Enhanced Profitability through a Balance between Production and Service - Essay Example

? A report on operations in a fast food outlet: enhance profitability through a balance between production and service # submission: Table of contents Content Page 1. Introduction 3 2. About Domino’s 3 3. Literature review 4 4. Methodology of study 6 5. Findings and analysis 7 5.1 Store layout and resource utilization 7 5.2. Challenges and bottlenecks 9 6. Recommendations 10 7. Conclusions 12 8. References 9. Appendices 1. Introduction: Operations management deals with production of new goods or provision of services with the efficient use or conversion of different resources in a way that adds value to the business during the transformation and also after the goods or services are delivered to intended end recipient. This process involves a series of activities that need to be well planned and executed in order to achieve expected outcomes. Operations are the core functions that help organisations to achieve their strategic goals for which operations strategies need to be aligned to organisational goals. A report on how operations in fast food service facilitate and enhance organisational profitability will be presented in this context that will be built based on observation of operations conducted in the international pizza giant, Domino’s pizza. This report will specifically focus on understanding the impact of operations strategies such as layout, location, resource allocation and their impact on efficiency and sales. This will be accomplished by studying the best practices followed as well as bottlenecks, if any, in three Domino’s outlets. Recommendations will be made to address the hindrances identified followed by highlighting the main conclusions of this observation in comparison with teachings form literature study. 2. About Domino’s: Domino’s Pizza is an international Pizza food chain with its presence in more than 100 countries, and employs thousands of people in all its outlets. This pizza food chain is known for its speedy service along with high-quality products as well as varied product line in the Italian food sector. Recently, Domino’s has also included other products in its offer. Domino’s Pizza also focuses on service, customer satisfaction and competitive pricing options. Their mission is to be the best pizza delivery company in the world; and their culture is based on the slogan, “sell more Pizza, have more fun” (About us, 2012). Personal visits to a Domino’s outlet more often depicted their mission as well as culture, but with deviations too; this means all visits to a Domino’s Pizza outlet do not provide a uniform experience, and varies from outlet to outlet, and probably varies with the location and region also. The way operations are managed at Domino’s can be described upon some keen observation, which is certainly facilitated by its layout, employee behaviour and attitude, employee decisions, technology used, quality and speed of service, quality of its products etc. 3. Literature review: According to Chase et al., (2006; p.7) operations management involves various aspects such as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services. Hughes, Pride and Kapoor (2012) explain that the end-to-end operations management combines three distinct functions, strategic, tactical and operational planning and control functions. Strategic functions include decisions related to operations management that include plans to achieve firm’s overall objectives. These decisions and plans are aligned to corporate strategy, which includes overall organisational objectives of a diversified firm. Collins and Montgomery (2005) define corporate strategy as, ‘the way a company creates value through the configuration and coordination of its multimarket activities,’ (as cited in Furrer, 2010; p.2). Hughes et al., (2012) further explain that tactical functions include all small-scale activities required to implement the strategic functions and plans. These plans can vary with situation and need and provide direction to operational functions. Thirdly, operational functions or plans include designs, activities, processes to implement and achieve tactical functions; these functions are the core activities involved in operations management that lead to achievement of end objectives. Another level of plan, added by Hughes et al., (2012), that should be included in operations strategy is the contingency plan, which includes alternative courses of action in case of risk, disruption or ineffectiveness of earlier plans. Main operational processes that constitute operations level strategy include planning, production and service providing, purchasing or inventory management, supply chain management, distribution and marketing (Chase et al, 2006). Process strategy has an influence on the budget required for production management, which includes equipment, resources and facilities; secondly, process flexibility, which considers the degree of adjustment that can be made as per situation or changes that can accommodate fluctuation in demand and supply, changes in technology etc (Stevenson, 2009). Spackman (2010) asserts that leadership will be effective only if combined with ability for operations management excellence and the necessary technical skills and knowledge, irrespective of the leader’s style, behaviour and attitude. Capacity planning is one of the fundamental aspects of operations management as it includes quantity of resources required for production and service to meet current and future demand; it also involves planning in terms of facilities, resources, raw materials etc (Pycraft et al, 2000). Specifically, facilities capacity is significant as it considers amount of capacity, size of the units, time, and types of facilities required (Schroeder 2008). Capacity is under the influence of demand, cost, competitors, and business strategy. Quality is yet another critical aspect that is given much importance in operations management. Iwarere and Fakokunde (2011) identified three levels of quality namely expected or compulsory quality, selective quality and unexpected or elective quality. Therefore, it is more appropriate to measure quality from customers’ perspective; however, quality service entails more than product quality and includes quality of resources, raw materials, facilities, service etc. An ideal state would be to maintain uniform quality in these spheres, which is yet another challenge most of the times (Slack, Chambers & Johnston, 2007). Layout and facilities in operations management leverage productivity, speed and costs (Jacobs & Chase, 2010). Stevenson (2009) points out that the operations process and layout decisions affect costs, flexibility, required skill level and capacity. 