E. SORIANO FAMILY CORP.

An Integrative Company Study

On Operations Management

Prepared by:

MARGARET JANE C. GALILEA, MD

KIM ROMMEL E. PANAGUITON, CPA
Master of Business Management – II

Submitted to:

Ms. CHARIS EMMELYNN M. BAUTISTA, CPA, MMBM

Course Instructor

College of Management
University of the Philippines Visayas
Iloilo City

16 December 2018
 TABLE OF CONTENTS

I. Introduction
A. Objectives of the study 1
B. Scope and limitations 2
C. Methodology 2

II. Company background

A. History and evolution 3
B. Mission, Vision, Core Values 4
C. Organizational structure 5
D. Operations Strategy of the Company 6

III. Documentation of Company Operations

A. Design of the company’s operation 7
B. Operating and controlling the system 18

IV. Decision Making

A. Identification of problems 22
B. Formulation of solutions 24
C. Control and management tools 30

VI. References 33

VI. Appendices 34
I. INTRODUCTION

The role of operations management in running the affairs of every organization cannot be

overemphasized. Virtually all organizations—large or small, commercial or non-profit—create some

output in the form of products, services, or a combination of the two. OM is largely concerned with the

production and delivery of these products, services, or product-service bundles upon which we all

depend on a day-to-day basis. Since operations management presents a structure on which

companies can improve on the areas of efficiency, effectiveness, and customer satisfaction,

managers today have come to understand the grate role that OM plays in the organization.

In a modern-day market characterized by a high degree of competition, the practice of

operations management is at the center of many changes which affects the business world. These

changes include changes in customer wants and needs, changes in business technologies, changes

in business policies and practices brought about by legislations and special interests, supply chain

innovations, so forth. Being such, operations management—or the operations manager to be specific

—is tasked to respond to these changes and advances by channeling the firm’s resources to

capitalize on the emerging opportunities and mitigate the threats. OM finds solutions to business

challenges in an environment of fierce competition.

A. Objectives of the Study

This main objective of this study is to look into the various aspects of the business operations

of E. Soriano Family Corporation, a real estate leasing company located at Molo, Iloilo City.

Specifically, the paper aims to:

1. Determine and describe the main competitive strategy of the company;

2. Discuss the design of the company’s operations;

3. Discuss the various operational controls and policies in place;

4. Identify potential problems or areas that need improvement; and

5. Recommend courses of action to mitigate the problems identified.

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B. Scope and Limitations of the Study

The study covers only the business segments of E. Soriano Family Corporation, specifically

the residential and commercial building spaces for lease, the printing and advertising shop, and the

badminton court located at West Avenue, Iloilo City. The scope of the study does not include the

other corporate business segments located elsewhere.

Furthermore, the proponents were not granted full access to all information regarding the

business such as those pertaining to financials and other business contracts. Therefore, the analysis

and discussions are limited only to the areas which the proponents was able to gather data and

document.

C. Methodology

To gather the needed information to complete the study, the proponents did face-to-face

interviews using semi-structured questionnaires with a number of company staff—to include the

building manager, the secretary, the head of the utility crew, and the security guard. In addition, the

proponents had a tour of the business facilities, and made observations on three separate areas at

two separate dates. Lastly the proponents were given access to some company documents and

records, and these were also incorporated in the study.

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II. COMPANY BACKGROUND

A. History and Evolution

E. Soriano Family Corporation was formally established in the year 2000 by Atty. Enrique

Soriano and his children. Initially, the business is a three-storey boarding house with twenty (20)

studio-type rooms having a room capacity of three to five persons. The business is located at 297

West Avenue, Iloilo City, adjacent to the residence of the Soriano family. The lot used was given to

Atty. Soriano by one of his clients in law practice during the 1970s. Construction of the building begun

during the late 90’s, and operations started in 2000. The initial target occupants were college students

from nearby colleges and schools such as the University of the Philippines, John B. Lacson Maritime

University, and Iloilo Doctor’s College. The business is open for long-term occupants and transients

alike. Five employees, including members of the Soriano family, initially managed the business

operations.

In the year 2002, the business expanded its service offering when it opened ten (10)

commercial spaces for rent on the ground floor of the building. Initial occupants were medical

practitioners, high school tutors, restaurateurs, and other small entrepreneurs. In 2007, the

gymnasium adjacent and connected to the main building was built and started operations the same

year. The gym is composed of four standard-sized badminton courts, complete with badminton

facilities. The gym is named Soriano Sports Complex under the name of the corporation.

As the years passed, the business continually expanded its product lines. Presently, there are

20 studio-type rooms for long-term occupany, 10 studio-type rooms for short-term occupancy

(transient), 15 bed-spaced rooms, and 12 commercial spaces for rent. Nine (9) out of the 12

commercial spaces are currently being occupied (medical clinic, dental clinic, law office, internet café,

graphic shop, pawnshop, spa, laundry shop, and salon). Recent additions include the cellular sites

(signal tower) of telecommunication companies Smart and Sun Cellular located also on the rooftop of

the building.

