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Example Management Essay

Farm Management

Assess the current capacity of ‘Holly Farm' and critically evaluate the optional ways of achieving the intended growth in the number of visitors, bearing in mind that capital investment is not available, although self-financing revenue earning ventures can be considered.

1. Introduction

This piece examines the case of Holly Farm, and the plan proposed by Gillian Giles to attempt to boost the number of visitors attending the farm. Holly Farm is currently quite a successful example of a farm that has diversified into visitor activities to boost its overall revenue levels. However, the farm has now reached a point at which visitor levels are relatively steady, and hence the farm is failing to grow its revenue significantly. This piece will thus investigate the current situation at the farm, including the current visitor numbers and the projected capacity for the farm. This data will then be used to determine the extent to which the farm can try to attract more visitors and the strategies that could be used to achieve this. This analysis will take place assuming that the farm is unable to raise further capital investment, other than through additional services that will also generate revenue.

2. Analysis and current situation

Car park capacity

 

Coach spaces

6

Car spaces

40

Average visitors per coach

35

Average visitors per car

3

Daily coach visitor capacity

210

Daily car visitor capacity

120

Total daily capacity

330

 

Current visitor numbers

April

May

June

July

August

September

October

Total

Visitors

1,200

1800

2800

3200

3400

1800

600

14,800

Days open

16

16

16

16

16

16

16

112

Weekend days open

8

8

8

8

8

8

8

56

Week days open

8

8

8

8

8

8

8

56

Average weekend day visitors

100

150

233

267

283

150

50

176

Average weekday day visitors

50

75

117

133

142

75

25

88

Daily car park capacity

330

330

330

330

330

330

330

330

Weekend utilisation

30.3%

45.5%

70.7%

80.8%

85.9%

45.5%

15.2%

53.4%

Weekday utilisation

15.2%

22.7%

35.4%

40.4%

42.9%

22.7%

7.6%

26.7%

Daily milking parlour capacity

200

200

200

200

200

200

200

200

Weekend milking parlour visitors

80

120

187

213

227

120

40

141

Weekday milking parlour visitors

40

60

93

107

113

60

20

70

Weekend utilisation

40.0%

60.0%

93.3%

106.7%

113.3%

60.0%

20.0%

70.5%

Weekday utilisation

20.0%

30.0%

46.7%

53.3%

56.7%

30.0%

10.0%

35.2%

The analysis of the current situation is based on the following assumptions:

  • On average, each coach visiting the farm will contain 35 visitors, and each car will contain 3 visitors. This is to account for the number of single parent families and families with only one child that may visit the farm.
  • The proportion of visitors by coach and by car are roughly proportional to the respective visitor capacity for coach and car visitors
  • The car and coach spaces cannot be used flexibly, i.e. coaches cannot park in the car spaces and vice versa
  • The milking sheds can support 80 people per hour for a period of two and a half hours, thus they have a daily capacity of 200
  • The visitors are spread roughly evenly throughout each month
  • 90% of visitors arrive after 12:30pm, and the visitors that arrived before 12:30pm at still there at this time. As such, around 1pm all visitors to the farm are at the farm and hence all need a car park space

The analysis indicates that the farm is currently very close to its maximum visitor capacity in July and August, with 80.8% and 85.9% capacity utilisation in the car park on these days. With 80% of visitors going to the milking parlour, the parlour itself is already over capacity on these days, with capacity utilisation levels of 106.7% and 113.3% respectively. It must be assumed therefore that some visitors that would have liked to have visited the milking sheds were unable to do so due to the capacity constraints.

3. Different scenarios

Two primary scenarios have been considered. The first is where the farm engages in widespread promotional activity designed to boost overall levels of attendance by 50%. The second is where the farm engages in targeted promotional activity designed to encourage school visits during the week, thus boosting weekday attendance levels by 50%. The analysis for these two scenarios is shown below:

