Service providers face many of the same operating issues as manufacturers! They must address process design considerations, inventory management decisions and scheduling issues similar to those in manufacturing. The effective management of the service delivery supply chain is critical to the success of today's service providers. Take the case of a full-service catering operation.
Copper Kettle Catering (CKC) is a full-service catering company providing services that range from box lunches for picnics or luncheon meetings to large weddings, dinner, or office parties. Established in 1972 by Wayne and Janet Williams to provide lunch deliver}' service to office complexes, CKC has grown to be one of the largest catering businesses in Raleigh, North Carolina. In describing his business, Wayne segments customer demand into two categories: deliver-only and deliver-and-serve.
The deliver-only side of the business focuses on providing a drop-off service of boxed meals. The meals consists of a sandwich, salad, dessert, and fruit. The menu for this service is limited to six sandwich selections, three salads or potato chips, and a brownie or fruit bar. Grapes and an orange slice are included with every meal, and iced tea can be ordered to accompany the meals. The overall level of demand for this service throughout the year is relatively stable. That is to say, the number of lunches/dinners delivered on a daily basis is fairly constant. What varies quite a bit is the mix of menu items delivered. The planning horizon for this segment of the business is typically very short. Customers will usually call no more than a day ahead of time. CKC has a policy that delivery-only orders must be called in by 10:00 a.m. on the day of delivery to guarantee delivery service.
The deliver-and-serve side of the business is somewhat different, focusing on the catering of larger parties, dinners, and weddings. The range of menu items is much more extensive to include a full selection of hors d'oeuvres, entree items, and beverages. In fact, customers can request special items not on the menu as long as availability and timing are not a problem. The demand for these services is much more seasonal, with heavier demands occurring in late spring-early summer for weddings and late fall-early winter for holiday parties. The planning horizon for this segment of the business is also much longer. Customers will book dates and choose menu items weeks if not months ahead of time.
Supporting both of these business segments is a large "backroom" preparation operation. The physical facilities layout resembles that of a job shop operation. There are five major work areas, which include a stove/oven area for hot food preparation; salad preparation; hors d'oeuvre preparation; sandwich preparation; and an assembly area where both delivery-only orders are boxed and assembled and deliver-and-serve orders are trayed and assembled. Three walk-in coolers are used to inventory foods requiring refrigeration, and a large pantry houses the dry goods. However, space for the storage of either raw materials or prepared food items is limited. The risk of spoilage also limits the amount of foodstuff that can be carried in inventory at any one time. Desserts are supplied by outside vendors. Depending upon which vendor an order was placed with, the desserts are either delivered to CKC or someone has to be sent to pick them up at the vendor's facility.
The scheduling of orders is a two-stage process. The deliver-and-serve side of the business, having longer order lead times, is scheduled on a weekly basis. Each Saturday, Wayne and Janet develop the schedule of orders to be processed for each day of the week. CKC will typically have multiple deliver-and-serve orders to fill for each day of the week. This allows, to a certain degree, the consolidation of food preparation among multiple orders. The delivery-only orders are scheduled on a day-to-day basis due to the very short-term nature of the order lead times. Problems of running out of menu items sometimes occur with these orders because of the limited inventories of food.
Wayne and Janet employ 10 fulltime employees. Two of these employees are cooks while the other eight work in the other food preparation areas. These employees also work as servers for the deliver-and-serve orders. When demand increases, additional servers are hired on a part-time basis to cover the peaks. Although the cooks' position is specialized and requires a higher degree of training and skill, the rest of the employees are flexible enough to move between work areas as needed.
The business environment within which catering companies operate is a. very competitive one. The hierarchy of competitive factors as Wayne and Janet envision it for CKC is, first, quality, followed by delivery reliability, flexibility, and, finally, costs. "The quality of the food and its preparation is, of course, paramount" stated Wayne. "Caterers
with poor quality food will not stay in business long." Quality is measured by both freshness and taste. Delivery reliability encompasses both on-time delivery and the time it takes to respond to customer orders, in effect, die order lead rime (i.e., the requirement to phone in lunch orders by 10:00 a.m.). Flexibility focuses on both the range of catering requests a company can satisfy along widi the variety available on the menus.
CKC was beginning to feel the competitive pressures of being squeezed between increasingly demanding customers and a wave of new specialty caterers. Customers were demanding more menu flexibility and reduced response times. Costs were also becoming a more important factor as consumers began to focus on the value they received for their catering dollar. In response to these customer demands, a number of smaller specialty caterers entered the market. Having lower cost structures, these specialty caterers targeted specific well-defined market segments. One example is a small caterer called Lunches-R-Us, which located a facility in the middle of a large office complex to service the lunch market only.
In a previous operations management course, Wayne and Janet had been struck by the concepts of Just-in-Time 0IT) operating systems. The literature had focused on such things as increasing flexibility, reducing lead times, and lowering costs. It sounded like just what CKC needed to remain competitive. But they wondered if the concepts and principles were transferable to a service-oriented business.
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