Presently, the Soriano siblings jointly manage the business.

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B. Mission, Vision and Core Values

Mission Statement

providing better service such as further improvements in the facilities,

including a continually developing security system.”

Vision Statement

“E. Soriano Building will be a widely in-demand transient residential place in

Iloilo City catering to all people in need of a “home away from home”.

Core Company Values

“Client-Focused: The tenant’s interest always comes first. The tenants are the

main source of funding of the business for future improvements and expansions. The

tenants trust the company to provide a secure and a comfortable residence.

Quality: The reputation for quality over time is a very important part of the

business’ character and history of success. The business will not cut corners at the

expense of sound long-term development of the services, operations, risk-

management systems, or people.

Integrity: The business will do its best to conform to the highest standards of

ethical behavior, integrity and honesty.”

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C. Organizational Structure

E. Soriano Family Corporation is a closely-held business managed by the Soriano siblings.

Mr. Enrique Soriano Jr., a business consultant based in Manila, acts as the chairman of the board

and president. Under him is the building manager who serves as the all-around general manager of

the business. The organizational structure is as follows.

Soriano Siblings

Enrique Soriano Jr.

President / Chairman

Building Manager

Records / Bookkeeping Maintenance / Utilities

Staff (2) Staff (3)

Advertising Shop
Security (2)
Staff (2)

“All-Around” Staff (2)

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 As a result of the business being closely-held and having only a very small number of

employees (12 in particular), the functional areas are not formally established and delineated. Most

employees multi-task and perform several functions at once. The only apparent sections with

established responsibilities are the records, maintenance, and security. Nevertheless, employees in

these sections perform other unrelated tasks as well. The human resource structure is discussed in

greater detail in Chapter III-A (7).

D. Operations Strategy of the Company

The business as a whole does not have a unified set of business strategy. Rather, each of

the business segment/unit have their own set of strategy.

For one, the E. Soriano Building (residential/commercial space leasing) employs a product

differentiation strategy. The business distinguishes its service offering from similar products offered

by competitors by having a number of “added features” to the basic service bundle. Some examples

of these “added features” are the 24/7 security guard on duty, quick response to tenant problems by

having a utility staff deployed throughout the day, an in-house mini canteen, wide parking space, and

many more. However, all of these come with a price premium, i.e. the fees charged by the business

are relatively more expensive vis-à-vis competitors. The service offering is discussed in detail in

Chapter III-A (5).

On the other hand, Soriano Sports Complex and the Soriano Prints and Advertising employ

the cost leadership business strategy. These business segments establishes a competitive

advantage by having lower prices for its product/services offerings relative to competition. As in the

case of the badminton court, it is a generic one with no or very limited special features and with

relatively low operating costs—which enables it to establish cheaper admission fees. For the printing

shop, it is using advanced production technology, which increases efficiency and minimizes

production time and cost.

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III. DOCUMENTATION OF COMPANY OPERATIONS

A. Design of the Company’s Operations

1. Operations & Competitiveness

E. Soriano Family Corporation has been in the hospitality industry for over 18 years, and

counting. From a purely residential space leasing catering to students in nearby universities, the

business eventually expanded its product-service offerings to include commercial spaces, a sports

complex, and a printing shop. As such, these expansionary activities and subsequent “diversification”

of product-service offerings brought about changes in the firm’s set of strategies, organizational

structure, and business policies. In particular, the business initially implemented a low-cost strategy

where it competed in terms of pricing, until it gradually shifted to differentiation in conformance with

the changing preferences of its target market.

At present, the main revenue generating unit of the business is still the E. Soriano Building,

and most of the organizational policies, technological innovations, capital expenditures, and

expansionary activities are centered on the latter. For example, a major expansionary activity done

recently on the building is the development of the rooftop into another floor of residential occupancy

units for “bed spacers.” Furthermore, the main building also houses the office for the administrative

staff, and the Soriano Printing and Advertising.

Competitiveness

In terms of competitiveness, the business strives “to provide a secure and comfortable

environment, wherein tenants feel at home and relaxed” and to offer services that “reach and exceed”

its clients’ expectations. The firm’s operations influences on competitiveness with respect to the

following factors: service bundle design, location, quality, quick response, and employees. The

specific attributes for each of the competitiveness factors are shown on Table 1.

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 Table 1. Competitive Attributes Employed by E. Soriano Family, Corp

Competitiveness Factor Attributes

Service bundle design Multiple added features or “extra” services

Premium location at the center of Iloilo City; near universities

Location and major business establishments; within transportation routes
of PUJs

Quality High degree of service quality

24-hour guard on duty; full-time utility crew on duty within office

Quick response
hours

Full-time building manager and crew on duty within office

Manager and crew
hours, including Saturdays

2. Operations Strategy & Decision Analysis

As stated earlier, E. Soriano Family Corporation does not have a unified business strategy at

the corporate level. Rather, the specific business segments have its own set of strategies and tactics,

taking into account several factors such as the target market, product-service quality, and operating

costs.

