Chapter 2: Operations Management Theories

Operations management in the hospitality and tourism industry

Operations Management
The management of the direct recourses that are required to produce and deliver an organization's goods and services.

Operations Management Theories

Theory of Process Choice- Hayes and Wheelwright (1979) identified that firms adopted different types of process in
order to manufacture products.
Theory of Swift and Even Flow - Flow ‘holds that the swifter and even the flow of materials through the process, the
more productive the process is’ (Schmenner and Swink 1998).
Theory of Lean Manufacturing- productivity is enhanced by applying principles designed to eliminate waste of all kinds.
Theory of Performance Frontiers- The theory is called so because the authors use a production function or performance
frontier
Theory of Service Experience- Hence customers are different to materials in that they sense and respond to their
environment

Laws within the Theory of Swift and Even Flow

Law of Variability 1
the greater the randomness of the process, the lower the productivity.
Law of Variability 2 the greater the variability of the requirements of the process, the lower the productivity.
Law of bottlenecks- the greater the difference in the rate of flow through stages in a process, the less productive the
process. To these we can add a fouth law:
Law of prioritization- in operations of inherent instability, the greater the instability, the greater the prioritization of
orders (Westbrook 1994).

Seven types of Waste

1. Waiting
2. Too much inflexible capacity a
3. Transporting
4. Doing too much
5. Unnecessary Motions
6. Defects
7. Unnecessary Stocks
Operations as a transformation process
 Operations management is the set of activities that create value in the form of goods and services by
transforming inputs into outputs.
Direct responsibilities: the activities which are directly related to producing and delivering products and services.
Broad responsibilities: a wider set of tasks that involve scanning the business
Indirect responsibilities: the activities involved in interfacing with other parts of the organization.
Responsibilities do operations managers
 Capacity
 Location
 Products & services
 Make or buy
 Layout
 Projects
 Scheduling
 Organizing
 Degree of Centralization
 Process Selection
4 Main Operational Decisions
1. Critical decisions of OM
2. Strategic Decisions
3. Tactical Decisions
4. Operational Decisions

Manufacturing vs. service

Customer Contact
 Service, by nature, involves a much high degree of customer contact than manufacturing.
Uniformity of Input
 Service operations are subject to greater variability of input than typical manufacturing operations.
Labor content of jobs
 Many services involve a higher labor content than manufacturing operations
Uniformity of output
 Because high mechanization generates products with low variability, manufacturing tends to be smooth and
efficient, service activities sometimes appear to be slow and awkward and output is more variable.
Measurement of productivity
 Measurement of productivity is more straightforward in manufacturing due to the high degree of uniformity of
most manufacturing items.

Chapter 3: SERVICE ENCOUNTER

SERVICE
ENCOUNTER
 is that period of time during which the customer and the service firm interact in person over telephone or
through other media (Shostack 1985).
• The service firm, which sets policies and guidelines;
• The employees, who enact the policies of the firm;
• The customer, who seeks to satisfy a range of needs and wants.
 Original work by Czepiel et al. (1985) identified seven key characteristics of a service encounter that can be
considered the distinguishing factors when analyzing service encounters. Briefly, service encounters usually:
 are goal oriented
 are undertaken as part of work activities
 are primarily a stranger relationship
 are narrow in scope: only surface topics of conversation
 are mostly task oriented
 mostly follow a pre-defined set of rules to facilitate the interaction
 involve the roles of service provider and client (customer)

Service Encounters & Service Relationships

 Gutek (1995) developed a taxonomy that differentiates among three types of service interactions:
o the encounter,
o the relationship and
o the pseudo-relationship.
 Service relationships are characterized by customers and providers that have personal knowledge of one another
a history of prior interaction and an anticipated future. In a service relationship, a customer is inclined to
attribute a successful encounter to the individual service provider’s internal characteristics (‘he is a good
receptionist’) but failure to external factors (‘he must be having a bad day’).
 Conversely, in a service encounter, there is typically a lack of intimacy and familiarity between the provider and
customer; thus, success is often dismissed as resulting from external factors (‘it was an easy job’), while failure is
related to internal factors (‘the receptionist was useless’).
 Gutek et al. (1999) argue that a hybrid – a pseudo-relationship – has developed that combines the practicalities
and economy of the service encounter with the loyalty-inducing features of the relationship.
 Internal Versus External 
Service Encounters

Traditionally, the focus of research has been on the external  service encounter, that is, the encounter
between an employee of a service provider and a customer as the service recipient. 
However, literature also points to internal service  encounters  whereby the employees of a company are
the customers. The notion of an internal customer follows from;
the services marketing triangle proposed by Kotler and Armstrong (1991) that illustrates the relationships
between a company, its employees and its customers.External marketing  refers to the interactions
between a service firm and its customers interactive marketing  relates to the interactions
between employees and customers. The latter interactions are termed the service encounter and have
been the focus of most research (Bitner et al. 1990).Internal marketing, the third type of marketing in
the services marketing triangle, is concerned with the relationship between the service firm and its
employees.

