Is A Restauarnt Manufacturing Operations Or Service Operations

11.6 Operations Management for Service Providers

Learning Objectives

List the characteristics that distinguish service operations from manufacturing operations.
Draw the decisions made in planning the production delivery process in a service company.
Identify the activities undertaken to manage operations in a service system.

As the U.S. economy has changed from a goods producer to a service provider, the predominance of the manufacturing sector has declined essentially over the last sixty years. Today, just about nine percent of U.South. workers are employed in manufacturing, in contrast to thirty pct in 1950."Avoiding an American 'Lost Decade,'" The Global Linguistic communication Monitor, November 3, 2010, http://www.languagemonitor.com/tag/percentage-of-the-non-subcontract-payroll-in-manufacturing/ (accessed November 2, 2011); William Strauss, "Is U.S. Manufacturing Disappearing?," Federal Reserve Banking company of Chicago, August 19, 2010, http://midwest.chicagofedblogs.org/archives/2010/08/bill_strauss_mf.html#footnote2 (accessed November ii, 2011). Nigh of us at present agree jobs in the service sector, which accounts for 77 percent of U.South. gross domestic product."International Monetary Fund, World Economic Outlook Database, April 2011: Nominal GDP List of Countries. Data For The Year 2010," International Budgetary Fund, http://www.imf.org/external/pubs/ft/weo/2011/01/weodata/index.aspx (accessed November ii, 2011); Wikipedia, s.v. "List of Countries by GDP Sector Composition," http://en.wikipedia.org/wiki/List_of_countries_by_GDP_sector_composition (accessed Nov 2, 2011). Wal-Mart is now America's largest employer, followed by IBM, United Parcel Service (UPS), McDonald's, and Target. Not until we drop down to the seventh-largest employer—Hewlett Packard—do we detect a company with even a manufacturing component."America'south X Largest Employers," 24/7 Wall Street, Apr x, 2011, http://247wallst.com/2011/04/24/americas-ten-largest-employers/#ixzz1ayiE71Sr (accessed November 2, 2011).

Though the primary part of both manufacturers and service providers is to satisfy customer needs, there are several of import differences between the two types of operations. Let's focus on three of them:

Intangibility. Manufacturers produce tangible products—things that can exist touched or handled, such equally automobiles and appliances. Service companies provide intangible products, such every bit banking, entertainment, or education.
Customization. Manufactured appurtenances are generally standardized; one twelve-ounce canteen of Pepsi is the same every bit any other twelve-ounce bottle of Pepsi. Services, past contrast, are often customized to satisfy the specific needs of a customer. When yous go to the hairdresser or the hairdresser, you inquire for a haircut that looks good on you because of the shape of your face and the texture of your hair. When y'all become to the dentist, you lot ask him or her to fill or pull the tooth that's bothering you.
Client contact. You could spend your entire working life assembling cars in Detroit and never see a customer who bought a car that you helped to make. Simply if you were a waitress, yous'd interact with customers every twenty-four hour period. In fact, their satisfaction with your product would be adamant in role by the service that yous provided. Unlike manufactured appurtenances, many services are bought and consumed at the same time.

Effigy 11.10

Here is just one of the over twelve 1000 Burger Male monarch restaurants beyond the earth.

Non surprisingly, operational efficiency is just every bit of import in service industries as it is in manufacturing. To become a better thought of the role of operations management in the service sector, we'll look closely at Burger King (BK), dwelling house of the Whopper, and the world'southward second-largest restaurant chain."Printing Room," Burger King, http://world wide web.bk.com/en/us/company-info/press/index.html (accessed Nov 2, 2011). BK has grown substantially since selling the first Whopper (for $0.37) most one-half a century ago. The instant success of the burn-grilled burger encouraged the Miami founders of the visitor to expand past selling franchises. Today, in that location are 12,200 BK company- and independently-owned franchised restaurants in 70-3 countries (seven 1000 of which are in the United States), and they employ almost forty chiliad people.SEC, 10K SEC Filings, Burger Rex Corporation, August 2010, http://services.corporate-ir.cyberspace/SEC.Enhanced/SecCapsule.aspx?c=87140&fid=7105569 (accessed Nov three, 2011). More than eleven million customers visit BK each day."Press Room," Burger Rex, http://www.bk.com/en/united states/company-info/press/index.html (accessed Nov ii, 2011).