In particular, the E. Soriano Building which has over 30 residential occupancy rooms and 13

commercial spaces employing the service differentiation strategy. A differentiation strategy offers

product-service bundles that are unique and different from the competition (Schermerhorn, 2008). In

the case of the building, this strategy is justified through the offering of various added features on top

of the basic hospitality service. These include a 24/7 security, in-house maintenance crew, a mini

canteen, and wide parking spaces, amongst others.

On the other hand, the Soriano Sports Complex and the Soriano Prints and Advertising

employs the cost leadership strategy. This strategy seeks to operate with lower cost than competitors,

thereby offering product-service bundles at lower prices (Schermerhorn, 2008). The badminton court

simply offers a generic service with very minimal operating costs, while the printing shop uses a

specialized production equipment that also allows savings in time and cost.

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Decision Analysis

In terms of decision analysis, the business doesn’t have an established framework or a

system on evaluating major business decisions. Rather, both strategic and operational decision-

making processes are concentrated at the top management level. No standing policy is in place, and

decision criteria vary on a case-to-case basis.

3. Quality Management

There are countless approaches in management literature in defining and measuring quality,

but common among these themes is the consistent conformance of the product-service offerings to

customers’ expectations (Slack et al, 2016).

E. Soriano Corporation’s quality management policies are determined at the top management

level. Being one of the firm’s core corporate values, the management team gives special emphasis to

quality, and has a number of policies in place to ensure that the service offering meets their clients’

expectations.

Quality management is a major concern for the hospitality business segment, considering the

service differentiation strategy that it employs. The standing business policies and operational

procedures are constantly being reviewed in a conference attended by the CEO (Mr. E. Soriano) and

all the staff at the end of each quarter, and changes are implemented right away as problems are

identified. Furthermore, Mr. Soriano avails of the services of an independent auditor at least twice a

year to evaluate the different areas of the firm’s operations and look for areas that need improvement.

Mr. Soriano himself conducts a visual inspection of all the facilities on a random basis to check if they

are orderly and well-maintained by the employees at all times.

For the other business segment that uses the cost leadership strategy, the firm’s

management only ensures that the basic products/services adhere to the minimum quality

requirements set by the industry. Nevertheless, these quality policies are also in writing and undergo

the same periodic evaluation process.

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4. Products and Services

E. Soriano Building

The main service offerings of the E. Soriano Building are the twenty(20) studio-type rooms for

long-term occupancy, ten (10) studio-type rooms for short-term occupancy (transient), fifteen (15)

bed-spaced rooms, and twelve (12) commercial spaces for lease.

Studio-Type Rooms (long-term)

The studio-type rooms are located at the second and third floors of the building. Each room is

good for four to five people. Tenants get to choose the kind and combination of beds that will be

placed inside their rooms—single beds or double-decks, or they can request to have queen-sized

beds at tenant’s expense. Each room also comes with a bathroom and a sink, with the bathroom

having a shower and a flush-type toilet. The floor is fully tiled, and the walls are neatly painted. Large

jalousie windows are built for ventilation, with provision for a window-type air conditioning unit in the

wall for tenants who would want to install such. Illumination is sufficient with LED light bulbs.

Each room comes with a number of equipment and furniture. For one, there are two electric

fans installed—a ceiling fan and a wall fan. Small tables and chairs (2 to 3 per room) are provided,

and a big 7-feet tall wooden cabinet with five divisions is fixed on the wall of each room. Furthermore,

each room has enough space for other furniture/equipment such as an office table, a computer table,

television, electric stove, and/or refrigerator.

There are also a number of added security and safety features inside each room. These

include a three-way door lock, a water sprinkler in case of fire, and an emergency light that will

automatically illuminate in case of a power outage. This is the standard security feature.

Tenants under the studio-type rooms for long-term occupancy are bound by a contract of

lease for at least three (3) months to one year. Renewal of contract is subject to management’s

discretion.

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Studio-Type Rooms (Short-term)

The studio-type rooms for transient boarders or short-term occupancy are located at the

second floors of the building. Each room is good for three to four. The room design, illumination,

layout, and ambiance is similar to that of a standard two-star hotel room. Each room also comes with

a bathroom and a sink. The rooms have air conditioning units, with a television set, small cabinet,

small desk and chair, and two-seater table. Similar to the other studio-type rooms for long-term

occupancy, the “hotel” rooms come with a big wooden cabinet with five divisions fixed on one side of

the wall, with standard security features.

Bed-Spaced Rooms

The set of bed-spaced rooms located at the fourth floor (formerly the rooftop) of the building

is the company’s latest expansion. This is to cater to tenants who have limited budget. These are

offered in more affordable fees charged than studio-type rooms.

Each room is good for one person only and comes with a single-sized bed, a wall fan, a small

table, and a small cabinet. There are no bathrooms inside each room. Rather, three common

bathrooms are located at the same floor next to the rooms. At the fourth floor of the building is a

terrace where tenants can have a “bird’s eye” view of Molo, Iloilo City.

