NAME: STUDENT#: MODULE TITLE: MODULE#: ASSIGNMENT TITLE: TUTORS NAME: WORD COUNT: DATE:

RAGHAVENDRA GUPTA 11412164 OPERATIONS MANAGEMENT IN A SUPPLY CHAIN CONTEXT STRM023 LEAN MANAGEMENT ANDREW GOUGH 2720 27/05/2011

TABLE OF CONTENTS

LEAN MANAGEMENT .............................................................................................................................. 2 INTRODUCTION ................................................................................................................................... 2 1. CASE STUDY ITC HOTELS .............................................................................................................. 3 Main Products, Services, and Customers:....................................................................................... 3 Order Qualifiers: ............................................................................................................................. 3 Order Winners: ............................................................................................................................... 3 2. OPERATIONAL PROCESSES: ............................................................................................................. 4 Front Office Operations: ................................................................................................................. 4 Housekeeping/Maintenance Process: ............................................................................................ 6 Food & Beverage (F&B) Service: ..................................................................................................... 7 3. LITERATURE REVIEW ....................................................................................................................... 8 Operational Benefits of Lean Management:................................................................................. 11 Future of Lean Management: ....................................................................................................... 11 Conclusion: .................................................................................................................................... 13

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LEAN MANAGEMENT INTRODUCTION

Lean Management concept is mostly derived from Toyota Production System (TPS) which is introduced by Taiichi Ohno and Shigeo Shingo and considered to be a manufacturing philosophy (Inman, 1999 Cited in Arheiter and Maleyeff, 2005). Lean systems are targeted to achieve long-term strategic gains as demonstrated by Toyotas spectacular growth in the automobile industry (Smart et al., 2003 Cited in Sawhney et al., 2009). This paper aims to discuss services offered by hotels and to also analyse general Lean Management concepts in addition to the concepts relevant to hospitality industry and how they fit in the context of ITC Hotels.

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1. CASE STUDY ITC HOTELS

Main Products, Services, and Customers:
The ITC Hotels is a chain of more than 100 hotels across 90 destinations throughout India catering to a wide range of super deluxe, premium, and economy market segments across its branches in India. ITC Hotels have pioneered a unique concept of Branded Accommodation by creating a different category of rooms targeted at different markets. Therefore, let us consider ITC Maurya, New Delhi, one of the ITCs flagship hotels, an architectural masterpiece, providing services to not only corporate travellers but also to many world leaders including Presidents and royalty, and business tycoons (ITC Hotels, 2011). The hotel privileges include 24-hour front desk and concierge service, 24-hour travel desk and car rental services, barber/beauty salon, wireless broadband, laundry/valet service, and the basic housekeeping. For corporate business leaders, the hotel also provides business services which include a business centre, secretarial service, translation service, and a cash machine (Starwood Hotels & Resorts Worldwide, Inc., 2011).

Order Qualifiers:
An order qualifier is the competitive attribute that a company or product must be able to display to be a viable contender in the market. Magnificent dcor. Impeccable and prompt service. Branded cuisine. Well-trained staff. Free airport transfers. Personalized check-in and check-out.

Order Winners:
It is that competitive attribute of a product or service which causes a customer to choose an organisations product or service rather than that of a competitor. Various luxurious suites with differentiated services. Prime location situated in the heart of New Delhi surrounded by the citys green belt and 25 minutes from the International Airport. An architectural masterpiece reflecting distinct Indian heritage and culture. Convenient secretarial and translation service and in-house cash machine (ATM).

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2. OPERATIONAL PROCESSES:
Front Office Operations:
Activities of a guest from the point of making a call to communicate a reservation inquiry to the moment when he/she is ready to check out from the hotel. Input Resources - At the pre-arrival stage, the hotels must make and keep a reservation record for each potential guest. - Arrival of a guest in a hotel. - Room rack. - Racks for keys, messages, and any mails. - Reservation racks. - Trays and/or buckets to handle guest folio. - Computer systems. - Hotel management software. - Telephones. Transforming Activities - The reservations department has to complete and maintain all the preregistration formalities and create a folio for each guest. - In doing so, the reservations department will then eventually maximize sales by monitoring room availability accurately and forecasting. - The check-in clerk determines status of the guest coming to the hotel (i.e. whether the guest already has a confirmed reservation or has just walked in). - The reservations clerk creates a record for registration or alternatively can print the pre-registration record and ask the guest to sign on it. This record has all the information including name, address, telephone number, and the length of stay. Page 4 of 18 Output Products/ Services - Front desk representative accompanies the guest to his/her room and finally the check-in process is complete.

