It is quite often difficult to directly apply operational management results to real-world scenarios and this give managers the reason to move away from such practices that are derived from traditional speculative results. The purpose of the report is to contrast and compare the differences and similarities between a Budget Hotel and a Luxury Hotel employing the five elements which are the major concern of operations management which are cost, quality, speed flexibility and dependability. Operational managers in an organisation are responsible for dealing with daily routine activities and problems. They are often the point of contact with the customers and involve in daily decision making regarding the business process.
Operational managers often know who the customers are and what they often require. For this reason alone an evaluation of the principle theories and techniques in the area of operational management will be carried out after which an analysis of practical operations management situations in the context of real life will be made as well as suggestion of appropriate, workable management solutions.
2 What is Operation Management
The way organisations produce goods and services to their customers is known as operations management. Most of the things we wear, buy, borrowed, eat, sit on, used or read and even healing we received in the hospital are produced by somebody. Performing an operation involves the transformation or conversion of certain group of resource like inputs into goods and services and outputs. Those input resources could be raw materials, raw data, and information or can be the customers of a business. The resources that are inputs goes through a transformation stages before they become goods and services through other transformation resources which are the services and personnel of the operation. (Rev. A, 1999)
Another article written by Wiley.com (1999) defined operations management as “Those business functions applied to plan, organise, coordinate, and control the resources that required in the production of the goods and services of the company. Operations management is classified as the function of management. It entails the management of, equipment, people, technology, information, and several other resources. Operations management is the vital nervous system or unique function of every company. This is a fact that is noticeable no matter the size of the company and can provide substantial good or service which are rendered for profit or non-profit.” (Wiley, 1999)
The input and output process
Source: Introduction to Operations Management by Rev. A. (1999)
2.1 Example of Inputs
Raw materials: An clear example of raw material is a shoe maker that takes some leather, cuts it into sizes, sew it together and puts the sole and heel on, then polish the product pending the production of a piece of footwear.
Information: A typical example of information is where an officer in the tourist office collects and presents information to those that are going on holiday and assisting and giveing them advice about where to stay.
Customers: When travelling , passengers are one of the numerous resources at the airport that are being processed and processing ot passenger ticket and baggage, going from ticket desk and passing the customs and duty-free areas to get to our waiting aircraft are the operation we are involved in.
2.2 Transformation Process
When more part are added to the transformation process, it will provide key elements that operation managers will considered.
Process: This is the step of transforming inputs into outputs and could be series of steps or operate as decision tree.
Capital Equipment: This involves all the tools necessary to support the transformation process and they could be machines, structures, computer hardware and software and information.
Labour: This involves all the personnel that are needed in the execution of the transformation process.
2.3 Example of Outputs
Output: Any product and / or output required by the customer are classified as output with the customer being used in the widest logic of the word. System’s output are often inputs into other subsequent process, e.g. steel panels used for making car fenders and the car fender used for building the car. Likewise outputs can also be inputs into the same system. Quality data control can be used to improve the system’s operation, e.g. a recipe of a hamburger may be changed due to complaint about a bland of the product. (Rev. A, 1999)
3 The role of Operation Management
Transformation of the company’s input to finished goods and services is the unique role of operations management. Those inputs are human resources like workers and managers, processes including facilities like buildings and equipment as well as materials technology and information. Outputs include goods as well as services that are produced by a company. Figure 1 and 2 represents the processof transformation, and at any given factory, the physical process of changing raw materials into finished products is the transformation process such as the transformation of rubber and leather into sneakers, denims to jeans, or plastics to toys. For the Airline industry, the professional movement of passengers and their luggage’s from one particular place to another is deemed the process of transformation, whereas in the hospital, organisation of resources such as medical procedures, doctors and medications needed totransform sick people to healthy ones is a significant examples. (Wiley, 1999)
Wiley stated further that “Orchestrating all the resources needed in producing the final product is the responsibility of operations management which involves the product design, decision on the resources that are needed, schedules arrangements, equipment and facilities, inventory management, quality control, jobs design for the product and the designing of work methods.” All aspects concerning the transformation of inputs to outputs are basically the responsibility of operations management as well. It can be seen in the diagram below that performance information and customers’ feedbacks are used in the continuous adjustment of the inputs, the transformation process and the outputs characteristics and fig 2 gives a representation of the dynamics for adapting to changes in the environment. Many companies have been successful due to proper management functions of operations and a typical example is Dell Inc which is a second-tier computer maker that managed its operation in1994 as similar to most in the computer industry. (Wiley.com, 1999)
