Strategies For Capacity Planning And Operations Management For Organizations

Definition of Capacity Planning

According to Georgiadis and Athanasiou (2013), capacity planning may be defined as the process of determining the overall production capacity that would be required by an organization in order to implement change or accommodate changing demands. The case study defines production capacity as the production levels of an organization as demonstrated within a period of thirty nine hour week. Capacity in terms of an organization is usually explained as its ability to produce outputs within the specified time frame. This is also known a design capacity. However, Liu and Papageorgiou (2013) deemed efficiency capacity as more important when it comes to supply chains and operations management. Efficiency capacity would refer to the ability of an organization to produce maximum outputs despite obstacles and constraints like delays, quality problems, material handling and so on (Fattahi et al. 2015).

The case study lists the operational management at R. Griggs & Company Limited and also explains the challenges the company faced with regards to capacity planning. The sudden changes that were implemented into the organization as part of its operational review and change management program lacked proper scheduling and planning. As a result, it was impossible for the organization to implement the initiatives efficiently. This had taken a toll on the quality of customer care and products and had also affected the smooth functioning of the operations management at the company. As specified by Martinez Costa et al. (2014), there are usually three strategies or steps to be followed by any organization in order to improve production and to pave the way for smooth capacity planning. For instance, a Malaysian manufacturing company named Yokohama Industries implemented capacity planning and was able to optimize production capacity and improve the overall performance of the organization (Latif and Hisyam 2013). There are a few strategies that may be followed:

• Defining the service level requirements – According to Seidman and Addleman (2013), in this strategy, the company would have to break down its operations into a number of compartments and categories, which make it easier to evaluate. Moreover, it would quantify the expectations of the users with respect to the operations. During this step, the company would be required to establish workloads, determine the unit of work and set service levels. A service level agreement would have to be laid down between the consumer and the service provider. This would help in ensuring that an optimized quality of service is delivered to the customer.
• Analysis of current capacity – The company would have to undertake an analysis of the current and existing strategies for capacity planning and management. In this phase, the company would have to examine the utilization of resources, ensure optimum utilization of them, compare the service level agreements and align them to business objectives, determine the flaws or the loopholes of the operations and so on.
• Sustainability – Ho and Fang (2013) argue that one of the major reasons why the Griggs’ production capacity proved ineffective is because it lacked planning and an outlook towards the bigger picture. In other words, it was not sustainable for long term goals. Based on the analysis of current capacity planning, the company should be able to devise an effective plan for the future. This plan would be based on processing requirements that are forecasted so as to prevent overloading of the system. For example, in the case study, the company was unable to meet a sudden rush of customer demands because they were not prepared for it. Having robust plans in place would help the organization anticipate workload beforehand and configure their operations accordingly.

One of the major challenges that Griggs in the case study faced during its operational review was meeting its deadlines. As a result, it suffered a number of delays in product delivery which affected customer satisfaction. The main purpose of implementing strategic deadlines is to ensure that the long term and short term goals of the organization are fulfilled in a timely manner while simultaneously improving performance levels. Irrespective of the kind of enterprise, all organizations would have to abide by certain deadlines. Deadlines would help facilitate smooth and more functional relationships with the clients and the shareholders and would also promote a favorable working culture in the organization. According to Toegel and Barsoux (2016), deadlines would also reduce chances of team conflict.

Mann (2013) argues that failure to meet deadlines could lead to broken supply chain links in the company operations. For instance, every client of the company has a set of expectations from the company. As part of its contract, the company is expected to meet its deadlines and deliver the product within the specified timeframe. Like Griggs, if a company fails to do so, it not only affects the overall reputation of the company but also adversely influences customer satisfaction. Similarly, delays in product delivery and customer care would adversely affect employee morale. It is important for any organization to be able to impose deadlines and enforce adherence to them. Failure to enforce internal deadlines would affect the consistency of the employees’ performance. Delays would also affect the business plans which are usually time bound and also the quality of vendor relationships.