Internal Versus External 

Service Encounters

 Atmospheric 
 Culture 

Staff attitude/service pre-disposition 

 Communication
 Emotional labour
 Control and efficiency

Evaluation of service encounters

Service failures -If a service failure occurs and customers experience dissatisfaction
Service recovery - Therefore, not only an understanding of the importance of service recovery but also that of
appropriate measures and procedures is critical. 

Multiple service encounters - Yet, the vast majority of previous research has concentrated on the impact of a single
service failure event, in part facilitated by the critical incident technique.

CHAPTER 4

Quality - in the dictionary is defined as ‘the degree or standard of excellence of something’. This suggests
that there is an absolute standard against which all things can be measured.

Garvin stresses that quality should be thought quality into eight dimensions or categories,
 Namely:

1. performance,
2. features,
3. reliability,
4. conformance,
5. durability,
6. service ability
7. subjective aesthetics and
8. perceived quality.

5 main areas
GAP 1 POSITIONING GAP -It develops if the product or service concept diverges from customer requirements
GAP 2 SPECIFICATION GAP- This occurs when management set standards of performance

GAP 3 "DELIVERY GAP" - occurs when employees do not, or cannot, deliver the product or service to the standard
required.

GAP 4 "COMMUNICATION"- This has an important influence upon customer perceptions of service quality.
GAP 5 PERCEPTION GAP - that is the difference between what customers expect and what they perceive they have
received.

SERVQUAL
 One of the most influential research instruments in researching service quality has been SERVQUAL.

Strategies for managing quality- ANOTHER POTENTIAL MEASURE OF OVERALL

QUALITY IS THE COST OF QUAL ITY. ACCORDING TO WYCKOFF (1984) AND CROSBY (1979), QUALITY COSTS FALL INTO
FOUR MAIN CATEGORIES:
1.PREVENTION
2.ASSURANCE
3.INTERNAL FAILURE
4.EXTERNAL FAILURE

Five main approaches to managing quality that focus on managing process.

1. QI- QUALITY INSPECTION
2. QC- QUALITY CONTROL
3. QA- QUALITY ASSURANCE
4. TQM- TOTAL QUALITY MANAGEMENT
5. CI- CONTINUOUS IMPROVEMENT

Model of quality control

1. DESIGN QUALITY LEVEL- Define
customer requirements
 Identify desired quality
characteristics.

2. SET PRODUCT STANDARDS- Design

product to meet standards:
 Drawings
  Equipment and materials specification
 Document procedures
 Plan organization and training
3. CHECK CONFORMANCE
Output
 Inspecting
 Quality audit
 Guest complaint
Process

 Check employee performance

 Equipment monitoring

4.CORRECT NON-STANDARD OUTPUT

 Redo or defer sale of rejects
 Analyse rejects for cause of failure
 Adjust production process.

TWO APPROACHES Control (SPC) TO QUALITY CONTROL

• Statistical Process control (SPC ) - It is a quality technique based on statistics.
• Hazard Analysis and Critical Control Point (HACCP) - It is a specific approach to Quality
Control (QC) designed for a large-scale catering

Quality assurance (QA) is built on the principle ‘get it right first time every time’. More is invested in
assurance costs, which should ensure a significantly greater decline in internal and external failure costs.

Quality Circle - As well as these general principles aimed at creating the appropriate climate in which
quality can thrive, there is a particular technique that is meant to result in total commitment to the
idea – namely the quality circle.

ALL ASPECTS OF QUALITY WITHIN AN ORGANIZATION

INCLUDING:

1. LEADERSHIP
2. POLICY AND STRATEGY
3. PEOPLE MANAGEMENT
4. RESOURCES
5. PROCESSES
6. CUSTOMER SATISFACTION
7. PEOPLE SATISFACTION
8. IMPACT ON SOCIETY
9. BUSINESS RESULTS

THE SIX SIGMA METHODOLOGY

DEFINE, MEASURE, ANALYZE, IMPROVE, CONTROL
Pizam and Ellis (1999) suggest there are nine (9)
salient customer satisfaction theories:
 1. Expectancy disconfirmation;
2. Assimilation or cognitive dissonance;
3. Contrast;
4. Assimilation-contrast;
5. Equity;
6. Attribution;
7. Comparison-level;
8. Generalized negativity; and
9. Value-precept.

Quality measurement techniques

THREE MAIN METHODS USED BY THE HOSPITALITY INDUSTRY TO MONITOR
QUALITY

1. MYSTERY GUEST PROGRAMME

2. CUSTOMER SATISFACTION SURVEY
3. QUALITY AUDIT