5-years study period, alternative 4 is recommended with the signing of a repair contract. Alternative 4 give the centre the largest amount of funds available for replacements at the end of year 10. This would give the centre more option for future replacements. Moreover, we feel that it might not be worthwhile to change all machines at the present.

The reason being, with the current rapidly improving technology and advancement in medical science, cheaper and more efficient dialysis machines, and new ways of treating kidney patients might be available in 5-years time. Furthermore, at the present, campaign on the prevention and awareness of kidney disease has been going out in full force. In the long run, demand for dialysis treatments at NKF centre might drop as Singaporeans start to make changes to their diet and lifestyle. With a lower demand predicted in the future, alternative 4 represent the best option for the replacement of dialysis machines at the present.