According to Omar, Sarker and Othman (2013), just in time manufacturing or JIT is the most efficient tool for dealing with deadlines and avoiding delays. JIT is an inventory system or a management strategy that would align the raw material orders from the suppliers directly with the production schedules. Companies make use of JIT in order to increase the overall efficiency of the manufacture process. It would also significantly reduce waste produced since only the required amount of raw materials would be ordered, thus reducing inventory costs (Javadian Kootanaee, Babu and Talari 2013). The main advantage of the JIT system is the low rate of production runs. This would enable the company to move from one product to another with ease. The JIT systems have been incorporated in a number of organizations within the Malaysian automotive industries (Fadly Habidin and Mohd Yusof 2013). In this industry, JIT has had the following benefits:

• JIT would require planning and forecasts on part of the manufacturing company. The company would have to anticipate demands and workload beforehand in order to place order for raw materials accordingly. This would entail a careful analysis of the market needs for the company, inventory management and planning (cash flow, personnel scheduling et cetera). This would help the company develop a purchase schedule which maintains a flow of the product to the market without delays (Lai and Cheng 2016).
• JIT also helped the companies reduce waste generation. For instance, completed products waiting in inventory would be wasteful. Instead, by implementing JIT, companies would be manufacturing goods according to their demand, which significantly reduces wastage.
• Most importantly, JIT would ensure that the customer needs are met and on time. By using this process, manufacturers would have complete control over their manufacturing processes. It must be remembered that customer needs and demands are ever changing. As such, JIT would enable manufacturers to adapt to the changing needs of the customers and respond to them in a quick and timely manner (Battini, Boysen and Emde 2013). For example, if the need for a product increases, the manufacturer would be able to quickly increase the production of the product in question.

Lean operations or lean manufacturing is a crucial waste management process used by organizations around the world. It is a systematic process of minimizing the waste generated by manufacturing systems while simultaneously increasing productivity (Bhamu and SINGH Sanghwan 2014). Lean is essentially based on three principles, namely “muda”, “mura” and “muri”. While muda refers to waste minimization, muri refers to the waste created through overloading of systems and mura refers to unevenness and imbalance in the workload. In other words, lean operations would simply focus on the aspects which add value in an organization and eliminates everything which does not (Ruiz-de-Arbulo-Lopez, Fortuny-Santos and Cuatrecasas-Arbós 2013). Use of lean operations would increase the profitability of an organization and also improve operations (Fullerton, Kennedy and Widener 2014). The two main purposes of a lean operating system are reduction of waste and addition of value to the customers. Implementing lean operations at an organization would require one to scrutinize every minute aspect of the business and eradicate everything which is nonessential or unnecessary in the long run (Wahab, Mukhtar and Sulaiman 2013). Lean operations would be characterized by the following:

• Lean operations are usually focused and customer centric. Such a system recognizes that customer value should be top priority for each employee and manger and the organization. Every decision at the organization would revolve around the customer.
• In lean operations, every aspect of the business and supply chain should be aligned with the business goals, mission, vision and values. This would be achieved through open lines of communication and development of suitable working cultures (Mostafa, Dumrak and Soltan 2013).
• Lean manufacturing realizes that there is scope for improvement within an organization. This is why it entails careful analysis and thorough checks and assessments at periodic intervals. As a result, any flaw or glitch within the system would be highlighted as part of the assessments which could then be rectified (Sundar, Balaji and Kumar 2014).
• Lean manufacturing is tenacious in nature. It delves deep into the problem, engages the concerned stakeholders, and compels people to raise their concerns, identify the problems and find solutions to them.

Strategies for Improving Production and Efficiency

A renowned company in Malaysia, named ABC SDN BHD Ltd. had adopted lean manufacturing as part of its operations. Before the implementation of lean processes, the company had been facing numerous issues with respect to quality control and employee productivity. However, the switch to lean operations proved to be immensely useful for the organization since it provided the company with a competitive edge and helped it improve its performance (Tang et al. 2016). The main purpose of lean operations is reduction in human effort, reduction in product development time, reduction of inventories and reduction of operational space. It would also speed up the production process. For example, at every step of the manufacturing process, materials would have to be moved from one step to the other. Lean management would reduce lead time involved in product development (Gupta and Jain 2013). For instance, pull systems would be implemented as part of the production process in order to shift the product from one phase of product development to another. Lean operations would result in a single piece process that has one product moving in a smooth flow from one stage to another in the production line. This would in turn reduce bottlenecks and improve customer service (Vamsi Krishna Jasti and Kodali 2014). As a direct consequence, the business would become highly responsive to the needs and demands of the customer and produce top quality goods in an economical and efficient manner. This bound to enhance and strengthen the competitive positioning of the company in the market. Since it would improve customer service, customer satisfaction and retention (which are chief factors determining the competitive positioning of a company), it can be assumed that lean operations is certainly the most effective way of attaining favorable market position, with respect to its rivals and competitors (Vienazindiene and Ciarniene 2013).

