Operation Management - Research Paper Example

? Executive Summary The focus of the paper is to review the shortcomings and to finally produce the potential remedies that would increase operational management efficiency of a leading five start hotel Fairmont operating in Singapore. Business dynamics and its performance cannot be kept in isolation from the macroeconomic constraints which either directly or indirectly influence business functions. So in order to develop a business plan all the factors need to be factored in to formulate the business plan. The paper would give a brief history of the hotel and evaluate the current situation in terms of its internal and external benchmarks. The solution to rectify operational management and delinquencies would take into account both of these functions in order to mitigate business threats, which would include such measures that measure operational management in terms of proper benchmarking, change management and business processes reengineering. Introduction Fairmont hotel is a leading traditional five star pit stop for many international tourists visiting Singapore. Due to high market penetration by various leading hotel chains Fairmont is anticipating a major shift in bringing operational efficiency by focusing on increased staff training to rise up the bar in terms of customer satisfaction. Secondly traditional procedures enrooted across the management in each department lacks competitive throughput as compared to other systematically superior newer hotels. Another reason why Fairmont failed to sustain its lustre is due to its lack of emphasis towards replacement of its traditional equipment, fixture and fittings in order to keep abreast with the changing trends. Singapore city had remained economically vibrant over the past few years and thus had attracted both business travellers and tourists alike from across the borders at an increased pace. Demand had remained stable throughout hospitality sector and hotel segment, but the hotel’s management had felt an alarming situation whilst its occupancy rate dropped immediately in times when the pressure from either group faded. In instances like business holiday season the occupancy rate dropped more abruptly compared to other industry players or far more than the industry rate. Likewise as soon as the peak season for tourists diminished the rate drop for Fairmont surpassed that of its peers. Management is concerned regarding hotel’s obnoxious performance and fears that if no prompt action is taken to bring in higher efficiency that would match performance of its peers, it might have to face consequences like complete closure. Methodology Business Risk Management is concerned regarding the prevalent obnoxious performance and fears that if no prompt action to bring in higher efficiency that would match that of its peers, it might have to face consequences like complete closure. So in order to implement and transform a strategy shift through change management the solution is to be devised based on the current factors that relate to the business. Fairmont is making handsome profits as far as its financial statements records states. But the gap between its profitability and operating cash flows is widening day by day. The GM who had been with the hotel till his retirement last year, had hands on experience and expertise over business marketing and management, his intervention to uplift and upgrade the hotel’s outlook had remained quite low. Performance measurement standards had been predominantly relied over simpler profitability ratios under his regime. It is truly a managers’ job to bring about the relevant change within each process and critically evaluate management with acute yardstick that would enable an enterprise to foster efficient practices and remove inefficiencies. Traditional models have their certain life after which new advance theories builds upon already defined principals as with time improvements are crafted naturally. For such reasons product cycle and stage within this cycle is important to be defined that would translate the change which is required within this entity. Table 1 Product Life Cycle Features of the Hotels We have analyzed the hotel features as follows: Hotel is facing a financial crunch in the form of negative cash flows and decrease in occupancy rates. Hotel is using old furniture and equipments as compared to other competitors in market. Hotel is in the area where visitors are easily accessible The reputation of the hotel is good but is in decreasing trend due to poor service and old furniture and not maintained rooms. General Analysis of the Hotel Design: The hotel is being managed by top management on the top then under their the managers comes then below the rank of manager works supervisors then under them is normal operational staff. Supply: Hotel generally requires supply for its kitchens, bar stands and general hotel supplies like soaps, match sticks etc. Planning: Majority of the planning is performed by Top management, some emergency decisions are taken on the managers on the work when top managements can not be accessed or there is a past trend of doing so. Shop-floor Control: Floor control is good but there is a lack of reporting. Environment: Except for the use of old furniture and equipments general environment features are good and acceptable. Technology: Hotel is using old technology therefore needs to upgrade its infrastructure to meet the needs of the customers. Quality: There is no proper documentation of feedback which may give an overview of the quality. Latest Operational Practises: Currently the hotel is inclined towards operational practise of leaning towards less profitable operations which need to be controlled otherwise hotel would needs to be closed. Analysis for improving operational practises Business Process Reengineering BPR is a modern business process that takes its roots from change management whilst aligning the business processes and people managing the system to a one common