Common Area

At the ground floor of the building is a small cafeteria where students can buy instant noodles,

crackers, soft drinks, energy drinks, coffee, “junk foods” and candies. The cafeteria is well ventilated

and has tables good for ten (10) people at a time. Students often use this area as a place study area.

Commercial Spaces

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 Along the building compound are twelve (12) commercial spaces for rent. Tenants are given

the leeway to modify the layout of each space, i.e. they can change the floor tile, change the paint

color of the ceiling and walls, and install divisions/room dividers at their own expense. Each space

comes with a comfort room and a sink. The only condition imposed by management to the tenants is

for the latter to install a uniform-sized panaflex™ signage for the business name.

At present, the commercial spaces are occupied by two medical doctors and a dentist

(clinics), a leather store, an internet café, a law office, a laundry shop, a salon and spa, and two

pawnshops.

Soriano Sports Center

The sports center adjacent to the main building houses four (4) standard-sized badminton

courts. The area is well-lit and ventilated. Clients only pay for the use of the court, and they have to

bring their own rackets and shuttle cocks. Benches are provided on the sides.

Soriano Prints and Advertising

The printing and advertising shop is one of the latest additions to the company’s business

segments. The store housed at the ground floor of the main building specializes in the

production/printing of tarpaulins, posters, stickers, flyers, and invitations for all occasions (political

campaigns, business advertisements, or special occasions). The shop also produces Panaflex™

signages, keychains, mugs, and similar paraphernalia.

5. Capacity, Processes, and Technology

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 Capacity refers to the upper limit or ceiling on the load that an operating unit can handle

(Stevenson, 2015). In this section, the firm’s capacity and technology issues shall be discussed per

business segment.

E. Soriano Building

At present, there are several capacity issues for the main building, particularly for the studio-

type and bed-spaced rooms. Throughout the year, mostly all the rooms for long-term residential

occupancy are fully occupied—or at full capacity, and every now and then, new customers (students,

in particular) would come over and inquire for available rooms.

On the other hand, the “hotel” rooms for transient boarders and the commercial spaces are

frequently operating at less than full capacity. More often, some rooms/spaces are left unoccupied for

months. According to the general manager, no seasonal patterns or recurring variations on

occupancy for the rooms are observed throughout the year, except only for the influx of transients

during Dinagyang season.

Soriano Sports Center

The badminton courts are operating at almost full capacity during the afternoon to evening

hours (e.g. 5 pm to 10 pm) in weekdays and for the whole day during weekends. During the daytime

on weekdays, the sports arena operate at only half or a fourth of its full capacity.

Soriano Prints and Advertising

Demand for the products of the print shop exhibits a seasonal pattern during the year. In

particular, the demand for tarpaulins, invitations, and other souvenir paraphernalia rises during the

so-called “Ber” months where most parties (birthdays, weddings, etc.) are being held. Furthermore,

demand for tarpaulins, posters, shirt prints, and flyers increase every three years during election

season.

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 As such, the shop operates at almost full capacity during the “ber” months. In fact, there were

some years in the past when the store needed to hire additional “part-time” workers to help meet the

high customer demand. For the other months of the year, demand is at a relatively steady state, with

little declines experienced during the months of May to July.

In terms of technology, the print shop uses sophisticated printing equipment with a very high

output yield per unit of time. This allows the shop to meet the growing demand during peak season,

but with the employment of additional manpower.

6. Location and Facilities

Location

E. Soriano Family Corporation is located along 297 West Avenue (Infante Street), Molo, Iloilo

City. The business lies near a street along the so-called local University Belt (stretch from John B.

Lacson Foundation Maritime University to the University of San Augustine) in Iloilo City. In particular,

the business compound is at the west side of the University of the Philippines Visayas, and at the

northern side of Iloilo Doctors’ College.

In addition to being near major colleges and universities at the center of Iloilo City, the

location is also ideal because of its accessibility to major business establishments (e.g. SM City and

Robinsons Place). West Avenue is within the standard route of various PUJs, so the business

location is just “one ride away” from major business centers and government offices, in addition to

schools and universities. Moreover, it is adjacent to a hospital (Iloilo Doctor’s Hospital) and about

0.5km away from St Pauls Hospital, the establishment could provide transient accommodation to

patients and their family who are seeking medical management on out- patient-basis.

There are also a number of small establishments within a “walking distance” away from the

business compound. Such establishments include fast food chains (Jollibee, Chowking, Greenwich,

JD, McDonalds), convenient stores (iMart, Ministop), pharmacies (IDH Pharmacy, Botikang Pinoy),

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internet cafés, and retail shops. In addition, street food vendors selling fried chicken, barbecue, and

inasal populate the sidewalks of West Avenue at nighttime.

Facilities

The business compound includes the four-storey main building which houses the rooms for

residential leasing (45 rooms in total), commercial spaces (5), and the office of the administrative

staff; a sports arena adjacent to the main building which has four standard-sized badminton courts;

an annex building with seven (7) commercial spaces; and a wide parking lot that can accommodate

more than ten (10) cars at a time. A graphic layout of the business compound is shown in the

appendix section.