Transformation and feedback process
Source: Introduction to Operations Management .Pp 3Wiley.com (1999)
A new business model was implemented by Dell that changed the company’s operations function role as well as the development of new and ground-breaking ways on how to manage the operations function which is one of today’s best practices. Dell company was able to offer rapid delivery of products that are of customised nature to their customers at a lower cost, due to these changes and so therefore become the industry leader. This gives an understanding that any operation that is properly managed can lead to improvement in company success and those that are improperly managed can lead to failure. (Wiley.com, 1999)
3.1 Operations Management Decisions
A general agreement stated that operation will give competitive advantage to a small firm for making operational decision regarding the firm’s business as well as corporate strategies. In the operation management literature these operation strategy decisions have been categorised as structured and infrastructured strategic decisions. (Hayes and Wheelwright, 1984)
Satisfy Factory Demand
Infrastructural decisions are often easier to change as they will not require large and physical modifications that are costly which structural decision have. However, infrastructural decisions combined are described to have strategic effect on the competitive position of the firm. The best way to look at specific decisions that are being made by operations managers is by thinking about decisions that we need to make if we start our own company called Niger Wafers producing praline pecan cookies that originates from an old family recipe. Operations management in this scenario is the decision that have to be made from the first idea to real production of the product. Although this example is exceptionally simple, every other company as well follows this decision-making process inclusive of IBM, General Motors Land’s End as well as a local floral shop. One must note in this example that we need to make a decision before we can think about specific day-to-day decisions. (Wiley.com, 1999)
Operations Management Decisions for Niger Wafers
Source: Introduction to Operations Management by Wiley.com (1999)
The relationship between strategic and tactical decisions
Source: Introduction to Operations Management by Wiley.com (1999)
It can be noted previously in our example that decisions need to be made on the whole company that are long-term in nature before one can think about day-to-day decisions. Strategic decisions are long-term decisions which are used in setting direction for the entire organisation and can be broad in scope when setting the tone for other more specific decisions. Questions similar to the unique features of our product are addressed through strategic decisions as well as the market that one plans to compete in as well as the demand for our product, while tactical decisions are short-term decisions which focus on specific departments and task. Every day issues such as quantities and the timing of specific assets are addressed, and focused more upon by tactical decisions. (Wiley.com, 1999)
Strategic decision determines tactical ones that are frequently and routinely made. Therefore operations management needs begin with strategic decisions, and then later moved to tactical ones. Fig 4 above shows the relationship and alignment of tactical decision with strategic decisions which act as the means to a company’s efficiency in the long run. Feedbacks are provided by tactical decisions to strategic decisions for modification. The example of Niger Wafers above gives an indication of the importance of operation management which are crucial to companies that are large and small. (Wiley.com, 1999)
4 Hotel Operation Management
Many factors determine the commercial success of a hotel and quite a few of which are only considered and recognised by a professional. sufficient positioning, rendered service level, qualifications of personnel as well as other things will influence the profits of a hotel considering both economic and seasonal factors. When tourism business and international partnership are energetically developed, it is then necessary to introduce complex hotel management system which can be singled out as a separate subject of business management that have features that are quite specific.
Operations management in a hotel stipulates that organisation must have business control over four keys important roles of a hotel:
Production of food including products purchase technology, control of supply and consumption, menu card planning, as well as occupation hygiene.
Service of Food and Beverages (clients services, beverages purchase and wines meeting of visitors, and orders fulfilment;
Housekeeping ( general housekeeping, cleaning of client’s rooms, room services and laundrette services);
Operations in front ( accommodation and reception of visitors and additional service render);
Just as in any other business, decision making process will determine how current work is being organised. In other words organising hotel operation will be based on communicational technology which relies on the art of listening, convincing and solving of conflicting situations and by following ethical standards of behaviour, to offer psychological atmosphere that is favourable within the group of people. This can be described as the theme of personnel and hospitality management which forms an integral part of hotel management. (Wiley.com, 1999)
4.1Differences and similarities between a Budget Hotel and a Luxury Hotel
Budget Hotels: These are small scale hotels normally considered to be one star hotel since they only provide lodging that are cheaper in cost per room per night, with some offering breakfast with these prices. The budget hotel as the name suggest are established for people that have a small budget and those who want to spend as little as possible. These hotels usually come with rooms that have basic facilities like bed and washing facilities with communal toilets. Most of them are older in nature compare to the luxury ones. They are also clean but they are not fanciful as the luxury hotels and they are sometimes equipped with worn fixtures and nothing free is offered except a simple breakfast or newspaper that is sometimes inclusive in the charged price. They are normally charged at ?45 to ?70 per room per day.