4. Methodology of study: The methodology adopted in this context to study operations process at Domino’s involved careful observation of various operational activities undertaken at Domino’s outlets. Three different Domino’s outlets were chosen for this study. Activities that were observed included quality and speed of service, product quality, uniformity and diversity, employee behaviour and attitudes, number of customers walking in to the outlet, the flow of activities and employees’ efficiency, and location and layout. Certain unobserved and/or unexplored areas included capacity of raw materials, complete facilities and actual space utilization, quality of inputs. A general view of the process followed in Domino’s has been presented in Appendix 1 based on the observations made. 5. Findings and analysis: 5.1. Store layout and resource utilization: The process strategy that defines various processes involved in delivering service should lay special emphasis on the layout and design. Layout and design include space required for various equipment, raw material storage, employee workstations, and space for accommodating customers during business. These factors remain common, they are not uniform for all outlets, but seemed to depend upon the location as well as number of customers that visit the outlet on any given day. The approach in designing layout as per capacity would be to consider number of customers during peak business hours. Moreover, considering that business would grow, layout should also accommodate increasing number of customers; however such a layout would also incur costs in the initial stages (Shim & Siegel, 1999). Hence, keeping the process layout flexible is suggested. Domino’s layout design at one of the outlets that was located in a crowded area surrounded by shopping malls and cinema halls seemed to be more flexible and was able to accommodate large number of customers. In fact, at this outlet, it was seen that Domino’s store representative discussed with neighboring store personnel to use some space for their customers, which the neighbor obliged. This could probably be an understanding or a contract; however, such options may not be feasible every time. Another significant observation was with respect to usage of manpower for multiple activities such as operations processes, inventory and procurement activities, customer service and accounting sections. A few store representatives seemed to be performing all of these activities, which indicated that they were multi-skilled and thus enhanced cost efficiency of the store. Structural setup at Domino’s seemed highly efficient and in a manner enhanced operational efficiency. Besides space, operational productivity at the three Domino’s outlets seemed to be at the peak during high demand, owing to its location and layout, irrespective of space constraints at two of its locations. All the outlets visited were located in crowded places surrounded by other retail businesses, while one of them was next to a shopping mall and was slightly more spacious compared to other two outlets. Layout inside the outlet seemed similar in all outlets. The layout design in all outlets complied with the job shop process type as their products were produced on small scale but varied highly (Stevenson, 2009). Although the product lines were few, Domino’s provided the option of customizing the product according customer’s choice. Hence, variety in products increased. All activities involved in producing one product, like one type of pizza, were small, simple, yet skill-based. Most of the products were produced using same equipment, and very few products, of different product types, were produced with other equipment. For instance, pizzas were produced using 3 sets of equipments; and milkshakes and chocolate products used other equipment types. As Domino’s specializes in pizza types, equipment numbers for its production were higher. The process type was not highly flexible, yet production of customized pizzas and other products required a variety of skills unlike traditional routine tasks. 5.2. Challenges and bottlenecks: The type of operations process not only impacts efficiency, customer satisfaction, productivity and time, but also the cost per unit of production, type of equipment, fixed and varied costs, skills of employees, promotional activities, scheduling and capacity planning, and work-in-progress inventory (Stevenson, 2009). The process layout at Domino’s outlets comply with all requirements that are required for highly efficient operations, such as material handling space and tools, flexibility in moving, capacity and space needs, environment and interiors; however, time required to move between spaces was higher due to smaller spaces that usually caused employee crowding. The job shop type of layout with limited space for employees on job hindered smooth and continuous workflow at times. This is because assumption of stability of demand does not stand true in case of busy fast-food outlets, like the Domino’s. Moreover, equipment utilization is usually high. Smaller spaces to accommodate limited equipment could also pose hindrance during equipment breakdown. Lack of space voids options of flexibility. Another hindrance noticed in one of the outlets was that of receiving supplies from vendors during business hours, which consumed sufficient time of two representatives in assisting transfer of supplies, goods receipting and inventory management activities. According to Clow and Kurtz (1998), all these hindrances are of capacity bottleneck types, which restrict maximum output of services. The job shop type requires ability to handle a wide variety of tasks at the same time. Hence, multitasking abilities are essential to meet the business demands (Mahadevan, 2009). At the Domino’s outlets, it was experienced that employees had varied levels of skills and confidence in attempting multiple tasks. For instance, one employee at the customer counter that was required to answer a phone call as well as cater to the customer at the counter seemed to struggle. Another employee seemed to be in need of assistance to make the pizza ordered, which made the customer wait for longer period because the employee had to wait for assistance from colleague. Technological breakdown is another bottleneck to smooth functioning of