All the rooms are equipped with a set of standard equipment, furniture and fixtures, and

safety devices such as sprinklers and emergency lamps are also installed on each room.

Security is also tight within the business premise. A main gate along West Avenue leads to

the building compound, and the compound—including the main gate, parking lot, and building lobby

and hallways—are all covered by closed-circuit television cameras (CCTVs).

Location Decisions

Location decisions for many types of businesses are made intermittently, but they tend to

have a huge impact on the firm’s day-to-day operations and strategic decisions. Stevenson (2016)

lists four location options that managers use in location planning—and of these, the management of

E. Soriano Corporation chooses to “expand the existing facility”, in the past and presumably in its

future location decisions. This was exhibited by the fact the rooftop of the main building which used to

house a gym, was converted into a fourth floor which now houses fifteen (15) bed-spaced rooms. The

expansion activity was implemented by early to mid of 2018, and the new rooms are fully operational

as of writing.

In the case of the business, the “expand the existing facility” option was the most attractive

one since there is still adequate airspace for expansion, and the structure provided a good foundation

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for an additional floor. Also, the location of the business compound as previously discussed has a

number of desirable features that are not readily available in nearby locations.

7. Human Resources / Work Measurement

The management of human resources deals with issues related to hiring, employee training

performance appraisal, compensation, organizational development, occupational safety, health and

wellness, fringe benefits, and motivation, amongst others.

E. Soriano Family Corporations has a total of twelve (12) employees, excluding the Soriano

siblings who are at the top management (Board of Directors). Table 2 below shows the current

employees of the firm with their job descriptions.

Table 2. Employee Job Descriptions

No. of
Job Title Job Description
Employees

The general manager of all the business segments within the

compound, to include the main building, the sports center, and the
Building manager 1 print shop. This employee has the authority to make operating and
tactical decisions, and directly reports to Mr. Soriano, the corporate
president.

Prepares billing statements, collects payments from

Records / customers/tenants, issues source documents, and prepares periodic
2
Bookkeeping staff occupancy reports and financial summaries (usually at the end of each
month, or as required by the management).

Maintains the cleanliness of the building, particularly the rooms,

hallways, stairs and the lobby, as well as the other facilities within the
Maintenance / Utilities
3 business compound; troubleshoot problems on plumbing and
staff
electricals; repair broken furniture and fixtures; and do landscaping
within the premises.

Performs the day-to-day operations of the print shop such as graphics

layout, photo editing, printing, pressing, cutting, and other crafty works.
Advertising shop staff 2
Proficiency in the use of computers and photo editing software
applications are required for this position.

Secure the main entrance, patrol the premises, record and required for
Security personnel 2 IDs of all non-tenants who visit the main building, assist motorists in
and out of the parking space.

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 Perform tasks as may be required by the top management or the
building manager. These tasks may include utility work,
“All-around” staff 2
encoding/recording of transactions, running errands, and various
troubleshooting jobs.

12

However, despite of job descriptions in paper, the actual tasks performed by the employees

are not clearly delineated. Oftentimes, the employees multi-task and perform several functions at

once, or perform tasks unrelated to their job description.

Performance Appraisal

A performance appraisal is a systematic and recurring process that measures an employee's

job performance and output/productivity in relation to some pre-established criteria.

In the case of E. Soriano Corporation, performance appraisals are done informally. At least

once a month, the president holds a staff conference where he would ask each employee to report on

all work done during the period so covered. The appraisal is then carried out in a subjective manner.

In addition, each employee is given the chance to evaluate and give comments on the performance of

his/her co-employees through a one-on-one interview with the president. Aside from these casual and

sensory processes, no formal performance appraisal system is in place. Furthermore, no employee

rewards are tied to appraisals.

Employee Retention

For the firm, employee retentions seem to be a persistent problem. The business

experienced high employee turnover during the past few years. Noteworthy is the fact that of the

current twelve (12) employees, only half of them are with the company for more than three years. The

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other half is composed of new-hires, or those who have been with the company for less than three

years. On the average for the past three years, two employees would leave the company, while the

name number would enter as new hires. Notably, turnover is high for the rank-and-file positions, while

the managerial and/or supervisory employees would stay longer.

B. Operating and Controlling the System

1. Supply Chain Management

A well-established supply chain management in the hospitality industry may lead to a

competitive advantage. The use of right supply chain and logistical strategies may improve the

service quality of the entity and may lead to a reduction of costs.

As in the case of E. Soriano Family Corporation, only the printing and advertising shop has

an established supplier based in Manila. The said supplier provides some of the materials needed for

the tarpaulins and Panaflex™. The same are shipped to the store premises. No particular order

policies are in place, and the staff only places an order as the materials are depleted. As for the other

materials/supplies such as papers, boards, and other souvenir paraphernalia (mugs, keychains,

fans), the advertising staff does the purchase at local merchandisers such as the Iloilo Society

Commercial.

For the main building and the badminton court, no standing supply chain policies are in place.