milestone. The main proponent takes the plea that if either of the two are inefficient in any structure the performance would not achieved to its optimal level. So BPR actually defines the way how people are moulded to higher motivation that not only results into higher cash flows but higher customer and employee satisfaction at the same time. Following is the list of common elements that are necessary while implementing any BPR within an organization. Technological Solutions, and innovation Change Management, and smooth transformation Appropriate human resource management and efficient benchmarking Utilization of assets All of the above functions are focused to enhance efficiency through realization. Business managers who continuously fail to anticipate changing business dynamics, tend to produce a long term failure for the organization. Evident from the current business condition of Fairmont, it is clear that each employee and person should conform to one vision statement. And change among the mindset needs to be fed, in order to make the transition successful while enrooting the motivation and enthusiasm for high achievers. For such matter benchmarking needs to be defined at a grass root level, where each individual is accountable in its capacity. Performance Measurements (Benchmarking) In order to measure performance we would first need to define the appropriate performance metrics that would form the basis of the evaluation of each person working for Fairmont. Previous management style and practices had a clear lacking in its performance measurement system as there were no measurable goals assigned to each department, although measurement thorough growth in profitability was already on cards, but meeting the overall industry growth and benchmarking over a wider spectrum was never introduced. As is the case which we had explored so far, that our hotel lacks the performance in relative terms our benchmarking should be such that it should target the appropriate criteria that top management uses to measure their own success. Lean Management Thus far in our discussion, we had constrained and limited our solution to employee and organization process redesign. However the critical task to increase customer satisfaction through a parsimonious approach still to be managed. Lean management through a hospitality spectrum, consider minor perks which does not cost business much but returns in terms of higher customer loyalty and spread through word of mouth. Undoubtedly word of mouth still remains the most effective marketing tool and is only produced as a result of lean management; a little extra care can cause dramatic results which had never been a focus for Fairmont. Quality service department is stagnant over internal matters solving issues that do not result in modern hospitality standards. At present the hotel has a special emphasis and focus on traditional components like cleanliness, timeliness, and proper delivery of basic services. Staff members had been kept aloof from the modern trends and empowerment to take decision by the middle management is still the issue the management face which eventually leads to inefficiency. Tough competition in today’s business environment makes it imperative for business operators to distinguish their product through superior customer satisfaction while making their experience truly priceless. Any company in any sphere, including hospitality industry and hotels namely, is concerned about its sales levels. In order the company, hotel in our case, gets profit and returns investments to the shareholders, the sales levels should be high enough to cover operational and other costs as well as contribute to the hotel’s and shareholders’ wealth. Thus, in many instances hotel management sets sales goals to be reached. However, aimed levels of sales might be a problem to achieve if other hotel functions are not performed adequately. Some authors state that sales function is the corner stone of the hospitality industry as those who are employed in the sales departments are directly responsible for the revenues of their respective organizations (Siguaw, Bojanic, 2003). Sale in their turn depend not only on the ability of sales people to sell the nights at a hotel, but also on the memorable experience that guests have after staying in the hotel. These memorable experiences for guests and clients of a hotel are the fundamental and primary goal for any service business, including hotel (Williams, 2008). However, memorable experiences are conceived when each and every part of the service is provided in an adequate manner fully fulfilling function and purpose of a service. According to its definition, hotel is commercial establishment providing lodging, meals, and other guest services. Other guest services include reception, bell service, room service, mail and information, concierge, cashiers and night auditors, wi-fi, as well as gym, pool, bars and restaurants, beauty and spa salons, and other facilities. To ensure fulfilling purpose and function of these services within a hotel and, consequently, provide for better sales of nights, the synergy of these functions should exist. Services, unlike products, are intangible and cannot be tested for quality other time than the time of actual service. Thus, the manner in which service is provided provides for customers’ experience of good or bad service. If the experience is good customers are more likely to return and make another purchase of the service decision. If the customers’ experience is bad, they will not return and, furthermore, they will spread their word of their negative impressions of service quality. Although hotel’s primary service is to provide accommodation for travelers, other guest services do matter in making good impression on customers. Customers look at the hotel services as a whole rather than at separate hotel services components. Therefore, it is essential that all function units and services have synergy in their performance in order to provide for sufficient