Operations Planning

When starting or expanding operations, businesses in the service sector must make a number of decisions quite like to those made past manufacturers:

What services (and perchance what appurtenances) should they offer?
How volition they provide these services?
Where will they locate their concern, and what will their facilities look like?
How will they forecast demand for their services?

Let's see how service firms like BK respond questions such as these.Data on Burger Male monarch was obtained from an interview with David Sell, former vice president of Central, Eastern, and Northern Europe divisions and president of Burger Male monarch French republic and Germany.

Operations Processes

Service organizations succeed by providing services that satisfy customers' needs. Companies that provide transportation, such as airlines, have to get customers to their destinations every bit quickly and safely equally possible. Companies that evangelize packages, such every bit FedEx, must pick up, sort, and deliver packages in a timely manner. Colleges must provide quality educations. Companies that provide both services and goods, such as Domino's Pizza, accept a dual challenge: they must produce a quality good and evangelize it satisfactorily.

Service providers that produce goods can, similar manufacturers, adopt either a make-to-order or a make-to-stock arroyo to manufacturing them. BK, which encourages patrons to customize burgers and other menu items, uses a make-to-social club approach. BK can customize products considering it builds sandwiches one at a fourth dimension rather than batch-process them. Meat patties, for example, become from the grill to a steamer for belongings until an club comes in. Then the patty is pulled from the steamer and requested condiments are added. Finally, the completed sandwich chutes to a counter worker, who gives information technology to the client. In contrast, many of BK's competitors, including McDonald's, rely on a brand-to-stock arroyo in which a number of sandwiches are fabricated at the same time with the same condiments. If a customer wants, say, a hamburger without onions, he or she has to look for a new batch of patties to be grilled. The procedure could take upward to five minutes, whereas BK tin can process a special gild in thirty seconds.

Like manufacturers, service providers must continuously look for means to meliorate operational efficiency. Throughout its 60-year history, BK has introduced a number of innovations that have helped make the visitor (every bit well equally the fast-food industry itself) more efficient. BK, for case, was the get-go to offer bulldoze-through service (which now accounts for lxx percentage of its salesBob Krummert, "Burger Rex: Headed For A Fast-Coincidental Flameout?," Restaurant Hospitality, http://eating place-hospitality.com/news/burger-king-headed-flameout-1019/ (accessed November 3, 2011). ).

It was likewise a BK vice president, David Sell, who came upward with the idea of moving the drink station from behind the counter and then that customers could have over the time-consuming job of filling cups with water ice and beverages. BK was able to cut back one employee per day at every 1 of its more than xi grand restaurants. Cloth costs also went downward because customers usually fill cups with more ice, which is cheaper than a beverage. Moreover, at that place were savings on supply costs considering almost customers don't bother with lids, and many don't use straws. On top of everything else, near customers liked the system (for one thing, it allowed them to customize their ain drinks by mixing beverages), and as a effect, customer satisfaction went up, too. Overall, the new process was a major success and apace became the industry standard.

Facilities

When starting or expanding a service business, owners and managers must invest a lot of time in selecting a location, determining its size and layout, and forecasting demand. A poor location or a badly designed facility can cost customers, and inaccurate estimates of need for products can result in poor service, excessive costs, or both.

Site Selection

People in the existent estate industry often say that the three most important factors to consider when you're buying a home are location, location, location. The aforementioned principle applies when you're trying to locate a service business. To be successful in a service industry, you need to be accessible to your customers. Some service businesses, such as cable-Tv providers, package-commitment services, and e-retailers, go to their customers. Many others, however—hotels, restaurants, stores, hospitals, and airports—have to attract customers to their facilities. These businesses must locate where there's a high volume of available customers. Let'southward see how BK decides where to place a eating house.

