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Impressive burgers started 10 years ago as a fast food chain and now it has entered from the past one year with changes in delivery, format of product and service supply. Therefore to gain an advantage in the highly competitive market and expansion of operations one needs to study the same from the operations point of view.
The three dimensions of operations are: product, process and supply chain and the parameters in which it operates is - time, cost, quality. Thus any decision of the management regarding the product, process and supply chain need to be critically examined before concluding on success or failure (Chambers, Johnston, & Slack 2007; Shim et al. 1999).
In terms of the competitive advantage theory the decision regarding operations leads to strategic competitiveness in industry .Operations management can thus be evaluated to formulate following decision making for impressive burgers ltd:
Product and service design: the design of the product along with product line decides whether the product or service is favorable to the consumer. (Waters 1999)
Cost or cost leadership: leads to the product or service being delivered at low or economical costs without a strain on profits. (Schroeder 1993).
Quality the level of quality should be such that it delivers good products having better serviceability and response from the consumer regarding quality ,which also matches price and service. (Stevenson 2008)
Agility how well the firm is able to respond to orders within and outside the coverage area. (Stevenson 2001)
Flexibility how fast are these changes in burgers and related number of stores/outlets are implemented. (Krajewski, Malhotra, & Ritzman 2006)
Inventory stock and supplies maintenance
Supply chain the chain of activites and people involved between order and delivery
Service after sales service
Various tools to critically evaluate the above decisions are:
Queuing Theory Queuing Theory tries to answer questions like e.g. the mean waiting time in the queue, the mean system response time (waiting time in the queue plus service times), mean utilization of the service facility, distribution of the number of customers in the queue, distribution of the number of customers in the system and so forth. (Schroeder 2005)
Inventory Control Inventory control means keeping the overall costs associated with having inventory as low as possible without creating problems. This is also sometimes called stock control. (Schroeder 2005)
Economic Order Quantity (EOQ). An inventory-related equation that determines the optimum order quantity that a company should hold in its inventory given a set cost of production, demand rate and other variables. This is done to minimize variable inventory costs. (Reid & Sanders 2004)
Newsvendor Model used to determine optimum inventory levels, characterized by fixed prices and uncertain demand
Optimal Order Policies (ROP) a stocking situation where optimal order depends upon the low pricing available and on ROP -re order point (demand per day x lead time for a new order in days)
Forecasting demand forecasting
Statistical Process Control (SPC)
Critical Path Method (CPM/PERT) Program Evaluation and Review Technique; Critical Path Method
The following strategy has been applicable by the company:
Increase of Menu options
Further increase of three options on burgers
Thus one can safely state that the company has invested time and energy on product line extensions .The product mix has developed in the hope that more customers can be expected ,marketing area increases ,market reach enhanced whereas market timing could be a lot better in other markets where the outlets are to be opened.
The company has come under a question mark as to increase the sales outlets and at same time leave the decisions of agility, quality, and flexibility and supply chain undecided. This causes the firm to be untactical in gathering the best possible use of resources when its market is expanding, and also the firm seems to be losing on strategic evaluation of the given scenario of market expansion and customer retention. There are a whole lot of policies and statistical measures that can determine the present and future scenarios that can readily point the decision to be taken for supply chain which is pertinent since the market has expanded and customers are increasing .The firm does not have much time to implement such decisions but safely over a period of six months if results do not show positive in above regard then it is highly likely that the firm shall show a loss in statement of financial position which is a setback. The expansion strategy is thus loose and wide to interpretation, with little focus on direction and channelization .The management would have been wise enough to expand, but not in areas having high level clients without after sales services .Customer retention is part of management and to best achieve this is through quality assured services ,here the staffing and manpower /human resources are being improperly trained .Customer loyalty and brand retention are being hampered by keeping such staff ,therefore a decision to reorganize the work force with the channel head or the manager HR for each of the outlets is very important .Decisions such as these have been overlooked and could be the reasons for the present debacle. Thus the lacunae on part of management in securing a foothold in burger market are many and the strategic fallout of already taken decisions might have the influence on further business decisions and profitability. (Greasley 2007)
2. Discuss the reasons behind the problems the company is facing and make suggestions for rectifying the situation :-
The problems being faced by the firm are many and numerous and therefore we need to examine them closely so as to get to know these better for it will help the firm and its upgradation .These problems weren't just because a decision regarding expansion wasn't been made and once the management decided the expansion happened. From this it is clear that it is policy that backs expansion and as in other areas the policy decisions(HR training and operating strategy, cost strategy) were simply ignored .The management thrust and drive were simply not there, could it be because of some lack of trust in managers among taking the firm forward?