- The clerk then inputs the information on to the management software. - After completion of all the formalities, the guest is finally checked into the hotels system - Transfer of guests luggage to the desired room by the porter.

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Housekeeping/Maintenance Process:
This process includes cleaning the rooms and furnishings in a hotel. This is an integral part of one of the processes in hotel. Input Resources - Recruitment of skilled staff. - Material required for cleaning the premises. - Toiletries. - Fresh linen and towels, etc. - Communication from the front office for any ad-hoc cleaning requirements. Transforming activities - The housekeeping staff carry their day-to-day activities like cleaning hotels premises including rooms, bathrooms, hallways, lobby, conference rooms, swimming pools etc. - Replenishment of towels, toiletries and replacing of bed linens in rooms. - Proper scheduling to maintain the demands during peak and off peak times. - Preparing a scheduler to record details, e.g., date, name, time, and signatures so that there would be a proper check on the whole system. - The staff fills in the details in the scheduler according to their shift timings. - Efficient housekeeping process in accordance with the benchmarks set by the management. - Supervisors carrying out routine checks. Output products/services - Hygienic and comfortable rooms and premises as per the industry

standards.

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Food & Beverage (F&B) Service:

One of the main pillars of the operational process in a hotel, F&B deals with the business of providing hygienic meals. This could be provided in the restaurant, room service, and/or banquet hall in case of weddings or birthdays, etc. Input Resources - Food supplies. - Items needed to serve the food including kitchen utensils and equipment,etc. Transforming activities - The chefs in the kitchen prepares and provides the cooking and plating for the received food order. - Necessary information is communicated regarding the food order in terms of size of the party by front desk department (most of the times it depends on who has provided the order) to the waiters. Output products/Services - As soon as the meals are prepared, it is served directly to the customer in the restaurant and to the rooms if the guest is

staying in the hotel or to the banquet hall (e.g.

wedding, birthdays). - Guests provide their

feedback and comments by filling feedback forms placed in their rooms.

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3. LITERATURE REVIEW
The frameworks proposed by Womack and Jones in their book Lean Thinking puts forward five principles (as seen in Figure 1) which an organisation can use to implement lean thinking:

Figure 1. Source: Lean Enterprise Institute, Inc., 2009

The lean management approach is based on mapping and studying the characteristics of the process which is called value stream mapping (VSM) (Worley and Doolen, 2006 Cited in Naslund, 2008). It is evident from the studies that there is 70% wastage of resources in most of the companies (Taj and Berro, 2005) and similarly lean implementation can reduce up to 40% waste (Bhasin and Burcher, 2006). Although the VSM has advantage, the VSM as a tool is static in nature and can capture only a snapshot view of the shop floor on any particular day. The VSM has a tendency to vary which is dependent on the situations that exist at a particular time in an organisation. One could draw a future state map assuming the fact that all the issues will be resolved completely in all the problematic areas (Gurumurthy and Kodali, 2011). Another well-known technique supporting the lean thinking is 5S technique based on 5 Japanese terms for eliminating muda (waste), mura (inconsistencies), and muri (unreasonableness) from the workplace (Pranckevicius et al., 2008). This is a well-known technique for organising workspace to boost morale of employees, environmental safety, and process efficiency (Schroeder et al., 2011). The 5S techniques are followed as a philosophy in Japan whereas Western countries such as USA and UK consider it as a tool or

