Operations Management in Tourism and Hospitality Industry

Module 3

Design of Tourism and Hospitality Service's

Learning Outcomes

At the end of this lesson, the learner should be able to:

1. Illustrate how time-based competition is implemented by
Production/Operations Management (P/OM)
2. Describe customer participation in the design and production of
services
3. Demonstrate the customer interaction in process design
4. Evaluate and apply the recent advances in service technology

Quality means, serving in a manner which suits to the tourist within the limits of
the industry. It also refers to the quality provided to the people who have visited an
individuals' place. The best of the services provided by the operations team is called
quality

Delivering quality service is one of the major challenges facing hospitality

managers in the opening years of the millennium. It is be an essential condition for
success in the emerging, keenly competitive, global hospitality markets. While the future
importance of delivering quality hospitality, service is easy to discern and to agree on,
doing so presents some difficult and intriguing management issues.

Since the delivery of hospitality service always involves people, these issues
center on the management of people, and in particular on the interactions between
guests and staff, interactions that are called service encounters. In the eyes of our
guests, our hospitality businesses will succeed or fail depending on the cumulative
impact of the service encounters in which they have participated.

The service sector took TQM from the manufacturing sector, and adapted it to the
characteristics of the tourism and hotel industry. Based on the manufacturing sectors
example and achieved good that results, the service sector adopted the business rule
that productivity, quality and profit constitute a single whole. This represented the
motive for the improvement and development of quality tourism services. Quality
becomes a decisive factor off efficiency and competitiveness on the turbulent tourism
market.

Tourists/guests, in general, consumers do not tolerate mistakes anymore. They

require quality for money. This has forced tourist agencies, hotels and other participants
of the tourism offer, to introduce quality control, standards and the system TQM. USA is
at the forefront, and in Europe, Sweden and Switzerland. American international hotel
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chains were the first to implement TQL and TQM, very good results were achieved. Such
systems of quality control are less used by small tourist agencies and smaller hotels.

In a going concern, services are developed to meet customers' needs and only if
there appears be a market, either now or in the future, can a service be justifiably
produced.

Good service design satisfies customers, communicates the purpose of the

service to its market and brings financial rewards to the business. The objective of good
design, whether of products or services, is to satisfy customers by meeting their actual
and anticipated needs and expectations. This, in tum, enhances the competitiveness of
the organization. Service design, therefore, can be seen as the starting and ending with
the customer. So, the design activity has one overriding objective: to provide services
and processes which will satisfy the operation's customers.

Service Strategy Options Support Competitive Advantage

A world of options exists in the selection, definition, and design of services again
based on differentiation by offering a distinctly unique and high-quality services; low-
cost strategy, by designing a service that can be produced with a minimum cost; and
rapid response, executing the fastest and shortest time to get a service to market before
customer tastes change and to do so with the latest technology and innovations.

Service decisions are fundamental to an organization's strategy and have major

implications throughout the operations functions.

a. While 90% of businesses which are growing rapidly say design is integral
to or significant to them, only 26% of static companies say the same;

b. Using design can help to reduce costs by making processes more efficient
and cutting materials costs. It can reduce the time to market for new
services

c. Also, almost 70% of companies which see design as integral have

developed new services in the last three years, compared with only a third
of businesses overall

d. Companies judged to be effective users of design had financial

performances 200% better than average.

Remember that not all new services are created in response to a clear and
articulated customer need. While this is usually the case, especially for services that are
similar to (but presumably better than) their predecessors, more radical innovations are
often brought about by the innovation itself creating demand.

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customers don't usually know that they need something radical. For example, in the late
1970s people were not asking for microprocessors, they did not even know what they
were.

Generating New Service

Because service die; because services must be weeded out and replaced; because
firms generate most of their revenue and profit from new services, service selection,
definition, and design take place on a continuing basis. Knowing how to successfully find
and develop new service is a requirement.

New service opportunities

One technique to generate new service ideas is brainstorming, technique in

which a diverse group of people share, without criticism, ideas on a particular topic. The
goal is to generate an open discussion that will yield creative ideas about possible
products and product improvements.

 Understanding the customer is the premier issue in new-service

development. The operations manager must be "tuned in to the market
and particularly these lead users (companies, organizations, or
individuals that are well ahead of market trends and have the needs that
go far beyond those of average users).
 Economic change brings increasing levels of affluence (prosperity) in the
long run but economic cycles and price changes in the short run. In the
long run, for instance, more and more people can afford better services,
but in the short run, a recession may weaken the demand for these.
 Sociological and demographic change may appear in such factors as de
creasing family size. This trend alters the size preference for homes,
apartments, and automobiles,
 Technological change makes possible.
 Political/legal change brings about new trade agreements, tarifs, and
government contract requirements.
 Other changes may be brought about through market practice,
professional standards, suppliers, and distributors.

