Service Operations Management - Talent Drycleaners - Essay Example

? Service Operations Management- Talent Drycleaners Case Study Executive Summary This case study aims to make an analysis of the dry-cleaning business operations at Talent Dry-cleaners and Stain Clinic. The case focuses on the achievement of further growth of the company while having to deal with the challenges inherent in this particular market. Among the challenges facing the company, this paper puts more emphasis on the company’s capacity utilization, its throughput and turnaround rates, and the profitability of expanding into other markets. Talent Dry-cleaners and Stain Clinic has found itself in the position where they have the best service quality in the market, but is also faced with severe limitations that discourage any potential for growth. The company has an adequate capacity utilization amount, a standard turnaround time, and a profitable return inherent in its added collection store located in Oshodi. Additionally, the paper will conduct an analysis that seeks to illustrate why Talent Dry-cleaner’s current operational state is limited as far as potential growth while also setting up the stage for making recommendations. The recommendations will be aimed at suggesting that the company hires extra staff, and extend the time of work with the objective of realizing an increased number of average drop-offs handled every day. SERVICE OPERATIONS MANAGEMENT- TALENT DRYCLEANERS CASE STUDY Introduction Eze owns a dry-cleaning business, Talent drycleaners and Stain Clinic, which has been operational for two years after he branched off from his former employer to start his own business. The major reason for starting a new business laid, in the opportunity, to open a dry-cleaning operation in a heavily populated area, Anthony Village, which had no dry-cleaning facility. Talent Dry-cleaners relied heavily on client referrals during and after its inception, as well as an awareness campaign complete with customized caps and t-shirts. When funding hampered any further campaigns, he turned to handbill distribution, although this approach was not satisfactory in pulling in large volumes of customers. Recently, he became aware that quite a number of his clients were moving to the outskirts of Lagos, especially the Lekki-Epe axis. Additionally, Eze also began to feel the effect of proliferating dry-cleaning outfits stationed in Anthony Village. This forced him to slash billing charges thrice within one month. Within this competitor base, the key competitive variables included a variety of service, high response levels, delivery time, quality of service, and price. Some outfits had also adopted business differentiation by instituting cloth delivery and amendment in an effort to improve responsiveness. At the moment, Eze has to develop new strategies that will enhance profitability via moving to new markets, improve throughput and turnaround time, as well as efficient capacity utilization. Problem Statement Talent Dry-cleaners finds itself in a position where it has the best service quality available, but potential growth is hampered by severe limitations, especially the lack of funding. Analysis One of the reasons why Talent Dry-cleaners is facing limitations in its growth has to do with capacity utilization. Capacity can be defined as the ceiling or upper limit on the load, which can be controlled by an operating unit that is the upper limit on the output rate (Schneider, 2010). The basic questions that Eze should ask when considering this angle include the kind of capacity needed, the amount of capacity needed, and when the capacity is needed. While there are several definitions for capacity, none of them is applicable universally. Design capacity is defined as service capacity or maximum output rate that a facility operation or process is designed for. Effective capacity is the design capacity fewer allowances such as maintenance and personal time while actual output is the actual output rate achieved, which cannot be more than effective capacity (Schneider, 2010). A capacity cushion is the amount that a business, say Talent Dry-cleaners, maintains in order to handle any sudden surges in demand or temporary production capacity losses (Schneider, 2010). Talent Dry-cleaner’s capacity utilization is at the job shop, batch manufacturing level with variable demand, worker breaks, and complex products due to differentiation. This places the company at average utilization of seventy to eighty percent. High capacity efficiency can be considered as a positive trend, as is high capacity utilization when using the correct types of processes and assuming that all other performance measure objectives can be and are achieved, for example, fast delivery, low cost, and high quality. However, as with talent Dry-cleaner’s case, high capacity utilization may be a bad thing if it comes with slow deliveries because of traffic congestion, low revenues because of increased competition, as well as high costs (Schneider, 2010). Throughput time, in this case, can be defined as the amount of time required, for the clothing