Operations management concerns with managing of resources that directly produce the organization’s service or product. These resources are brought together by a series of processes so that they are utilized to deliver the primary service or product of the organization. Thus, operations is concerned with managing resources through transformation processes to deliver service or products. (Rowbotham, Galloway and Azhashemi, 2007) Since the mid-1980s, the rate of growth of major service sector categories as hospitality services, has been approximately double that of other industries (Daley et al., 1998). Due to the unique characteristics of service operations, such as heterogeneity, inseparability, intangibility and perishability, a service cannot be stored and has to be produced and consumed simultaneously (Fitzsimmons and Fitzsimmons, 2004). From a guest’s point of view, the service is an experience. It is the sum of everything that happens to him or her in connection with a transaction or series of transactions. Services differ from goods in several aspects. (Lovelock, 1992) Operation is the core function of the organization and continuously manages the flow of resources through it. In many organizations, operations accounts for 80% of the employees and hence most of the added value (Naylor, 1996). The growing importance of the service sector in the global economy has drawn a significant increase of interest in operations management.
An effective and efficient service operation is consequently a challenge to operations manager due to the intense, competitive environment within the hospitality industry.
Therefore the improvement of operation functions, such as the use of capacity management, is essential for operations manager to create a more effective and efficient operation. At the same time, it helps to increase service quality and generate higher profitability.
Ava Restaurant in Hotel Panorama in Hong Kong is the organization of choice for evaluation for this essay. Definitions of one of the operation’s functions, capacity management, will first be given. It will be used as a practical example to evaluate and analyze the effectiveness of capacity management in the industry. Existing problems with capacity management in Ava Restaurant will be identified, and potential solutions and recommendations will be suggested. A summary of the key points and final recommendation will be presented in conclusion.
In the service industry, achieving efficient capacity management has always been one of the challenges of all operations managers (Klassen & Rohleder, 2002). Lines (1996) states that customers have grown accustomed not to have to wait, and if the goods they require are either not in stock or unavailable at short notice, they will go elsewhere.
Consequently, their requirements have to be anticipated and most or all distribution operations have to be completed before their orders are received. Despite the opportunities and apparent attractiveness of the service sector, however, there are no guarantees of
success (Rodie & Martin, 2001). Dealing with capacity effectively and efficiently will definitely increase success in the service industry.
Lovelock (1992) defines the capacity of a service as the highest possible amount of output that may be obtained in a specific period of time with a predefined level of staff, installations and equipment. Slack et al. (1995) defines capacity as the maximum level of value-added activity over a period of time that the process can achieve under normal operating conditions. Due to the fact that services need to be produced and consumed simultaneously (Czepiel, 1990; Grove and Fisk, 1997; Martin and Clark, 1996), when demand for a service falls short of the capacity to serve, the results are idle servers and facilities. An example is during lunch or dinner periods the majority of guests arrive at a fairly similar time. These variations...