The staff only acquires materials from various suppliers as the need arises.

2. Forecasting

Forecasting is a tool in planning that helps management cope with the uncertainty of the

future by estimating occurrences relying mainly on historical data.

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 For the Soriano family businesses, forecasting is primarily done at the grassroots—that is, the

staff in charged in a particular business segment is the ones who make a forecast for that segment.

However, no mathematical or quantitative tool is utilized for the forecasting process. Rather, they are

simply done subjectively based on the forecaster’s experience, knowledge, and judgment. For

example, as in the case of the print shop, since the staff is already aware of the seasonality in

demand, they would simply come up with figures to estimate the increase in demand during the “ber”

season. For the “hotel” part of the building, increases in occupancy rates are expected during the

Dinagyang season in January.

However, these forecasts are not documented. Rather, they are done in a very informal

fashion, and they rarely receive much attention or consideration from the top management. Also, they

do not have any bearing on the standing business policies of the firm.

3. Inventory Management / Simulation

Inventory management, as an important element of the expanded supply chain, includes

aspects such as determining reorder points, scheduling purchases, controlling ordering quantities,

and storing unsold goods.

Of the three operating segments within the business compound, only the printing and

advertising shop maintains a substantial amount/quantity of merchandise inventories. These include

tarpaulin and Panaflex™ materials, papers of different kinds and hues, photo papers, mugs, fans, and

keychains. No standing inventory management policies are in place, and the staff only makes

acquisitions if “they think” that they will run out of stock. The tarpaulins and Panaflex™ materials are

ordered from one supplier in Manila, while the rest of the raw materials are purchased from general

merchandisers within the city.

For the main building and the badminton court, no substantial merchandise inventories are

maintained. The basic materials such as pillows, blankets, and sheets for the rooms, and rackets and

shuttlecocks for the badminton court are purchased occasionally.

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4. Aggregate Planning and Resource Planning

The important characteristic of aggregate is that it is concerned with setting capacity levels

over the medium and short terms in aggregated terms (Slack et al, 2016). That is, the business as a

whole is making overall, broad capacity decisions, but is not concerned with all of the detail of the

individual products and services offered (ibid).

In the case of E. Soriano Family Corporation, aggregate planning and general resource

allocation is done at the top management level. In other words, only the Soriano siblings have

participative roles in decision-making for overall capacity decisions. Mr. Soriano (CEO) only gathers a

few inputs from the building manager and the staff during the employee conference; but the analysis

of facts, discussions, deliberations, and decision-making are confined only to the board of directors.

On the downside, since the mix of the products and services offered by the business is highly

diversified and that each segment uses a varied mix of available resources, the aggregate planning

process may require more assumptions and a great degree of approximation on the part of top

management.

5. Lean Production, Scheduling, and Waiting Line Analysis

All of the operating segments of the corporation are not practicing lean operations, whether

for service or manufacturing/retail. As in the case of the printing and advertising shop, the latter

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maintains substantial inventories and these are stored in a separate room within the business

compound. This is necessary since the demand for the products of the store are quite variable in

most parts of the year, and that they don’t have established business-to-business relationship with

some of its suppliers, especially for the local ones. As such, lean operations may not be a feasible

option at this point.

As for all of the business segments, scheduling techniques and waiting line analysis are also

not applicable.

IV. DECISION MAKING

A. Identification of Problems / Points for Improvement

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 Based on an analysis and evaluation of the various aspects of the company’s facilities and

operations, the following is a summary of the problems or control weaknesses identified:

Table 3. Weaknesses / points for improvement on the company’s operations

Aspect of
Problem / Weakness Risk Level
Operations

Most of the resources are invested on the main building.

Operations and
The other operating segments only get a share of the Low
competitiveness
“residual” funds.

Operations strategy Strategic and operational decision-making processes

Medium
and decision analysis are concentrated at the top management level

Limited quality assessment procedures: employee

conferences are done once in every quarter, and the
Quality management external audit is done only twice a year. There is no Medium
systematic evaluation tool for the performance of the
staff. Neither is there a system for incentives.

The rooms for long-term residential occupancy are

operating at full capacity, while the “hotel” rooms for
transient boards are often operating only at half of full
capacity.
Capacity Medium
The badminton court operates at full capacity during
certain hours/days of the week

The advertising and print shop lacks manpower during

peak season (“ber” months and elections)

Employee job delineation only exists in “paper”, and the

employees often multi-task.
Human resource and
work measurement No established performance appraisal system. Medium

High turnover for the rank and file employees.

As for the company’s operating controls and management tools, the following are the

identified weaknesses or points for improvement:

Table 4. Weaknesses / points for improvement on the company’s controls

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 Control Mechanism Problem / Weakness Risk Level

Supply chain
No established B2B relationships with local suppliers. Medium
management

Mathematical forecasting tools are not utilized.

Forecasting Forecasts are done in a very subjective manner only by Low

the staff-in-charge.

No standing inventory management policies are in

Inventory
place, and the staff only makes acquisitions if “they Medium
management
think” that they will run out of stock.