"Through the light and to the right." This is a favorite catchphrase amongst BK planners who are looking for a promising spot for a new restaurant (at to the lowest degree in the United States). In picking a location, BK planners perform a detailed analysis of demographics and traffic patterns, yet the most of import gene is usually traffic count—the number of cars or people that pass past a specific location in the class of a mean solar day. In the United States, where we travel almost everywhere by car, BK looks for decorated intersections, interstate interchanges with easy off and on ramps, or such "primary destinations" as shopping malls, tourist attractions, downtown business areas, or movie theaters. In Europe, where public transportation is much more common, planners focus on subway, train, bus, and trolley stops.

In one case planners observe a site with an acceptable traffic count, they apply other criteria. It must, for case, be easy for vehicles to enter and exit the site, which must also provide plenty parking to handle projected dine-in business concern. Local zoning must permit standard signage, specially forth interstate highways. Finally, expected business must be high enough to justify the cost of the land and building.

Size and Layout

Considering manufacturers do business out of plants rarely visited past customers, they base of operations the size and layout of their facilities solely on production needs. In the service sector, all the same, nearly businesses must design their facilities with the customer in listen: they must accommodate the needs of their customers while keeping costs as low every bit possible. Performing this twofold chore isn't easy. Allow's see how BK has met the challenge.

For its first three decades, almost all BK restaurants were pretty much the same. They all sat on 1 acre of land (located "through the light and to the right"), had about four thou square anxiety of space, and held seating for seventy customers. All kitchens were roughly the same size. As long as country was inexpensive and sites were readily bachelor, this system worked well plenty. Past the early on 1990s, however, most of the prime sites had been taken, if not past BK itself, then by one of its fast-food competitors or other businesses needing a pick spot, including gas stations and convenience stores. With anybody bidding on the same sites, the cost of a prime acre of state had increased from $100,000 to over $1 million in a few curt years.

To continue growing, BK needed to alter the way it constitute and developed its locations. Planners decided that they had to discover ways to reduce the size of a typical BK restaurant. For one thing, they could reduce the number of seats, because the business at a typical outlet had shifted over time from xc percent inside dining and 10 percent drive-through to a 50-fifty split. BK customers tended to be in a hurry, and more than customers preferred the convenience of drive-through "dining."

David Sell (the aforementioned executive who had recommended letting customers fill their own drink cups) proposed to salve space by wrapping Whoppers in newspaper instead of serving them in the cardboard boxes that took up too much infinite in the dorsum room of every eating house. So BK switched to a single paper wrapper with the characterization "Whopper" on one side and "Cheese Whopper" on the other. To show which product was within, employees just folded the wrapper in the right management. Ultimately, BK replaced pallets piled high with boxes with a few boxes total of wrappers.

Ideas like these helped BK trim the size of a restaurant from 4 thousand square feet to as piffling as one grand. In plough, smaller facilities enabled the company to enter markets that were once toll prohibitive. At present BK could locate profitably in airports, food courts, strip malls, centre-city areas, and even schools. The visitor even designed ten-pes-by-x-foot kiosks that could be transported to special events, stadiums, and concerts.

Capacity Planning

Estimating capacity needs for a service business isn't the same affair as estimating those of a manufacturer. A manufacturer can predict overall demand, produce the production, store it in inventory, and ship information technology to a customer when information technology's ordered. Service providers, however, can't shop their products for later use: hairdressers can't "inventory" haircuts, hospitals can't "inventory" operations, and amusement parks can't "inventory" roller-coaster rides. Service firms take to build sufficient capacity to satisfy customers' needs on an "as-demanded" basis. Similar manufacturers, service providers must consider many variables when estimating demand and capacity:

How many customers volition I accept?
When will they want my services (which days of the calendar week, which times of the day)?
How long volition it have to serve each client?
How will external factors, such equally conditions or holidays, affect the need for my services?

Forecasting demand is easier for companies like BK, which has a long history of planning facilities, than for brand-new service businesses. BK can predict sales for a new restaurant by combining its noesis of customer-service patterns at existing restaurants with information collected about each new location, including the number of cars or people passing the proposed site and the issue of nearby competition.

