The History Of Optimising Organisational Capacity Business Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

According to the author in the hospitality industry the aim of any organisation depends on its staff people. The staff help the organisation in outlining its success. To achieve the customer satisfaction and the organisation goal staff need to possess the right set of skills.

While they possess the skills required, continuous training and development is also needed to upkeep with the changes of the dynamic world.

The report aims at identifying the shortfalls of organisations in terms of the skills

required to carry out a particular job and design the training need analysis to bridge the gaps and reap benefits.

The object of investigation is the Radisson Edwardian Kenilworth Hotel. It is a privately owned successful luxury group with 14 hotels across London Guildford and Manchester. The Radisson Edwardian Kenilworth hotel is a perfect combination of stylish and contemporary approach to meet the needs of customers as it termed as the most beautifully decorated hotels.

The essence of the Radisson Edwardian is the 'Yes I can" philosophy and its great choice of concept rooms. It aims at providing their employees with the training to help them attain self empowerment and meet their objectives and targets. It also aims at the profit maximisation.

The Radisson Edwardian is associated with the Carlson companies which s one of the world's largest hospitality businesses with a turnover of more than $22bn p.a. in 140 countries. This partnership gives the group access to the worldwide marketing and the UK hospitality industry, with its ever-developing range of products and services, has seen vast growth in recent years. The high streets of towns are now as much a forum of branded restaurants and coffee houses as they are for general retailers.

Whilst there have been substantial technical improvements, and conditions in the industry may have improved over what they were in the past, the relative status of the industry as an employer, compared with other employers has not improved significantly. Admittedly at the top of the scale, some highly skilled workers such as chefs, who are in short supply, can command very high incomes, hut at the other end of the scale, kitchen porters and cleaners, and for example would earn considerably higher wages for broadly similar work in other employment sectors.

This is in spite of efforts being made by some of the larger companies in the Industry to improve conditions. Among the reasons must be the fact that most employees only generate around 40,Xk) per year (based on data taken from Trends and Statistics 2004, British Hospitality Association, 2004) for their employer and of this between 10 and 40% will be taken up by labour costs, the remainder going towards material costs, Property costs, fixed costs and profit. With few exceptions, catering services do not lend themselves easily to mechanization, although there are now signs that significant changes in productivity may be forthcoming in the future. As a result the industry is heavily labour-intensive and labour costs dominate many profit and loss accounts.

Task 1

Capacity planning is a long-term strategic decision that establishes a firm's overall level of resources. It extends over a time horizon long enough to obtain those resources--usually a year or more for building new facilities or acquiring new businesses. Capacity decisions affect product lead times, customer responsiveness, operating costs, and a firm's ability to compete. Inadequate capacity can lose customers and limit growth. Excess capacity can drain a company's resources and prevent investments in more lucrative ventures. When to increase capacity and how much to increase capacity are critical decisions.

There are basic strategies for the timing of capacity expansion in relation to a steady growth in demand.

Capacity lead strategy. Capacity is expanded in anticipation of demand growth. This aggressive strategy is used to lure customers from competitors who are capacity constrained or to gain a foothold in a rapidly expanding market.

Capacity lag strategy. Capacity is increased after an increase in demand has been documented. This conservative strategy produces a higher return on investment but may lose customers in the process. It is used in industries with standard products and cost-based or weak competition. The strategy assumes that lost customers will return from competitors after capacity has expanded.

Average capacity strategy. Capacity is expanded to coincide with average expected demand. This is a moderate strategy in which managers are certain they will be able to sell at least some portion of the additional output.

How much to increase capacity depends on (1) the volume and certainty of anticipated demand; (2) strategic objectives in terms of growth, customer service, and competition; and (3) the costs of expansion and operation.

Task 2

Capacity can be increased incrementally or in one large step as Incremental expansion is less risky but more costly. An attractive alternative to expanding capacity is outsourcing, in which suppliers absorb the risk of demand uncertainty.

The best operating level for a facility is the percent of capacity utilization that minimizes average unit cost. Rarely is the best operating level at 100 percent of capacity--at higher levels of utilization, productivity slows and things start to go wrong. Average capacity utilization differs by industry. An industry with an 80 percent average utilization would have a 20 percent capacity cushion for unexpected surges in demand or temporary work stoppages. Large capacity cushions are common in industries where demand is highly variable, resource flexibility is low, and customer service is important. Utilities, for example, maintain a 20 percent capacity cushion. Capital-intensive industries with less flexibility and higher costs maintain cushions under 10 percent. Airlines maintain a negative cushion--overbooking is a common practice! This shows the best operating level--in this case, the optimal occupancy rate--for three different size hotels. Of the three alternatives, the 500-room hotel has the lowest average unit cost. This is the point where the economies of scale have reached their peak and the diseconomies of scale have not yet begun.