3.1 Boost visitor demand by 50% on all days

Projected visitor numbers

April

May

June

July

August

September

October

Total

Visitors

1,800

2,700

4,200

4,800

5,100

2,700

900

22,200

Days open

16

16

16

16

16

16

16

112

Weekend days open

8

8

8

8

8

8

8

56

Week days open

8

8

8

8

8

8

8

56

Average weekend day visitors

150

225

350

400

425

225

75

264

Average weekday day visitors

75

113

175

200

213

113

38

132

Daily car park capacity

330

330

330

330

330

330

330

330

Weekend utilisation

45.5%

68.2%

106.1%

121.2%

128.8%

68.2%

22.7%

80.1%

Weekday utilisation

22.7%

34.1%

53.0%

60.6%

64.4%

34.1%

11.4%

40.0%

Actual average weekend day visitors

150

225

330

330

330

225

75

238

Actual average weekday day visitors

75

113

175

200

213

113

38

132

Total weekend day visitors

1200

1800

2640

2640

2640

1800

600

13320

Total weekday day visitors

600

900

1400

1600

1700

900

300

7400

Total visitors

1800

2700

4040

4240

4340

2700

900

20720

Daily milking parlour capacity

200

200

200

200

200

200

200

200

Weekend milking parlour visitors

120

180

264

264

264

180

60

190

Weekday milking parlour visitors

60

90

140

160

170

90

30

106

Weekend utilisation

60.0%

90.0%

132.0%

132.0%

132.0%

90.0%

30.0%

95.1%

Weekday utilisation

30.0%

45.0%

70.0%

80.0%

85.0%

45.0%

15.0%

52.9%

It should be noted that, for this scenario, as the capacity of the car park is limited to around 330 people per day, some visitors who wish to visit the farm on weekends in July and August will be unable to do so. The farm will thus have maximum average daily weekend visitor numbers during these months of 330. A plan should thus be put in place to manage capacity on these days, and ensure that visitors do not travel a long way only to find there is no space in the car park. 

3.2 Boost visitor demand by 50% for weekdays only

Projected visitor numbers

April

May

June

July

August

September

October

Total

Average weekend day visitors

100

150

233

267

283

150

50

264

Average weekend day visitors

75

112.5

175

200

212.5

112.5

37.5

132

Weekend days open

8

8

8

8

8

8

8

56

Week days open

8

8

8

8

8

8

8

56

Total weekend day visitors

800

1200

1867

2133

2267

1200

400

9867

Total weekday day visitors

600

900

1400

1600

1700

900

300

7400

Total visitors

1400

2100

3267

3733

3967

2100

700

17267

Daily milking parlour capacity

200

200

200

200

200

200

200

200

Weekend milking parlour visitors

80

120

187

213

227

120

40

211

Weekday milking parlour visitors

60

90

140

160

170

90

30

106

Weekend utilisation

40.0%

60.0%

93.3%

106.7%

113.3%

60.0%

20.0%

105.7%

Weekday utilisation

30.0%

45.0%

70.0%

80.0%

85.0%

45.0%

15.0%

52.9%

In this scenario, the capacity of the car park does not represent a critical factor, as the farm will never attract more than 330 visitors per day on average. This will thus help relieve the problems associated with an across the board increase in visitor numbers.

4. Suggestions and validation

The results from the first scenario show two main issues with Gillian's desire to boost visitor numbers. The first is that boosting levels of demand will cause capacity issues in the car park in the busy months of June, July and August. This will create issues for the farm as it may result in visitors arriving and having to be turned away, which could create a negative image for the farm. In addition to this, boosting the number of visitors during these peak periods will result in the milking sheds becoming very congested with long queues, and potentially large numbers of people unable to visit the sheds. As the carousel appears to be a very important attraction, if people are unable to visit it they may again become unhappy and this could damage the reputation of the farm as well as causing problems for the employees running the attraction (Waters, 1999, p. 85).

In terms of the actual impact on visitor numbers, the 50% increase in demand across the board would be expected to boost visitor numbers by around 40%, from 14,800 to 20,720 per annum. In contrast, the 50% increase during weekdays would boost visitor numbers by around 17%, from 14,800 to 17,267 per annum. As such, the 50% increase across the board would be more beneficial in terms of total numbers, but would also likely cost more to implement, and would not provide a full 50% increase in visitor numbers. In order to achieve this 50% increase, the best option would be to implement both the general marketing scheme to increase overall numbers, and the targeted partnership scheme with schools to boost visitor numbers during the weekdays. This would help achieve the 50% target within the existing capacity constraints. At the same time, the farm will need to carry out targeted analysis of the current levels of car park usage, in order to determine whether it should target more coach groups or more family groups depending on the capacity utilisation of the coach and the car spaces.
However, the best way to achieve the goal of a 50% expansion in visitor numbers whilst avoiding the potential issues with capacity and overcrowding the in the milk sheds as discussed above would be to address the constraints the company faces. According to Huefner (2011, p. 40), “companies of all sizes are limited by any number of constraints: capacity of their plants and other physical structures, distribution channels, rules and regulations, size and education of the workforce, and access to raw materials, to name a few”. As such, addressing and overcoming these constraints is a vital aspect of operations management, and enables companies to improve their profitability without having to invest additional capital.