Managing Operations

Overseeing a service organization puts special demands on managers, especially those running firms, such as hotels, retail stores, and restaurants, that have a high degree of contact with customers. Service firms provide customers with personal attending and must satisfy their needs in a timely manner. This task is complicated past the fact that demand tin vary greatly over the form of whatever given mean solar day. Managers, therefore, must pay particular attention to employee work schedules and (in some cases) inventory management. Let'south come across how BK deals with these bug.

Scheduling

In manufacturing, managers focus on scheduling the activities needed to transform raw materials into finished goods. In service organizations, they focus on scheduling workers so that they're bachelor to handle fluctuating customer demand. Each week, therefore, every BK shop manager schedules employees to cover not only the peak periods of breakfast, lunch, and dinner, but also the slower periods in betwixt. If he or she staffs besides many people, labor cost per sales dollar volition be too loftier. If in that location aren't enough employees, customers have to look in lines. Some get discouraged, and even leave, and many may never come up back.

Scheduling is made easier by information provided by a point-of-sale device congenital into every BK cash register. The register keeps track of every sandwich, beverage, and side lodge sold by the hour, every 60 minutes of the solar day, every day of the calendar week. Thus, to decide how many people will be needed for next Thursday'southward lunch 60 minutes, the manager reviews last Th'south data, using sales revenue and a specific BK formula to determine the appropriate staffing level. Each managing director can adjust this forecast to account for other factors, such equally current marketing promotions or a local sporting event that will increase client traffic.

Inventory Control

Businesses that provide both appurtenances and services, such as retail stores and auto-repair shops, have the same inventory-command bug as manufacturers: keeping levels too high costs money, while running out of inventory costs sales. Technology, such as the point-of-sale registers used at BK, makes the chore easier. BK's system tracks everything sold during a given fourth dimension and lets each store managing director know how much of everything should exist kept in inventory. It also makes it possible to count the number of burgers and buns, bags and racks of fries, and boxes of beverage mixes at the beginning or terminate of each shift. Because in that location are fixed numbers of supplies—say, beefiness patties or numberless of fries—in each box, employees simply count boxes and multiply. In just a few minutes, the manager knows whether the inventory is right (and should be able to meet if any theft has occurred on the shift).

Key Takeaways

Though the primary function of both manufacturers and service providers is to satisfy client needs, at that place are several important differences between the 2 types of operations.
While manufacturers produce tangible, generally standardized products, service firms provide intangible products that are often customized to satisfy specific needs. Unlike manufactured goods, many services are bought and consumed at the same time.
Operational efficiency is only as important in service industries as information technology is in manufacturing.
Operations managers in the service sector brand many decisions that are similar to those made by manufacturers: they decide which services to offering, how to provide these services, where to locate their businesses, what their facilities will expect similar, and what the demand volition be for their services.
Service providers that produce goods tin can, similar manufacturers, adopt either a brand-to-club arroyo (in which products are made to customer satisfaction) or brand-to-stock arroyo (in which products are fabricated for inventory) to manufacturing them.
Estimating capacity needs for a service business is more difficult than for a manufacturer. Service providers tin can't store their services for later use: services must exist delivered on an as-needed footing.
Overseeing a service organisation puts special demands on managers, especially services requiring a high degree of contact with customers.
Given the importance of personalized service, scheduling workers is more complex in the service manufacture than in manufacturing. In manufacturing, operations managers focus on scheduling the activities needed to produce appurtenances; in service organizations, they focus on scheduling workers to ensure that plenty people are bachelor to handle fluctuating customer demand.

Exercise

(AACSB) Analysis

Starting a new business tin can be an heady adventure. Here's your chance to start a "pretend" business. Select a service business that you'd like to open, and respond these questions. Provide an explanation for each respond:

What services (and maybe appurtenances) volition I provide?
How will I provide these services?
Where volition I locate my concern?
What volition the facilities wait similar (how large will the facilities be and what will the layout look similar)?
How many customers volition I serve each day?
When will my customers want my services (which days of the calendar week, which times of the day)?
How long will it take to serve each customer?
Why volition my business succeed? Why volition my customers return?