Also this lends credence to the fact that there were lot of unruly staff, rude and impolite and which lends itself to the belief that lower managerial staff are not following the guidelines set up by the founders and top management. This could be due to two factors that the line managers which manage the function provided to them like HR ,staffing,payroll,finance,sales,marketing are actually not older managers and might be new recruits .The second one being that the HR policies might have taken a setback with few experienced people in top management leaving the organization. (Greasley 2007)
The organization itself demarcated many aspects and issues itself .One of them could also be that the payments and raise in salaries aren't that well and that payroll manager might not be able to communicate this to his /her higher management?
There is also the distinct possibility that the firm has done a review only after 10 years under the aegis of an expert opinion and the manager motivation is slack to undertake some sort of rectification on issues that are glaring?
There is also the question of ownership vs managerial commitment towards the retail chain .There is expected an influence from the family owners of the business wanting to run the business their way whereas the management might not at all be along the way the owners think indicating manager discontent ?Due to reason of expansion of outlet it is expected that all these issues were hidden from the management and they came up quickly in that much more intensely that the firm in 6 months is contemplating a demise of sorts? Probably the hierarchical structure or chain of command, matrix structure of organization could be leading to improper communication and failure in communication.
Apart for the above reasons there is also the aspect of change ownership and change management .Since the new direction and expansion is being provided there are all the possibilities that change process wasn't included in the expansion strategy .It must have been conceived that the product line extension was only the strategy with the firm/company and productivity might have been applied not with care influencing inflexibility and mismatched operations.
The product is standardized no doubt but probably the sales and marketing were better than the new variation and therefore productivity could have catered to the aspect of generating sales and not to the tastes /preferences of the consumer.
Conducting a lifecycle analysis for the burger one can rationalize that the product is in its maturity stage, since the market is mature and knows the product leading to better sales and turnover. Whereas in other markets /areas it is only been introduced leading to different maturity /lifecycle implying that there would be difficulty in accepting the product initially. (Greasley 2007)
Also the aspect of failure to adhere to incremental variations in product, differentiation of product or service might have lead to problems encountered in employees getting rude when the customer is impressing for no change or change in service time.
Failure at establishing good capital investments strategy and as well as the HR resources strategy can lead to a failure of capacity utilization and wastage of resources by overstocking.
The other areas where the setbacks are being seen are increase of service time and therefore the processing activities are showing more service time than normal.
Profits have dwindled whereas turnover has increased .This could imply that cost of operating activities has increased such that net profit is decreasing whereas overall revenue increases. This in turn could be possible from the fact that 20% more is being stocked at outlets leading to higher inventory costs and services cycle and payments credit and debit cycle becoming mismatched .The financial operations are bound to have been negatively affected since the company does not also have a supply chain management system .A supply chain management system implies a sequence of activities, processes, functions needed for producing and delivering a service or product. For e.g. if the delivery of burger is on day to day basis and customers are serviced both at restaurant and within 4 minutes in nearby coverage area then the demand and product request should be able to be completed in real time as the order is placed. Leads and lags in service delivery imply faulty processes and operations are hampered, staff morale goes down, customers tend to become irate. (Greasley 2007) Also there is the bigger question of wastage from stocking too much of the raw material bread, sugar ,gas, sauce etc. Most of these are perishable goods and require cold storage and where these are not provided at outlets wastage occurs .Since this is a fast food outlet there needs to be an attractive ad campaign alongwith sound marketing strategy .The consequent failure at not keeping customers happy with service of burgers might have made faulty the brand image. This might lead to problems in future.