Aggregate planning is not fully participative, and is done

Aggregate Planning only at the top level of management. Operational staff Low

have minimal input.

B. Formulation of Solutions

Part of the objectives of this study is to “identify potential problems or areas that need

improvement” and “recommend courses of action to mitigate the problems identified.” In the

evaluation of the alternative courses and action and in the selection of the decision, the following

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factors must be considered: cost, time horizon, operational disruptions. Specifically, the course of

action selected must:

 Balance the benefits with the associated costs;

 Provide a long-term solution to the problem identified; and

 Lead to the minimal level of disruption in the firm’s day-to-day operations.

Problem: Most of the resources are invested on the main building. The other operating

segments only get a share of the “residual” funds.

Alternative Courses of Action Pros Cons

Less funds for improvements

Allocate the funds/resources
equally among the three
business segments.
More funds for expansionary
on the main building.
activities for the sports
Main building operations may
complex and print shop
experience disruptions.

Less funds for improvements

Allocate the funds/resources on the main building, and the

More funds for expansionary
based on a quantitative/ method to be employed may
activities for the sports
systematic method of be complex.
complex and print shop
apportionment. Main building operations may

experience disruptions.

The badminton court and the

More funds for expansionary
print shop may continue to
Do nothing. activities and/or improvements
operate at full capacity
for the main building.
during peak periods.

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DECISION: Do nothing.

The main building is also the main cash generating unit of the business, and as such, it is

reasonable to apportion a huge amount of resources on it.

Problem: Strategic and operational decision-making processes are concentrated at the

top management level.

Alternative Courses of Action Pros Cons

Implement a participative Decisions are more proactive,

decision-making process where and can be expected to

Costly and time-consuming
employees are given the increase productivity and

opportunity to give inputs employee empowerment.

Decision-making is fast, and Limited information on which

Do nothing
less costly. decisions are based.

Decision: Increase employee participation.

Employees or the rank and file are the ones who are more familiar with the nitty-gritties of the

operations. If they are involved in decision-making, benefits are expected to be attained in the form of

increased efficiency and productivity. In addition, employee morale is high if they feel that they are

engaged in major business decisions.

Problem: Limited quality assessment procedures: employee conferences are done once

in every quarter, and the external audit is done only twice a year.

Alternative Courses of Action Pros Cons

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 Increase quality assurance Time-consuming and costly;
The level of quality is
measures and evaluation some employees may feel
maintained / improved
processes threatened

Quality may not be

Do nothing Less costly
maintained at all times

Decision: Increase quality assurance measures and evaluation processes.

The current quality evaluation practices (employee conferences and visits by the external

auditor) must be done more frequently. In addition, employees may be given the opportunity to

evaluate quality within their respective spheres, and a mechanism to obtain feedback from clients

must be in place.

Problem: The rooms for long-term residential occupancy are operating at full capacity,

while the “hotel” rooms for transient boards are often operating only at half of

full capacity.

Alternative Courses of Action Pros Cons

Additional and more stable

Convert some of the “hotel”
rooms to residential occupancy
rooms
Expand the residential
occupancy rooms
Do nothing
Costly, and may cause
revenue inflows brought
disruptions on the building’s
about by the increase in long-
operations
term tenants.
Additional and more stable
Entails a huge amount of cost,
revenue inflows brought
and significant disruptions on
about by the increase in long-
the building’s operations.
term tenants
Missed income due to
No financial outlays, and no
unaccommodated clients.
operational disruptions

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Decision: Convert some of the “hotel” rooms to residential occupancy rooms.

Considering that the “hotel” rooms frequently operate at less than full capacity, it may be a

wise move if some of the hotel rooms is converted into residential rooms for long-term occupancy.

However, since this will entail significant costs, a careful financial evaluation on the part of

management is strongly suggested.

Problem: The badminton court operates at full capacity during certain hours/days.

Alternative Courses of Action Pros Cons

Costly and may entail

No more dissatisfied
Expand the existing facility disruptions on the
badminton clients
compound’s operations

No cost, no operational Dissatisfied clients during

Do nothing
disruptions. peak times

Problem: Do nothing.

Considering the constraint in terms of space, it may not be feasible to expand the existing

facility and construct additional courts. If the expansion option shall be selected, it will cover a portion

of the parking space, which may cause dissatisfaction to the continuing tenants. Furthermore, the

monetary outlays and the operational disruptions are too significant to ignore.

Problem: Employee job delineation only exists in “paper”, and the employees often

multi-task.

Alternative Courses of Action Pros Cons

Better employee
Limit the employee’s duties to Employee retraining; hiring of
performance, increased
their job descriptions additional employees.
output/productivity.

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 Reduced employee

Do nothing Less costly productivity; low degree of

accountability

Decision: Limit the employee’s duties to their job descriptions

The company must strictly follow what are stated in the job description when assigning tasks

and responsibilities to employees. Doing multiple and unrelated tasks simultaneously may cause the

employee to lose focus. This may lead to reduced productivity and poor work quality. Furthermore,

accountability and control is enhanced if only one employee is assigned to do a particular task.