Importance of New Services

Despite constant efforts to introduce viable new services, many new services do
not succeed. Service selection, definition, and design occur frequently, perhaps
hundreds of times for each financial successful service. Operations managers and their
organizations must be able to accept risk and tolerate failure. They must accommodate a
high volume of new service ideas while maintaining the activities to which they are
already committed.

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The biggest risk in research lies in the high mortality rate of research projects.
Yet, since everyone knows that research payoffs are hazardous and few projects pay off,
one might ask why almost all companies of any size carry on research. Aside from
having to research in order to compete, it is still true that some of the successes pay for
themselves several times over. In general, and in total, research pays off.

Furthermore, if a company does not do research, then income taxes will take
nearly 50% of its profit dollars, so tax savings pay for almost 50% or more of research
costs. The question is not, “Is research worth its costs?” but “Is research worth half of its
cost?”

SERVICE DEVELOPMENT

Service development system - an effective service strategy links service

decision with cash flows, market dynamics, service life cycle, and the organization's
activities. A firm must have the cash flows for service development, understand the
changes constantly taking place in the marketplace, and have the necessary talents and
resources available.

Sources of ideas
 Marketing people see the need for something their customers want.
 Production people see opportunities to improve methods and processes
 Everyone in an organization is a potential source of ideas.
o Quality circles, to stimulate ideas
 Outside the company, as from its customers, or the public, or from sources
within the firm not directly responsible for new service ideas like its
employees.
In spite of what has just been said, however, a great deal of innovation comes from
researchers.

Stages in developing a marketable service

 Initiation of an idea.
 Gathering of necessary data on the marketability of the service
 Screening of the gathered data by the preliminary service review
committee consisting of specialists from the sales, administration,
production, and design departments.
 Determination of the immediate and ultimate marketing objectives of the
service after thorough scrutiny
 Development of the service with the combined efforts of the market
research, service development, and service design.
 Checking of the service development results and pre-testing for
marketability.
 Organizing the initiation of the service
 Field test of the service on its marketability.
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 Review of the design based on test results and from the point of view of
economic considerations. This work has to be done by the service design
and development departments in complete collaboration with the other
departments
 Standardization of the service criteria and the method of providing the
service.

Organizing for service development (approaches)

A. Traditional US approach to product development s an organization with distinct

departments.
a. A research and development department to do the necessary research
b. An engineering department to design the service
c. A service engineering department to design a service that can be provided
d. An operations department that provides the service.

The distinct advantage of this approach is that fixed duties and responsibilities
exist. The distinct disadvantage is lack of forward thinking: How will downstream
departments in process deal with the concept, ideas, and design presented to them, and
ultimately wh will the customer think of the service?

B. Assign a service manager to "champion the service through the service

development system and related organizations

C. Use of teams. This is perhaps the best used in Us. Such teams are variously
known as service development teams, and value engineering teams. These teams
are charged with the responsibility of moving from market requirements for a
service to achieving a service success. Such teams often include representatives
from marketing, manufacturing, purchasing, equality assurance, and field service
personnel. Many teams also include representatives from vendors. The objective
of a service development team is to make the service a success. This includes
marketability, and serviceability. Use of such teams is also called concurrent
engineering.

D. Japanese approach. They bypass the team issue by not subdividing into
organizations into research and development, engineering, production, and so
forth. Consistent with the Japanese style of group effort and teamwork, these
activities are all in one organization. Japanese culture and management style are
more collegial (power or authority vested equally in each of a number of
colleagues) and the organization less structured than in most Western countries.
Therefore, the Japanese find it unnecessary to have "teams" provide the
necessary communications and coordination. However, the typical Western style
and the conventional wisdom, is to use teams.

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These activities are concerned with improvement of design and specifications at the
research, development, design, and different stages of service development. In addition
to immediate, obvious cost reduction, design for serviceability and value engineering
may produce other benefits including:
 Reduced complexity of the service.
 Additional standardization of components
 Improvement of functional aspects of the service.
 Improved job design and job safety.
 Improved maintainability (serviceability) of the service.
 Robust design

Value Engineering

Value engineering (usually done by design engineers) or value analysis (usually

done by the purchasing department) means that everything that is made or purchased is
thought of as being made or brought to serve a particular purpose. Value engineering
answers:
 Would another lower-cost design work as well?
 Could another less costly item fill the need?
 Would less expensive material do the job?
 On purchased items, are the vendors' prices as low as they could De T
level of quality and delivery dated required?