Shangri La is a luxury hotel located in Kuala Lumpur, Malaysia, falling under the banner of Shangri La Hotels and Resorts. The hotel was established in the year 1985 and presently consists of 662 guestrooms and suites. Located in a central location in the city, Shangri La is reputed as being one of the most opulent and exotic hotels around the world. The hotel is also well known for its legendary and authentic Asian hospitality and trained staff who are at the beck and call of the guests (Shangri La 2018). The following section is an inspection of the operations at Shangri La.

The Importance of Meeting Deadlines

• Location – Location is a major success factor for the hotel. When it comes to hospitality services, the location of any hotel would play a crucial role in determining customer perceptions. The hotel is located in a favorable region, with easy access to the airport and other transport facilities. It is also centrally located, thus allowing tourists ample opportunities for sightseeing (Shangri La 2018).
• Quality management – When it comes to hotels, customers usually have a set of expectations. Given the fact that the hotel holds a superior position in the Malaysian hospitality industry, the prime focus of the Shangri La management is quality. The sole focus of their operational strategies and strategic management is the customer.
• Global outlook – Although the hotel boasts of authentic Asian hospitality, the hotel management ensures that a global outlook is maintained in the hotel so as to establish itself on an international level.
• Flexibility and adaptability – Since the primary focus of the Shangri La management is customer care, the employees and the service providers would have to be flexible and adaptable so as to accommodate changes as and when required.   

The process flow at Shangri La is as shown in the flow chart above. The customer service begins with the customer looking for a reservation at the hotel. Once the hotel makes the customer aware of tariffs and available services, the customer can either choose to proceed with the booking or look for alternatives. If the customer chooses the first option, he would have to prepay for the services. Based on that, the hotel management would confirm the reservation and allot a room for the customer. When the customer arrives at the hotel, he would be led to the allotted room and a continuation of services would proceed in the form of basic amenities that the guest would need. This phase of the process flow would have to be kept flexible because customer needs would vary from person to person. The hotel staff would have to adapt to the changing needs and demands of the guests at the hotel and provide customized service so as to ensure maximum customer satisfaction. At the time of the departure of the customer, he will be informed of reward and loyalty programs which pave the way for customer retention.

At Shangri La, the customers are treated with kindness, tact and empathy so as to ensure maximum customer satisfaction. The staff members at the hotel are trained to be flexible and adaptable to the needs of the customer. Each customer has a unique set of demands which must be adhered to. The managers at the hotel are constantly on the lookout for glitches or faulty equipment or any aspect of the hotel operation that is lacking in terms of quality. Quality measurement practices are also in place at the hotel (Xu and Gursoy 2015). Each guest staying at the hotel is urged to fill up a questionnaire which asks them to rate the service they received on a scale of one to ten. The questions are all encompassing and take into account various aspects of customer service and hotel operations. Every week, the feedback of the customers are evaluated and distributed to each member of the hotel staff. This would educate them about the flaws in the operation process which could then be rectified (Bendoly 2013).

• The company has a total of 561 rooms and 101 suites. It also has nearly 2000 employees, including frontline staff, managers, executives, part time staff, interns, housekeeping staff and others (Shangri La 2018).
• Capacity planning at Shangri La takes into consideration the fact that certain factors could contribute to bottlenecks in the process flow. For instance, if some of the equipments are not functioning properly, it could disrupt the operations (Shi and Liao 2013).
• The company has provisions for temporary and overtime labor in the peak seasons when the customer demands fluctuate.
• At the hotel, the staff scheduling is not aligned to the number of guests at the hotel. For every week, the forecasting would suggest the expected workload for the concerned week. The hotel management should carry out staff scheduling in such a way that the ratio of hotel staff to number of guests is appropriate. This would ensure that there is no shortage of staff at any point of time.
• Shangri La also has a plethora of interns and part time workers along with specialists and experts who pitch in during high demand seasons.