Problem: No established performance appraisal system, and high turnover for the rank

and file employees.

Alternative Courses of Action Pros Cons

Better basis for Increased costs; time

Implement a formal appraisal
compensation; motivated consuming; some employees
system
employees may feel threatened.

Employees may not be

No additional development
Do nothing motivated to increase
costs; no disruptions.
productivity.

Decision: Set a formal appraisal system.

The establishment of a formal employee appraisal system may lead to improved

performance, correction of deficiencies, employee growth and development, and employee

motivation. All of these may then result to increased efficiency and productivity for the company as a

whole.

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 Also, in the case of the high turnover, management must conduct “exit interviews” to

determine the employees’ reasons for leaving the firm, and consider these information in human

resource planning.

Control and Operations Management Tools

Control can be broadly defined as the process of measuring performance and taking action to

ensure desired results (Schermerhorn, 2008). The purposes is quite straightforward—that is, to

ensure that plans are carried out and goals are achieved.

An analysis of the various aspects of the firm’s operations reveals that a number of controls

are not in place, to wit:

1. No established B2B relationships with local suppliers;

2. Mathematical forecasting tools are not utilized; and

3. No standing inventory management policies are in place.

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 The aforementioned controls are essential for management to plan activities, and check if the

actual performance/output meets or surpasses the organizational goals and objectives. In sum, the

recommendations are as follows:

Recommendation 1: Establish and nurture B2B relationships with local suppliers

As mentioned in the previous part, the company, particularly the advertising and print shop, is

dependent on local supplier for the bulk of its raw material requirements. Therefore, it would be a

wise move for the company to establish strategic partnerships with local suppliers. The probable

gains that the company may eventually derive from this are: increased market share and increased

revenues through new market access, extended product lines though additional raw materials, and

access to new manufacturing technologies. In addition, the company may save on ordering and

purchasing costs considering that suppliers who are partners may offer more attractive inventory

purchasing schemes (e.g. provision of discounts, on-site delivery, etc.).

Recommendation 2: Mathematical forecasting tools must be utilized.

Instead of the usual “subjective” forecasting method employed at present, the company must

perform a variety of mathematical forecasting tools to predict demand for the company’s product and

service offerings.

Forecasting will positively impact the firm’s operations by providing management with

valuable information that it can use to make economic and managerial decisions. For example,

forecasts based on hard data may anticipate future demand surges, thereby helping management

anticipate resource needs in the near future.

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 Recommendation 3: Inventory management policies must be in place.

Inventory management policies, with emphasis on reordering points, ordering quantities, and

cost management, must be in place for the print and advertising shop. Considering that stored

printing materials occupy one room space within the main building, the same may be incurring

significant amounts of inventory carrying costs and opportunity losses. By having an inventory

purchasing management system in place, acquisitions may be correctly timed for a certain period’s

production needs, thereby minimizing the amount of inventories on hand. This will then require a

lesser amount of space for storage, and the excess storage space may be used for more productive

activities.

However, management must first establish strong B2B relationships with existing and

potential suppliers and must have reliable demand forecasts to compliment the inventory

management system.

Recommendation 4: Aggregate planning must incorporate employee inputs.

Considering that the corporation’s three business segments are highly diversified (i.e.

property leasing, sports arena, and printing shop), the aggregate planning process may be quite a

challenge for top management. The process is impacts virtually all aspects of the organization—

whether operational/short-term or strategic/long-term. Being such, top management must incorporate

inputs from employees working at the grassroots for the following reasons:

1. Employees can best estimate demand for the products and services; and

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 2. Employees having a hands-on involvement in the actual production of goods and/or

delivery of the service can better evaluate available resources, production efficiency, and

operational capacity.

For an aggregate plan to be realistic, top management must come up with a reliable and

timely information on available facilities and a solid forecast for the firm’s product and service

offerings—information that may be best determined by people involved in operations.

Communication

To successfully control the various aspects of an organization’s operations, managers must

not only set controls in place. Rather, top management must communicate these to all employees

and let them understand and appreciate the process. The lines of communication must be kept open

to facilitate feedback mechanisms.

REFERENCES

Schermerhorn Jr., John R. (2008) Management 9th Edition. United States: John Wiley &

Sons, Inc.

Stevenson, William J. (2015) Operations Management 12th Edition. NY: McGraw-Hill

Education.

Slack, N., Brandon-Jones, A., and Johnston, R. (2016). Operations Management 8th Ed.

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London: Pearson Education.

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 APPENDICES

Appendix 1. Layout of the business compound (2016)

[Taken from the management]

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Annex 2. Photos of the business compound (present)

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Fig. 1 Main entrance

Fig 2. Main building

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Fig 3. Commercial spaces

Fig 4. Commercial spaces

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 Fig 5. Building lobby/cafeteria

Fig 6. Building entrance (center); Soriano Advertising (right side)

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Fig 7. Badminton court

Fig 8. Parking space

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