High levels of output tend to cost less per unit. Called economies of scale, this holds true when:

Fixed costs can be spread over a larger number of units,

Production costs do not increase linearly with output levels,

Quantity discounts are available for material purchases, and

Production efficiency increases as workers gain experience.

The electronics industry provides a good case example of economies of scale. The average cost per chip placement for printed circuit-board assembly is 32 cents in factories with a volume of 25 million placements, 15 cents in factories with 200 million placements, and only 10 cents in factories with 800 million placements.

Economies of scale do not continue indefinitely. Above a certain level of output, diseconomies of scale can occur. Overtaxed machines and material handling equipment break down, service time slows, quality suffers requiring more rework, labour costs increase with overtime, and coordination and management activities become difficult. In addition, if customer preferences suddenly change, high-volume production can leave a firm with unusable inventory and excess capacity.

Long-term capacity decisions concerning the number of facilities and facility size provide the framework for making more intermediate-term capacity decisions--such as inventory policies, production rates, and staffing levels. These decisions are collectively known as aggregate production planning or just plain aggregate planning.

Task 3

Capacity planning is a dominant issue when developing hospitality-operations strategies. From relatively small-scale settings such as restaurants to massive venues such as cruise ships and theme parks, managers face the same questions, such as: How can the service create the most revenue from a limited space and still keep the guests satisfied?; Should the business promote off-peak use at discount prices, add more capacity (at the risk of making guests feel crowded), or target marketing campaigns to those customer groups that might take advantage of underused facilities?; and Should the firm implement automated reservation technology to control queues for a ride or attraction

Depending on the characteristics of the hospitality operation, those capacity decisions determine other measures of service management such as productivity, growth, change, and competition. (1) The well-known core problem for the service industry is that demand for services must be met as it arises, because it cannot be inventoried. Demand variability creates alternating periods of idle service workers or facilities and consumer waits. (2) Therefore, management must trade off the cost of idle resources versus the potential cost of customer dissatisfaction with long waits. Dissatisfied customers hurt the long-term profits and success of service firms for the following reasons: (1) failure of the customer to return for future business; (2) reduction in the customer's frequency of visits; and (3) negative word-of-mouth advertising. (3) Thus, managers must consider the long-term effects of their capacity strategies. In this paper we examine the issue of capacity planning in a service network, namely, at a popular U.S. ski resort.

Service networks are businesses that offer multiple services and activities at one site. Hospitality examples include theme parks, casinos, cruise ships, airlines' multimedia entertainment systems, and exercise facilities. Service networks face more-complex capacity-management decisions than do services with a single service offering. This complexity occurs due to intra-activity demand variation (e.g., the popularity of different activities or restaurants on a cruise ship varies from day to day), the number of activities and servers available at any given time, and physical constraints such as space limitations. In a service network, customers pay one fee to enter the site, pay per activity visited on the site, or both. Once the customer enters the site, the individual either chooses or is directed (e.g., as part of a package tour) to participate in any number of activities within the system. Customers randomly arrive at the activities, and each activity has a different duration for each customer. As a result, lengthy waits can occur at each activity depending on the service times. This problem is apparent at ski resorts, where patrons must queue up to wait for the various lifts (not to mention the resort's various food-service outlets). The goal, of course, is to maximize the number of customers entering the site (e.g., amusement park) or paying for facilities within the site. On the other hand, customers would like to minimize their waiting time during any encounter (e.g., a ride on the tallest roller-coaster). As Lovelock aptly put it, "nobody wants to be at Disney World on a record-breaking day for ticket sales." (4) Service networks offer distinctive opportunities for matching supply to demand within the system. Assuming that managers have some influence over external demand through their marketing efforts, the operations area is typically responsible for reallocating demand within the system and matching supply to demand on a real-time basis (e.g., by moving patrons from one attraction to another). Although it is possible to effectively manage capacity through a single strategy or perspective, an optimal strategy would require an integrated set of strategies representing both demand and supply perspectives.

Assuming that (a) hospitality firms want to maximize capacity use for a given level of customer satisfaction in a constrained-capacity environment, (b) customer satisfaction is directly related to overall waiting time in the service system, and (c) management has the capability to manage certain aspects of supply and demand, the research question driving our investigation is:

What is the optimal combination of supply and demand-management strategies that provide for maximum capacity in the service system while operating within a specified peak waiting-time limit for customers?