Value engineering can be divided into five phases:

 An information phase, getting all the available facts concerning the item
being studied and answering them:
o What is it?
o What is its function or special purpose?
o Where it is used?
o What environmental conditions will it be subjected to?
o What it its frequency of use?
o What cost estimates are available?
 Creative phase, checklists are
o Can the design be simplified without impairing function or
reliability?
o Would a substitute, lower-cost material be suitable?
o Could the part be produced as a precision casting, forging,
extrusion or similar form to reduce machining costs?
o Are there any finish requirements that could be eliminated or
changed?
o Would a relaxation of any tolerances result in lower service costs?
o Could lower-cost components be obtained from vendors?

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o Are there any tests, qualifications, or other requirements that

appear to be unnecessary or that could be relaxed?
o Can a standard, off-the-shelf item be adapted to serve the purpose?
 Evaluation phase, ideas are refined.
 Program planning, with a certain approach selected, the next step is to
develop the more promising ideas
 Reporting phase, when value engineers have fully developed their
recommendations, they are ready to report the results to management, to
design and manufacturing engineers, and to others directly concemed.

SERVICE DESIGN

Designing services is challenging because they often have unique characteristics.

One reason productivity improvements in services are so low is because both the design
and delivery of service products include customer interaction. When the customer
participates in the design process, the service supplier may have a menu of services
from which the customer selects options. At this point, the customer may even
participate in the design of the service.

However, like goods, a large part of the cost and quality of service is defined at
the design stage. Also as with goods, a number of techniques can both reduce costs and
enhance the product.

a. One technique is to design the product so that customization is delayed

as late in the process as possible
b. To modularize the product so that customization takes the form of
changing modules.
c. Another approach to the design of services is to divide into small
parts and identify those parts that lend themselves to automation or
reduced customer interaction. Ex. Airlines are moving to ticket-less
service
d. Because of the high customer interaction in many service industries, a
fourth technique is to focus design on the S0-called moment of truth
when the relationship between the provider and the customer is crucial.
At that moment, the customer's satisfaction with the service is defined.
The moment of truth is the moment that exemplifies, enhances, or
detracts from the customer's expectations like cannot reach the
provider via phone because it is always busy; always on hold; etc.
detracts from the customer's expectations like cannot reach the
provider via phone because it is always busy; always on hold; etc.

Documents for services

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The documentation for a service will often take the form of explicít job
instructions that specify what is to happen at the moment of truth.

Example of service documentation for production (drive-up teller stations)

a. Be especially discreet when talking to the customer through the
microphone.
b. Provide written instructions for customers who must fill out form you
provide.
c. Mark lines to be completed or attach a note with instructions.
d. Always say "please" and "thank you" when speaking through the
microphone.
e. Establish eye contact with the customer if the distance allows it.

CONCEPT SCREENING (Operations Management, 5th Edition by Nigel Slack, Stuart Chambers and
Robert Johnston, 2007, pp.126-127.)

Design Criteria

1. Feasibility. This is the ability of an operation to produce a process,

product or service. The feasibility of the design option, can we do it?
a. Do we have the skills (quality of resources)
b. Do we have the organizational capacity (quantity of resources)
c. Do we have the financial resources to cope with the option?

2. Acceptability. The attractiveness to the operation of a process, product or

service. The acceptability of the design option, do we want to do it?
a. Does the option satisfy the performance criteria which the design is
trying to achieve? (These will differ or different designs.)
b. Will our customers want it?
c. Does the option give a satisfactory financial return?

3. Vulnerability. The risks taken by the operation in adopting a process,

product or service. Do we want to take the risks? That is,

a. Do we understand the full consequences of adopting the option?

b. Being pessimistic, what could go wrong if we adopt the option? What

would be the consequences of everything going wrong? (This is called the
"downside risk" of an option.

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Sustainability

Managers may find it helpful to think in terms of the four R's as they address
sustainability. These are:
1. the resources used in the production process;
2. the recycling of production materials and product ‘service components;
3. the regulations that apply; and
4. the firm's reputation. All four areas provide impetus for managers to
perform well as they develop and refine service processes.

 Resources. Operations is often the primary user of the firm's resources. This
puts special pressure on using human, financial, and material resources in a
sustainable way.

 Recycle. As managers seek sustainability, they should realize that there are only
three things can be done with waste: burn it, bury it, or reuse it.

 Regulation. Laws and regulations are affecting transportation, waste and noise
are proliferating and can be as much of a challenge as reducing resource use.

 Reputation. The marketplace may reward leadership in sustainability.

Imaginative, well-led firms are finding opportunities to build sustainable
production processes that conserve resources, recycle, meet regulatory
requirements, and foster a positive reputatio

PERFORMANCE TASKS

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PART I: MODIFIED TRUE OR FALSE: Write T if the statement is True and write F if it is
false.

__________1. A service strategy may focus on differentiation, low cost, or rapid response.

__________2. The objective of the service decision is to develop and implement a service
strategy that meets the demands of the marketplace with a competitive advantage.

__________3. Political/legal change and economic change are both factors influencing
market opportunities for new services.

