Operations Management and Hospitality and Tourism Operations - Essay Example

INTRODUCTION: The overall scenario of the world is rapidly changing, owing to increasing globalisation and technological advancements. Organisations are coming up with different strategies and tactics in order to remain competitive and survive in all these difficult situations. In order to make sure that the organisations are heading towards right direction and are being able to give high performance and make profits, it is important to manage the operations of the organisations in more effective and efficient manner (Barratt, Choi, and Li, 2011). Another important change or transition in the world is about the increasing growth of the service industry and organisations. More and more organisations are entering into service industry. It is important to acknowledge here that operations management is as much applicable on the service industry as on manufacturing industry or any other industry. It is relatively difficult to manage the operations in the service industry because the final outcome is intangible and cannot be measured (Apte, Maglaras, and Pinedo, 2008). One growing sector in service industry is of hospitality or tourism. Despite of all the economic issues and recession, the tourism and hospitality industry have managed to survive and grow. In order to make sure that the operations of the organisations in hospitality industry are being performed in accurate manner and the high quality services are provided to the customers, the organisations in hospitality industry should effectively use the techniques of the services and hospitality operations management. Operations management deals with running the operations or internal processes of an organization as smoothly as possible. Smooth running in operations management refers to efficient and effective utilization of available resources, time management, priority setting, cost monitoring and controlling and any other activity that directly or indirectly helps an organization to achieve a competitive advantage, which would enable the organization to remain competitive in its industry (Barratt, Choi, and Li, 2011). Operations management shifts into a whole new paradigm when it is applied in the service industry. Although the basic terminology remains somewhat the same, however, they find a whole new utility in the service industry (Apte, Maglaras, and Pinedo, 2008). In the service industry some main performance indicators are used in order to evaluate and measure the overall performance of the service organisation. These performance indicators are (Apte, Maglaras, and Pinedo, 2008): 1. Service Quality Measurement 2. Capacity Management 3. Revenue Management 4. Efficiency Management or Service Productivity Management It is important for the service organisations to manage the service quality, capacity, revenue, and efficiency in order to remain competitive and avoid failures. As there have been many cases in which the organisations which have failed to incorporate these performance indicators in effective manner, have faced several issues and have been forced out of the industry. In this paper and attempt has been made to understand all these performance indicators briefly, with special focus on the service quality management and capacity management. The paper will discuss the important concepts regarding these two performance indicators and their implications in the service or hospitality industry will be highlighted with the help of examples. Apart from this the paper will try to identify the pitfalls which can lead to failure of the organisation and will recommend to avoid these pitfalls. VITAL OPERATIONAL TOOLS IN OPERATIONS MANAGEMENT: Some of the tools which are vital for the smooth functioning of the hospitality or tourism industry are defined and explored below: Service Quality Management: Many proponents of service quality support the assertion that service quality depends largely on the perception of the service provider. It is totally dependent upon the service provider how much satisfaction he or she wants to deliver in his or her service. And in today’s highly competitive environment it is imperative on the service provider to exceed the customer expectation level and set a new benchmark for customer satisfaction every time the customer comes back for more servicing. Service providers should counter the tendency of taking home short term profits and should look at the future benefits that would enjoy if they develop a brand loyal customer (Seth and Deshmukh, 2005). Performance Assessment Methods in a Hospitality Business: GAP model Simulation methods ISO self assessment checklist Interviews of customers and service provider. Customer Satisfaction survey Capacity Management: Capacity Management refers to the ability of a service delivery system of an organization to balance demand for a service with capabilities to satisfy this demand. Therefore for an organization to manage capacity effectively, it is imperative for it to forecast demand as accurately as possible and develop its service capacity based on this forecast. Due to the prior mentioned intersection of demand and capacity, capacity management is also sometimes referred to as demand management. However, both the concepts are quiet distinct and therefore fall in two different domains with capacity management falling in the domain of Operations Management and demand management being a part of Marketing Management (Armistead and Clark, 1994). Performance Assessment Methods in a Hospitality Business: Days Sales Outstanding Days inventory turnover Service function time analysis Customer Arrival rate Service rate Revenue Management: Revenue Management deals with managing demand, price and duration in the services business. Through this tool an organization can implement a pricing strategy, servicing strategy and moreover