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a technique. Therefore, there is no consensus about the scope of 5S (Kobayashi et.al., 2008 Cited in Bayo-Moriones et al., 2009). Just-In-Time (JIT) or Kanban system invented by Ohno is based on reduction of muda (waste) and this is considered to be one of the pillars of Lean philosophy. JIT has developed over the time from the core concept of a process to be implemented on the factory floor to a management philosophy with a primary aim of waste elimination and continuous improvement (Lummus and Vokurka, 1999 Cited in Vokurka et al. 2007). It is a system in which production takes place whenever there is a requirement from other operation downstream and on particular demands from the external customers. Therefore, JIT in other words is a pull system. JIT philosophy considers inventory as waste, not an asset. Too much level of inventory and buffer stocks are considered as an unnecessary excess due to the fact they hide the fundamental causes of root problems in the context of a manufacturing system. JIT ensures that the flow within a process is simple, smooth, and error-free thereby avoiding waste (Vonderembse and White, 2004). Critics of JIT believe that JIT techniques of multi-skilling and waste elimination would have deleterious effects on the quality of work environment for employees involved in production, extreme workload and peer pressure in the delivery of service (Turnbull, 1988). The elimination of all forms of waste is central to the lean management and this creates value in the supply chain (Disney et al.,1997) which includes goods in production not yet ordered, mistake rectification, waiting time and processing in excess, movement, transport, and stock (Jones and Hines, 1997). Taiichi Ohno, father of TPS, identified seven types of waste which form the core of lean philosophy. Womack and Jones added an eighth form of waste in 2003: 1) Defects. 2) Over-Production. 3) Waiting. 4) Transportation. 5) Movement. 6) Excess Processing. 7) Inventory. 8) Under-utilised staff: Ohno founded the system on five core principles that could help in elimination of the abovementioned wastes: They are: a) Muda The Japanese term to identify the waste in the first instance. b) Process Focus Managers function cross-organisationally to create and maintain strong processes in a business. c) Genchi Genbutsu: Gathering information and evidence in a workplace setting. d) Kaizen: Uninterrupted and incremental improvement of a process.

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e) Mutual Respect: Healthy relationship amongst management, employees, and business partners (Sutherland and Bennett, 2008). Another important tool to reduce waste/defects in lean philosophy is Six Sigma. It was developed by Bill Smith, a reliability engineer, at Motorola in 1980s (Brady and Allen, 2006 Cited in Pepper and Spedding, 2010). Six Sigma became a multifaceted tool which encompasses everything from just improvement of process to involve broad initiatives namely project management, change management, leadership, culture changes, rewards and compensation, defect definition, and problem solving (Goodman and Theuekauf, 2005 Cited in Naslund, 2008). There has been no published criticism against Six Sigma; however, Six Sigma and Lean have similar features and Six Sigma does not contain anything new in principle. The new thing concerning Six Sigma is its linkage between the tactical and strategic aspects (Klefsjo et al., 2001 Cited in Andersson et al., 2006). Striving for perfection requires continuous improvement (CI) which is depicted by Kaizen (Japanese word) meaning incremental improvements of existing processes. According to the CI methodology, there is scope of improvement in each step of the process whether it is service or an operation in an organisation (Temponi, 2005). Various studies have mentioned the overwhelming benefits of Kaizen in Toyota Motor Corp. and it is evident from the findings that the Toyota was able to leverage the power of the visual factory, waste elimination, and creating a robust companywide tradition of continuous improvement in its entire operations (Neese, 2007; Stewart and Raman, 2007; Fishman, 2006 Cited in Smadi, 2009). On the contrary, an international study of CI (Mellor et al., 2000 Cited in Hyland et al., 2003) found that it is restricted to manufacturing process in many organisations and not widely used in other functions. Therefore, based on the above literature review, few concepts of Lean Management are depicted as seen in Figure 2:

Value Stream Mapping

Continuous Improvement

5S

Lean Management

Six Sigma
Waste Elimination

Just-InTime

Figure 2.

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Operational Benefits of Lean Management:

Based on the findings as mentioned in the lean concepts and frameworks, benefits for ITC Maurya can be summarized as follows: Elimination of some waste in a cycle by analyzing their own value stream through value stream mapping (VSM) which would help in creating lean culture. Improved quality, productivity, and competitiveness by keeping the workplace tidy and in order in a rigorous and systematic way. Decreased inventory due to reduced lot sizes, setup times, and lead times to enable fast changeover from one customer to the next. Cost minimisation is an obvious benefit. Elimination of all types of waste related to uncertainty, waiting, searching for relevant information to make work easier and faster. Substantial improvement in business performance and permanently reoriented organisations way of thinking, developing an environment in which innovation would thrive.

