Operations Management Assignment- Group 1 - Final PDF

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Operations Management Assignment

Operations Management Assignment MG916 2018-2019

MY Café Restaurant

Group 1 - Bahrain Mohamed Alshirawi 201963516 Mohamad ElLabban 201970316 1

Operations Management Assignment

TABLE OF CONTENTS 1. Executive Summary 3 2. Introduction 4 3. Research Methodology 4. Audit Findings

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5. Recommendation I: Operations Strategy

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5.1 Identifying the Business Strategy 6 5.2 Identifying the Competitive Advantage

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5.3 Codifying Strategy and Circulation 8 6. Recommendation II: Performance Management

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6.1 Evaluation of a Performance Measurement System

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6.2 Program Launch and BSC Implementation Summary

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6.3 Assessment

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6.4 Identifying Strategy

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6.5 Building the Strategic Objectives and Strategic Map 6.6 Performance Measures

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6.7 Setting Strategic Initiatives

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6.8 Roll Out and Automation 11 6.9 Alignment and Evaluation 12 7. Conclusion

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References

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Appendix I: Strategy Map

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Appendix II: Organization Chart

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Appendix IIII: Audit & Data

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Operations Management Assignment

1. Executive Summary This paper investigates the operational functions of My Café Restaurant assessing its Operations Strategy, Product and Service Design, Process Design, Capacity Management, Supply Chain Management, Quality Management, and Performance Management. The assessment is conducted through gathering qualitative data from My Café’s management team through an interview, and a general review of some documented processes. The findings presented are a summary of the insights obtained from the raw data acquired and presented in Appendix III: Audit & Data. The paper then compares the findings against relevant theoretical models to identify the core gaps in the operational function. The two core gaps identified were as follows:  

Management’s poor awareness of what the Operational Strategy, how to set and align it, as well as its impact on the organization as a whole. My Café’s dependence on lag indicators, which were solely financial, as a method for managing performance.

It is believed that the other gaps identified in the findings were in fact symptoms of the core gaps identified above. As such, two recommendations were proposed, each one to rectify one of the gaps identified. The first recommendation delves into communicating the understanding of the factors that affect and shape the operational strategy. The second recommendation proposes the Balance Scorecard as a performance management system to help align the operations towards meeting My Café’s strategic goals.

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Operations Management Assignment

2. Introduction My Café Group is a business in the Food and Beverage (F&B) industry established in March 2015. This paper will attempt to study the operational function of My Café Group’s first restaurant, My Café. By conducting a general audit on seven key areas within the operational functions, the authors will attempt to identify the gaps with the highest impact and offer recommendations to close those gaps. Recent studies conducted by the Bahrain Economic Development Board have suggested that the F&B industry is among the most popular choices of investment in the Kingdom of Bahrain, and that 6% of the Kingdom of Bahrain’s overall GDP comes from the Tourism and Hospitality sector. My Café, started as a passion project by the owner with no awareness of those specific details. Yet, as of the date this paper has been written, My Café remains very successful and has expanded to include two other businesses in the F&B sector.

3. Research Methodology The authors conducted a basic operational audit of My Café through interviewing the three core members of the management team of the My Café Group . The team consisted of the Deputy CEO, COO, and Procurement Manager. The management team where not comfortable with the interview being transcribed, and as such, the interview was documented by taking notes and double checking with the management team to confirm the accuracy of the data gathered. The interview data was then compared to existing practices of businesses that adopted a similar operational approach, as well as academic research and relevant theoretical models in order to identify the gaps relating to the Operational Function. Once the gaps were identified, their impact on My Café was assessed in order to propose recommendations on how they can be tackled.

4. Audit Findings In regards to Operational Strategy, there seems to be a clear indication that the My Café management team follows a strategy revolving around providing a high-quality F&B experience with a more accessible relaxed ambiance and atmosphere that does not require formal attire and the like. The operating strategy is however not codified nor communicated effectively to the extent that the management team themselves are not fully aware they are employing a strategy. Instead, they are under the impression that My Café’s approach towards a consistent and high quality standard is simply a preference of the owner. Also, there is a lack of insight regarding the nature of the clientele targeted by My Café. The management team also did not have a clear idea of what their competitive advantage was or why they positioned themselves in the market in this manner. The Product and Service design of My Café is well thought out and firmly managed with innovation being driven directly by the owner in a hands-on manner. There are strict guidelines that affect how dishes and drinks get on the menu and whether or not they remain. Although there are certain exceptions to indulge the owner, they do not greatly affect the selection on the menu. While the chefs and waiters have processes and guidelines present to maintain a set standard on quality, the back office suffers from a reactive approach towards improving the efficiency, effectiveness, and economy of processes.