manage demand more aptly. A vibrant revenue management system would comprise of an efficient demand forecasting model and servicing processes (Vinod, 2004). Since a revenue management system requires an upfront investment for increasing capabilities, it is therefore vital to have in place controlling systems that give an accurate feed on return of investment, payback period, accuracy of data and quality of data (Weatherford and Kimes, 2003). Performance Assessment Methods in a Hospitality Business: Contribution margin per available room Spoilage Occupancy turndown Average daily rate Revenue per available room Over sales Closing rates Efficiency Management In a hospitality industry efficiency management deals with providing the customers with all the promised services in shorter time duration without compromising the service quality. All the services provided are expected to meet the satisfaction level of the customer. Efficiency management requires doing things correctly without wasting valuable resources. A related concept is effectiveness which deals with doing the right things. This concept finds its application mostly in the manufacturing business (Johnston and Jones, 2004). Performance Assessment Methods in a Hospitality Business: Cycle time per unit Queue time per unit Resource expanded per unit Percent on-time delivery Cost of poor quality per unit output TWO IMPORTANT PERFORMANCE INDICATORS: Out of all these performance indicators and integral aspects of operations management, it is believed that service quality management and capacity management can go a long way in defining the overall profitability of the organisations in the hospitality or tourism industry. In this section of the report an attempt has been made to define and elaborate the concepts and ideas related to these two performance indicators along with their implications on the hospitality or tourism business. Service Quality: The most important element in the success of failure of any organization is the quality of the product or service. In the services industry, this concept of service quality is more important and more complex. It is relatively difficult to measure and quantify the quality of the service being offered or provided. Two important elements in this regard are customers who are taking the service and the employees who are providing the service. It is important for any service organisation to make sure that the quality of the service provided by the employees should be high and at the same time consistent. There should be no differences in the quality of services provided by all employees of the organisation and hence there should be extensive training and developing of the employees and staff of the organisations. Another important aspect in this regard is the needs and demands of the customers. There is high possibility of drastic mood shifts by the customers, hence it is important for the organisation to understand the demand and mood of the customers and present the service in order to satisfy or delight them (Seth and Deshmukh, 2005). In this period of globalization, businesses are having global customers for their products or services. In this scenario it is imperative for a business to have an in depth understanding of its customer portfolio. Since each customer brings with him distinct aspirations, requirements and personality; this makes it very important for a business and especially a hospitality business to tailor its services based on each customers unique preferences. The services offered by the business should meet the expectations of the customers. Every business should have efficient systems in place that can measure the quality of services offered by the business as accurately as possible. All the systems developed by the business to assess its service quality should address dimensions such as (Sharabi and Davidow, 2010): Customer Satisfaction Organizational performance Customer retention Word of mouth Return on Investment Market share Profitability Every service offered by a business should be build around the dimensions of SERVQUAL’s model. These dimensions are (Seth and Deshmukh, 2005): Tangible Reliable Responsiveness Assurance Empathy This model has the ability to define minimum service level, desired service level, and customers’ perception of actual service level. In this model there is concept known as the “Zone of Tolerance” that defines the amount of acceptable variation in actual and expected service level by the customers (Nadiri and Hussain, 2005). For a hospitality business it is of utmost importance to develop a service quality level that allows it to differentiate itself from its competitors. In order to match its service quality with that of its competitors a business should employ benchmarking technique or in this case a hospitality business can use expectation as a measure to assess its service quality. In order to understand the importance of service quality in a hospitality business it is of utmost importance to mention the example of “Hotel Harriet”. This hotel has developed a sophisticated customer database that records customers’ habits during their stay in the hotel. These records of customer habits turn up each time a customer come back to the hotel. By using this history of customer habits the hotel tailors its services to the customers liking. This level of service has allowed Harriet to position itself distinctly in the marketplace. Moreover, the satisfied customers on receiving such a high quality service promote the hospitality of the hotel within their friends circle (Laudon and Laudon, 2007). Apart from this several other companies have been able to create a satisfied portfolio of customers for themselves through effective and efficient use of information management systems and improving the quality of the service. Entire reputation of the company is build around its service