One of the main ways this could be achieved for the farm would be to improve capacity management through car park flexibility. Specifically, the farm should look to arrange the spaces in the car park so that coaches can park across two or three car parking spaces in order to boost capacity. This is because two or three cars will bring an average of around nine visitors, but a coach can contain 35 visitors. As such, by allowing some car spaces to be used for coaches, the farm could focus on attracting more coach groups at the weekends, and thus boost the effective capacity of the car park. This will play a vital role in boosting overall capacity, as parking is a critical factor in determining travel destinations (Nurul Habib et al, 2012, p. 154). This would also help the farm profit more by offering discounted entry fees to coach tours, as well as potentially running coaches from larger nearby car parks where other visitors could park and then ride to the farm.

Another important tool that could be used to boost revenues and visitor numbers is to engage in superior demand management, through pricing structures. According to Hwang et al (2010, p. 465) the use of pricing for demand management plays a key role in the effective management of demand levels, and thus maximises potential revenue levels. In this case, the farm could offer half day visitor structures, whereby people who arrive later, after 4pm, when around 20% of visitors have left, will be offered discounted prices. There could also be discounted prices offered to people who arrive at 11am and stay only for a couple of hours, thus leaving before the large groups arrive. This would help ensure that more visitors can attend during quieter periods. Similarly, setting higher prices at the weekend and lower prices during the week could help ensure that more people came on Friday and Monday, when the farm is quiet, instead of at the weekends when it is busy.

These efforts could be combined with revenue management techniques which use differential pricing strategies and capacity allocation tactics to maximise overall revenue levels for the farm, as well as visitor numbers (Deng et al, 2008, p. 737). In addition to this, the farm could boost capacity by opening new attraction nearby such as a go kart course. This would create funds to expand the car park and encourage people to visit both attractions at once. Different tickets could be sold for people who want to go on the go kart in the morning and visit the farm in the afternoon and vice versa, in order to smooth out demand levels across the two attractions.

These efforts would improve capacity utilisation in the car park and boost the overall visitor numbers, but efforts will still be needed to address the issue of queuing for the milking shed, and ensuring capacity is smoothed in this area. One of the main ways to achieve this would be for each visitor to the milking shed to come to the shed when they first arrive and book a time slot for their viewing. This would help customers avoid having to queue and reduce customer discontent due to the length of the queue (Xu et al, 2007, p. 971). It would also ensure that customers were not left waiting until the end of the day and then frustrated that the milking shed was not open for them to see the milking. This approach would thus help reduce the queues in the milking shed and hence support the increase in visitor numbers for the farm as a whole.

References and Bibliography

  1. Deng, H. Wang, Q. Leong, G. and Sun, S. (2008) The Usage of Opportunity Cost to Maximize Performance in Revenue Management. Decision Sciences; Nov2008, Vol. 39 Issue 4, p737-758
  2. Huefner, R. (2011) A Guide to Integrating Revenue Management and Capacity Analysis. Management Accounting Quarterly; Autumn2011, Vol. 13 Issue 1, p40-46
  3. Hwang, J. Gao, L. and Jang, W. (2010) Joint demand and capacity management in a restaurant system. European Journal of Operational Research; Nov2010, Vol. 207 Issue 1, p465-472
  4. Nurul Habib, K. Morency, C. and Trépanier, M. (2012) Integrating parking behaviour in activity-based travel demand modelling: Investigation of the relationship between parking type choice and activity scheduling process. Transportation Research Part A: Policy & Practice; Jan2012, Vol. 46 Issue 1, p154-166
  5. Shim, J. and Siegel, J. (1999) Operations Management. Barron's Educational Series.
  6. Waters, D. (1999) Operations Management. Kogan Page Publishers.
  7. Xu, S. Long, G. and Jihong, O. (2007) Service Performance Analysis and Improvement for a Ticket Queue with Balking Customers. Management Science; Jun2007, Vol. 53 Issue 6, p971-990

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