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Operations Management Assignment

Chambers and Rand (2010) identify those three dimensions as the Three E’s; efficiency being concerned with the time requirement for a process to be completed, effectiveness being concerned with the quality produced by the process, and economy being concerned with the wastage resulting from the process. Gaps are only discovered when they are chanced upon rather than being proactively searched for and closed. As of yet, this has not resulted in any considerable loss, but it seems that it is a symptom of the “informal approach” that the management prefers. Capacity Management seems to be one of the areas that the team at My Café have the least trouble with as they have an understanding of their downtimes and peak times based on their own historic footfall data. Accordingly, they have fairly reliable forecasts with regular meetings to manage forecast accuracy, as well as contingencies for when forecasting is inaccurate. Supply Chain Management is well handled, with the procurement team regularly working to broker deals with new suppliers to improve their bargaining position. The warehousing team lacks a system that could track expiry dates; this is currently done manually by the chefs. While this has not resulted in any considerably losses, it is not an efficient method for managing stored goods. Another area My Café does well in is in Quality Management. With detailed recipe manuals that take a chef through every step of preparing a specific dish, as well as objective measures that allow the chef to ascertain that a dish has been prepared within the standard parameters. Furthermore, the frontline staff have all been given standardized training, as well as a deep familiarization with menu items. SOPs are codified and made available to handle customer complaints when they occur. Mystery shoppers are also used to audit quality of products and services. The management team does utilize measures of performance tracking, such as financial performance. Staff performance as well as product performance; there is no framework or system that manages the performance driven by the strategic and operational goals. Furthermore, measures of performance are not clearly communicated and are treated in a secretive manner. Lastly, the researchers must note that while access was provided by the My Café Management team to review their kitchen, recipe manuals, and processes; permission was not given to attach them to the appendices.

5. Recommendation I: Operations Strategy The core issue regarding the operational strategy of My Café is that the management team does not have a sound understanding of what constitutes an operational strategy nor its importance within their organization. In order for this to be rectified, it would be best to approach the owner directly for buy-in in order to start by educating the management team on this, as well as identifying, codifying, and refining the strategy that they are informally adapting. Slack et al (2016) discusses four perspectives that should be taken into consideration when developing an operational strategy. The first of those is the top-down perspective, which takes into consideration the corporate and business strategies cascading down to the operations function. As the interview findings indicate, there is a notable absence of business strategy feeding into the operational strategy, and as a result there are no clear growth and profitability targets. The second perspective is the bottom-up perspective, which takes into account what the day-to-day experiences of the operations team suggest, should be done. In this regard, the My Café team, be they 5

Operations Management Assignment

chefs or management, take into account this perspective very well, continuously using their experience to feed back into the operational strategy. Likewise, the third of those perspectives takes into account the resources available, and in that regard the My Café team also pay attention to their limitations and make decisions based on their awareness of said limitations. Finally, the last of the four perspectives considers the market requirements, and while our findings do indicate that the owner seemed to take this perspective into account upon establishing My Café, it seems that the management team do not take this into consideration much anymore, and as such the insights gleaned from considering this perspective are not fed back into the operations strategy.

5.1 Identifying the Business Strategy: The first step in implementing the operations strategy would be to close the gap in terms of the missing Business Strategy elements. Kaplan and Norton (2004) define the mission statement to be one that is brief, focused internally, and simply states an organization’s purpose of existence. Based on that, the excerpt from their About Us page equates to a mission statement and reads as follows “My Cafe is a boutique restaurant created by and for “The Bon Vivant.”” Communicating this to the management team and having them cascade this to staff will provide a clear purpose and intent. As for the vision, Kaplan and Norton (2004) defines it as a statement that portrays an organization’s short to medium term goals expressing how the organization wishes to be seen externally. My Café’s team suggested that the owner’s vision “Is to keep My Café on the map”. It is suggested however that perhaps a more compelling wording of the vision could be used instead along the lines of what follows: “We will become the favored destination for the Bon Vivant to come, relax, enjoy, and share the great experience we offer.” Based on this, it can be extrapolated that the main objectives of My Café’s business strategy would be to maintain a high quality changing menu that remains accessible, as well as provide a relaxed atmosphere that differentiates it from its other competitors. Hill’s (James, 2011) provides a five step framework that shows how the strategy cascades from Corporate to operational levels: 

Define corporate objectives. o

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To develop a smart-casual dining experience that does not compromise on quality.

Determine the marketing strategies required to meet those objectives. o

To continuously engineer and develop a menu of items that sell with the emphasis on customer retention.

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Pricing is based on the component cost of the dish. This allows for fairly diverse range of pricing, focusing on accessibility.

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Promotion through social media and work of mouth.

Assess competitive advantage.

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Operations Management Assignment

o

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The smaller selection on the menu allows the maintenance of high quality standards and availability.

Identify operational and process design choices. o

Processes are set and fixed in order to allow for a consistent level of quality, with some room for customization based on the recipe manuals.

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The restaurant layout is changed in tandem with waiter routes in order to ensure efficient delivery from and to the kitchen.