Possible solutions for halting the debacle possible at impressive burgers could be :
Acceptance sampling (for product) important form of inspection applied to lots or batches of items before or after a process, to judge conformance with predetermined standards..
An efficient and proper working Supply Chain Management System ,which should be able to address the following issues :-
Customer needs, forecasting of demand (Day to Day, Weekly and monthly), designing, processing (controlling and directing the work and its quality), inventory, purchasing, suppliers, location and logistics. Here logistics imply the time related positioning of resources, managing product life cycles (burgers), supply chains and resultant efficiencies.
Company can use backward and forward scheduling to plan the use of resources in production and resources in sales and distribution of services of burgers.
A proper and efficient HR team and channel outlet managers are therefore required to dispel such miscommunications between the top management and local mangers, outlet owners that could be hampering the success of the retail chain.
Use of after sales service which seems to be quite negligible and as given the company is into burger manufacturing ,therefore it becomes all the more important since customers would be able to highlight their comments on service very easily and this might affect the morale of employees as well as form customer opinion on the burgers ,which could be negative and requires effort and training on part of managers and outlet owners for after sales service to be effective.It certainly is a cost effective way of getting to know the customer better and at sametime enhancing the quality of service.
Use of expert analysis in gathering the data and facts for application of SPC statistical process control and PERT-CPM analysis.CPM critical path analysis could be undertaken for following issues at Impressive Burgers Ltd:-
Delivery of stocks/inventory, delivery and management of credit terms with suppliers, delivery of product to end - consumer (burgers) at restaurant and at vicinity through available human resource.
3. Considering the effects on the operations, identify ways in which the overall
Operation could be improved and expanded further.
The influence of Human Resources in this regard in expanding the product line and maintaining the client base is utmost importance for the company, since considering all the facets of the operations one can come to the conclusion that this might be a temporary phase for self determination in the company and outlet .It could be arising from a small issue at mid management level since it is affecting all the other outlets uniformly .The profits are dwindling and turnover is increasing alongwith client base ,marketing and branding strategy is successful yet the operations strategy is not so hopeful. Therefore the strategy adopted by the firm should be such that mid management is motivated and given HR training so that the employees find confidence and miscommunication among channels and outlets diminishes. (Krajewski, Malhotra, & Ritzman 2006)
The second aspect is of applying a Supply chain that is hitherto unavailable.This gains importance since the inventory and other costs of operations would need to go down if the firm has to obtain a satisfactory profit level against the turnover it is making .This shall also be important in realizing economies of scale since a better and efficient inventory control will diminish chances of wayward profits and the scale of operations can be expanded further.
Proper Training of Employees is impertinent since the situation might go out of control and requires utmost care and attention of the manager at top level.
It needs to be emphasized that the employees might be planning an unrest and therefore there needs to be a proper payroll and incentive scheme built into the compensation scheme so as to boost employee morale .There could also be a pension fund and ex gratia for retired employees .The company could go for shares and open offer and also provide ownership to employees in shares of the company whereas this could be highly risky. The contents of such an evaluation package needs to be worked out for benefit of the employees.
