Operations and Service Management - Case Study Example

1. Executive Summary The Wheatley Park Hotel is located in Wheatley, just on the outskirts of Oxford and it has 100 bedrooms. It was built initially as a family owned business, and it has enjoyed a profitable business. However, the hotel’s reputation has been in decline since Grand Cosmopolitan bought it few years ago. Different operating issues have been identified in the case which includes capacity, equipment reliability and quality. The operational concerns of the hotel have hindered the performance of the business as well as the efficiency of the operations. The impact of these factors greatly affects the operations of the hotel as well as the bottom line of the business – profit. In order to improve the performance of Wheatley Park Hotel, several recommendations are given in the paper. The recommendations are structured in a business strategy approach with emphasis on the service operations side especially on total quality management. The focus of the recommendations is to reduce cost, increase efficiency, and acquire greater occupancy in the hotel. The aim of this paper is to address the issues and problems of Wheatley Park Hotel and improve its performance in the hotel industry. 2. Operations Audit and Analysis 2.1. Capacity Demand is the amount of output that customers want at a particular point of time in relation to the price and characteristics of any product/service. When it comes to managing business operations, the process of reconciling demand with supply becomes an important part of any business. Capacity in operations management is defined as the maximum amount of a product that can be made in a given time (Waters, 2002). In a service operation of a hotel, capacity can be defined as the maximum number of rooms that are available for occupancy (Johnston, 2005). However, Waters (2002) claims that the design capacity of an operation is seldom achieved and what is achieved is the effective capacity of the operations which is defined as the maximum realistic output under normal conditions. The Wheatley Park Hotel does not only face a daily demand fluctuation but also a seasonality of demand fluctuations. For instance, there is usually congestion during the breakfast as business clients checked out in the mornings. There is also an issue of staffing, particularly, when the demands are high during the holiday seasons. This aspect of demand fluctuations occurs when demand changes over the period of times as it can slow during the evening and reaches its peak during the morning and vice versa. Nevertheless, the hotel seems to be neither forecasting nor planning the demand in these times. In many organisations such as hotels, capacity planning and control is concerned coping with seasonal fluctuations. A level capacity strategy does not vary the amount of resources supplied (Rowbotham, Galloway, & Azhashemi, 2007). At Wheatley Park Hotel, the staffs are kept at a constant level regardless of the demand pattern. This strategy has created subsequent problems with the hotel such as staff wages, overtime pays, congestion and overall high operations costs. 2.2. Reliability Reliability can be defined as the probability that an equipment continuous to work throughout an entire period at an efficient utilisation (Hill, 2005). It is a tactical function of operations management to find ways of improving equipment reliability as well as to find the best time to replace unreliable equipments. Equipments that function well are contributors to the success of an operation, while equipments that are not reliable become liabilities to the business and the operations (Waters, 2002). A problem at Wheatley Park Hotel is its laundry equipment. The machine is old and suffered frequent break-downs. As a result, the cost of laundry operation is high and rising. Cost for breakdown maintenance call-out is added to the weekly running cost of laundry operation. Consequently, it affects other operations in the hotel such as the changing of bed linens and towels. Another problem at Wheatley Park Hotel is its energy consumption of electricity and gas. The costs for light and heat are higher as compared to similar hotels. The insulation of the facilities needs improvement. The energy management system of the hotel is outdated. Energy is a major cost driver for a business that operates large facilities and resources. Efficiency in utilising energy is an area in operations where most cost savings are acquired through effective management (Halevi, 2006). 2.3. Health and Safety The goal of hotel food and beverage operation is to meet hotel guests’ desires, with attention paid to price, value, quality, service and atmosphere (Bosselman, 2007). As part of value, quality and service, it is the duty of the kitchen management and staff to create a healthy, clean and safe kitchen environment. As an assurance to the guests and diners, the facility must be certified by public health inspectors (Birchfield, 2008). Loss of certification would generate loss of credibility on the facility and negative reputation on the business as a whole. Wheatley Park Hotel experienced a devastating deficiency in their kitchen facility when it was closed for six days by the Public Health Inspectorate. It was a planned inspection yet there were unsatisfactory findings during the audit. Six days were allocated for thoroughly cleaning the facility and replacing the suspected equipments. As a consequence, the Head Chef was replaced and additional costs as well as opportunity losses were incurred in the business. 