Future of Lean Management:

In a competitive world where change is the only constant, new trends are emerging to create more complexity in the existing business environment: a move towards green initiatives, utilization of lean process, and globalization. Globalization of supply chains has led to offshoring of production, inventories, suppliers and customers and differences in economies, infrastructures, cultures, and politics in the competitive environment (Manuj and Mentzer, 2008; Schmidt and Wilhelm, 2008; Christopher, 2005 Cited in Mollenkopf et al., 2010). Organisations have modified and restructured their lean management efforts keeping in mind the importance of green supply chain management initiatives which have proved to improve their performance (Vachon and Klassen, 2006b Cited in Mollenkopf et al., 2010). This type of environmental collaboration would develop knowledge-sharing capabilities (Vachon and Klassen, 2008 in Mollenkopf et al., 2010) and would act as a resource for a sustainable competitive advantage. However, this can present several challenges including the difference in economic, cultural, and regulatory environments. It is evident from the studies that there are trends which suggest incorporating Lean and Six Sigma methodology into Lean Six Sigma based on the facts and tools obtained from years of operational improvement research and implementation (Arheiter and Maleyeff, 2005).

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4. Application of Lean Concepts at ITC Maurya

Some of the lean concepts (from Figure 2) can be related to ITC Group Hotels which are as follows: Just-In-Time: With the application of JIT in F&B department, the chefs at ITC now only create dishes when it is ordered as per the customer demand instead of making the dishes well in advance which they had been doing in the past. This has helped in reducing inventory and saved operational cost of processes besides reducing throughput time in dealing with customers at the hotel. Therefore, instead of queues of material (inventory), the hotel has to deal with queue of customers (Slack et al., 2007). It was evident from JIT implementation that there was an increased focus on customer order which not only helped in improving the overall customer service but also the quality of the food served to them (Lai and Baum, 2005). Six Sigma: As front office operations is considered to be most crucial for hotels, Six Sigma implementation led to reduced wait time during peak check-in and check-out time, eliminated/reduced billing errors and improved accuracy, increased occupancy, and increased customer delight and improve financial result. The ITC Group has restructured its statistical methods to understand fluctuations in the processes which led to identify and isolate the origin of the problem. This led to improvement of front office operations by eradicating errors to control the process making sure that defects do not reappear (Pojasek, 2003 Cited in Naslund, 2008) and it has provided long-term benefits to the ITC Group (Bisgaard and Freiesleben, 2004 Cited in Naslund, 2008). Waste Minimisation: Much of the waste created in hotels is generated in the F&B department (organic food waste, packaging, aluminium cans, etc.) or from the housekeeping department (cleaning materials and packaging). ITC Group identified and applied Ohnos waste elimination methodology, instructing the suppliers to use reusable packing and started purchasing products made with recycled content. A program of waste audit has been initiated to audit waste generation, for example, checking on things thrown in the trash, whether it was burnt food or over portioned food, was it incorrectly dated and went bad, and need for setting up extra recycling bins to name a few. Training is essential for successful waste minimisation program and the employees at ITC were provided special training. This resulted in recycling much of the waste from the F&B operations, and improvising the existing policies on recycling which certainly has the huge potential for reducing operational costs (Sustainable Foodservice Consulting, 2011).

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Conclusion:

Though ITC hotels are well known for their excellent service, there would still be some challenges they would face as a group in order to sustain this level of excellence. Due to the direct contact with the customers, any minor quality problem would be much more obvious to the customer and therefore, it would be an uphill task for the management and the employees to deliver world class quality (24 x 7 x 365). Though the service organisations like hotels often have no finished-goods inventory, they still may have inventory of supplies or even work-in-process which can hide problems. This would impact prompt delivery of customer service when speed is becoming an important order winner in service operations (Vonderembse and White, 2004). Another challenge would be to make a customers stay pleasant in the hotel which would help in shaping up customer loyalty and generating revenue during the times of recession (Mason et al., 2006, Nasution and Mavondo, 2008 Cited in Ramanathan and Ramanathan, 2011). Additionally, despite the key benefit of customer satisfaction with Six Sigma, there would be certain impediments to its successful implementation at ITC Group because of the uncertainty of results, cost involved, lack of support, and inadequate organisational culture (Snee, 2001 Cited in Aboelmaged, 2011). As ITC Group caters to customers from high-income group and people from different cultures, the employees needs to be well trained in cross-cultural hospitality etiquette so that they can identify customers expectations and handle their requirements. Also, the hotel industry is known for its high attrition rates, it sometimes hampers overall operations which in turn lead to increased operational costs (Camison, 1996). These are some of the challenges which ITC Group can overcome as it has been the case in the past and can continue to reap benefits of Lean Management and maintain the unique competitive advantage.

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