Change Ownership (change agent)
Job Designing Design aspect requires strategic planning and may fall under the domain of Organizational strategy and senior management, also
Design aspect requires the existing system to be improved or replaced by a better system for this you should always focus on the word Productive. This word reflects the idea of adding value either to the manufacturing or the services System or to be more precise improving the operation system. Job design and services design will be important in realizing the goals of the company by allowing it to have available options to design and implement various HR strategies for streamlining operational strategy along the lines of maximum profit in as less a time as possible .The firm is really short of achieving its goals as the time frame considered for changes is six months as against an experience of more than 10 years .Therefore the management should hire expert opinion for the same. (Reid & Sanders 2004)
Capacity planning is the analysis of what you are capable of producing versus what your expected demand will be.It takes place at multiple levels and is a lengthy process.Initially a Master Production schedule is prepared for the given month and capacity planning needs to be used to balance the workload. Capacity should have already been analyzed in business planning session. Capacity at operating level needs to be formulated at a percentage level and capacity should have been measured against actual demand and not actual production.In the short term capacity can be analyzed for discrepancies with demand weekly. There are three strategies for capacity planning:-
Lead, Lag and Match strategy.
The lead strategy focuses on adding capacity in view of expected increase in demand and tries to overtake the competition by taking away customers from market share. The lag strategy implies the increase in capacity only after the increase in demand has been confirmed .It decreases risk of waste yet there could be loss of customers .matching strategy is regarding adding capacity to change in demand in lots or batches and is more moderate strategy.
It does look from the increase in capacity at outlets that the firm might have increased capacity from the lead strategy and did reap higher turnover yet the profits dwindled and also there have been increase in irate customers .It goes to indicate again that such strategies aren't helpful when the root cause isn't clear /identified.Also this was an exercise by management to delve upon the work of the outlets and figure out the problem areas before going for a bigger change since the management hadn't brought about a change since last 10 years and would have now got to know the barriers in change are mainly from the staffing and inventory planning ,HR training and other grey areas needing some more delving upon.
Just in Time Production Systems
Just-in-Time production is making what the customer needs, when it is needed, in the quantity needed. This must be done using the minimum resources of manpower, material, and machinery. This methodology is highly successful in organizations where the lead and lag times are smaller than the operations and therefore it requires and maintains success in delivery of small operations. It is a pull system of production and allows the production of services at just the correct time, correct quantity and what is required. An inventory strategy in which products are delivered at the time they are needed rather than on a set delivery schedule .This requires a carefully planned scheduling and flow of resources. Usually the information exchange with suppliers is happening through EDI electronic data interchange to help ensure every detail is correct.
Total maintenance cost
This is a financial value indicating the direct and indirect costs to the company of the total value of operations (at least operating cost of maintenance).if products are produced just in time then these cannot be held due to poor maintenance. This is generally achieved through the operator participation in all maintenance and outlet activities. In three areas of quality, maintenance and set up there should be maximum participation by operators in routine activities while saving specialist skills for the more difficult tasks and for coaching operators/outlet managers .Thus here as in the beforesaid the managers at lower level have to bring the concept of ownership for change and cost maintenance for better performance of the outlets. This also contains the aspect of breakdown maintenance and preventive maintenance cost. Breakdown maintenance implies a policy that involves dealing with problems as they occur and attempting to reduce their impact on operations and preventive maintenance implies a policy that involves using such measures as inspecting, cleaning, adjusting, and replacing worn parts to prevent breakdowns from occurring in the first place. Preventive maintenance is periodical and can be scheduled to avoid interfering with production.
The objective here is to find a balance between the total maintenance costs on one hand and both the types of costs on the other. If preventive cost maintenance is unavailable the breakdown cost can be enormous. Also here the hidden costs must be factored in .But after a certain level of preventive maintenance costs exceeds the benefit. Employees will after a routine check ups get to know the machines and their functioning better and age and condition of the machines are important when considering preventive maintenance cost.
Just as cost leadership is important to an organization, in this company due to frequent lags and problems associated with operations it is important the following method /model of determine the cost of maintaining the activities added in operational structure be carried out .This will lend credibility to the process of management in operations and finance. Given the above suggestions the company is bound to achieve the targets it has set out to achieve for itself.