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Identify the infrastructure required. o

Storage warehouse, cold rooms, high end kitchen and tools are required. Also, automated systems are required to reduce manpower needs for back office staff.

5.2 Identifying the Competitive Advantage: The findings indicated that the management team has a poor awareness of My Café’s competitive advantage. For that, Porter’s (2008) five forces are reviewed in relation to My Café. 

The bargaining power of buyers: Bahrain is a relatively small market for the higher end F&B businesses but My Café’s semi-formal approach towards higher end dining is rare with very few decent alternatives.

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The bargaining power of suppliers: As indicated by the management team, the access to high end and fresh ingredients is a struggle in Bahrain. Suppliers do not suffer from fierce competition and are therefore free to drive the prices of non-common items pretty high. As such, My Café adopted the approach of working mostly with suppliers overseas to ship ingredients in bulk and store them locally. Despite that, some issues with overseas suppliers do exist. In the case of the import of Kobe beef, local legislation requires that all cattle meat served in restaurants in Bahrain be slaughtered using the Halal method. The supplier, however, does not traditionally offer that method of slaughter. Hence, My Café’s procurement team must purchase the cattle prior to slaughter and have its marbling graded as a carcass rather than ordering select parts of the carcass. While there are some suitable alternatives that provide the Halal slaughter at an equal or better level of quality and even lower prices, the brand-name value of Kobe is such that My Café remained working with the supplier, which displays the heavy impact of this particular force on the business.

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Rivalry among existing competitors: While rivalry is fierce within the F&B business in Bahrain, My Café’s approach is not to compete over prices or specific cuisine, instead focusing on innovations in their menu, as well as keeping it fresh and interesting through regular food and menu engineering sessions.

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Threat of new entrants: While the threat of new entrants in the F&B industry tends to be high for the staple and street food market, higher end dining tends to be less accessible with few willing to risk investing in real estate or maintaining high operational expenditure as part of rent, as well as the investment in a high end kitchen and staff, despite the support of governmental programs like Tamkeen, which offer to cover 50% of the costs of establishing the business.

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Operations Management Assignment

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Threat of substitutes: The higher end F&B market is reliant on customer opinion and likability, not cost. Therefore, My Café’s focus on innovation reduces the risk of being substituted considerably.

To sum it all up, My Café’s seems pretty secure at the moment. The only real issue faced is the bargaining power of the suppliers, but the same issue would be faced by the competitors as well. One area of concern in regards to that, however minor it may be, is that a competitor could decide to introduce the supply of Miyazaki wagyu which the My Café mentioned was better priced and of consistent quality due to the absence of complications in regards to the Halal method of slaughter. If clients note the inconsistent quality of My Café’s meals incorporating Kobe Beef versus the consistent quality of the hypothetical competitor, it could result in a loss of credibility and could have long-term damaging effects to their reputation. Perhaps an initiative can be proposed wherein Miyazaki or Matsusaka wagyu could be slowly introduced while educating the regular clientele to Kobe’s two other alternatives. This would allow My Café to slowly show more consistent quality of food and gradually close the gap created by the brand-name value, which could be very beneficial at no real cost.

5.3 Codifying strategy and circulation: My Café’s strength revolves around its focus on operational excellence and innovative excellence. As such, its operational strategy should reflect the focus on achieving a quality and consistency level to be awarded a Michelin star. This goal is not as unachievable as it sounds, especially as street foods have been awarded that in recent years, and the orientation of the Michelin Restaurant Guide is moving towards quality and consistency of traditional standards of Haute cuisine. Furthermore, creating broader supply networks is essential in order to have a stronger leverage when negotiating with suppliers both locally and overseas.

6. Recommendation II: Performance Management As discussed in the findings, the My Cafe management team believe for the most part that the more traditional approach of measuring financial profits, in this case Profit and Loss, is the main measure for the organization’s performance. There was no approach to link or understand the impact of organization and operational goals with the financial goals. While My Cafe is currently successful, relying on lag indicators would not allow for issues that affect their performance to be addressed in a timely manner (Kaplan & Norton, 1996).

6.1 Evaluation of a Performance Measurement System: Both an organization’s sustainability and business continuity are vital to it. In order to ensure sustainability, performance management systems need to be in place so that when things go wrong, problems can be identified in a timely manner and rectified. As such, Slack et al. (2016) suggest the Triple Bottom Line (TBL) as a broad approach towards evaluating the performance of an organization. The TBL framework looks at the social, environmental and economic bottom lines. The social bottom line is concerned with the measurement of the impact that the operation has on the lives of people. This would include things like customer safety and employment impact. The environmental bottom line is concerned with the impact the operation has on the environment. Lastly, the economic bottom line is concerned with the effective use of resources. The TBL, however, fails to account for how

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Operations Management Assignment

for-profit organizations would manage their own immediate need to satisfy their owners against the social and environmental aspect. As such, another framework needs to be examined. Kaplan and Norton (2004) suggested the value of using the Balance Score Card (BSC) as...