quality, and to strengthen their reputation in their industry, these companies are working hard to conquer new horizons in services. Taking the example of these companies one set further, and considering a hypothetical case in which these companies failed to deliver the kind of services they are delivering, as a result of this these companies would have to facing the following consequences (Sharabi and Davidow, 2010): Negative word of mouth Credit freeze by the customers Loss of market share and sales Declining profitability and curtailing of operations Capacity Management: Capacity management is relatively difficult in the hospitality industry. The organisations operating in hospitality industry should be able to make sure that the demand of service is always fulfilled by the supply of the service. Secondly, it is also important for the organisations in the hospitality industry to judge and forecast the demand accurately and the facility where service is being provided should be constructed keeping in mind the potential demand. Customer prefer the hotels and restaurants which have ample space and which provides soothing and pleasing environment and surroundings. On the other hand, the hotels and restaurants which are congested and are not well planned are avoided and ignored by the customers. Capacity management in a hospitality business has become an imperative for survival. Since it deals with balancing demand and supply of services, capacity management has its influence on the cost structure of the company and thereby on its profitability. For an operations manager working in a hospitality business his work is seriously cut out because he has to come up with accurate demand forecasts, match capacity with demand, influence demand and above all he has to do it on a real time basis (Armistead and Clark, 1994). So in order to conduct his job in the most effective manner possible, an operations manager would have to understand the nature of demand in his forecast and his available options when it comes to deciding the capacity. In the matter of capacity the manager has the option of two strategies: level and chase (Pullman and Rodgers, 2010). Moreover, the operations manager will have to consider the following factors when he assessing the output delivered by any service delivery system (Pullman and Rodgers, 2010): Capacity Task Service Load Capacity Leakage A sound service delivery system would have in it the following features (Pullman and Rodgers, 2010): Quality targets Accurate forecasting Productivity targets Provisions for bottlenecks Provisions for hygiene factors In capacity management, it is important to balance managerial objectives, demand, capacity and visitor experience. For this purpose analytical tools and techniques should be employed, some of these are mentioned below (Pullman and Rodgers, 2010): Probabilistic Methods Closed-form approaches Closed form approach does not take into consideration external conditions and dynamic nature of supply and demand. Capacity management also entails capacity design that is dependent upon social stratification. In order to develop a capacity design simulation techniques are used. It is also worth mentioning that capacity management is important because it influences customers’ perception about the service quality of the business. In a hospitality business the concept of capacity management should be analyzed from both the customer and company’s perspective. In case a customer is made to wait for his turn this situation should be seen as putting pressure on the marketing expenditure of the company in order to counter the negative perception resulting due to waiting (Pullman and Rodgers, 2010). Call centres experience large fluctuations in demand over relatively short periods of time. However, most centres also need to maintain short response times to the demand. This places great emphasis upon capacity management practices within call centre operations. In concert hall designing, management makes all possible efforts to insure that the forecasted capacity is accurate and adequate for operations above the break-even point. However, in majority of concert halls even when these halls are operating at full capacity breakeven is not achieved and additional funds are requested. Krispy kreme, original had 8000 square foot of stores which made it difficult for them to remain profitable in many markets. They tried again with 1300 square foot stores, but these stores also failed because they hampered the visibility of seeing and smelling the donuts. Finally, the company achieved the idea store size of 2600 square foot, with a window to enhance visibility. Capacity management requires a huge amount of capital expenditure for capacity change. This expenditure is so high that it makes the company to resort to incremental changes rather than complete over haul. Therefore, it is imperative on the part of the operations manager to make the right capacity planning decision as the cost involved is so high that there is no room for error or room for adventure. If the organisations in the hospitality or tourism industry are not able to manage the capacity then it will result in lost sales and thus failure of the organisation. All operations should be arranged in such a way that there should be minimum waiting time in order to cater the needs of the customers (Hensley and Sulek, 2007). Hence, it is highly important for the hotels and restaurants to forecast the accurate demand and arrange the capacity accordingly. Capacity management is as important in service industry as it is in manufacturing industry. GAP ANALYSIS OF HILTON HOTEL: Gap 1: Management lacking customer orientation. Management might not be at a good position to understand the customers’ service requirement Management might be self-oriented and might not take staff on board when planning services. Gap 2: Improper protocols for