Luxurious Hotels: This can be defined as an upscale hope that typically cost more than any average accommodation. In the absence of a formal threshold in most cities, any hotel that charges above ?200 to ?250 could be considered as luxury hotel. This type of hotel is only available for people that can spend a lot of money like celebrities, big investors, and the wealthy ones in the society. Crowl and Pascal Duchauffour of The Ritz-Carlton Bahrain Hotel & Spa describes luxury hotel as the hotel that “Provide extraordinary experiences that exceeded customer expectations and created life-long memories.” These hotel’s employees are specially trained on how to cater for everyone of the guests need and their aim is to provide their guests with all the luxuries that the guest desire during their stay. These hotels are even constructed to make their guests stay absolutely stress-free. These hotels are usually equipped with spas offering massages in addition to basic amenities as well as a provision of gyms with the latest exercise equipment, beauty centres offering a wide range of beauty treatments, swimming pools, in-house bars and restaurants and laundry service. (articlesbased.com, 2010)
The price of services in the luxury hotels is much higher when compared to budget hotels but luxury hotel do have free room service, free newspapers and better channel selections on the television with provision of robes and slippers in each rooms. Similar to the budget hotels, rate with luxury hotels vary greatly depending on where the hotel is located and LH in London usually charges between ?240 to ?250 per day. Basically it is a common practice for luxury hotels to have official website so that travellers can go online to make reservation for hotel of their choice, not all budget hotel have official website they are sometimes introduced through leaflets and word of mouth. A criteria table have been drawn below to illustrate some difference between budget hotel and luxury hotels based on the five elements which are the main concerns of operations management. (articlesbased.com, 2010)
Criteria Comparison Table of Budget and Luxury Hotel
Fig 5 Source: Own self
Managing a hotel property could be an uphill task, and professional operations of both luxury and budget hotel is not a smooth journey, because sometimes in both cases the guest expectations always runs high. It is pertinent to conclude from the above analysis that human resources is central to successful and profitable operations of both types of hotels. To properly manage and handle the situation by management principles, the production of hospitality management education institutes in most countries have produced able operation managers and skills necessary to operate successful hotels today and also for the future although the overall industrial requirement exceeds supply. While the management of budget hotel is done with limited resources and can be segmented into two categories of leisure users and business users, the market communication must be directed at these segments. On the other hand luxury hotels are professionally managed with large investment from corporate bodies and tend to bring in a higher rate of return for the investors.
Introduction to Operations Management (Carlson School of Management Employer Education Services) by Rev. A. (1999)
www.jpcmediallc.com/acrobat/managment.pdf Accessed (24/02/2011)
2. Technology & Operations Management Website
www.sussex.ac.uk/Users/dt31/TOMI/whatisom.html Accessed (25/022011)
3. Introduction to Operation management by Wiley (1999)
4. Difference between Budget Hotel and Luxury Hotel
budget-hotels-3311827.html Accessed (07/03/2011)
Berry, W.L., and M.C. Cooper. “Manufacturing Flexibility: Methods for Measuring the Impact of Product Variety on Performance in Process Industries,” Journal of Operations Management, 17, 1999, 163–178.
Hayes R. H. And S C Wheelwright, 1984, Restoring our Competitive Edge: Competitive Through manufacturing, Wiley, New York, Vice; DHHS Publication No.(PHS) 91-50212, Washington, DC
South Asian Journal of Tourism and Heritage (2010), Vol. 3, Number 2 © 2010 South Asian Journal of Tourism and Heritage (Emergence of Budget Hotels and Metamorphosis of Small sized Commercial Hotels in India) by Professor Saroj Kant Biswal
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