operations. Technological breakdown can be in the form of power supply issues, workstation and/or telecommunication breakdown, processor overload, calls overload and call waiting etc. 6. Recommendations: Considering the challenges and bottlenecks in operations of the three Domino’s pizza outlets as observed, approaches to efficiency and profitability vary. For instance, in the outlet that experienced employee crowding due to lack of space on operations shop floor, it would be best to shift some operations to another area outside the operations shop floor. For instance, setting up another counter for the beverages and cakes section that are standardized products will help in creating some extra space for employees. Moreover, this will also reduce customer queuing during high demands. All procurement activities should ideally be carried out before or after business hours, which will save time for store representatives to attend to operations activities and also not cause inconvenience to customers. To improve speed of delivery, all employees should receive extensive training on handling multiple tasks at the same time and with same efficiency. Speed of delivery is critical to fast food business’s profitability and customer satisfaction. Although performing multiple tasks at the same time might not result in same productivity, it is important especially at the customer counter to keep customers engaged. However, multitasking on shop floor might result in errors or low quality product, which could lower customer satisfaction. Intense multitasking could also result in employee stress. Yet, multitasking at fast food joints is possible because the tasks involved are relatively simpler and easy. Employees must be trained on heating convenience foods and at the same time be involved in making a new item. A systematic multitasking would enhance productivity and save time. Appropriate control measures to address technological glitches would save much time and costs for the fast food outlet. The best approach to this would be to have backup, which is commonly adopted by all businesses. However, the main issue is to address processor and call overload, both of which take up much time. When systems slow down due to overload, a backup method of taking sale orders would be handy. This data can be later transferred onto the main database. Secondly, too many customer calls for door-step delivery increases call waiting time as well as frustration for the customer. This would require more number of employees to attend to customer calls. The best approach to handle this issue would be to automate the call service process through interactive voice recording (IVR) system, which is already adopted by many other fast food companies. Automation enhances flexibility, productivity, quality, and provision of error-free output (Pzydek, 2003). 7. Conclusions: To conclude, operations management forms the core area of a fast food business that involves, both, production of goods as well as providing customer service. Hence, these activities require high level of planning and execution through appropriate skills, leadership, technology, and quality control mechanisms. Operation planning incorporates resource planning, location and layout plan, and the process plan. Efficiency is an outcome of effective planning and execution. Observation of three Domino’s outlets in different locations revealed that the layout is congruent with business and process requirements, except for space consideration in one of the outlets that was located in areas with high demand. Although flexibility to manage space was evident, this flexibility was limited to accommodate customers; the store representatives continued to struggle to perform their activities, which lowered their efficiency. Moreover, bottlenecks such as technological glitches, skill issues and work overload caused further inefficiency. Efficiency can be improved by addressing these hindrances by adopting appropriate practices such as putting in place backup procedures for technological failure; high-level intense training for representatives to perform multiple tasks at the same time; and to adopt automation measures to reduce workload for store representatives wherever possible, which will also enhance customer satisfaction and create time for representatives to focus on other operational activities. References About us. (2012). Domino’s Pizza. Dominos.uk.com. Available from, http://www.dominos.uk.com/aboutus.aspx (Accessed 28 April, 2012). Chase, R., Jacobs, F. and Aquilano, M. (2006) Operations management for competitive advantage. New York: McGraw-Hill. Clow, K.E and Kurtz, D.L. (1998).Services Marketing: Operation, management and strategy. 2nd edn. New York: John Wiley & Sons. Furrer, O. (2010). Corporate level strategy: Theory and applications. Oxon, UK: Routledge. Iwarere, H.T and Fakokunde, T.O. (2011). Consumers’ perception of product and service quality and price in the Nigerian fast food industry: A case of selected outlets in Ekiti State, Nigeria. European Journal of Social Sciences, 19(2), pp: 198-207. Available from http://www.eurojournals.com/EJSS_19_2_04.pdf (Accessed 28 April 2012). Jacobs, R.F and Chase, R.B. (2010). Operations and supply chain management. New York: McGraw-Hill Irwin. Mahadevan, B. (2009). Design of processes. In Operation management: Theory and practice. India: Pearson Education. (Ch.3, pp: 53-80). Pycraft, M et al. (2000). Capacity planning and control. In Operations management. South Africa: Pearson Education. (Ch.11, pp: 376-417). Pzydek, T. (2003). The six sigma handbook, revised and expanded: A complete guide for greenbelt, blackbelts and managers at all levels. 6th edn. New York: McGrawHill Companies. Schroeder, R.G (2008) Operations management: Concepts and contemporary cases. 4th edn. New York: McGraw-Hill. Shim, J.K and Siegel, J.G. (1999). Operations management. New York: Barron's Educational Series Inc. Slack, N, Chambers, S and Johnston, R. (2007). Operations management. 6th edn. Harlow: Prentice Hall. Spackman, T. (2010). Crafting a leadership and management development strategy II. In Gold, J, Thorpe, R, and Mumford, A’s Gower handbook of leadership and management development. 5th edn. England: Gower Publishing, Ltd. (Ch.4; pp: 57-82). Stevenson, W.J. (2009). In Operations Management. New York: McGrawHill. Pride, W.M, Hughes, R.J and Kapoor, J.R. (2012). Understanding the management process. In Foundations of business. 3rd edn. Ohio, USA: Cengage Learning. (Ch. 6; pp:163-187). Appendix 1: Process chart at Domino’s Pizza Read More