In the hospitality industry, there are a large number of supplies that are required on a daily basis (Xu and Gursoy 2015). The chief aspects of the supply chain at Shangri La include cleaning and maintenance facilities, dry cleaning, flowers and other decorative items, food and beverages, interior design facilities, waste disposal systems, IT services, construction, energy services, electrical supplies and so on. However, a few issues have been noticed in the supply chain of Shangri La. For instance, the management has failed to incorporate adequate supplier engagement. As a result, there is often a delay in the provision of supplies, which clogs the process flow at the hotel.

Just in Time Manufacturing (JIT)

Forecasting is an integral aspect of operations management (Slack, Brandon-Jones and Johnston 2013). A strong forecasting technique is used at Shangri La so as to ensure that the flow of operations at the hotel is maintained. Weekly forecasts are made, which takes into account the expected workload that week and the scheduled duty hours for the staff members. The expected workload is estimated and divided equally amidst all the staff members. Tracking books, hotel databases, past records are just some of the sources that are used for forecasting. During peak seasons, the records of the past years and bygone high demand seasons are drawn up and analyzed. This would highlight the flaws of the bygone seasons which can be avoided in this peak season. It is also important to take into account special occasions and other information which could lead to a sudden increase or decrease of customer demand.

The following issues have been identified as part of Shangri La operations:

• The supply chain of a hotel is vast and consists of a number of minute aspects (Xu and Gursoy 2015). For the hotel management, it often becomes challenging to track the flow of process from one step of the supply chain to the other. This often results in delays and bottlenecks. Similarly, the supply chain at the hotel is not regulated. It lacks adequate engagement of the suppliers which often causes a delay in the delivery of essential supplies. This deters customer service in the long run.
• Staff scheduling at Shangri La is not aligned with the workload of the upcoming days and weeks. At the beginning of every week, a forecast is prepared and released. However, the staff schedules are devised irrespective of that. Thus, although the hotel has a workforce of nearly 2000 employees, there is often a shortage of staff during peak seasons.
• Faulty or broken equipment is another problem noticed by customers. Analysis of the customer feedback shows that a large number of rooms reported broken or malfunctioning equipment. It is the responsibility of the manager to ensure that all equipments and facilities are in proper working conditions.

• Lean operations would be the most effective recommendation for Shangri La. As explained above, lean would be the process of eliminating all kinds of waste or unnecessary elements from the supply chain altogether (Piercy and Rich 2015). It is due to the minute aspects of the process flow which largely go ignored that the supply chain of the hotel has become clogged. Lean operations would scrutinize each aspect of the hotel operations and identify all the unnecessary steps and processes which would consequently be eliminated. This would fasten up the process flow and make it seamless. It would also speed up the process of customer delivery to the customer.
• Delay is another major issue that the hotel management had been facing. Just in time inventories could be implemented as part of the hotel operations. For instance, the staff would be scheduled according to the expected workload in a specific week. If fluctuations in workload or customer demands are expected, then the hotel would have to bring in more staff members, specialists or part time workers. This would ensure that the service is delivered on time and no impact is felt on customer satisfaction even during peak seasons.

Conclusion 

To conclude, it can be said that the Shangri La hotel in Kuala Lumpur is one of the most popular and beloved luxury hotels in Malaysia. An analysis of its operations shows that despite the numerous strategies to regulate the process flow, two major issues were noticed – delays in service delivery and staff shortage during some peak seasons or during fluctuations in customer demand. As such, two recommendations have been provided for the hotel. It could make use of just in time inventories for staff scheduling and lean operations to clean up the process flow and make it waste free.

References:

Battini, D., Boysen, N. and Emde, S., 2013. Just-in-Time supermarkets for part supply in the automobile industry. Journal of Management Control, 24(2), pp.209-217.

Bendoly, E., 2013. Real-time feedback and booking behavior in the hospitality industry: Moderating the balance between imperfect judgment and imperfect prescription. Journal of Operations Management, 31(1-2), pp.62-71.

Bhamu, J. and Singh Sangwan, K., 2014. Lean manufacturing: literature review and research issues. International Journal of Operations & Production Management, 34(7), pp.876-940.

Fadly Habidin, N. and Mohd Yusof, S.R., 2013. Critical success factors of Lean Six Sigma for the Malaysian automotive industry. International Journal of Lean Six Sigma, 4(1), pp.60-82.

Fattahi, M., Mahootchi, M., Govindan, K. and Husseini, S.M.M., 2015. Dynamic supply chain network design with capacity planning and multi-period pricing. Transportation Research Part E: Logistics and Transportation Review, 81, pp.169-202.

Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management, 32(7-8), pp.414-428.

Lean Operations in Organizations

Georgiadis, P. and Athanasiou, E., 2013. Flexible long-term capacity planning in closed-loop supply chains with remanufacturing. European Journal of Operational Research, 225(1), pp.44-58.

Gupta, S. and Jain, S.K., 2013. A literature review of lean manufacturing. International Journal of Management Science and Engineering Management, 8(4), pp.241-249.

Ho, J.W. and Fang, C.C., 2013. Production capacity planning for multiple products under uncertain demand conditions. International Journal of Production Economics, 141(2), pp.593-604.

Javadian Kootanaee, A., Babu, K. and Talari, H., 2013. Just-in-time manufacturing system: from introduction to implement.

Lai, K.H. and Cheng, T.E., 2016. Just-in-time logistics. Routledge.

Latif, A. and Hisyam, M.N., 2013. Production management and improvement initiatives: case studies of two Malaysian manufacturing companies (Doctoral dissertation, Universiti Tun Hussein Onn Malaysia).

Liu, S. and Papageorgiou, L.G., 2013. Multiobjective optimisation of production, distribution and capacity planning of global supply chains in the process industry. Omega, 41(2), pp.369-382.

Martínez-Costa, C., Mas-Machuca, M., Benedito, E. and Corominas, A., 2014. A review of mathematical programming models for strategic capacity planning in manufacturing. International Journal of Production Economics, 153, pp.66-85.

Mostafa, S., Dumrak, J. and Soltan, H., 2013. A framework for lean manufacturing implementation. Production & Manufacturing Research, 1(1), pp.44-64.

Omar, M., Sarker, R. and Othman, W.A.M., 2013. A just-in-time three-level integrated manufacturing system for linearly time-varying demand process. Applied Mathematical Modelling, 37(3), pp.1275-1281.

Piercy, N. and Rich, N., 2015. The relationship between lean operations and sustainable operations. International Journal of Operations & Production Management, 35(2), pp.282-315.

Ruiz-de-Arbulo-Lopez, P., Fortuny-Santos, J. and Cuatrecasas-Arbós, L., 2013. Lean manufacturing: costing the value stream. Industrial Management & Data Systems, 113(5), pp.647-668.

Seidman, D.I. and Addleman, M.J., CA Technologies Inc, 2013. Capacity planning based on resource utilization as a function of workload. U.S. Patent 8,402,468.

Shangri-la.com. 2018. Hotel in Kuala Lumpur – Luxury 5 Star | Shangri-La Hotel, Kuala Lumpur. [online] Available at: https://www.shangri-la.com/kualalumpur/shangrila/

Shi, X. and Liao, Z., 2013. Managing supply chain relationships in the hospitality services: An empirical study of hotels and restaurants. International Journal of Hospitality Management, 35, pp.112-121.

Slack, N., Brandon-Jones, A. and Johnston, R., 2013. Operations management. Pearson.

Sundar, R., Balaji, A.N. and Kumar, R.S., 2014. A review on lean manufacturing implementation techniques. Procedia Engineering, 97, pp.1875-1885.

Tang, S., Ng, T., Chong, W. and Chen, K., 2016. Case Study on Lean Manufacturing System Implementation in Batch Printing Industry Malaysia. In MATEC Web of Conferences(Vol. 70, p. 05002). EDP Sciences.

Toegel, G. and Barsoux, J.L., 2016. How to preempt team conflict. Harvard business review, 94(5), pp.78-83.

Vamsi Krishna Jasti, N. and Kodali, R., 2014. A literature review of empirical research methodology in lean manufacturing. International Journal of Operations & Production Management, 34(8), pp.1080-1122.

Vienazindiene, M. and Ciarniene, R., 2013. Lean manufacturing implementation and progress measurement. Economics and management, 18(2), pp.366-373.

Wahab, A.N.A., Mukhtar, M. and Sulaiman, R., 2013. A conceptual model of lean manufacturing dimensions. Procedia Technology, 11, pp.1292-1298.

Xu, X. and Gursoy, D., 2015. A conceptual framework of sustainable hospitality supply chain management. Journal of Hospitality Marketing & Management, 24(3), pp.229-259.

Xu, X. and Gursoy, D., 2015. Influence of sustainable hospitality supply chain management on customers’ attitudes and behaviors. International journal of hospitality management, 49, pp.105-116.