__________4. An operations manager's most ethical activity is to enhance productivity

while delivering desired goods and services. Unfortunately, this activity is not
environmentally sound.

__________5. Two issues-viewing a product in terms of its impact on the entire economy
and considering the life cycle of a product-combine to increase the likelihood of ethical
decisions by managers.

__________6. Rapidly developing services and moving them to the market is part of time-
based competition.

__________7. The enhancement of existing services is an external service development

strategy.

__________8. The customer may participate in the design of, and in the delivery of services.

__________9. The moment-of-truth is the crucial moment between the service provider
and the customer that exemplifies, enhances, or detracts from the customer's
expectation.

__________10. The typical full-service restaurant uses a product-focused process.

__________11. Professional services typically require low levels of labor intensity.

12. An example of the postponement strategy for improving service productivity is

having the customer wait until you have sufficient time to serve the customer.

__________12. One use of camera-and-computer-based vision systems is to replace

humans doing tedious and error-prone visual inspection activities.

___________13. Optical checkout scanners and ATMs are examples of technology's impact
on services

___________14. In selecting new equipment and technology, decision-makers look for

flexibility- the ability to respond with little penalty in time, cost, or customer value.

PART I: MULTIPLE CHOICE: Read each statement carefully and encircle you answer.

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1. Which of the following would likely cause a change in market opportunities

based upon levels of income and wealth?
a. economic change b. sociological and demographic change
c. technological change d. political change e. legal change
2. When should service strategy focus on forecasting capacity requirements?
a. at the introduction stage of the service life cycle
b. at the growth stage of the service life cycle
c. at the maturity stage of the service life cycle
d. at the decline stage of the service life cycle none of the above
3. Which of the following represents an opportunity for generating a new service?
a. understanding the customer
b. demographic change, such as decreasing family size
c. changes in professional standard
d. economic change, such as rising household incomes
e. all of the above are such opportunities.
4. Strategies for improving productivity in services are
a. separation, self-service, automation, and scheduling
b. lean production, strategy-driven investments, automation, and process
focus
c. reduce inventory, reduce waste, reduce inspection, and reduce rework d.
high interaction, mass customization, service factory, and just-in-time
d. none of the above
5. Which of the following is not a strategy for improving service productivity?
a. self-service c. scheduling
b. b. automation d. separation
d. mass Customization
6. In mass service and professional service, the operations manager should focus
on____________?
a. Automation b. equipment maintenance
c. sophisticated scheduling d. human resources
e. all of the above
7. In mass service and service factory quadrants of the service process matrix, the
operations manager could focus on all of the following except.
a. automation b. standardization
c. tight quality control d. removing some services
e. Customization
8. Which of the following is true regarding opportunities to improve service processes?
a. Automation can do little to improve service processes, because services are so
personal
b. Layout is of little consequence, since services seldom use an assembly line.
c. If a work force is strongly committed, it need not be cross-trained and flexible.
d. All of the above are true.
e. None of the above is true.
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9. Advances in technology ____________

a. have impacted the manufacturing sector only
b. have had only limited impact on services
C. have failed to change the level of customer interaction with an organization
d. have had dramatic impact on customer interaction with services and with
products.
e. have dramatically changed health care, but have not changed retailing
10. Ethical and environmentally friendly services processes include which of the
following?
a. emission controls b. recycling
C. efficient use of resources d. reduction of waste by-products
e. all of the above
11. Making environmentally sound services through efficient processes
a. is unprofitable, as long as recyclable materials prices are soft
b. is known as lean manufacturing
c. can still be profitable
d. is easier for repetitive processes than for product-focused processes
e. none of the above
12. Which of the following statements regarding ethical and environmentally friendly
services processes is true?
a. Operations managers can be environmentally sensitive, but they must avoid
following a low-cost strategy.
b. Processes can be environmentally friendly or socially responsible, but not
both.
C. Operations managers can be environmentally sensitive and still follow a low-
cost strategy.
d. Using energy-efficient lighting saves so little that it should not be labeled
environmentally friendly.
e. The only business strategy consistent with ethical and environmentally
sensitive management is the differentiation strategy.
13. The four R's of sustainability do not include.
a. recycling b. resources
C. regulations d. reputation e. responsibility
14. A graphic technique for defining the relationship between customer desires and
product service is _____
a. Product Lifecycle Management b. the House of Quality
C. the moment of truth d. the assembly drawing
e. the product development team
15. A Japanese method of organizing for product/service design features
a. teams
b. product managers (champions)
c. distinct departments with assigned tasks

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d. a single organization without subdivision or individual teams e. none of the

above

PART Ill: ONLINE ACTIVITY

Direction: Search for a case study about the customer participation in the design and
production of services or customer role in service delivery. Present your video recorded
analysis.

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