Our primary objective in this study was to evaluate and recommend the appropriate alternatives for capacity management. By examining all possible combinations of alternatives, we determined the capacity strategy that maximizes the percentage of customers experiencing a wait time of less than ten minutes. Though our investigation is based on a ski resort, our findings have implications for any hospitality firm considering some combination of capacity expansion or demand-management strategies. We use a service-standard metric--the proportion of customers who experience a wait of 10 minutes or less--to evaluate the effect of the capacity and demand-management strategies. Our informal discussions with skiers suggest that a 10-minute service standard is reasonable.

Simulation Modelling

For studying hospitality businesses under many different capacity-management scenarios, simulation modelling is a useful tool. Simulation provides the analyst with a method for modelling actual customer demand and server-variability and -shift patterns, evaluating the effects of different strategies in a simulated environment before implementing the idea with real people, and generating useful performance measures and reports such as employee-use rates, wait times, and machinery-breakdown times. Many of the current software packages have graphic-output capabilities for modelling typical hospitality settings such as restaurants, airports, cruise ships, and theme parks. For example, the analyst can watch how a restaurant might perform throughout an evening in both front- and back-of-house areas when a certain promotion increases customer traffic by 10 percent or moves 25 percent of orders from the sauté station to the grill. Simulation software ranges from a simple and inexpensive package, Roller Coaster Tycoon (a theme-park simulation game), to the highly customizable Service Model, which incorporates graphics and metrics for most hospitality applications.

Task 4

Performance, in the context of organization, is not only a broad concept which has been used synonymously with productivity, efficiency, effectiveness, and more recently competitiveness; it has also been a subject of study for social scientists from a wide range of disciplinary perspectives. Labour productivity, for example, has long been the concern of (labour) economists ever since Marx and Smith. Within this perspective, how to extract labor from labor power, one of Marx's most fundamental insights, is seen as a basic problem of management (Harrison, 1997, p364). More recently efforts have been made by HRM theorists to try to establish a causal link between HRM and performance. This has led to a growing number of studies which examine the potential contribution that good human resource policy can make to improving organizational performance, so much so that the impact of human resource management on performance has become the dominant research issue in the field' (Guest, 1997, p263). The studies of HRM and performance are mostly cross-sectional and quantitative in nature, and contained in differing theoretical frameworks. While these studies provide us with colorful opposing findings and rich competing theoretical perspectives, the emerging field of HRM on performance suffers from a lack of unity in theory and inconsistency in research methodology.

Increasing productivity through in-house skill training and functional flexibility or by training sources

Training is a management tool used to develop skills and knowledge as a means of increasing an individual's and ultimately an organization's current relations of efficiency, effectiveness and productivity. Employee development, training theorists argue, is another management tool, but the investment is mainly made for the future performance of the individual and organization, and is connected to organizational objectives for the future. The tool is used to enhance the skills and abilities which the individual needs to be able to move along with the organization and to pursue a career in line with its evolving needs.

Training and development of employees, it has been widely argued, is essential to organizations which seek to gain competitive advantage through a highly skilled and flexible workforce as a major ingredient for high productivity and quality performance. A more highly skilled workforce may increase productivity by producing a higher level of output or by producing output of greater value. A well-trained and motivated workforce may cut costs of supervision as they possess the skills to inspect their own work. They can minimize the downtime of the machinery because they are able to diagnose faults on machinery and are even able to repair them. A skilled workforce can also improve the firm's functional flexibility since they are much easier to retrain due to their relatively broad knowledge base of multi-skills. A technically competent workforce will also give management confidence in utilizing new technology and provide employers with more scope for rapid adjustment to changes in production methods, product requirements and technology. In today's intensified international competitive climate, efficient production even of technically unsophisticated products benefits from technically advanced machinery operated by a workforce with a high level of skills' which is in turn a pre-condition for successful selection of appropriate machinery and its efficient utilization' (Steedman and Wagner, 1990, p133). Finally, a force of well-trained and responsible office workers can improve their company's productive efficiency through maintaining good relationships with customers and suppliers, organizing smooth flows of production materials and keeping correct records to ensure that the products are delivered in time and to the customer's satisfaction.

Improving productivity through soft HR policies or by work intensification and job insecurity?

Job satisfaction, employee commitment and motivation have often been regarded as important HR dimensions to organizational performance. Employees, enthusiasts of the 'soft' model of HRM argue, should be treated as valued assets, a source of competitive advantage through their commitment, adaptability and high quality (of skills, performance and so on) (Guest, 1987). 'Employees are proactive rather than passive inputs into productive processes; they are capable of development', worthy of trust' and 'collaboration', to be achieved through participation' and informed choice' (Beer and Spector, 1985). The stress is therefore on generating commitment via communication motivation and leadership' (Storey, 1987, p6), 'if employees' commitment will yield better economic performance' (Storey, 1995, p35).