sales levels. The impact of separate service function on prospect sales is reviewed in more detail further. For example, a hotel of 50 rooms has set the goal to ensure sales of 80 percent of its capacity. In order to reach such quite high occupancy, hotel management has to pay attention not only to sales procedure, e.g. personal sales, telemarketing, cooperation with local companies, etc. but also on the quality level of its services that would provide for positive word-of-mouth for prospect customers and returning service purchases from existing customers. Thus, the services it provides, assume that it is medium level hotel, lodging, reception, bell services, meals, room services, mail and information, fitness. Although sales agent for the hotel has made a positive impression on the customer to make him use the hotel’s services, the customer will evaluate actual services he/she receives. The very first impression to be made on customers is by the front office department function. The front desk is the cornerstone of further services, which is faced from the very first moments of staying in a hotel. The functions of the front desk staff members include welcoming the guests, carrying their luggage, helping them register, giving them their room keys and mail, answering questions about the activities in the hotel and surrounding area, and finally checking them out. Actually, it is the front office staff members who have direct contact with customers and, consequently, have the greatest impact on customers’ experience most of the time. Usually front desk functions may be split into several general areas like reception, bell service, mail and information, concierge, cashiers and night auditors, and belong to different departments (namely rooms department and financial department), they still perform some functions of sales department. For instance, reception staff can provide information on special offers in the hotel’s bar or restaurant or an interesting program in fitness. Though the front desk does not directly sell the services of those, they still attract prospective customers for other services. In case staff at the front desk does provide information on other services available, they not only pursue the function of their service, but also pursue overall purpose of the hotel to sustain the sales. Thus, there is a synergy of front desk functions and sales. In order to increase sales in business segment, the hotel should undertake extensive informational campaign among local businesses as well as extend online presence. To achieve this, the hotel could send out prospects to local firms and make personal presentations for the hotel’s capacities for conferences and meetings. In order to get new sales from online customers, it is suggested to use not only booking websites, but also make the hotels website more attractive and informational for potential customers. To make the site more attractive and informational on rooms, capacities, and other amenities, the hotel could implement Hotel Virtual Tour of its premises and the vicinity of the hotel. Possible Difficulties and their solutions The hotel staff may have some resistance to new system that is being adopted by top management. In order to overcome this problem hotel staff should be trained properly about the changes and the reason for changes and also their feedback should also be taken about new system and their grievances should be addressed before concluding the implementation so that the staffs also considers themselves as part of organization. This will increase their productivity and lesser resistance would also be faced. One more problem which can be faced by hotel management is that of investment and bearing the cost of change. In order to avoid this scenario budgets should be prepared and proper cost benefit analysis should be performed in order to avoid any unreasonable circumstances which ends in destruction. Further financing arrangements should be made in the way that is most feasible for the hotel health and cash counter as well. Conclusion A new wave of incentivizing the slacking behaviour of employees is utterly needed, in order to take the situation out of the conundrum. Simply following traditional measures are not advisable and to expect transition within its operational structure would be highly optimistic. So the management should introduce changes with full confidence by taking along all the stakeholders side by side. Success should be shared among those who put in their efforts to bring about the change. And accountability should be well incorporated at all levels. The business is already profit making entity and presently requires investment outlay that would revamp its outlook, but all should be done and planned prior to make any decision. The management needs to plan surveys in order to decide whether or not the hotel would be better off with maintaining its traditional ambiance throughout operation or would it be more advisable to follow the ring amid changing consumer preferences. Once the decision is made upon any of the strategy, immediate revamp and proper asset utilization be done and redundancy be eliminated through efficient management. Afterwards, each individual should be set accountable for his/her performance and leniency on low achievers should not be replicated. References Dube L., Renaghan L. Strategic Approaches to Lodging Excellence. Hotel and Restaurant Administration Quarterly. December, 1999. pp. 16-26. Hotel – Definition. Business Dictionary. Accessed at Lanz L. Five Ways to Increase Your Sales and Marketing Momentum in 2008. Retrieved from < http://www.hvs.com/article/3112/five-ways-to-increase-your-sales-and-marketing-momentum-in-2008/> October 22, 2009 Siguaw A. Judy, Bojanic C. David. Hospitality Sales: Sell Smarter. 2003. Accessed at October 10, 2009. Williams K. Bryan. Delivering World-Class Service: Function vs. Purpose. Special Report. Hotel Online. August 2008. Retrieved from October 22, 2009. 360 Brings Your Website to Life Read More