April 05, 2009

Operations Management – Lesson 6


Examples of the following practices and justifications for reasons of the their adoptation

  1. Level of Capacity Management
  2. Chase Capacity Management
  3. Yield Management
  4. Queue Design


Level of Capacity Management

GBS Consulting

http://www.consultant-news.com/article_display.aspx?p=adp&id=2367

IBM sets Annual Revenue Targets which each Business Units needs to develop a Strategy and Plans to faciliate  achieving such targets.

Taking into account the Growth factor (currently declining) , high staff turnover, more demand for experienced/skilled specialist - this is recipe for a complexed Resourcing Model.

What can be done is the following;

  1. Create a Delivery Pool based on core competencies and skills
  2. Align the level to the 70% Utilisation level
  3. Apply 65-25-10 rule
  4. 65% of resource base to be full time employed, whilst 25% subcontractors (have a strategic Alliance with a few) and 10% imported resources (from other IBM countries)
  5. Implement Resource Deployment Environment where local RDM's share their resources plans and share shortages and availability.

Advantage of the above is that you have a manageable exposure on the costs as these fixed costs/resources can be deployed on a 65% resource allocation rule.

Disadvantage - whenever lack of local resources becomes an issue, Resource Developement Manager will have to offer more expensive import resources to the PM, which depening on the project could introduce language issue or even jepordise project financials (increased costs : travel-accomodation-meals-allowances-taxi..)

Alternatively - after having trained them, the using of low cost interns can be deployed on higher skilled roles which increases the pool of resources at minimum costs, this brings more balance into the Delivery Pool, as we you will be mixing

  1. "experience/mature/skilled" with
  2. "interns/young/hungry to learn/fresh ideas"


Level of Capacity Management

Summer season means that restaurants have higher increased visit number, hence higher RevPASH (Revenue Per Available Seat Hour), which means need for more serving staff.

This has opened the market for Agencies who specialise in seasonal staff and offer such services. The majority of such workers will be students seeking summer jobs.

More extreme is during harvesting time when own labor force is either not willing nor enough for the increased work, hence import labor from former CEE countries is an addition to the peak workforce, as many of the products are low revenue, high volume commodities, needing quick harvest and quick to sales point, which makes using low cost "migrant" workers nowadays a business as usual concept.

Overtime is not always the solution as legislation has introduced stringent measures, which makes it less popular, hence external resources offer the solution.

Yield Management

source: http://www.hotelschool.cornell.edu/research/chr/pubs/reports/abstract-13604.html

Restaurants have very creative ways in how to Manage Revenue, as they have classic characteristics that invite revenue-management strategies (those characteristics being relatively fixed capacity, perishable inventory, a demand inventory, time-variable demand, appropriate cost structure, and segmentable customers).

Examples;

  1. Day Time - Business Lunch (small portions) for $10 includes, starter - main course - tea or coffea (value for money)
  2. Evening Time - Reservations to ensure constant revenue levels
  3. Creating ambience which attracts customers (live music, belly dancing...)
  4. Discount cards to ensure customer loyalty
  5. Menu engineering - by offer discounts on some simple items vs higher prices on more sophisticated items
  6. Seating arrangement - moving from 4seating to 2seating arrangement or ability to flex the settings
  7. Post meal procedures - retrain on staff on how to shorten the "exit time" - some even have the cashier walking around with a "wallet" instead of having the server receive the cash and walk to the cashier and back.


Queue Design

Whilst living in Ukraine and Russia, I realised that during peak traffic jam hours, the traffic lights are de-activated and manual traffic coordinators manage the flow of traffic via;

  1. Control on each intersection of main artheries of the cente
  2. Watch the size of the queue which is building up on the "waiting" side
  3. Instruct the "moving" side to move along and where needed dis-allow right/left turn (to avoid creating another queue) and move the moving traffic in a straight line..as quickly as possible

"Advantage" - once you are moving you are moving smoothly instead of waiting for the traffic light to turn green, only to realise that the road is blocked due to traffic and the system collapses and everyone starts blowing their horns.

"Disadvantage" - you sometimes have to wait 10minutes before you start to move again, however this allows you to use your BlackBerry (mails) or get prep'ed for a meeting by reading some material.



End


References


Slack et al, 2006, "Operations and Process Management", Prentice Hall

Wally, 2009, Warwick MBA Study note on "Operations Management"



Websites

http://www.hotelschool.cornell.edu/research/chr/pubs/reports/abstract-13604.html

http://www.consultant-news.com/article_display.aspx?p=adp&id=2367



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