items, to pass through the dry-cleaning process (Wright & Race, 2012). In general, rate of inflow and outflow tend to fluctuate over time. This commonly happens in a stable environment, where the average rate of inflow should be equal to the average rate of outflow. The average rate of flow through the dry-cleaning system can be referred to as throughput rate and is assessed as the number of clothing serviced per unit time. Turnaround time, on the other hand, can be defined as the total amount of time that it takes to do a job and give output once the finished work has been submitted for processing (Wright & Race, 2012). In this case, turnaround time involves the last stage after dry-cleaning that involves ironing, quality checks, collating, packaging, and finally tagging. For Talent Dry-cleaners, the average turnaround time was approximately three to four days following drop-off. They also offered an express service of approximately 12 to 24 hours turnaround time, which called for the client to pay an extra twenty-five percent on top of the business’ normal rate. Eze and Talent Dry-cleaners could also get a profitable return from expanding into different markets. For dry-cleaners who are in possession of their own equipment, deciding to open new stores depends on whether the equipment currently in use is at full or almost full capacity (Greasley, 2009). If a facility is being run at full capacity, then the owner may not find it feasible to add any new locations that would be served by the already existing dry-cleaning facility. However, if the current dry-cleaning facility were run at a relatively low rate of capacity utilization, then it would be apt to initiate a new location, which may help to improve the dry-cleaner’s overall productivity. In this case, starting up a new location in Oshodi may help to improve the productivity inherent in the original dry-cleaning facility at Anthony Village without incurring a lot of additional expense. While the business man will have to cover the cost of putting up additional spaces for retail, for example, staffing of the new store, buying new items of furniture, and leasing additional space for retail, the dry-cleaner would not have to buy any additional equipment for cleaning purposes (Galloway, 2012). Instead, the dry-cleaner could take the additional drop-off clothing and clean them using the equipment already in existence at the previous location. This will act to reduce the dry-cleaner’s up-front investment, as well as allowing for the owner to rent a much smaller retail space to locate his new premises. Without any requirement to purchase more dry-cleaning equipment, the owner is more likely to enjoy a steady stream of annual profits that are associated with his new location, which will exceed the startup capital used to set up the new store and the variable costs inherent in the new store outlet. The ability to start a new retail outlet at a new location that can be used to leverage the assets in existence will act to reduce the incremental costs that would come with opening a new retail storefront and improving the chances of more geographical expansion in the future (Bassett, 2012). Recommendations Talent Dry-cleaners should make an attempt to hire additional members of staff with an aim to reduce throughput and turnaround time. Additionally, the dry-cleaner should extend the working hours of the workers in order to improve throughput and turnaround time. However, this will lead to additional costs, although, over the long-term, it should work to retain customers. This will result in a more efficient service that ensures the client’s get their clothing items on time. Additional working hours, coupled with an increased labor force should act to yield much higher capacity utilization and will enable the owner, Eze to increase the company’s profitability. Having access to these profits should help talent Dry-cleaners make plans for the future. In addition, it could ultimately provide for the realization of Eze’s dream to open a dry-cleaning school. Eze should also focus more on his Oshodi store, with the objective of the making maximum use of his dry-cleaning machines, rather than buying new ones. This is informed by the fact that his current machines are not running at full capacity. Finally, Eze should take advantage of the demand for express services to advertise his express service that aims to reduce turnaround time to between twelve and twenty four hours, down from the currently more popular three to four days. With the extra charges from this service, it should see his profits increase. References Bassett, Glenn. (2012). Operations management for service industries : competing in the service era. Quorum Books: Westport. Galloway, Robert. (2012). Operations management: the basics. Boston : International Thomson Business Press. Greasley, Andrew. (2009). Operations management in business. Cheltenham : S. Thornes. Schneider, Mitch. (2010). Operations management. Clifton Park: Thomson/Delmar Learning . Wright, Nevan. & Race, Peter. (2012). The management of service operations. London : Thomson . Read More