3. Recommendations 3.1. Quality Planning Level capacity approach is effective only when the demand is fairly stable and not seasonal (Rowbotham, Galloway, & Azhashemi, 2007). However, this approach does not bring value for money in Wheatley Park Hotel. In fact, it has caused high labour costs for the hotel. Maintaining a stable workforce for a 60% occupancy over time creates imbalance during peak and low seasons. It is recommended that the hotel utilise a chase demand capacity planning approach. Chase demand involves changing the amount of staffs available in order to match the demand pattern as closely as possible (Rowbotham, Galloway, & Azhashemi, 2007). This means that at times of peak demand most staffs will be available, while at quiet times the resources will reduced. Staff resource is flexible enough reflect the fluctuation in demand. The effective method of creating a chase demand capacity plan is through time-series forecasting. Time series is defined as chronologically ordered data that may contain one or more components of demand such as trend and seasonality (Chase, Jacobs, & Aquilano, 2005). 3.2. Process Improvement The feature of process improvement focuses on delivering outcomes while maximising value and eliminating waste. A company who aims for operational excellence must develop the design of business processes to achieve improvements in cost, quality and service (Hammer & Champy, 2001). 3.2.1. Laundry Services Laundry service is one of the two major areas for Wheatley Park Hotel to improve its performance and reduce costs. The laundry equipment was old and suffered frequent break-downs. As a result the cost of cleaning the hotels linen was higher than normal, and rising. It also resulted in linen being used for longer than it really should. The policy is to change bed linen and towels every day. Currently, the normal running costs were fixed weekly costs plus an additional cost per daily room set. A daily room set is all the bedding and towels which would be used in a room during one day. The replacement cost of all laundry equipment would represent a capital investment cost. After installation, running costs would be reduced per week and the cost for each room set halved. The project is likely to take one month to organise and to place purchase orders for the necessary equipment and contractors, and then 2 further months to undertake the work and complete. In order to provide continuity of service, a sub contract quotation has been received to undertake all laundry per daily room set. 3.2.2. Energy Consumption The current energy consumption of the hotel is inefficient and costly. Electricity and gas costs, for light and heat, are higher than most similar hotels. By improving the insulation and installing a computerised energy management system, the hotel can gain annual cost savings up to 40 percent of the current annual energy cost. 3.2.3. Kitchen Facility Quality improvement strategies can be applied in the kitchen facility. The best method of controlling the cleanliness, safety and health of the kitchen is by implementing a checklist of areas and activities that needs frequent inspection. This activity can be audited internally by management for compliance and in conformity to the standards of the Public Health Inspectorate. A first class executive chef is essential to allow the hotel to compete effectively for food and beverage business in today’s market. The chef is an integral part of the competitive advantage of the hotel. He must be more than a technician by being a full-fledged department leader who is responsible for the management of the whole food and beverage department. He must have developed a significant range of managerial skills to complement the technical and artistic training as expected from an executive chef. (Bosselman, 2007) 3.3. Yield Management The current trend of hotels is to employ yield management strategy in their reservations. Yield management is the management the amount of revenue that a unit of capacity generates to the business (Rowbotham, Galloway, & Azhashemi, 2007). In the hotel setting, the unit capacity is one room. Currently, the hotel has a yield contribution of £100. By implementing yield management strategy, the hotel can increase the contribution of the room as well as increase its occupancy. It involves analysing both revenue-producing outlets and the people who spend money. The management system uses length-of-stay controls to shift demand from sold-out periods to slack periods. A good practice is to give discounts on early reservations and group reservations. Yield management make controlling demand easier. (Quain & LeBruto, 2007) 4. Bibliography Anderson, P. (2007). Spas and the Lodging Industry. In D. Rutherford, & M. OFallon (Eds.), Hotel Management and Operations (pp. 50-67). New Jersey: John Wiley & Sons, Inc. Birchfield, J. (2008). Design and Layout of Foodservice Facilities. New Jersey: John Wiley and Sons, Inc. Bosselman, R. (2007). Managing food and beverage operations in lodging organizations. In D. Rutherford, & M. OFallon (Eds.), Hotel Management and Operations (pp. 239-250). New Jersey: John Wiley & Sons, Inc. Chase, R., Jacobs, F., & Aquilano, N. (2005). Operations Management for Competitive Advantage (11th ed.). New York: McGraw-Hill Companies. Edwards, P. (2005). Discipline and Attendance: A Murky Aspect of People Management. In S. Bach (Ed.), Managing Human Resource (pp. 375-397). Oxford: Blackwell Publishing. Halevi, G. (2006). Industrial Competitiveness: Cost Reduction. Dordrecht: Springer. Hammer, M., & Champy, J. (2001). Reengineering The Corporation: A Manifesto for Business Revolution. London: Nicholas Brealey Publishing. Hill, T. (2005). Operations Management (2nd ed.). Palgrave Macmillan. Hindle, T. (2003). Guide to Management Ideas. 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