The world’s leading economies are ostensibly heading towards a recession with plummeting stock markets and soaring crude oil prices as consumers are beginning to feel the pinch of the credit crunch. According to analysts, the financial slumps of the past nine months seem to be unmatched since the Great Depression (Elliot, 2008). Unstable and unpredictable market turmoil from various sectors of industries with particular reference to the UK has seen major companies battling the slowdown in consumer spending due to the ongoing effects of the credit crunch which threatens job security (Harding & Elliot 2008).
The snowball effect of the faltering economy has caused companies and establishments to redesign their marketing strategies and approach towards consumers as well as employ various forms of operations management concepts to improve the effectiveness and efficiency of hospitality service operations.
This essay aims to discuss various service operations concepts that are currently applied in the industry to increase efficiency and effectiveness of the service process which will benefit hospitality firms in view of the economic challenges faced today.
Demand and capacity management
Demand and capacity management has always been an issue for service-oriented establishments where balancing demand and supply almost seems impossible due to the inability to predict and forecast with pinpoint accuracy. Garcia et al. (2002) define the aim of capacity management as the goal of minimizing the waiting time for customers and avoiding idle capacity whilst attending to demand in the most efficient way possible. Demand management can be viewed as the process that balances the customers’ requirements with the capabilities of the supply chain (Croxton et al., 2002).
According to Klassen & Rohleder (2002), there are two approaches towards demand and capacity management. Demand management deals with manipulating demand to match the capacity available whereas capacity management changes the capacity to accommodate the demand.
General concepts used to modify the demand in favor of the capacity in establishments include price manipulation and promotional events (Garcia et al., 2002). Both price manipulation and promotions can be viewed from a revenue management perspective to simultaneously maximize revenue and manipulate demand. Price manipulation and promotional events aim to balance out peak periods and non peak periods by creating a demand for lower occupancy stages. This diverts a percentage of demand from the peak period to the non-peak period to maintain similar occupancy levels in order for the capacity to be fully utilised.
As capacity management manipulates the supply to accommodate the demand, various approaches such as increasing resources and modifying the product can be used (Garcia et al., 2002). Increasing resources such as using overtime, adding shifts and employing part-time staff are used to meet the demands during peak periods. Modifying the product includes reducing the quality, standardising the product and making recipients do part of the work to ease out the burdens of productivity in order to accommodate demands. Product standardisation and reducing quality enables the firm to channel efforts somewhere else in order to meet demands such as increasing quantity. By making the customer do part of the work, it allows the customer to be a part of the workforce and serve themselves. This works in self-catered of self-serviced operations such as buffets and open bars.
These approaches towards demand and capacity issues are taken when demands are unpredictable or difficult to forecast which creates a problem for capacity issues and queues. As a result, insufficient supply to match demand usually results in a lower level of attention to customer needs thus affecting the effectiveness and quality of service.
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