offered services Staff not adequately trained to carry out the services Staff lacking a customer centred attitude Gap 3: Service planning deficient in proper customer demand estimation and capacity planning Staff overloaded with service request Staff overwhelmed with workload and therefore do not fulfill service requirements Gap 4: Not channel available to facilitate lateral communication Hotel’s promotions over exaggerate hotel’s services leading to false perception about the quality of services. Gap in the expected and delivered services create customer dissatisfaction, annoyance and most importantly negative word of mouth effect. The organisation should overcome all gaps in order to reduce the possibility of service failure. CONCLUSION: Thereby, after a detail description of the role of operations management on the hospitality industry, it is clear that in today’s business environment the practices of operations management are integral for business survival and growth. Growth should not only be in term of scale but also in term of profitability. Along with the manufacturing sector, the service sector is also taking considerable steps in order to increase the overall performance and service productivity. All the performance indicators or objectives i.e. service quality management, capacity management, revenue management, efficiency management or service productivity, are important in order to provide the customers with the high quality services and remain competitive in the industry. Operations management it is an important element in the process of organisation’s growth and success. The management of the organisation should give due consideration to the effective and efficient management of operations, as all activities and tasks of the organisation are directly dependent on this. Operations management provides the organisation with the important and essential tools which are required in order to improve the productivity of the organisation and fulfil the needs and demands of the customers. There has been considerable growth in the services industry in the past few years. This in turn has resulted in the creation of the whole new domain in the operations management i.e. services operations management. The organisations operating in the services industry are coming up with different methods and techniques in order to manage the operations and activities related with the providence and marketing of the intangible and immeasurable services (Johnston, 1999). All the concepts highlighted and their corresponding tools and techniques are all aimed at achieving the following set of objectives: Low cost operations Minimum wastage of resources Maximization of profit margin Sustainable business operations Optimal employee number Optimal capacity design Sustainable and comparable competitive advantage Streamlining of vital business processes Superior customer experience and satisfaction Organic supply chain Better resource planning and utilization Dynamic business operations All in all like all other business functions operations management illustrates it’s utility and conveys the importance of applying operations management principles in a hospitality business. It is highly important for the organisations in the hospitality business to effectively and efficiently manage the operations in order to survive in the industry and avoid losses and failures. Effective and efficient implementation of operations management in service industry can lead to reducing the possibility of service failure and allows the service companies to satisfy the needs of the customers. List of References Apte, U., Maglaras, C. and Pinedo, M. (2008). ‘Operations in the Service Industries: Introduction to the Special Issue’. Production and Operations Management, vol. 17, no. 2, pp. 235–237.  Armistead, C., and Clark, G. (1994). ‘The coping capacity management strategy in services and the influence on quality performance.’ International Journal of Service Industry Management, vol. 5, no. 3, pp. 5-22. Barratt, M., Choi, T., and Li, M. (2011). ‘Qualitative case studies in operations management: trends, research outcomes, and future research implications.’ Journal of Operations Management, vol. 29, no. 4, pp. 329-342 Hensley, R., and Sulek, J. (2007). ‘Customer Satisfaction with waits in multi-stage services.’ Managing Service Quality, vol. 17, no. 2, pp. 152-173. Johnston, R. (1999). ‘Service Operations management: return to roots.’ International Journal of Operations and Productivity Management, vol. 19, no. 2, pp. 104-124 Johnston, R., and Jones, P. (2004). ‘Service Productivity: towards understanding the relationship between the operational and customer productivity.’ Journal of Productivity and Performance Measurement, vol. 53, no. 3, pp. 201-213. Laudon, K., and Laudon, J. (2007). Management Information Systems: Managing the Digital Firm, New Jersey: Prentice Hall. Nadiri, H., and Hussain, K. (2005). ‘Diagnosing the zone of tolerance for hotel services.’ Managing Service Quality, vol. 15, no. 3, pp. 259-277 Pullman, M., and Rodgers, S. (2010). ‘Capacity management for hospitality and tourism: a review of current approaches.’ International Journal of Hospitality Management, vol. 29, pp. 177-187 Seth, N., and Deshmukh, S. (2005). ‘Service Quality Models: a review.’ International Journal of Quality and Reliability Management, vol. 22, no. 9, pp. 913-949. Sharabi, M., and Davidow, M. (2010). ‘Service Quality implementation: problems and solutions.’ International Journal of Quality and Service Science, vol. 2, no. 2, pp. 189-205. Vinod, B. (2004). ‘Unlocking the value of revenue management in the hotel industry.’ Journal of Revenue and Pricing Management, vol. 3, no. 2, pp. 178-190. Weatherford, L., and Kimes, S. (2003). ‘A comparison of forecasting methods for hotel revenue management.’ International Journal of Forecasting, vol. 19, pp. 401-415. Read More